Exhibit 99.1
Iowa Telecom Reports Results for Second Quarter Ended June 30, 2007
NEWTON, Iowa--(BUSINESS WIRE)--Aug. 8, 2007--Iowa
Telecommunications Services, Inc. (NYSE: IWA) today announced
operating results for the second quarter ended June 30, 2007.
Quarterly highlights for the Company include:
-- Operating revenues were $62.7 million.
-- Operating income was $19.2 million.
-- Net income was $6.6 million or $0.20 per diluted share.
-- Adjusted EBITDA (as defined herein) was $32.2 million.
"We're very pleased with our second quarter performance, which was
in line with our expectations," said Alan L. Wells, Iowa Telecom
chairman and chief executive officer. "The continued success of our
bundled product offerings, our DSL growth, and our expanded customer
premise equipment (CPE) and data business resulted in a 9.7% increase
in revenue from a year ago. While the second quarter has historically
been our softest due to seasonal trends, sales of our DSL product
remained solid as we added 2,700 new customers during the quarter. Our
rate of access line loss for the quarter increased to 3,300 lines, but
approximately 500 of the ILEC lines lost were related to internet
service for a single wholesale customer that scaled back operations in
our markets.
"Adjusted EBITDA for the quarter was consistent with the year ago
quarter at $32.2 million," added Wells. "Income tax expense for the
quarter was $4.8 million compared to $2.8 million a year ago, but our
actual cash taxes paid during the quarter were only $439,000. For the
first six months of this year, our actual cash taxes paid were
$442,000. Our net operating loss carry forwards and our continued
goodwill amortization for tax purposes serve to minimize our cash
income tax obligations, and thus our recorded tax expense has little
impact on our cash flow, or more importantly, on our ability to pay
dividends to our shareholders.
"Our guidance for 2007 remains on track as we continue to expect
capital expenditures for the year to be between $25.0 million and
$27.0 million, and expect cash interest expense to be between $30.0
million and $32.0 million," Wells continued. "For the first six months
of this year, capital expenditures were $13.2 million, and our cash
interest expense was $15.8 million.
"We are very pleased with our results for the first half of 2007.
As we move into the balance of the year, our focus will be on
continuing to expand our data and CPE business, growing our DSL
subscriber base, and retaining access lines through innovative bundled
product offerings," Wells concluded. "We will also continue to
identify and evaluate acquisition opportunities that are accretive and
strategically beneficial to our rural telecommunications business."
FINANCIAL DISCUSSION FOR SECOND QUARTER 2007:
-- Revenues and Sales were $62.7 million in the second quarter
compared to $57.2 million in the second quarter of 2006.
Network access services revenues increased $1.1 million, or
4.5%, for the second quarter. The increase is in part due to
$980,000 of revenue from the resolution of certain
non-recurring network access billing matters with a connecting
carrier. Local services revenues decreased $692,000, or 3.6%,
primarily due to access line erosion. Other services and sales
revenues increased by $5.4 million, or 62.8%, primarily as a
result of growth in our CPE and data business. Additionally,
DSL Internet access service revenues increased $1.6 million,
or 38.5%, due primarily to customer growth.
-- Operating Costs and Expenses increased $7.3 million, or 20.1%,
in the second quarter of 2007 as compared to the second
quarter of 2006. Cost of service and sales increased $4.4
million, or 27.5%, principally due to the growth of our CPE
and data business. Selling, general and administrative costs
increased $2.6 million compared to the year-ago period, as the
2006 period included the benefit of a $1.3 million gain on the
sale of three exchanges. Depreciation and amortization
increased $341,000, or 2.9%, during the second quarter
compared to 2006.
-- Operating Income was $19.2 million in the second quarter of
2007 as compared to $20.9 million in the same period in 2006.
The decrease is primarily related to the one-time $1.3 million
gain on sale of exchanges that was included in the 2006
period.
-- Interest Expense for the second quarter increased $181,000, or
2.3%, 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 second quarter of 2007
were $11.4 million compared to $13.3 million in the second
quarter of 2006.
-- Income Tax Expense for the second quarter was $4.8 million
compared to $2.8 million in the second quarter of 2006. The
2006 quarter was lower as a result of a $2.5 million valuation
allowance reversal. 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 actual cash taxes paid during the
quarter as the Company paid actual cash income taxes during
the quarter of only $439,000. Cash income taxes reflect 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 $164 million.
-- Net Income was $6.6 million for the quarter compared to net
income of $10.5 million in the second quarter of 2006. The
change is primarily due to the one-time benefits of the $1.3
million gain on exchange sales and the $2.5 million income tax
valuation allowance reversal, both of which were recorded in
the second quarter of 2006.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $32.2
million for the second quarter of 2007, as compared with $32.2
million in the same period in 2006.
-- Total Access Lines decreased by 3,300 during the second
quarter of 2007 from the first quarter in 2007, as ILEC access
lines declined by 4,000 lines and CLEC lines increased by 700
lines. During the quarter approximately 500 of the access
lines lost related to internet service to a single wholesale
customer that scaled back operations. The total access line
decrease of 3,300, or 1.3%, for the second quarter of 2007
compared to 2,900, or 1.1%, for the second quarter of 2006.
