Exhibit 99.1
Iowa Telecom Reports Results for First Quarter Ended March 31, 2007
NEWTON, Iowa--(BUSINESS WIRE)--May 3, 2007--Iowa
Telecommunications Services, Inc. (NYSE: IWA) today announced
operating results for the first quarter ended March 31, 2007.
Quarterly highlights for the Company include:
-- Operating revenues were $66.5 million.
-- Operating income was $25.6 million.
-- Net income was $10.5 million or $0.33 per diluted share.
-- Adjusted EBITDA (as defined herein) was $38.4 million.
"Our results were excellent in the first quarter," said Alan L.
Wells, Iowa Telecom chairman and chief executive officer. "We continue
to be very pleased with the sales of our DSL product as we added 5,200
new customers during the quarter. Our rate of access line loss also
continued to improve as we experienced a decline of only 600 total
lines during the first quarter. Revenues for the first quarter
increased 15.8%, including $4.8 million of revenue from the resolution
of certain non-recurring network access billing matters with
connecting carriers. Excluding this item, revenues increased $4.3
million over the year-ago period as a result of the continued success
of our bundled product offerings, our DSL growth, and our expanded
customer premise equipment (CPE) and data business.
"On a year-over-year basis, our Adjusted EBITDA increased 19.6%,
or $6.3 million, to $38.4 million," added Wells. "During the quarter
we recorded income tax expense of $7.3 million, as compared to zero in
the year-ago quarter. As we have noted since we began recording book
income tax expense in the second quarter of 2006, this recorded tax
expense has little impact on our cash flow, or more importantly, on
our ability to pay dividends to our shareholders since our actual cash
taxes paid during the quarter were only $3,000. Our net operating loss
carry forwards and our continued goodwill amortization for tax
purposes serve to minimize our cash income tax obligations. Our
earnings before taxes actually increased 47.7%, or $5.7 million, to
$17.7 million compared to the year-ago period.
"Capital expenditures were $6.5 million for the quarter, and our
cash interest expense was $7.9 million," Wells continued. "These
levels are on track with our guidance as we continue to expect our
2007 capital expenditures to be between $25.0 million and $27.0
million, and continue to expect cash interest expense to be between
$30.0 million and $32.0 million.
"Overall, we are very pleased with our first quarter performance,"
Wells concluded. "For the remainder of the year we will continue our
focus of growing both our DSL subscriber base and our data business."
FINANCIAL DISCUSSION FOR FIRST QUARTER 2007:
-- Operating Revenues were $66.5 million in the first quarter
compared to $57.4 million in the first quarter of 2006.
Network access services revenues increased $4.5 million, or
18.3%, for the first quarter. The increase is primarily due to
$4.8 million of revenue from the resolution of certain
non-recurring network access billing matters with connecting
carriers. Also contributing to the increase was a $4.9
million, or 59.9%, increase in other sales and services. The
revenue increase was primarily due to growth of our CPE and
data business. DSL Internet access service revenues increased
$1.6 million, or 45.3%, due primarily to customer growth.
-- Operating Costs and Expenses increased $3.1 million, or 8.3%,
in the first quarter of 2007 as compared to the first quarter
of 2006. Cost of service and sales increased $2.8 million, or
18.2%, principally due to the growth of our CPE and data
business. Selling, general and administrative costs decreased
$40,000 compared to the year-ago period. Depreciation and
amortization increased $349,000, or 3.0%, during the first
quarter compared to 2006.
-- Operating Income was $25.6 million in the first quarter of
2007 as compared to $19.7 million in the same period in 2006.
The increase was primarily the result of the $4.8 million in
higher revenue associated with the previously discussed
network access matters.
-- Interest Expense for the first quarter increased $188,000, or
2.4%, to $8.0 million compared to $7.8 million in the same
period in 2006. The increase was the result of higher interest
rates on our variable rate debt and a higher average balance
on our revolving credit facility.
-- Earnings Before Income Taxes for the first quarter of 2007
were $17.7 million compared to $12.0 million in the first
quarter of 2006.
-- Income Tax Expense for the first quarter was $7.3 million
compared to zero in the first quarter of 2006. 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. Cash income taxes reflect the continued
utilization of net operating loss carry forwards and continued
goodwill amortization for tax purposes. The Company paid
actual cash income taxes during the quarter of $3,000. At the
end of the quarter, the Company had a net operating loss carry
forward balance of approximately $171 million.
