TLL Proshares Ultrashort Telecommunications

Teletouch Communications, Inc. (AMEX: TLL) today reported on its quarterly financial results filed on Form 10-Q for the third quarter ended February 28, 2006. Total revenues for the third quarter of fiscal 2006 declined approximately 14.4% to $5.02 million compared with $5.87 million in the third quarter of fiscal 2005. Cash and cash equivalents increased nearly 41% to approximately $1.80 million at the end of the third quarter compared with $1.28 million at the 2005 fiscal year ended, May 31, 2005. The Company recorded Net Income of approximately $0.02 million, or $0.00 earnings per share versus a loss of $0.54 million, or $0.12 loss per share in the comparable quarter of fiscal 2005. Reporting on a segment basis, the decline in total Paging revenues for the second quarter slowed slightly to approximately 18.4% or $3.70 million compared with $4.52 million in the prior-year period, in line with the Company's estimates. However, the decline in net pager subscribers slowed significantly in the third quarter 2006 compared to the second quarter 2006. Total third quarter over second quarter 2006 pagers in service were essentially flat at 121,800 versus 125,500 in service at the end of the second quarter. As indicated above, the year-over-year comparative quarters analysis shows total pagers in service declined approximately 25% through the period ended February 28, 2006, that is when compared with 162,300 pagers in service at February 28, 2005. However, the relative increase in the decline rate is due to the July, 2005 sale of approximately 15,000 subscribers to Satellink Communications. When accounting for this sale, the overall decline rate actually slowed to approximately 15.7%. Total Two-way radio service and product sales were down 8.9% to $1.18 million in the quarter, from $1.3 million in the comparable 2005 quarter. The decline was due primarily to a reduction in and the timing of certain homeland security related hardware product sales; recurring service revenues increased approximately 13.2% during the current period over the comparative 2005 period. Total Other service and product revenues, including the Company's Telemetry unit increased approximately 215% to $0.15 million in the third quarter of 2006, compared to $0.05 million during the same period in 2005. Although there were increased subscriber activations in the period, the overall increase is largely attributable to the Company's decision to exit the telemetry hardware sales and its subsequent successful efforts to liquidate much of the remaining telemetry-related hardware inventory for cash. The Company reported Net Income of $0.02 during the third quarter 2006, compared to a loss of $0.54 million during the prior year quarter on significantly improved operating income to $0.13 million for the third quarter of fiscal 2006, from a loss of $0.67 million in the prior year comparable period. The reduction in operating loss was primarily due to the Company's continued cost reductions across all departments. "It is notable that this is the first quarter since August 2003 that the Company has been able to report positive net income derived solely from its operating businesses," stated Teletouch CEO, T. A. "Kip" Hyde, Jr. "This is a testament to the team's success in slowing pager attrition by generating new adds and renewals, reducing expenses and corporate overhead everywhere possible to match our revenue base. These were the primary factors in Teletouch reporting an increase in its cash and cash equivalents, as well as operating income of $132,000 and net income of $19,000 for the third quarter of fiscal 2006." Hyde continued, "While we do estimate a net loss through the fourth quarter due to continued paging revenue declines and expected additional one-time costs for the professional fees related to the sale of the Company's paging business, we are confident that we will continue to manage the business effectively through this process. "We continue to work on the sale of our legacy paging business, but have been delayed due to the SEC's review and comments to our preliminary proxy. As we work to complete our response to the SEC, we are also exploring alternative transactions for the Company that, if completed prior to the paging sale, could eliminate the need for shareholder approval. We still hope to complete the paging sale by mid-2006. Once completed, we expect the sale of the paging assets to generate sufficient cash to enable Teletouch to support the embedded overhead costs of a public company, and allow the return