Exhibit 99.1
Iowa Telecom Reports Results for Fourth
Quarter and Year Ended December 31, 2006
NEWTON, Iowa--(BUSINESS WIRE)--March 2, 2007--Iowa
Telecommunications Services, Inc. (NYSE: IWA) today announced
operating results for the fourth quarter and year ended December 31,
2006. Quarterly highlights for the Company include:
-- Operating revenues were $59.8 million.
-- Operating income was $15.4 million.
-- Net income was $3.5 million or $0.11 per diluted share.
-- Adjusted EBITDA (as defined herein) was $28.8 million.
"We're very pleased with our financial and operating performance
during both the fourth quarter and the year," said Alan L. Wells, Iowa
Telecom chairman and chief executive officer. "Our results were very
strong, and were in line with our expectations for our rural
telecommunications business. Operationally, sales of our DSL product
were again outstanding as we added 5,000 new customers during the
quarter. Our rate of access line loss was also in line with our
expectations, as we experienced a decline of only 1,600 total lines
during the fourth quarter, as compared to a decline of 2,000 access
lines during the year ago quarter. We believe these results illustrate
the positive impact that our bundled product offerings are having on
our pace of access line losses. Our financial performance was also
strong, with revenues for both the quarter and the year growing 2.8%
and 1.1%, respectively, over the year ago periods. These increases are
attributable to the success of our bundled product offerings, our DSL
growth, and our expanded CPE and data business.
"Our adjusted EBITDA for the fourth quarter and for the year was
$28.8 million and $124.3 million, respectively. As we've previously
noted, in the fourth quarter we recognized a pension settlement charge
associated with amendments to our pension plan, which lowered to
approximately 40 the number of employees that continue to accrue
pension benefits. While the $2.7 million charge we recorded was less
than we originally estimated, it nonetheless negatively impacted our
reported results for the quarter. In addition, during the fourth
quarter our provision for income tax expense was $3.9 million, as
compared to zero in the year-ago quarter. Excluding the effect of the
pension plan costs and the income tax provision, our results for the
quarter and year were consistent with past performance and were in
line with our expectations.
"While we recorded a provision for income tax expense of $12.3
million in 2006, the recorded tax expense had little impact on our
cash flow, or more importantly, on our ability to pay our dividends to
shareholders," Wells said. "Despite the income tax charge for
accounting purposes, both the continued utilization of our net
operating loss carry forwards and our continued goodwill amortization
for tax purposes serve to minimize our cash tax obligations. As a
result of utilizing these tax attributes, our actual cash taxes paid
in 2006 were only $964,000. As of December 31, 2006, our net operating
loss carry forward balance was $185 million.
"Our capital expenditures were $7.7 million for the fourth quarter
and $28.1 million for 2006, which was on the low end of our guidance,"
Wells continued. "Our cash interest expense for the year was $31.1
million, in line with our prior guidance. We expect cash interest
expense to be between $30.0 million and $32.0 million in 2007. For
2007 we expect our capital expenditures to range between $25.0 million
and $27.0 million, including approximately $2.0 million related to the
purchase and move to our new headquarters location.
"Overall, we are very pleased with our results for the quarter and
year," Wells concluded. "We believe that during 2006 we strengthened
our competitive and strategic position in our markets through several
acquisitions. Our DSL subscribers grew by over 60% during the year,
and we also were successful in slowing our rate of access line
declines. We significantly enhanced our ability to meet the data needs
of our business customers through the acquisition of Baker
Communications. Looking ahead, we intend to continue to pursue
opportunities to profitably grow our business, while at the same time
returning a significant portion of our cash flow back to our
shareholders in the form of dividends."
FINANCIAL DISCUSSION FOR FOURTH QUARTER 2006:
-- Operating Revenues were $59.8 million in the fourth quarter
compared to $58.2 million in the fourth quarter of 2005.
Network access services revenues decreased $1.3 million, or
4.9%, for the fourth 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 $3.2 million, or 39.6%, increase in other sales
and services. The revenue increase was primarily due to growth
of our CPE and data business. DSL and dial up Internet access
service revenues also increased $1.1 million, or 19.1%, due
primarily to customer growth.