-- Net Income was $10.5 million for the quarter compared to net
income of $12.0 million in the first quarter of 2006.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $38.4
million for the first quarter of 2007 as compared with $32.1
million in the same period in 2006.
-- Total Access Lines decreased by 600 during the first quarter
of 2007 from the fourth quarter in 2006, as ILEC access lines
declined by 1,400 lines and CLEC lines increased by 800 lines.
The total access line decrease of 600, or 0.2%, for the first
quarter of 2007 compared to 1,000, or 0.4%, for the first
quarter in 2006.
First Quarter 2007 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
1st Quarter 1st Quarter Change
----------------
2007 2006 Amount Percent
- ----------------------------------------------------------------------
Revenue $66,496 $57,439 $9,057 15.8%
Operating Income $25,611 $19,691 $5,920 30.1%
Interest Expense $8,012 $7,824 $188 2.4%
Earnings Before Income Taxes $17,746 $12,018 $5,728 47.7%
Income Tax Expense $7,273 $- $7,273 100.0%
Net Income $10,473 $12,018 $(1,545) -12.9%
Basic Earnings Per Share $0.33 $0.39 $(0.06) -15.4%
Diluted Earnings Per Share $0.33 $0.38 $(0.05) -13.2%
Adjusted EBITDA (1) $38,445 $32,132 $6,313 19.6%
Capital Expenditures $6,537 $5,112 $1,425 27.9%
Dividends Paid $12,846 $12,680 $166 1.3%
(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 1st Quarter 1st Quarter Change
----------------
2007 2006 Amount Percent
- ----------------------------------------------------------------------
Telephone Access Lines
ILEC Lines (1) 226,800 236,400 (9,600) -4.1%
CLEC Lines (2) 24,600 21,300 3,300 15.5%
Total Telephone Access Lines 251,400 257,700 (6,300) -2.4%
Long Distance Subscribers 147,700 144,600 3,100 2.1%
Dial-up Internet Subscribers 29,200 39,600 (10,400) -26.3%
DSL Subscribers 55,200 35,900 19,300 53.8%
Key Operating Statistics 1st Quarter 4th Quarter Change
----------------
2007 2006 Amount Percent
- ----------------------------------------------------------------------
Telephone Access Lines
ILEC Lines (1) 226,800 228,200 (1,400) -0.6%
CLEC Lines (2) 24,600 23,800 800 3.4%
Total Telephone Access Lines 251,400 252,000 (600) -0.2%
Long Distance Subscribers 147,700 146,600 1,100 0.8%
Dial-up Internet Subscribers 29,200 31,500 (2,300) -7.3%
DSL Subscribers 55,200 50,000 5,200 10.4%
(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 3,200
wholesale lines subscribed at March 31, 2006; 3,100 at December 31,
2006; and 3,000 at March 31, 2007.
(2) Access lines subscribed by customers of our competitive local
exchange carrier subsidiaries, Iowa Telecom Communications, Inc. and
IT Communications, LLC.
Investor Call
As previously announced, Iowa Telecom's management will hold a
conference call to discuss the first quarter 2007 results on Thursday,
May 3, 2007, at 9:00 a.m. (Eastern Time). To listen to the call,
participants should dial (913) 981-5533 approximately 10 minutes prior
to the start of the call. A telephonic replay will become available
after 12:00 p.m. (Eastern Time) on May 3, 2007 and will remain
available through May 10, 2007 by dialing (719) 457-0820 and entering
Confirmation Code 9248550.
