Iowa Telecommunications Services, Inc. (NYSE: IWA) today announced
operating results for the second quarter ended June 30, 2008. Quarterly
highlights for the Company include:
-
Operating revenues were $58.2 million.
-
Operating income was $16.6 million.
-
Net income was $5.3 million or $0.16 per diluted share.
-
Adjusted EBITDA (as defined herein) was $30.3 million.
“We are very pleased with our second quarter
performance, which was solid despite the weather challenges that we
faced in June,” said Alan L. Wells, Iowa
Telecom chairman and chief executive officer. “Our
operations were only minimally impacted by the historic flooding we
experienced, largely because our employees went beyond the call of duty
to avoid disruption to our customers’
communications services.
“Adjusted EBITDA for the quarter was $30.3
million, compared with $32.2 million a year ago,”
added Wells. “Adjusted EBITDA for the quarter
was negatively impacted by a $1.5 million revenue reduction related to a
network access billing matter in the quarter, while comparatively, the
2007 quarter included a $980,000 favorable revenue impact from the
settlement of a similar matter. Sales of our DSL product remained steady
as we added 1,800 new customers during the quarter. Our rate of access
line loss for the quarter was 3,700 lines, and was flat with the first
quarter of the year.
“Subsequent to quarter end, we closed our
acquisition of Bishop Communications Corporation, a local exchange
carrier in Minnesota. We expect the Bishop transaction to be cash flow
accretive on a per share basis, and are excited about the opportunity to
grow our operation into a contiguous state.
As a result of the Bishop transaction, we are slightly modifying our
previous guidance. We expect capital expenditures for the year to be
similar to 2007 levels, and will be between $27.0 million and $29.0
million. This is a $1.0 million increase over our prior guidance, and is
due to both capital expenditures at Bishop Communications, as well as to
capital expenditures related to the historic flooding we experienced. We
continue to expect cash interest expense to be between $29.0 million and
$31.0 million, but expect our expense will be toward the higher end of
our range as a result of the additional interest costs on debt related
to the acquisition of Bishop,” Wells
continued. “For the first six months of this
year, capital expenditures were $13.0 million, and our cash interest
expense was $14.9 million.
“We are pleased with our results for the
first half of 2008. 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,
like Bishop, that are accretive and that are strategically beneficial to
our rural telecommunications business.”
FINANCIAL DISCUSSION FOR SECOND QUARTER 2008:
-
Revenues and Sales were $58.2 million in the second quarter
compared to $62.7 million in the second quarter of 2007. Network
access services revenues decreased $4.4 million, or 17.8%, for the
second quarter. The decrease is in part due to a $1.5 million revenue
reduction related to a network access billing matter during 2008,
while 2007 included a $980,000 favorable revenue impact from the
settlement of a similar matter. The remainder of the decrease was
primarily due to the decline of access lines. Local services revenues
decreased $1.3 million, or 7.1%, primarily due to the decline of
access lines. Data and internet services revenue increased $1.1
million, or 15.2%, primarily due to $1.3 million of growth in revenue
from our DSL Internet access service, and $273,000 of growth in our
data solutions products revenue. This increase was offset by a
$426,000 decrease in dial-up Internet revenue. Other services and
sales revenue decreased by $346,000, or 5.2%, for the second quarter
primarily due to a decrease in rental income, partially offset by
higher miscellaneous customer charges.
-
Operating Costs and Expenses decreased $2.0 million, or 4.6%,
in the second quarter of 2008 as compared to the second quarter of
2007. Cost of service and sales decreased $1.5 million, or 7.2%,
principally due to a decline of $947,000 in access expense. Selling,
general and administrative costs decreased $971,000 compared to the
year-ago period, principally due to lower salary, wages, and benefit
costs. Depreciation and amortization increased $435,000, or 3.6%,
during the second quarter compared to 2007 primarily due to higher
plant balances.
-
Operating Income was $16.6 million in the second quarter of
2008 as compared to $19.2 million in the same period in 2007. The
decrease was primarily the result of lower revenue associated with
previously discussed network access matters.
-
Interest Expense for the second quarter decreased $502,000, or
6.3%, to $7.5 million compared to $8.0 million in the same period in
2007. The decrease was the result of a lower average balance on our
revolving credit facility and lower rates on our variable rate debt.
-
Earnings Before Income Taxes for the second quarter of 2008
were $9.3 million compared to $11.4 million in the second quarter of
2007.
-
Income Tax Expense for the second quarter was $4.0 million
compared to $4.8 million in the second quarter of 2007. 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 $143,000.
-
Net Income was $5.3 million for the quarter compared to net
income of $6.6 million in the second quarter of 2007.
-
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $30.3 million
for the second quarter of 2008, as compared with $32.2 million in the
same period in 2007.
