Exhibit 99.1
Iowa Telecom Reports Results for Quarter Ended September 30, 2006
NEWTON, Iowa--(BUSINESS WIRE)--Nov. 8, 2006--Iowa
Telecommunications Services, Inc. (NYSE: IWA) today announced
operating results for the quarter ended September 30, 2006. Quarterly
highlights for the Company include:
-- Operating revenues were $59.6 million.
-- Operating income was $21.7 million.
-- Net income was $8.0 million or $0.25 per diluted share.
-- Adjusted EBITDA (as defined herein) was $31.2 million.
"We are very pleased with our third quarter results," said Alan L.
Wells, Iowa Telecom chairman and chief executive officer. "Sales of
our DSL product were particularly strong with 6,400 new customers
added during the period, which was more than double the number of new
DSL customers added during the previous quarter. Our pace of access
line loss slowed during the quarter, with 1,200 total lines lost
during the second quarter. Strong DSL sales, combined with continued
growth of our bundled product offerings, resulted in a total revenue
increase of 4.3% from the second quarter of this year, and an increase
of 3.0% from the year ago quarter. The expansion of our CPE and data
business through our acquisition of Baker Communications in August of
this year also had a positive impact on our revenues.
"Our Adjusted EBITDA for the third quarter of 2006 of $31.2
million was in line with the same period in 2005, as adjusted for
certain one-time charges incurred last year," Wells added. "As a
result of our current tax position, which required us to begin
recording book income tax expense during the second quarter of this
year, we recorded a provision for income tax expense of $5.6 million
during the third quarter and $8.4 million year to date. It is
important to note that the recorded tax expense did not impact our
cash flow. Our actual cash taxes paid through the first nine months of
2006 were only $654,000, reflecting both the continued utilization of
our net operating loss carry forwards and our continued goodwill
amortization for tax purposes.
"Our capital expenditures were $7.0 million for the third quarter,
and total $20.4 million year to date. We expect our 2006 capital
expenditures to be within the range of our original guidance of
between $28 million and $30 million," Wells continued. "We expect our
interest expense for the year will be approximately $31 million, at
the midpoint of our prior guidance.
"We are also pleased with our success in the quarter in the FCC's
Advanced Wireless Spectrum auction, which concluded in September. We
were the successful bidder on 15 licenses in Iowa that cover
approximately 1.9 million pops, including approximately 75% of our
incumbent access lines," Wells noted. "These licenses will provide us
the opportunity to offer our customers even more advanced
communication and data services in the future. The total cost for
these licenses was $11.5 million.
"Overall, we are pleased with the quarter, in particular the
continued success of our DSL offering, and the expansion of our CPE
and data business," Wells concluded.
FINANCIAL DISCUSSION FOR THIRD QUARTER 2006:
-- Operating Revenues were $59.6 million in the third quarter
compared to $57.9 million in the third quarter of 2005.
Network access services revenues decreased $1.3 million, or
5.3%, for the third quarter. The decrease in access services
revenue is primarily the result of a combination of a decrease
in access lines and an increase in cellular traffic for which
we receive lower rates of compensation. These decreases were
offset by a $3.6 million, or 44.5%, increase in other sales
and services. The revenue increase was primarily due to growth
of our CPE and data business, in part as a result of the
acquisition of Baker Communications in August 2006. DSL
Internet access service revenues also increased $1.4 million,
or 46.2%, due primarily to customer growth.
-- Operating Costs and Expenses decreased $2.1 million, or 5.2%
in the third quarter of 2006 as compared to the third quarter
of 2005. Selling, general and administrative costs decreased
$3.3 million, or 28.0%, for the third quarter, primarily as a
result of a $2.9 million gain on the sale of four exchanges
during the period. Cost of service and sales increased $1.4
million, or 8.7%, principally due to the growth of our CPE and
data business as a result of our acquisition of Baker
Communications. Depreciation and amortization decreased
$225,000, or 1.9%, during the third quarter compared to 2005.
-- Operating Income was $21.7 million in the third quarter of
2006 as compared to $17.8 million in the same period in 2005.
The increase in operating income was primarily the result of
the $2.9 million gain on the four exchange sales during the
period and a $1.0 million charge in the year ago quarter
related to amendments to our defined benefit pension plans.