Second Quarter 2007 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
2nd Quarter 2nd Quarter Change
------------------
2007 2006 Amount Percent
- ----------------------------------------------------------------------
Revenue $ 62,735 $ 57,172 $ 5,563 9.7%
Operating Income $ 19,184 $ 20,922 $ (1,738) -8.3%
Interest Expense $ 7,965 $ 7,784 $ 181 2.3%
Earnings Before Income
Taxes $ 11,352 $ 13,253 $ (1,901) -14.3%
Income Tax Expense $ 4,778 $ 2,757 $ 2,021 73.3%
Net Income $ 6,574 $ 10,496 $ (3,922) -37.4%
Basic Earnings Per Share $ 0.21 $ 0.34 $ (0.13) -38.2%
Diluted Earnings Per Share $ 0.20 $ 0.33 $ (0.13) -39.4%
Adjusted EBITDA (1) $ 32,235 $ 32,224 $ 11 -
Capital Expenditures and
Acquisitions $ 6,675 $ 8,261 $ (1,586) -19.2%
Dividends Paid $ 12,846 $ 12,704 $ 142 1.1%
(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 2nd Quarter 2nd Quarter
2007 2006 % Change
- ---------------------------------------------------------------
Telephone Access Lines
ILEC Lines (1) 222,800 232,800 -4.3%
CLEC Lines (2) 25,300 22,000 15.0%
----------- ----------- ---------
Total Telephone Access
Lines 248,100 254,800 -2.6%
Long Distance Subscribers 147,000 145,000 1.4%
Dial-up Internet
Subscribers 26,700 37,400 -28.6%
DSL Subscribers 57,900 38,600 50.0%
2nd Quarter 1st Quarter
2007 2007 % Change
-----------------------------------
Telephone Access Lines
ILEC Lines (1) 222,800 226,800 -1.8%
CLEC Lines (2) 25,300 24,600 2.8%
----------- ----------- ----------
Total Telephone Access
Lines 248,100 251,400 -1.3%
Long Distance Subscribers 147,000 147,700 -0.5%
Dial-up Internet
Subscribers 26,700 29,200 -8.6%
DSL Subscribers 57,900 55,200 4.9%
(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 June 30, 2006; 3,100 at December 31,
2006; and 3,000 at June 30, 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 second quarter 2007 results on
Wednesday, August 8, 2007, at 10:00 a.m. (Eastern Time). To listen to
the call, participants should dial (719) 457-2697 approximately 10
minutes prior to the start of the call. A telephonic replay will
become available after 1:00 p.m. (Eastern Time) on August 8, 2007 and
will remain available through August 15, 2007 by dialing (719)
457-0820 and entering Confirmation Code 4435783.
The live broadcast of Iowa Telecom's quarterly conference call
will be available online at www.iowatelecom.com or www.earnings.com on
August 8, 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
June 30, 2007 December 31, 2006
------------- -----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,585 $ 13,613
Accounts receivable, net 21,909 20,828
Inventory 3,623 3,124
Prepayments and other assets 3,054 2,550
------------ -----------------
Total Current Assets 34,171 40,115
------------ -----------------
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 532,933 521,556
Accumulated depreciation (243,899) (222,581)
------------- -----------------
Net Property Plant and Equipment 289,034 298,975
------------- -----------------
GOODWILL 466,554 466,554
INTANGIBLE ASSETS AND OTHER, net 42,362 39,982
INVESTMENT IN AND RECEIVABLE FROM
THE RURAL TELEPHONE FINANCE
COOPERATIVE 13,729 13,903
------------- -----------------
Total Assets $ 845,850 $ 859,529
============= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 12,000 $ 31,000
Accounts payable 11,024 9,565
Advanced billings and customer
deposits 8,383 8,460
Accrued and other current
liabilities 29,997 32,035
------------ ------------------
Total Current Liabilities 61,404 81,060
------------ ------------------
LONG-TERM DEBT 477,778 477,778
DEFERRED TAX LIABILITIES 34,680 18,716
OTHER LONG-TERM LIABILITIES 6,691 14,276
------------ ----------------
Total long-term liabilities 519,149 510,770
------------ ----------------
TOTAL LIABILITIES 580,553 591,830
------------- -----------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
100,000,000 shares authorized,
31,416,313 and 31,379,670 shares
issued and outstanding 314 314
Additional paid-in-capital 323,000 322,016
Retained deficit (68,668) (59,976)
Accumulated other comprehensive
income 10,651 5,345
------------- -----------------
Total Stockholders' Equity 265,297 267,699
------------- -----------------
Total Liabilities and Stockholders'
Equity $ 845,850 $ 859,529
============= =================
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Income Statements
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2007 2006 2007 2006
------- ------- -------- --------
REVENUE AND SALES
Local services $18,745 $19,437 $37,592$ 38,492