-
Total Access Lines decreased by 3,700 during the second quarter
of 2008 from the first quarter in 2008, as ILEC access lines declined
by 4,300 lines and CLEC lines increased by 600 lines. The total access
line decrease of 3,700, or 1.6%, for the second quarter of 2008
compared to 3,300, or 1.3%, for the second quarter of 2007.
|
Second Quarter 2008 Financial Summary
|
|
(Unaudited)
|
|
(dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
2nd Quarter
|
|
2nd Quarter
|
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
|
Amount
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
58,177
|
|
$
|
62,735
|
|
|
$
|
(4,558
|
)
|
|
-7.3
|
%
|
|
Operating Income
|
|
$
|
16,618
|
|
$
|
19,184
|
|
|
$
|
(2,566
|
)
|
|
-13.4
|
%
|
|
Interest Expense
|
|
$
|
7,463
|
|
$
|
7,965
|
|
|
$
|
(502
|
)
|
|
-6.3
|
%
|
|
Earnings Before Income Taxes
|
|
$
|
9,327
|
|
$
|
11,352
|
|
|
$
|
(2,025
|
)
|
|
-17.8
|
%
|
|
Income Tax Expense
|
|
$
|
4,034
|
|
$
|
4,778
|
|
|
$
|
(744
|
)
|
|
-15.6
|
%
|
|
Net Income
|
|
$
|
5,293
|
|
$
|
6,574
|
|
|
$
|
(1,281
|
)
|
|
-19.5
|
%
|
|
Basic Earnings Per Share
|
|
$
|
0.17
|
|
$
|
0.21
|
|
|
$
|
(0.04
|
)
|
|
-19.1
|
%
|
|
Diluted Earnings Per Share
|
|
$
|
0.16
|
|
$
|
0.20
|
|
|
$
|
(0.04
|
)
|
|
-20.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (1)
|
|
$
|
30,315
|
|
$
|
32,235
|
|
|
$
|
(1,920
|
)
|
|
-6.0
|
%
|
|
Capital Expenditures and
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
$
|
7,135
|
|
$
|
6,675
|
|
$
|
460
|
|
|
6.9
|
%
|
|
Dividends Paid
|
|
$
|
12,959
|
|
$
|
12,846
|
|
|
$
|
113
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
2nd Quarter
|
|
2nd Quarter
|
|
|
Change
|
|
|
|
2008
|
|
2007
|
|
|
Amount
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
Telephone Access Lines
|
|
|
|
|
|
|
|
|
|
|
ILEC Lines (1)
|
|
|
206,000
|
|
|
222,800
|
|
|
|
(16,800
|
)
|
|
-7.5
|
%
|
|
CLEC Lines (2)
|
|
|
27,300
|
|
|
25,300
|
|
|
|
2,000
|
|
|
7.9
|
%
|
|
Total Telephone Access Lines
|
|
|
233,300
|
|
|
248,100
|
|
|
|
(14,800
|
)
|
|
-6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Long Distance Subscribers
|
|
|
139,200
|
|
|
147,000
|
|
|
|
(7,800
|
)
|
|
-5.3
|
%
|
|
Dial-up Internet Subscribers
|
|
|
18,800
|
|
|
26,700
|
|
|
|
(7,900
|
)
|
|
-29.6
|
%
|
|
DSL Subscribers
|
|
|
67,600
|
|
|
57,900
|
|
|
|
9,700
|
|
|
16.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2nd Quarter
|
|
1st Quarter
|
|
|
Change
|
|
|
|
2008
|
|
2008
|
|
|
Amount
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
Telephone Access Lines
|
|
|
|
|
|
|
|
|
|
|
ILEC Lines (1)
|
|
|
206,000
|
|
|
210,300
|
|
|
|
(4,300
|
)
|
|
-2.0
|
%
|
|
CLEC Lines (2)
|
|
|
27,300
|
|
|
26,700
|
|
|
|
600
|
|
|
2.2
|
%
|
|
Total Telephone Access Lines
|
|
|
233,300
|
|
|
237,000
|
|
|
|
(3,700
|
)
|
|
-1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Long Distance Subscribers
|
|
|
139,200
|
|
|
141,000
|
|
|
|
(1,800
|
)
|
|
-1.3
|
%
|
|
Dial-up Internet Subscribers
|
|
|
18,800
|
|
|
20,800
|
|
|
|
(2,000
|
)
|
|
-9.6
|
%
|
|
DSL Subscribers
|
|
|
67,600
|
|
|
65,800
|
|
|
|
1,800
|
|
|
2.7
|
%
|
|
|
|
|
|
|
|
|
|
|
(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 3,000 wholesale lines subscribed at June 30, 2007;
2,800 at March 31, 2008; and 2,600 at June 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
(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
2008 results on Friday, August 1, 2008, at 9:00 a.m. (Eastern Time). To
listen to the call, participants should dial (719) 325-4771
approximately 10 minutes prior to the start of the call. A telephonic
replay will become available after 12:00 p.m. (Eastern Time) on August
1, 2008 and will remain available through August 8, 2008 by dialing
(719) 457-0820 and entering Confirmation Code 7838864.