-- Interest Expense for the third quarter increased $226,000, or
2.9%, to $8.0 million compared to $7.7 million in the same
period in 2005. Higher interest rates on our variable rate
debt and an increase in the rate on the interest rate swap
agreement, resulting from the extension of the term in August
2005, were partially offset by a lower average balance on the
Company's revolving credit facility.
-- Earnings Before Income Taxes for the third quarter of 2006 was
$13.6 million compared to $9.6 million in the third quarter of
2005.
-- Income Tax Expense for the third quarter was $5.6 million
compared to zero in the third quarter of 2005. The Company
estimates that book income tax expense will be recorded at an
effective tax rate of approximately 41% in future periods. The
recorded book tax expense did not impact the cash taxes paid
during the quarter. The Company paid actual cash income taxes
for Alternative Minimum Taxes during the quarter of $482,000
and $654,000 year to date, reflecting the continued
utilization of net operating loss carry forwards and continued
goodwill amortization for tax purposes. At the end of the
quarter, the Company had a net operating loss carry forward
balance of approximately $183 million.
-- Net Income was $8.0 million for the quarter compared to net
income of $9.6 million in the third quarter of 2005.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $31.2
million for the third quarter of 2006 as compared with $29.8
million in the same period in 2005.
-- Total Access Linesdecreased by 1,200 during the third quarter
of 2006 from the second quarter in 2006, as ILEC access lines
declined by 2,200 lines and CLEC lines increased by 1,000
lines. During the third quarter, 2,100 access lines, 1,350
cable television subscribers, and approximately 500 High Speed
Internet subscribers were acquired as the result of the
acquisition of Montezuma Mutual Telephone Company and 2,000
access lines and 300 DSL subscribers in four other exchanges
were sold. Total access lines decreased by 7,100, or 2.7%, for
the third quarter of 2006 as compared to the third quarter in
2005.
Third Quarter 2006 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
3rd Quarter 3rd Quarter Change
2006 2005 Amount Percent
- ----------------------------------------------------------------------
Revenue $59,631 $57,876 $ 1,755 3.0%
Operating Income $21,663 $17,832 $ 3,831 21.5%
Interest Expense $ 7,969 $ 7,743 $ 226 2.9%
Earnings Before Income Taxes $13,649 $ 9,617 $ 4,032 41.9%
Net Income $ 8,032 $ 9,617 $(1,585) -16.5%
Basic Earnings Per Share $ 0.26 $ 0.31 $ (0.05) -16.1%
Diluted Earnings Per Share $ 0.25 $ 0.30 $ (0.05) -16.7%
Adjusted EBITDA (1) $31,193 $29,828 $ 1,365 4.6%
Capital Expenditures $ 7,026 $ 9,864 $(2,838) -28.8%
Dividends Paid $12,759 $12,521 $ 238 1.9%
(1) See the definition of Adjusted EBITDA under Explanation and
Reconciliation to Non-GAAP Concepts at the end of the financial
statements.
Key Operating Statistics 3rd Quarter 3rd Quarter
2006 2005 % Change
- ----------------------------------------------------------------------
Telephone Access Lines
ILEC Lines (1) 230,600 240,500 -4.1%
CLEC Lines (2) 23,000 20,200 13.9%
----------- ----------- ---------
Total Telephone Access Lines 253,600 260,700 -2.7%
Long Distance Subscribers 145,900 141,800 2.9%
Dial-up Internet Subscribers 33,700 44,200 -23.8%
DSL Subscribers 45,000 27,200 65.4%
Average Monthly Revenue Per
Access Line (3) $ 78.19 $ 73.34 6.6%
3rd Quarter 2nd Quarter
2006 2006 % Change
----------------------------------
Telephone Access Lines
ILEC Lines (1) 230,600 232,800 -0.9%
CLEC Lines (2) 23,000 22,000 4.5%
----------- ----------- ---------
Total Telephone Access Lines 253,600 254,800 -0.5%
Long Distance Subscribers 145,900 145,000 0.6%
Dial-up Internet Subscribers 33,700 37,400 -9.9%
DSL Subscribers 45,000 38,600 16.6%
Average Monthly Revenue Per
Access Line (3) $ 78.19 $ 74.37 5.1%
(1)Includes lines subscribed by our incumbent local exchange carrier
retail customers and lines subscribed by our "wholesale" customers
who are competing local exchange carriers. Wholesale access lines
include: lines subscribed by our local exchange carrier competitors
pursuant to interconnection agreements on an unbundled network
element basis, for which the competitive local exchange carrier pays
us a monthly fee; lines that we provide to competitive local exchange
carriers for resale to their subscribers, for which the competitive
local exchange carrier pays us a monthly fee equal to what we would
charge our customers for local service less an agreed discount; and
shared lines, for which a competitive local exchange carrier pays us
a monthly fee to provide DSL service to its customers. We had 3,600
wholesale lines subscribed at September 30, 2005 and 3,200 at June
30, 2006 and September 30, 2006. During the second quarter of 2006,
the company completed the sale of three exchanges resulting in the
loss of 600 ILEC lines. During the third quarter of 2006, the company
completed the sale of four exchanges resulting in the loss of 2,000
ILEC lines and completed the acquisition of two exchanges resulting
in the gain of 2,100 ILEC lines.
