NEWTON, Iowa--(BUSINESS WIRE)--October 29, 2009--Iowa Telecommunications Services, Inc. (NYSE: IWA) today announced operating results for the third quarter ended September 30, 2009. Quarterly highlights for the Company include:

“We are extremely pleased with our strong results for the quarter, which reflect the benefits of our strategy of growth through acquisition,” said Alan L. Wells, Iowa Telecom Chairman and Chief Executive Officer. “During the quarter, we acquired substantially all of the assets of Sherburne Tele Systems, Inc. (“Sherburne”), making this the first quarter in which Sherburne is reflected in our results. Immediately after the closing, we began the process of integrating Sherburne’s operations into our systems and business processes. Sherburne is located approximately 30 miles from the Minnesota operations we acquired last year from Bishop Communications, providing us an opportunity to achieve significant benefits from consolidating our Minnesota properties. The financial results for the quarter reflect some of the synergies we expect to achieve from integrating these operations.

“In addition, on September 24, 2009, we completed our acquisition of New Ulm Telecom, Inc.’s ownership interests in EN-TEL Communications, LLC, SHAL, LLC, and SHAL Networks, Inc.,” Wells noted. “We now own all of the equity in the SHAL entities, and substantially all of En-Tel Communications, LLC. We are particularly excited about SHAL, which owns and leases a 2,500-mile fiber-optic network throughout Minnesota used to provide low cost, high quality transport facilities. We view SHAL as strategic to our Minnesota operations, and feel it offers us an opportunity to further expand in the wholesale and transport markets. We are confident that our newly acquired local exchange and fiber network operations, and the markets and customers they serve, will continue to have a positive impact on our future results as we realize the benefits associated with the integration and growth of our Minnesota operations.

“Adjusted EBITDA for the quarter was $33.4 million, compared with $31.6 million a year ago. Revenues for the quarter increased 8.5% to $68.3 million, primarily due to the acquisition of the Sherburne operation,” added Wells. “During the quarter our customer counts also increased, as the acquisition of Sherburne added 14,300 ILEC lines, 9,600 CLEC lines, and 14,600 DSL subscribers as of the end of the period. Overall we had total access lines of 255,600 at the end of the quarter, which reflected net increases of 10,900 ILEC lines and 9,200 CLEC lines over the prior quarter. From a product standpoint, total long distance subscribers increased by 16,900, DSL subscribers increased by 15,400, dial-up Internet subscribers decreased by 1,900, and video subscribers increased by 3,900 during the quarter.

“We continue to expect capital expenditures for the year will be between $26.0 million and $28.0 million, but are confident that our results for the year will be on the lower end of the range,” Wells added. “This includes capital expenditures for our newly acquired Sherburne operation. We also continue to believe cash interest expense will be between $29.0 million and $31.0 million, but expect that it will be toward the higher end of the range as a result of the interest costs on the additional debt we incurred for the acquisition of Sherburne. For the first nine months of this year capital expenditures were $16.3 million, and our cash interest expense was $22.8 million.

“We are very pleased with our overall performance through the first nine months of this year, particularly in light of the overall economic environment,” Wells concluded. “We believe our telecommunications business has performed well during these trying times, in part due to both the rural nature and relative stability of our operations. Furthermore, we believe our results illustrate the benefit of our strategy of growth through acquisitions. Our Company is well capitalized, and most of our long-term debt is fixed at attractive interest rates. As of September 30, 2009, we have drawn only $41.0 million of our $100 million credit facility, providing us ample room to prudently expand our rural telecommunications business as attractive opportunities arise. We continue to remain focused on our free cash flow generation, and on returning cash to our shareholders in the form of our $1.62 annualized dividend.”


Third Quarter 2009 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)

	3^rd Quarter		3^rd Quarter		Change
	2009		2008		Amount			Percent

Revenue	$	68,296	$	62,923	$	5,373		8.5	%
Operating Income	$	14,922	$	16,798	$	(1,876	)	-11.2	%
Interest Expense	$	8,333	$	8,033	$	300		3.7	%
Earnings Before Income Taxes	$	7,914	$	10,024	$	(2,110	)	-21.0	%
Income Tax Expense	$	3,341	$	4,301	$	(960	)	-22.3	%
Net Income	$	4,573	$	5,723	$	(1,150	)	-20.1	%

Basic Earnings Per Share	$	0.13	$	0.18	$	(0.05	)	-27.8	%
Diluted Earnings Per Share	$	0.13	$	0.17	$	(0.04	)	-23.5	%

Adjusted EBITDA ⁽¹⁾	$	33,419	$	31,610	$	1,809		5.7	%
Capital Expenditures	$	5,911	$	7,129	$	(1,218	)	-17.1	%
Dividends Paid	$	13,247	$	12,953	$	294		2.3	%


Key Operating Statistics	3^rd Quarter	3^rd Quarter	Change
	2009 ⁽³⁾	2008	Amount	Percent