The live broadcast of Iowa Telecom's quarterly conference call
will be available online at www.iowatelecom.com or www.earnings.com on
May 3, 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
March 31, 2007 December 31, 2006
-------------- -----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $5,205 $13,613
Accounts receivable, net 20,086 20,828
Inventory 3,362 3,124
Prepayments and other assets 3,026 2,550
-------------- -----------------
Total Current Assets 31,679 40,115
-------------- -----------------
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 527,261 521,556
Accumulated depreciation (233,094) (222,581)
-------------- -----------------
Net Property Plant and Equipment 294,167 298,975
-------------- -----------------
GOODWILL 466,554 466,554
INTANGIBLE AND OTHER ASSETS, net 37,041 39,982
INVESTMENT IN AND RECEIVABLE FROM
THE RURAL TELEPHONE FINANCE
COOPERATIVE 13,592 13,903
-------------- -----------------
Total Assets $843,033 $859,529
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $16,000 $31,000
Accounts payable 10,185 9,565
Advanced billings and customer
deposits 8,254 8,460
Accrued and other current
liabilities 26,469 32,035
-------------- -----------------
Total Current Liabilities 60,908 81,060
-------------- -----------------
LONG-TERM DEBT 477,778 477,778
DEFERRED TAX LIABILITIES 25,147 18,716
OTHER LONG-TERM LIABILITIES 14,555 14,276
-------------- -----------------
Total long-term liabilities 517,480 510,770
-------------- -----------------
TOTAL LIABILITIES 578,388 591,830
-------------- -----------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
100,000,000 shares authorized,
31,380,292 and 31,379,670 shares
issued and outstanding 314 314
Additional paid-in-capital 322,619 322,016
Retained deficit (62,349) (59,976)
Accumulated other comprehensive
income 4,061 5,345
-------------- -----------------
Total Stockholders' Equity 264,645 267,699
-------------- -----------------
Total Liabilities and Stockholders'
Equity $843,033 $859,529
============== =================
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Income Statements
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended
March 31,
------------------
2007 2006
--------- --------
REVENUE AND SALES
Local services $18,847 $19,055
Network access services 29,281 24,748
Toll services 5,390 5,519
Other services and sales 12,978 8,117
--------- --------
Total revenues and sales 66,496 57,439
OPERATING EXPENSES
Cost of services and sales (exclusive of items
shown separately below) 18,376 15,548
Selling, general and administrative 10,481 10,521
Depreciation and amortization 12,028 11,679
--------- --------
Total operating costs and expenses 40,885 37,748
OPERATING INCOME 25,611 19,691
OTHER INCOME (EXPENSE)
Interest and dividend income 371 201
Interest expense (8,012) (7,824)
Other, net (224) (50)
--------- --------
Total other expense, net (7,865) (7,673)
EARNINGS BEFORE INCOME TAXES 17,746 12,018
INCOME TAX EXPENSE 7,273 -
--------- --------
NET INCOME $10,473 $12,018
========= ========
COMPUTATION OF EARNINGS PER SHARE
Basic - Earnings Per Share $0.33 $0.39
Basic - Weighted average number of shares
outstanding 31,380 31,085
Diluted - Earnings Per Share $0.33 $0.38
Diluted - Weighted average number of shares
outstanding 32,013 31,950
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
------------------
2007 2006
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $10,473 $12,018
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 11,495 11,100
Amortization of intangible assets 533 579
Amortization of debt issuance costs 148 148
Loss on sale of exchanges - 26
Deferred income taxes 6,895 (172)
Non-cash stock-based compensation expense 593 568
Changes in operating assets and liabilities,
net of effects of business acquisitions:
Receivables 742 (735)
Inventory (238) (552)
Accounts payable 620 (2,041)
Other assets and liabilities (5,286) (1,374)
--------- --------
Net cash provided by operating activities 25,975 19,565
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (6,537) (5,112)
Proceeds from sale of properties - 95
--------- --------
Net cash used in investing activities (6,537) (5,017)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in revolving credit facility (15,000) (24,000)
Proceeds from exercise of employee stock options - 357
Dividends paid (12,846) (12,680)
--------- --------
Net cash used in financing activities (27,846) (36,323)
--------- --------
Net (Decrease) Increase in Cash and Cash
Equivalents (8,408) (21,775)
--------- --------
Cash and Cash Equivalents at Beginning of Period 13,613 26,782
--------- --------
Cash and Cash Equivalents at End of Period $5,205 $5,007
========= ========
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
EXPLANATIONS AND RECONCILIATIONS TO NON-GAAP CONCEPTS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
------------------
2007 2006
--------- --------
ADJUSTED EBITDA:
Net Income $10,473 $12,018
Income Tax Expense 7,273 -
Interest Expense 8,012 7,824
Depreciation and Amortization 12,028 11,679
Unrealized losses on financial derivatives 224 50
Non-cash stock-based compensation expense (1) 593 568
Extraordinary or unusual (gains) losses - -
Non-cash portion of dividend income (2) (158) (33)
Other non-cash losses (gains) - -
Loss (gain) on disposal of assets not in ordinary
course of business - 26
Transaction costs - -
--------- --------
ADJUSTED EBITDA $38,445 $32,132
========= ========
(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.
*T
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.
Investor Relations Contacts:
Corporate Communications, Inc.
Kevin Inda, 407-566-1180
Kevin.Inda@cci-ir.com
or
Craig Knock, Chief Financial Officer, 641-787-2089
or
Media Contact:
Julie White, 641-787-2040
Director, Corporate Communications
Julie.White@iowatelecom.com