(2)Access lines subscribed by customers of our competitive local
exchange carrier subsidiaries, Iowa Telecom Communications, Inc. and
IT Communications, LLC.
(3)Average monthly revenue per access line is computed by dividing the
total revenue for the period by the average of the access lines at
the beginning and at the end of the period.
Investor Call
As previously announced, Iowa Telecom's management will hold a
conference call to discuss the third quarter results on Wednesday,
November 8, at 9:00 a.m. (Eastern Time). To listen to the call,
participants should dial (913) 981-5519 approximately 10 minutes prior
to the start of the call. A telephonic replay will become available
after 12:00 p.m. (Eastern Time) on November 8, 2006 and will continue
through November 15, 2006 by dialing (719) 457-0820 and entering
Confirmation Code 4024570.
The live broadcast of Iowa Telecom's quarterly conference call
will be available online at www.iowatelecom.com or www.earnings.com on
November 8, 2006, beginning at 9:00 a.m. (Eastern Time). The online
replay will become available after 12:00 p.m. (Eastern Time) and will
continue to be available for 30 days.
Forward-Looking Statements
The press release may contain forward-looking statements that are
not based on historical fact, including without limitation statements
containing the words "believes," "may," "plans," "will," "estimate,"
"continue," "anticipates," "intends," "expects," and similar
expressions. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause actual results,
events or developments to be materially different from future results,
events or developments described in the forward-looking statements.
Such factors include those risks described in Iowa Telecom's Form 10-K
on file with the SEC. These factors should be considered carefully and
readers are cautioned not to place undue reliance on such
forward-looking statements. All information is current as of the date
this press release is issued, and Iowa Telecom undertakes no duty to
update this information.
About Iowa Telecom
Iowa Telecommunications Services, Inc. (d/b/a Iowa Telecom) is a
telecommunications service provider that offers local telephone, long
distance, Internet, broadband and network access services to business
and residential customers. Today, the Company serves over 435
communities and employs over 600 people throughout the State of Iowa.
The company's headquarters are in Newton, Iowa. The Company trades on
the New York Stock Exchange under the symbol IWA. For further
information regarding Iowa Telecom, please go to www.iowatelecom.com
and select "Investor Relations." The Iowa Telecom logo is a registered
trademark of Iowa Telecommunications Services, Inc. in the United
States.
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Balance Sheets
(Unaudited)
(dollars in thousands, except per share amounts)
As of As of
Sept. 30, 2006 Dec. 31, 2005
-------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,565 $ 26,782
Accounts receivable, net 21,034 18,121
Inventory 3,886 2,722
Prepayments and other assets 3,070 2,402
-------------- -------------
Total Current Assets 33,555 50,027
-------------- -------------
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 516,038 504,662
Accumulated depreciation (213,046) (189,163)
-------------- -------------
Net Property Plant and Equipment 302,992 315,499
-------------- -------------
GOODWILL 466,635 460,113
INTANGIBLE AND OTHER ASSETS, net 40,926 23,993
INVESTMENT IN AND RECEIVABLE FROM
THE RURAL TELEPHONE FINANCE
COOPERATIVE 13,532 14,890
-------------- -------------
Total Assets $ 857,640 $ 864,522
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 14,000 $ 40,000
Accounts payable 10,473 10,416
Advanced billings and customer
deposits 7,939 6,042
Accrued and other current liabilities 37,935 29,842
-------------- -------------
Total Current Liabilities 70,347 86,300
-------------- -------------
LONG-TERM DEBT 477,778 477,778
DEFERRED TAX LIABILITIES 14,921 -
OTHER LONG-TERM LIABILITIES 19,452 19,913
-------------- -------------
Total long-term liabilities 512,151 497,691
-------------- -------------
TOTAL LIABILITIES 582,498 583,991