Telephone Access Lines
ILEC Lines ⁽¹⁾	214,100	213,700	400	0.2%
CLEC Lines ⁽²⁾	41,500	32,100	9,400	29.3%
Total Telephone Access Lines	255,600	245,800	9,800	4.0%

Long Distance Subscribers	160,100	147,600	12,500	8.5%
Dial-up Internet Subscribers	11,800	18,500	(6,700)	-36.2%
DSL Subscribers	94,500	74,500	20,000	26.8%
Video Subscribers	26,400	18,500	7,900	42.7%

	3^rd Quarter	2^nd Quarter	Change
	2009 ⁽³⁾	2009	Amount	Percent

Telephone Access Lines
ILEC Lines ⁽¹⁾	214,100	203,200	10,900	5.4%
CLEC Lines ⁽²⁾	41,500	32,300	9,200	28.5%
Total Telephone Access Lines	255,600	235,500	20,100	8.5%

Long Distance Subscribers	160,100	143,200	16,900	11.8%
Dial-up Internet Subscribers	11,800	13,700	(1,900)	-13.9%
DSL Subscribers	94,500	79,100	15,400	19.5%
Video Subscribers	26,400	22,500	3,900	17.3%

⁽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 2,400 wholesale lines subscribed at September 30, 2008; 2,000 at June 30, 2009; and 1,900 at September 30, 2009.
⁽²⁾		Access lines subscribed by customers of our competitive local exchange carrier subsidiaries, Iowa Telecom Communications, Inc., IT Communications, LLC, En-Tel Communications, LLC, Lakedale Link, Inc. and Lakedale Link, LLC.
⁽³⁾		Includes the following units as of September 30, 2009 which were acquired from Sherburne Tele Systems.

As previously announced, Iowa Telecom’s management will hold a conference call to discuss the third quarter 2009 results on Thursday, October 29, 2009, at 9:00 a.m. (Eastern Time). To listen to the call, participants should dial (785) 830-1916 approximately 10 minutes prior to the start of the call. A telephonic replay will become available after 12:00 p.m. (Eastern Time) on October 29, 2009, and will remain available through November 5, 2009, by dialing (719) 457-0820 and entering Confirmation Code 4761169.

The live broadcast of Iowa Telecom’s quarterly conference call will be available online at www.iowatelecom.com or www.earnings.com on October 29, 2009, 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.

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.

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. The Company and its subsidiaries serve over 450 Iowa communities and 10 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
	September 30, 2009			December 31, 2008
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	12,091		$	11,605
Accounts receivable, net		22,663			23,320
Inventories		5,527			3,946
Prepayments and other current assets		5,767			3,149
Total Current Assets		46,048			42,020

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment		664,688			601,782
Accumulated depreciation		(350,982	)		(310,936	)
Net Property, Plant and Equipment		313,706			290,846

GOODWILL		494,400			473,984
INTANGIBLE ASSETS AND OTHER, net		51,960			36,904
INVESTMENT IN AND RECEIVABLE FROM THE RURAL TELEPHONE FINANCE COOPERATIVE		17,036			16,174
Total Assets	$	923,150		$	859,928

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Revolving credit facility	$	41,000		$	39,000
Accounts payable		10,026			11,017
Advanced billings and customer deposits		10,662			8,615
Accrued and other current liabilities		27,291			32,429
Current maturities of long-term debt		2,048			1,219
Total Current Liabilities		91,027			92,280

LONG-TERM DEBT		566,940			489,003
DEFERRED TAX LIABILITIES		56,296			47,575
OTHER LONG-TERM LIABILITIES		27,944			28,326
Total long-term liabilities		651,180			564,904

TOTAL LIABILITIES		742,207			657,184

STOCKHOLDERS’ EQUITY
Common stock, $.01 par value, 100,000,000 shares authorized, 32,046,087 and 31,500,687 shares issued and outstanding		320			315
Additional paid-in-capital		332,156			327,264
Accumulated deficit		(138,390	)		(110,814	)
Accumulated other comprehensive income		(13,143	)		(14,308	)
Total Iowa Telecom stockholders’ equity		180,943			202,457
Noncontrolling Interest		-			287
Total Stockholders’ Equity		180,943			202,744

Total Liabilities and Stockholders’ Equity	$	923,150		$	859,928


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,
	2009			2008			2009			2008

REVENUE AND SALES
Local services	$	19,618		$	18,013		$	55,538		$	53,126
Network access services		23,306			22,852			64,873			65,857
Toll services		5,658			5,845			16,705			17,394
Data and internet services		11,658			9,129			31,117			25,615
Other services and sales		8,056			7,084			20,170			19,953
Total revenues and sales		68,296			62,923			188,403			181,945

OPERATING COSTS AND EXPENSES
Cost of services and sales (exclusive of items shown separately below)		22,650			20,424			61,536			57,781
Selling, general and administrative		14,312			11,965			39,973			32,230
Depreciation and amortization		16,412			13,736			44,730			39,006
Total operating costs and expenses		53,374			46,125			146,239			129,017