of the Company to a successful growth model." About Teletouch Communications Teletouch offers a comprehensive suite of telecommunications services to enterprise users, including cellular, two-way radio communications, GPS-telemetry and wireless messaging services throughout the United States. TLL acquires, bills and supports a large, primarily business and government base of subscribers, under its own network of FCC licensed spectrum in Texas, Louisiana, Arkansas, Oklahoma, Alabama, Missouri, Mississippi, Tennessee, and Florida. Teletouch's common stock is traded on the American Stock Exchange under stock symbol: TLL. Additional information about Teletouch can be found at: www.teletouch.com. All statements in this news release that are not based on historical fact are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control, that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth under the caption "Additional Factors That May Affect Our Business" in the Company's most recent Form 10-K and 10-Q filings, and amendments thereto. In addition, we operate in a highly competitive and rapidly changing environment, and new risks may arise. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. We disclaim any intention to, and undertake no obligation to, update or revise any forward-looking statement. -0- *T TELETOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except shares and per share amounts) Three Months Ended February 28, ------------------------ 2006 2005 ------------ ----------- Operating revenues: Service, rent, and maintenance revenue $ 4,054 $ 4,795 Product sales revenue 967 1,073 ------------ ----------- Total operating revenues 5,021 5,868 ------------ ----------- Operating expenses: Cost of service, rent and maintenance (exclusive of depreciation and amortization included below) 2,319 2,690 Cost of products sold 529 917 Selling and general and administrative 1,588 2,125 Depreciation and amortization 443 784 Loss (gain) on disposal of assets 10 21 ------------ ----------- Total operating expenses 4,889 6,537 ------------ ----------- Operating income (loss) 132 (669) Interest expense, net (113) (121) ------------ ----------- Income (loss) before income tax benefit 19 (790) Income tax benefit - (253) ------------ ----------- Net income (loss) 19 (537) Participation rights of common stock purchase warrants in undistributed earnings (2) - ------------ ----------- Net income (loss) applicable to common shareholders $ 17 $ (537) ============ =========== Income (loss) per share applicable to common shareholders: Basic $ - $ (0.12) ============ =========== Diluted $ - $ (0.12) ============ =========== Denominator for income (loss) per share - weighted average number of common shares outstanding: Basic 48,740,163 4,546,980 ============ =========== Diluted 55,027,689 4,546,980 ============ =========== Nine Months Ended February 28, ------------------------ 2006 2005 ------------ ----------- Operating revenues: Service, rent, and maintenance revenue $ 12,874 $ 15,231 Product sales revenue 3,072 3,455 ------------ ----------- Total operating revenues 15,946 18,686 ------------ ----------- Operating expenses: Cost of service, rent and maintenance (exclusive of depreciation and amortization included below) 7,331 8,209 Cost of products sold 1,970 3,120 Selling and general and administrative 5,136 6,152 Depreciation and amortization 1,707 2,518 Loss (gain) on disposal of assets 8 (30) ------------ ----------- Total operating expenses 16,152 19,969 ------------ ----------- Operating income (loss) (206) (1,283) Interest expense, net (328) (332) ------------ ----------- Income (loss) before income tax benefit (534) (1,615) Income tax benefit - (492) ------------ ----------- Net income (loss) (534) (1,123) Participation rights of common stock purchase warrants in undistributed earnings - - ------------ ----------- Net income (loss) applicable to common shareholders $ (534) $ (1,123) ============ =========== Income (loss) per share applicable to common shareholders: Basic $ (0.02) $ (0.25) ============ =========== Diluted $ (0.02) $ (0.25) ============ =========== Denominator for income (loss) per share - weighted average number of common shares outstanding: Basic 23,994,432 4,546,980 ============ =========== Diluted 23,994,432 4,546,980 ============ =========== TELETOUCH COMMUNICATIONS, INC. Selected Balance Sheet Highlights (in thousands) February 28, May 31, 2006 2005 ----------------------- Cash and cash equivalents $ 1,804 $ 1,283 Current portion of long-term debt 108 74 Long-term debt, net of current portion 55 102 *T