Network access services 24,736 23,671 54,017 48,419
Toll services 5,285 5,483 10,675 11,002
Other services and sales 13,969 8,581 26,947 16,698
------- ------- -------- --------
Total revenues and sales 62,735 57,172 129,231 114,611
OPERATING COSTS AND EXPENSES
Cost of services and sales
(exclusive of items shown
separately below) 20,200 15,849 38,576 31,397
Selling, general and
administrative 11,121 8,512 21,602 19,033
Depreciation and
amortization 12,230 11,889 24,258 23,568
------- ------- -------- --------
Total operating costs and
expenses 43,551 36,250 84,436 73,998
OPERATING INCOME 19,184 20,922 44,795 40,613
OTHER INCOME (EXPENSE)
Interest and dividend income 182 167 553 368
Interest expense (7,965) (7,784) (15,977) (15,608)
Other, net (49) (52) (273) (102)
------- ------- -------- --------
Total other expense, net (7,832) (7,669) (15,697) (15,342)
EARNINGS BEFORE INCOME TAXES 11,352 13,253 29,098 25,271
INCOME TAX EXPENSE 4,778 2,757 12,051 2,757
-------- ------- -------- ---------
NET INCOME $ 6,574 $10,496 $ 17,047 $ 22,514
======== ======= ======== =========
COMPUTATION OF EARNINGS
PER SHARE
Basic - Earnings Per
Share $ 0.21 $ 0.34 $ 0.54 $ 0.72
Basic - Weighted average
number of shares
outstanding 31,406 31,168 31,393 31,127
Diluted - Earnings Per
Share $ 0.20 $ 0.33 $ 0.53 $ 0.70
Diluted - Weighted
average number of shares
outstanding 32,072 32,063 32,043 32,007
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2007 2006 2007 2006
------- ------- ------- -------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 6,574 $ 10,496 $ 17,047 $ 22,514
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 11,772 11,325 23,267 22,425
Amortization of intangible
assets 458 564 991 1,143
Amortization of debt
issuance costs 148 148 296 296
Gain from sale of exchanges - (1,318) - (1,292)
Deferred income taxes 4,379 2,585 11,274 2,413
Non-cash stock-based
compensation expense 680 597 1,273 1,165
Changes in operating assets
and liabilities; net of
effects of business
acquisitions:
Receivables (1,823) 1,433 (1,081) 698
Inventory (261) (364) (499) (916)
Accounts payable 839 243 1,459 (1,798)
Other assets and
liabilities 1,430 3,636 (3,856) 2,262
-------- -------- -------- --------
Net cash provided by operating
activities 24,196 29,345 50,171 48,910
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures (6,675) (8,261) (13,212) (13,373)
Proceeds from sale of
exchanges - 4,825 - 4,920
--------- -------- --------- --------
Net cash used in investing
activities (6,675) (3,436) (13,212) (8,453)
CASH FLOWS FROM FINANCING
ACTIVITIES
Net change in revolving credit
facility (4,000) (13,000) (19,000) (37,000)
Proceeds from exercise of
employee stock options 21 307 21 664
Shares reacquired (316) (316)
Dividends paid (12,846) (12,704) (25,692) (25,384)
--------- -------- -------- --------
Net cash used in financing
activities (17,141) (25,397) (44,987) (61,720)
--------- -------- -------- --------
Net (Decrease) Increase in
Cash and Cash Equivalents 380 512 (8,028) (21,263)
--------- -------- -------- --------
Cash and Cash Equivalents at
Beginning of Period 5,205 5,007 13,613 26,782
-------- -------- -------- --------
Cash and Cash Equivalents at
End of Period $ 5,585 $ 5,519 $ 5,585 $ 5,519
======== ======== ======== =========
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
EXPLANATIONS AND RECONCILIATIONS TO NON-GAAP CONCEPTS
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2007 2006 2007 2006
--------- -------- -------- --------
ADJUSTED EBITDA:
Net Income $ 6,574 $10,496 $17,047 $22,514
Income Tax Expense 4,778 2,757 12,051 2,757
Interest Expense 7,965 7,784 15,977 15,608
Depreciation and Amortization 12,230 11,889 24,258 23,568
Unrealized losses on financial
derivatives 49 52 273 102
Non-cash stock-based compensation
expense (1) 680 597 1,273 1,165
Extraordinary or unusual (gains)
losses - - - -
Non-cash portion of RTFC Capital
Allocation (2) (41) (33) (199) (66)
Other non-cash losses (gains) - - - -
Loss (gain) on disposal of assets
not in ordinary course - (1,318) - (1,292)
Transaction costs - - - -
--------- -------- -------- --------
ADJUSTED EBITDA $32,235 $32,224 $70,680 $64,356
========= ======== ======== ========
(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.
Media Contact:
Julie White, 641-787-2040
Director, Corporate Communications
Julie.White@iowatelecom.com
or
Corporate Communications, Inc.
Investor Relations Contacts:
Kevin Inda, 407-566-1180
Kevin.Inda@cci-ir.com
or
Craig Knock, 641-787-2089
Chief Financial Officer