OPERATING INCOME		14,922			16,798			42,164			52,928

OTHER INCOME (EXPENSE)
Interest and dividend income		480			179			1,742			729
Interest expense		(8,333	)		(8,033	)		(23,541	)		(23,194	)
Other, net		845			1,080			576			821
Total other expense, net		(7,008	)		(6,774	)		(21,223	)		(21,644	)

EARNINGS BEFORE INCOME TAXES		7,914			10,024			20,941			31,284

INCOME TAX EXPENSE		3,341			4,301			8,938			13,311

NET INCOME		4,573			5,723			12,003			17,973
Noncontrolling Interest		23			-			195			-

NET INCOME ATTRIBUTABLE TO IOWA TELECOMMUNICATIONS	$	4,596		$	5,723		$	12,198		$	17,973

COMPUTATION OF EARNINGS PER SHARE
Basic - Earnings Per Share	$	0.13		$	0.18		$	0.35		$	0.55
Basic - Weighted average number of shares outstanding		32,038			31,492			31,880			31,469

Diluted - Earnings Per Share	$	0.13		$	0.17		$	0.35		$	0.54
Diluted - Weighted average number of shares outstanding		32,239			32,085			32,187			32,043


IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
(in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	4,573		$	5,723		$	12,003		$	17,973
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		15,477			13,318			42,978			37,841
Amortization of intangible assets		935			418			1,752			1,165
Amortization of debt issuance costs		381			170			729			466
Deferred income taxes		3,139			4,079			8,667			12,673
Non-cash stock-based compensation expense		959			890			2,802			2,660
Changes in operating assets and liabilities:
Receivables		(401	)		(1,026	)		3,153			278
Inventory		275			159			(167	)		(280	)
Accounts payable		975			(560	)		(2,430	)		528
Other assets and liabilities		(1,546	)		(1,429	)		(5,858	)		(7,333	)
Net cash provided by operating activities		24,767			21,742			63,629			65,971

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(5,911	)		(7,129	)		(16,251	)		(20,122	)
Business acquisitions, net of cash acquired		(79,719	)		(33,419	)		(80,043	)		(33,419	)
Purchase of wireless licenses		-			-			-			(5,938	)
Net cash used in investing activities		(85,630	)		(40,548	)		(96,294	)		(59,479	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net change in revolving credit facility		10,000			36,000			2,000			19,000
Proceeds from exercise of stock options		3			-			677			-
Payment of debt issuance costs		(2,009	)		(351	)		(2,009	)		(351	)
Issuance of long term debt		75,000			-			75,000			-
Payment on long-term debt		(489	)		(308	)		(1,087	)		(308	)
Acquisition of noncontrolling interest		(1,890	)		-			(1,890	)		-
Capital contributions from noncontrolling interests		90			-			390			-
Shares reacquired		(146	)		(210	)		(493	)		(488	)
Dividends paid		(13,247	)		(12,953	)		(39,437	)		(38,799	)
Net cash provided by (used in) financing activities		67,312			22,178			33,151			(20,946	)

Net Change in Cash and Cash Equivalents		6,449			3,372			486			(14,454	)
Cash and Cash Equivalents at Beginning of Period		5,642			4,093			11,605			21,919

Cash and Cash Equivalents at End of Period	$	12,091		$	7,465		$	12,091		$	7,465


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,
	2009			2008			2009			2008

ADJUSTED EBITDA:
Net Income	$	4,573		$	5,723		$	12,003		$	17,973
Income Tax Expense		3,341			4,301			8,938			13,311
Interest Expense		8,333			8,033			23,541			23,194
Depreciation and Amortization		16,412			13,736			44,730			39,006
Unrealized (gains) losses on financial derivatives		236			(1,028	)		540			(769	)
Non-cash stock-based compensation expense ⁽¹⁾		959			890			2,802			2,660
Extraordinary or unusual (gains) losses		-			-			-			-
Non-cash portion of RTFC Capital Allocation ⁽²⁾		(165	)		(45	)		(674	)		(191	)
Other non-cash losses (gains)		(1,036	)		-			(1,036	)		-
Loss (gain) on disposal of assets not in ordinary course		-			-			-			-
Transaction costs		766			-			2,226			-
ADJUSTED EBITDA	$	33,419		$	31,610		$	93,070		$	95,184

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:
Investor Relations Contacts:
Corporate Communications, Inc.
Kevin Inda, 407-566-1180
Kevin.Inda@cci-ir.com
or
Craig Knock, 641-787-2089
Chief Financial Officer
or
Media Contact:
Iowa Telecommunications Services, Inc.
Julie White, 641-787-2040
Director, Corporate Communications
Julie.White@iowatelecom.com

Sherburne Tele Systems, Inc.

Telephone Access Lines
ILEC Lines			14,300
CLEC Lines			9,600
Total Telephone Access Lines			23,900

Long Distance Subscribers			18,600
Dial-up Internet Subscribers			500
DSL Subscribers			14,600
Video Subscribers			3,600

⁽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.