-- Operating Costs and Expenses increased $5.1 million, or 13.0%,
in the fourth quarter of 2006 as compared to the fourth
quarter of 2005. Selling, general and administrative costs
increased $3.6 million, or 32.5%, for the fourth quarter,
primarily as a result of a $2.7 million pension settlement
charge related to amendments to our defined pension plans
compared to a similar $435,000 charge during the 2005 period.
Cost of service and sales increased $1.0 million, or 6.4%,
principally due to the growth of our CPE and data business.
Depreciation and amortization increased $482,000, or 4.0%,
during the fourth quarter compared to 2005.
-- Operating Income was $15.4 million in the fourth quarter of
2006 as compared to $18.9 million in the same period in 2005.
The decrease in operating income was primarily the result of
the $2.2 million increase in the pension settlement charge
related to amendments to our defined benefit pension plans.
-- Interest Expense for the fourth quarter increased $234,000, or
3.0%, to $8.1 million compared to $7.9 million in the same
period in 2005. The increase was the result of higher interest
rates on our variable rate debt and an increase in the rate on
our interest rate swap agreement.
-- Interest and Dividend Income decreased to $426,000 during the
fourth quarter, due primarily to higher RTFC dividend income
during 2005.
-- Earnings Before Income Taxes for the fourth quarter of 2006
were $7.4 million compared to $11.6 million in the fourth
quarter of 2005.
-- Income Tax Expense for the fourth quarter was $3.9 million
compared to zero in the fourth 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 $310,000,
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 $185
million.
-- Net Income was $3.5 million for the quarter compared to net
income of $11.6 million in the fourth quarter of 2005.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $28.8
million for the fourth quarter of 2006 as compared with $31.9
million in the same period in 2005.
-- Total Access Linesdecreased by 1,600 during the fourth quarter
of 2006 from the third quarter in 2006, as ILEC access lines
declined by 2,400 lines and CLEC lines increased by 800 lines.
Total access lines decreased by 1,600, or 0.6%, for the fourth
quarter of 2006 as compared to 2,000, or 0.8%, for the fourth
quarter in 2005.
Fourth Quarter 2006 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
4th Quarter 4th Quarter Change
-----------------
2006 2005 Amount Percent
----------- ----------- --------- -------
Revenue $ 59,843 $ 58,226 $ 1,617 2.8%
Operating Income $ 15,403 $ 18,901 $ (3,498) -18.5%
Interest Expense $ 8,131 $ 7,897 $ 234 3.0%
Earnings Before Income
Taxes $ 7,432 $ 11,595 $ (4,163) -35.9%
Net Income $ 3,497 $ 11,595 $ (8,098) -69.8%
Basic Earnings Per Share $ 0.11 $ 0.37 $ (0.26) -70.3%
Diluted Earnings Per Share $ 0.11 $ 0.36 $ (0.25) -69.4%
Adjusted EBITDA (1) $ 28,768 $ 31,926 $ (3,158) -9.9%
Capital Expenditures $ 7,723 $ 6,609 $ 1,114 16.9%
Dividends Paid $ 12,836 $ 12,666 $ 170 1.3%
(1) See the definition of Adjusted EBITDA under Explanation and
Reconciliation to Non-GAAP Concepts at the end of the financial
statements.
4th Quarter 4th Quarter Change
-----------------
Key Operating Statistics 2006 2005 Amount Percent
----------- ----------- --------- -------
Telephone Access Lines
ILEC Lines (1) 228,200 237,900 (9,700) -4.1%
CLEC Lines (2) 23,800 20,800 3,000 14.4%
Total Telephone Access
Lines 252,000 258,700 (6,700) -2.6%
Long Distance Subscribers 146,600 142,800 3,800 2.7%
Dial-up Internet
Subscribers 31,500 41,700 (10,200) -24.5%
DSL Subscribers 50,000 31,200 18,800 60.3%
4th Quarter 3rd Quarter Change
-----------------
Key Operating Statistics 2006 2006 Amount Percent
----------- ----------- --------- -------
Telephone Access Lines
ILEC Lines (1) 228,200 230,600 (2,400) -1.0%
CLEC Lines (2) 23,800 23,000 800 3.5%
Total Telephone Access
Lines 252,000 253,600 (1,600) -0.6%
Long Distance Subscribers 146,600 145,900 700 0.5%
Dial-up Internet
Subscribers 31,500 33,700 (2,200) -6.5%
DSL Subscribers 50,000 45,000 5,000 11.1%
(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 3,100
wholesale lines subscribed at December 31, 2006 and 3,200 at
September 30, 2006 and December 31, 2005. 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.