The live broadcast of Iowa Telecom’s
quarterly conference call will be available online at www.iowatelecom.com
or www.earnings.com on August 1,
2008, 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 and its subsidiaries serve
over 450 Iowa communities and 6 Minnesota communities and employ nearly
800 people. 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, 2008
|
|
|
December 31, 2007
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
4,093
|
|
|
|
$
|
21,919
|
|
|
Accounts receivable, net
|
|
18,948
|
|
|
|
|
20,252
|
|
|
Inventories
|
|
3,434
|
|
|
|
|
2,995
|
|
|
Prepayments and other current assets
|
|
2,445
|
|
|
|
|
2,288
|
|
|
Total Current Assets
|
|
28,920
|
|
|
|
|
47,454
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
Property, plant and equipment
|
|
552,981
|
|
|
|
|
542,949
|
|
|
Accumulated depreciation
|
|
(285,908
|
)
|
|
|
|
(264,284
|
)
|
|
Net Property Plant and Equipment
|
|
267,073
|
|
|
|
|
278,665
|
|
|
|
|
|
GOODWILL
|
|
466,554
|
|
|
|
|
466,554
|
|
|
INTANGIBLE ASSETS AND OTHER, net
|
|
30,493
|
|
|
|
|
24,888
|
|
|
INVESTMENT IN AND RECEIVABLE FROM
|
|
|
|
|
|
THE RURAL TELEPHONE FINANCE
|
|
|
|
|
|
COOPERATIVE
|
|
13,934
|
|
|
|
|
13,998
|
|
|
Total Assets
|
$
|
806,974
|
|
|
|
$
|
831,559
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
Revolving credit facility
|
$
|
1,000
|
|
|
|
$
|
18,000
|
|
|
Accounts payable
|
|
10,150
|
|
|
|
|
9,062
|
|
|
Advanced billings and customer deposits
|
|
8,838
|
|
|
|
|
9,365
|
|
|
Accrued and other current liabilities
|
|
27,793
|
|
|
|
|
32,104
|
|
|
Total Current Liabilities
|
|
47,781
|
|
|
|
|
68,531
|
|
|
|
|
|
LONG-TERM DEBT
|
|
477,778
|
|
|
|
|
477,778
|
|
|
DEFERRED TAX LIABILITIES
|
|
44,354
|
|
|
|
|
35,255
|
|
|
OTHER LONG-TERM LIABILITIES
|
|
6,588
|
|
|
|
|
7,028
|
|
|
Total long-term liabilities
|
|
528,720
|
|
|
|
|
520,061
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
576,501
|
|
|
|
|
588,592
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Common stock, $.01 par value, 100,000,000 shares authorized,
31,476,776 and 31,440,215 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
315
|
|
|
|
|
314
|
|
|
Additional paid-in-capital
|
|
325,670
|
|
|
|
|
324,170
|
|
|
Retained deficit
|
|
(95,816
|
)
|
|
|
|
(82,154
|
)
|
|
Accumulated other comprehensive income
|
|
304
|
|
|
|
|
637
|
|
|
|
|
|
Total Stockholders' Equity
|
|
230,473
|
|
|
|
|
242,967
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
$
|
806,974
|
|
|
|
$
|
831,559
|
|
|
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
REVENUE AND SALES
|
|
|
|
|
|
|
Local services
|
$
|
17,422
|
|
$
|
18,745
|
|
$
|
35,113
|
|
$
|
37,592
|
|
|
Network access services
|
|
20,343
|
|
|
24,736
|
|
|
43,005
|
|
|
54,017
|
|
|
Toll services
|
|
5,679
|
|
|
5,285
|
|
|
11,549
|
|
|
10,675
|
|
|
Data and internet services
|
|
8,408
|
|
|
7,298
|
|
|
16,486
|
|
|
14,242
|
|
|
Other services and sales
|
|
6,325
|
|
|
6,671
|
|
|
12,869
|
|
|
12,705
|
|
|
Total revenues and sales
|
|
58,177
|
|
|
62,735
|
|
|
119,022
|
|
|
129,231
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
|
Cost of services and sales (exclusive of items shown separately
below)
|
|
|
|
|
|
|
|
18,744
|
|
|
20,200
|
|
|
37,357
|
|
|
38,576
|
|
|
Selling, general and administrative
|
|
10,150
|
|
|
11,121
|
|
|
20,265
|
|
|
21,602
|
|
|
Depreciation and amortization
|
|
12,665
|
|
|
12,230
|
|
|
25,270
|
|
|
24,258
|
|
|
Total operating costs and expenses
|
|
41,559
|
|
|
43,551
|
|
|
82,892
|
|
|
84,436
|
|
|
|
|
|
OPERATING INCOME
|
|
16,618
|
|
|
19,184
|
|
|
36,130
|
|
|
44,795
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
Interest and dividend income
|
|
172
|
|
|
182
|
|
|
550
|
|
|
553
|
|
|
Interest expense
|
|
(7,463
|
)
|
|
(7,965
|
)
|
|
(15,161
|
)
|
|
(15,977
|