-------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
100,000,000 shares authorized,
31,354,670 and 31,065,963 shares
issued and outstanding 314 311
Additional paid-in-capital 321,253 317,877
Retained deficit (50,627) (42,874)
Accumulated other comprehensive income 4,202 5,217
-------------- -------------
Total Stockholders' Equity 275,142 280,531
-------------- -------------
Total Liabilities and Stockholders'
Equity $ 857,640 $ 864,522
============== =============
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Income Statements
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------------
2006 2005 2006 2005
-------- -------- --------- ---------
REVENUE AND SALES
Local services $ 19,135 $ 19,016 $ 57,627 $ 56,844
Network access services 23,532 24,844 71,951 75,711
Toll services 5,419 6,025 16,421 18,000
Other services and sales 11,545 7,991 28,243 22,859
-------- -------- --------- ---------
Total revenues and
sales 59,631 57,876 174,242 173,414
OPERATING EXPENSES
Cost of services and
sales (exclusive of
items shown separately
below) 17,836 16,414 49,233 47,856
Selling, general and
administrative 8,437 11,710 27,470 30,636
Depreciation and
amortization 11,695 11,920 35,263 36,609
-------- -------- --------- ---------
Total operating costs
and expenses 37,968 40,044 111,966 115,101
OPERATING INCOME 21,663 17,832 62,276 58,313
OTHER INCOME (EXPENSE)
Interest and dividend
income 159 140 527 432
Interest expense (7,969) (7,743) (23,577) (23,192)
Other, net (204) (612) (306) (758)
-------- -------- --------- ---------
Total other expense,
net (8,014) (8,215) (23,356) (23,518)
EARNINGS BEFORE INCOME TAXES 13,649 9,617 38,920 34,795
INCOME TAX EXPENSE 5,617 - 8,374 -
-------- --------- --------- ----------
NET INCOME $ 8,032 $ 9,617 $ 30,546 $ 34,795
======== ======== ========= =========
COMPUTATION OF EARNINGS
PER SHARE
Basic - Earnings Per
Share $ 0.26 $ 0.31 $ 0.98 $ 1.13
Basic - Weighted
average number of
shares outstanding 31,254 30,939 31,170 30,894
Diluted - Earnings Per
Share $ 0.25 $ 0.30 $ 0.95 $ 1.10
Diluted - Weighted
average number of
shares outstanding 32,165 31,790 32,062 31,661
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
2006 2005 2006 2005
------------- -------- ------------ --------
CASH FLOWS FROM
OPERATING
ACTIVITIES
Net income $ 8,032 $ 9,617 $ 30,546 $ 34,795
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation 11,249 11,323 33,674 34,824
Amortization of
intangible assets 446 597 1,589 1,785
Gain from sale of
exchanges (2,888) - (4,180) -
Deferred income
taxes 5,307 - 7,720 -
Non-cash stock-
based
compensation
expense 597 541 1,762 1,256
Changes in
operating assets
and liabilities,
net of effects of
business
acquisitions:
Receivables (1,019) 1,916 (321) 797
Inventory 209 1,229 (707) 85
Accounts
payable 971 491 (827) (4,724)
Other assets
and
liabilities (2,151) (361) 407 2,449
------------- -------- ------------ --------
Net cash provided by
operating activities 20,753 25,353 69,663 71,267
CASH FLOWS FROM
INVESTING ACTIVITIES
Capital expenditures (7,026) (9,864) (20,399) (23,532)
Business
acquisitions, net of
cash acquired (18,126) (9) (18,126) (94)
Purchase of spectrum
licenses (3,102) - (3,102) -
Proceeds from sale of
exchanges 8,353 - 13,273 -
------------- --------- ------------ ---------
Net cash used in
investing activities (19,901) (9,873) (28,354) (23,626)
CASH FLOWS FROM
FINANCING ACTIVITIES
Net change in
revolving credit
facility 11,000 (2,000) (26,000) (16,007)
Proceeds from
exercise of employee
stock options 953 811 1,617 1,195
Dividends paid (12,759) (12,521) (38,143) (30,422)
------------- -------- ------------ --------
Net cash used in
financing activities (806) (13,710) (62,526) (45,234)
------------- -------- ------------ --------
Net (Decrease)
Increase in Cash and
Cash Equivalents 46 1,770 (21,217 ) 2,407
------------- -------- ------------ --------
Cash and Cash
Equivalents at
Beginning of Period 5,519 3,511 26,782 2,874
------------- -------- ------------ --------
Cash and Cash
Equivalents at End
of Period $ 5,565 $ 5,281 $ 5,565 $ 5,281
============= ======== ============ ========
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