FINANCIAL DISCUSSION FOR YEAR ENDED DECEMBER 31, 2006:
-- Operating Revenues increased $2.4 million, or 1.1%, to $234.1
million for the year ended December 31, 2006, as compared to
2005. The increase was primarily the result of an $8.6
million, or 27.8% increase, in other services and sales
revenue. Specifically, the increase was due to a $5.8 million,
or 51.6%, increase in DSL Internet access revenue, as well as
from the growth of our CPE business as a result of our
acquisition of Baker Communications in August 2006.
-- Operating Costs and Expenses increased $2.0 million, or 1.3%,
to $156.4 million in 2006 as compared to 2005. Cost of service
and sales increased $2.4 million, or 3.8%, principally due our
acquisition of Baker Communications. Selling, general and
administrative expenses increased $434,000, or 1.0%, which
included a pension settlement charge increase of $1.5 million
and a $526,000 increase in non-cash equity-based compensation.
Also contributing to the increase in selling, general and
administrative expenses was a $2.0 million benefit in 2005
resulting from the settlement of past access disputes.
Offsetting these increases was a $4.2 million gain on the sale
of eight exchanges during the period. Depreciation and
amortization decreased by $864,000, or 1.8%, for 2006 as
compared to 2005.
-- Operating Income increased to $77.7 million in 2006 compared
to $77.2 million in 2005.
-- Interest Expense increased $619,000, or 2.0%, in 2006 as
compared to 2005, principally as a result of higher interest
rates on our variable rate debt and the increase in the rate
on our interest rate swap agreement resulting from the
extension of the term in August 2005.
-- Interest and Dividend Income decreased $125,000, or 11.6%, in
2006, due primarily to higher RTFC dividend income in 2005.
-- Earnings Before Income Taxes for the year was $46.4 million,
and was in line with 2005.
-- Income Tax Expense for 2006 was $12.3 million compared to zero
in 2005. The Company paid actual cash income taxes in 2006 of
$964,000.
-- Net Income decreased to $34.0 million in 2006 from $46.4
million 2005. The decrease was primarily the result of
non-cash book income tax expense of $12.3 million in 2006.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $124.3
million for 2006 as compared with $127.9 million for 2005. The
decrease in Adjusted EBITDA was primarily the result of the
previously described pension settlement charges, and the
benefit of the one-time settlement of access disputes during
2005.
-- Total Access Linesdecreased by 6,700, or 2.6%, for 2006 as
compared to 2005. Incumbent local exchange carrier access
lines declined by 9,700 lines and CLEC lines increased by
3,000 lines from the end of 2005. During the year, 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 2,600 access lines and 300 DSL
subscribers in eight other exchanges were sold.
2006 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
Change
--------------------------
2006 2005 Amount Percent
--------- --------- --------- ----------------
Revenue $234,085 $231,640 $ 2,445 1.1%
Operating Income $ 77,679 $ 77,214 $ 465 0.6%
Interest Expense $ 31,708 $ 31,089 $ 619 2.0%
Earnings Before Income
Taxes $ 46,352 $ 46,390 $ (38) -0.1%
Net Income $ 34,043 $ 46,390 $(12,347) -26.6%
Basic Earnings Per
Share $ 1.09 $ 1.50 $ (0.41) -27.3%
Diluted Earnings Per
Share $ 1.06 $ 1.46 $ (0.40) -27.4%
Adjusted EBITDA (1) $124,317 $127,864 $ (3,547) -2.8%
Capital Expenditures $ 28,122 $ 30,141 $ (2,019) -6.7%
(1) See the definition of Adjusted EBITDA under Explanation and
Reconciliation to Non-GAAP Concepts at the end of the financial
statements.
Investor Call
As previously announced, Iowa Telecom's management will hold a
conference call to discuss the fourth quarter and year ended 2006
results on Friday, March 2, 2007, at 9:00 a.m. (Eastern Time). To
listen to the call, participants should dial (719) 457-2728
approximately 10 minutes prior to the start of the call. A telephonic
replay will become available after 12:00 p.m. (Eastern Time) on March
2, 2007 and will remain available through March 9, 2007 by dialing
(719) 457-0820 and entering Confirmation Code 5984869.
The live broadcast of Iowa Telecom's quarterly conference call
will be available online at www.iowatelecom.com or www.earnings.com on
March 2, 2007, 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 440
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
Dec. 31, 2006 Dec. 31, 2005
-------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 13,613 $ 26,782
Accounts receivable, net 20,828 18,121
Inventory 3,124 2,722
Prepayments and other assets 2,550 2,402
-------------- --------------
Total Current Assets 40,115 50,027
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 521,556 504,662
Accumulated depreciation (222,581) (189,163)
-------------- --------------
Net Property Plant and Equipment 298,975 315,499
-------------- --------------
GOODWILL 466,554 460,113
INTANGIBLE AND OTHER ASSETS, net 39,982 23,993
INVESTMENT IN AND RECEIVABLE FROM THE
RURAL TELEPHONE FINANCE COOPERATIVE
13,903 14,890
-------------- --------------
Total Assets $ 859,529 $ 864,522
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 31,000 $ 40,000
Accounts payable 9,565 10,416
Advanced billings and customer
deposits 8,460 6,042
Accrued and other current liabilities 32,035 29,842
-------------- --------------
Total Current Liabilities 81,060 86,300
-------------- --------------
LONG-TERM DEBT 477,778 477,778
DEFERRED TAX LIABILITIES 18,716 -
OTHER LONG-TERM LIABILITIES 14,276 19,913
-------------- --------------
Total long-term liabilities 510,770 497,691
-------------- --------------
TOTAL LIABILITIES 591,830 583,991
-------------- --------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
100,000,000 shares authorized,
31,379,670 and 31,065,963 shares
issued and outstanding 314 311
Additional paid-in-capital 322,016 317,877
Retained deficit (59,976) (42,874)
Accumulated other comprehensive
income 5,345 5,217
-------------- --------------
Total Stockholders' Equity 267,699 280,531
-------------- --------------
Total Liabilities and Stockholders'
Equity $ 859,529 $ 864,522
============== ==============
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Income Statements
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
REVENUE AND SALES
Local services $18,801 $18,737 $ 76,428 $ 75,581
Network access services 24,266 25,516 96,217 101,227
Toll services 5,383 5,813 21,804 23,813
Other services and sales 11,393 8,160 39,636 31,019
--------- -------- --------- ---------
Total revenues and sales 59,843 58,226 234,085 231,640
OPERATING EXPENSES
Cost of services and sales
(exclusive of items shown
separately below) 17,295 16,262 66,528 64,118
Selling, general and
administrative 14,672 11,072 42,142 41,708
Depreciation and
amortization 12,473 11,991 47,736 48,600
--------- -------- --------- ---------
Total operating costs and
expenses 44,440 39,325 156,406 154,426
OPERATING INCOME 15,403 18,901 77,679 77,214
OTHER INCOME (EXPENSE)
Interest and dividend income 426 646 953 1,078
Interest expense (8,131) (7,897) (31,708) (31,089)
Other, net (266) (55) (572) (813)
--------- -------- --------- ---------
Total other expense, net (7,971) (7,306) (31,327) (30,824)
EARNINGS BEFORE INCOME TAXES 7,432 11,595 46,352 46,390