EXPLANATIONS AND RECONCILIATIONS TO NON-GAAP CONCEPTS
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
2006 2005 2006 2005
---------- -------- --------- ----------
ADJUSTED EBITDA:
Net Income $ 8,032 $ 9,617 $ 30,546 $ 34,795
Income Tax Expense 5,617 - 8,374 -
Interest Expense 7,969 7,743 23,577 23,192
Depreciation and
Amortization 11,695 11,920 35,263 36,609
Unrealized losses on
financial derivatives 204 39 306 185
Non-cash stock-based
compensation expense
(1) 597 541 1,762 1,256
Extraordinary or
unusual (gains) losses - - - -
Non-cash portion of
RTFC Capital
Allocation (2) (33) (32) (99) (99)
Other non-cash losses
(gains) - - - -
Loss (gain) on disposal
of assets not in
ordinary course (2,888) - (4,180) -
Transaction costs - - - -
------------- --------- ---------- -----------
ADJUSTED EBITDA $ 31,193 $ 29,828 $ 95,549 $ 95,938
============= ========= ========== ===========
(1) Included in Selling, General and Administrative Expense on the
Consolidated Statements of Operations.
(2) Included in Interest and Dividend Income on the Consolidated
Statements of Operations.
We present Adjusted EBITDA because we believe it is a useful
indicator of our historical debt capacity and our ability to service
debt and pay dividends. We also present Adjusted EBITDA because
covenants in our credit facilities contain ratios based on Adjusted
EBITDA.
Adjusted EBITDA is defined in our credit facilities as: (1)
consolidated net income, as defined therein; plus (2) the following
items, to the extent deducted from consolidated net income: (a)
interest expense; (b) provision for income taxes; (c) depreciation and
amortization; (d) transaction expenses related to the IPO and the
related debt refinancing and other limited expenses related to
permitted securities offerings, investments and acquisitions incurred
after the closing date of the IPO, to the extent not exceeding $5.0
million; (e) unrealized losses on financial derivatives recognized in
accordance with SFAS No. 133; (f) non-cash stock-based compensation
expense; (g) extraordinary or unusual losses (including extraordinary
or unusual losses on permitted sales of assets and casualty events);
(h) losses on sales of assets other than in the ordinary course of
business; and (i) all other non-cash charges that represent an accrual
for which no cash is expected to be paid in the next twelve months;
minus (3) the following items, to the extent any of them increases
consolidated net income: (w) extraordinary or unusual gains (including
extraordinary or unusual gains on permitted sales of assets and
casualty events); (x) gains on asset disposals not in the ordinary
course; (y) unrealized gains on financial derivatives recognized in
accordance with SFAS No. 133; and (z) all other non-cash income
(including the non-cash portion of any RTFC patronage capital
allocation). If our Adjusted EBITDA were to decline below certain
levels, covenants in our credit facilities that are based on Adjusted
EBITDA, including our fixed charge coverage and total leverage ratio
covenants, may be violated and could cause, among other things, a
default or mandatory prepayment under our credit facilities, or result
in our inability to pay dividends.
We believe that net income is the most directly comparable
financial measure to Adjusted EBITDA under GAAP. Adjusted EBITDA
should not be considered in isolation or as a substitute for
consolidated statement of operations and cash flows data prepared in
accordance with GAAP. Adjusted EBITDA is not a complete measure of an
entity's profitability because it does not include costs and expenses
identified above; nor is Adjusted EBITDA a complete net cash flow
measure because it does not include reductions for cash payments for
an entity's obligation to service its debt, fund its working capital,
capital expenditures and acquisitions and pay its income taxes and
dividends.
CONTACT: Corporate Communications, Inc.
Investor Relations Contacts:
Kevin Inda, 407-566-1180
Kevin.Inda@cci-ir.com
or
Chief Financial Officer
Craig Knock, 641-787-2089
or
Iowa Telecommunications Services, Inc.
Media Contact:
Director, Corporate Communications
Julie White, 641-787-2040
Julie.White@iowatelecom.com