INCOME TAX EXPENSE 3,935 - 12,309 -
--------- -------- --------- ---------
NET INCOME $ 3,497 $11,595 $ 34,043 $ 46,390
========= ======== ========= =========
COMPUTATION OF EARNINGS PER
SHARE
Basic - Earnings Per
Share $ 0.11 $ 0.37 $ 1.09 $ 1.50
Basic - Weighted average
number of shares
outstanding 31,371 31,062 31,221 30,937
Diluted - Earnings Per
Share $ 0.11 $ 0.36 $ 1.06 $ 1.46
Diluted - Weighted
average number of shares
outstanding 32,220 31,900 32,104 31,720
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 3,497 $ 11,595 $ 34,043 $ 46,390
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 11,953 11,389 45,627 46,213
Amortization of
intangible assets 520 602 2,109 2,387
Amortization of debt
issuance costs 148 148 591 591
Gain from sale of
exchanges (14) - (4,194) -
Deferred income taxes 3,960 - 11,680 -
Non-cash stock-based
compensation
expense 592 572 2,354 1,828
Changes in operating
assets and liabilities,
net of effects of
business acquisitions:
Receivables 122 498 (199) 1,295
Inventory 493 172 (214) 257
Accounts payable (915) (749) (1,742) (5,473)
Other assets and
liabilities (526) 1,827 (562) 3,833
--------- --------- --------- ---------
Net cash provided by
operating activities 19,830 26,054 89,493 97,321
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures (7,723) (6,609) (28,122) (30,141)
Business acquisitions, net of
cash acquired 11 - (18,115) (94)
Purchase of wireless licenses (8,371) - (11,473) -
Proceeds from sale of
properties 14 - 13,287 -
--------- --------- --------- ---------
Net cash used in investing
activities (16,069) (6,609) (44,423) (30,235)
CASH FLOWS FROM FINANCING
ACTIVITIES
Net change in revolving
credit facility 17,000 14,500 (9,000) (1,507)
Proceeds from exercise of
employee stock options 123 222 1,740 1,417
Dividends paid (12,836) (12,666) (50,979) (43,088)
--------- --------- --------- ---------
Net cash used in financing
activities 4,287 2,056 (58,239) (43,178)
--------- --------- --------- ---------
Net (Decrease) Increase in
Cash and Cash Equivalents 8,048 21,501 (13,169) 23,908
--------- --------- --------- ---------
Cash and Cash Equivalents at
Beginning of Period 5,565 5,281 26,782 2,874
--------- --------- --------- ---------
Cash and Cash Equivalents at
End of Period $ 13,613 $ 26,782 $ 13,613 $ 26,782
========= ========= ========= =========
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
EXPLANATIONS AND RECONCILIATIONS TO NON-GAAP CONCEPTS
(Unaudited)
(in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
---------- -------- --------- ---------
ADJUSTED EBITDA:
Net Income $ 3,497 $11,595 $ 34,043 $ 46,390
Income Tax Expense 3,935 - 12,309 -
Interest Expense 8,131 7,897 31,708 31,089
Depreciation and Amortization 12,473 11,991 47,736 48,600
Unrealized losses on
financial derivatives 266 49 572 234
Non-cash stock-based
compensation expense (1) 592 572 2,354 1,828
Extraordinary or unusual
(gains) losses - - - -
Non-cash portion of RTFC
Capital Allocation (2) (112) (178) (211) (277)
Other non-cash losses (gains) - - - -
Loss (gain) on disposal of
assets not in ordinary
course (14) - (4,194) -
Transaction costs - - - -
---------- -------- --------- ---------
ADJUSTED EBITDA $ 28,768 $31,926 $124,317 $127,864
========== ======== ========= =========
(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: Iowa Telecommunications Services, Inc., Newton
Investor Relations:
Craig Knock, Chief Financial Officer, 641-787-2089
or
Media Relations:
Julie White, 641-787-2040
Director, Corporate Communications
Julie.White@iowatelecom.com
or
Corporate Communications, Inc.
Investor Relations:
Kevin Inda, 407-566-1180
Kevin.Inda@cci-ir.com