IRVING, Texas, May 15 /PRNewswire-FirstCall/ -- VALOR
Communications Group, Inc. (NYSE:VCG) today reported first quarter
consolidated financial and operating results and will host a
conference call today at 10:00 a.m. (EDT) to discuss these results
and its business. Highlights for the Quarter * Adjusted EBITDA of
$68.6 million and an Adjusted EBITDA margin of 55%. * Cash
Available to Pay Dividends (CAPD) of $38.7 million. * Average
monthly revenue per access line (ARPU) of $80.91, an increase of
3.8% compared to $77.92 a year ago. * Total access lines of 516,511
and total connections of 577,457 at March 31, 2006. * More than
60,000 DSL subscribers and nearly 237,000 long distance customers
at March 31, 2006, increases of 95% and 6%, respectively, over the
prior year. "I am pleased to report cash available to pay dividends
(CAPD) of nearly $39 million with healthy Adjusted EBITDA margins
and strong gains in our DSL and long distance subscribers,"
commented Jack Mueller, VALOR Communications Group, Inc. president
and chief executive officer. "Our DSL penetration, based on lines
capable of receiving the service, increased to 16% from 9% a year
ago. In addition, our long distance penetration increased to 46%
from 42% a year ago." Revenue of $125.6 million in the first
quarter of 2006 was relatively flat with the prior year. Net income
was $16.0 million in the first quarter of 2006, resulting in
quarterly EPS (earnings per share) of $0.23 per share. For the
first quarter of 2006, revenue from data services and other
services increased 29.1% and 15.5%, respectively, due to increased
DSL subscribers and increases in equipment sales, directory
advertising and wholesale services. Revenue from local service,
access and Universal Service Fund decreased 6.6%, 1.7% and 2.8%,
respectively, compared to last year's first quarter due primarily
to access line losses. Capital expenditures were $10.2 million in
the first quarter of 2006 and DSL service is now available to 72%
of VALOR's total access lines. Cash and cash equivalents at March
31, 2006 were $69.8 million. Merger with Alltel Wireline "We're on
track to obtain all required federal and state regulatory and
governmental approvals necessary to close the transaction," stated
Mueller. "VALOR and the Alltel Wireline transition teams are
working closely together to implement the transition plans laid out
earlier this year. We expect the merger to close in July."
Conference Call Information As previously announced, the company
will host a conference call and simultaneous Webcast to discuss
first quarter 2006 results at 10:00 a.m. (EDT) on May 15, 2006.
During the conference call, VALOR may discuss and answer one or
more questions concerning its business and financial matters as
well as trends that affect the company. VALOR's responses to these
questions, as well as other matters discussed during the conference
call, may contain information that has not been previously
disclosed. Simultaneously with the conference call, an audio
webcast of the call will be available via a link on our website,
http://www.valortelecom.com/ , "Investor Relations," or at
http://www.earnings.com/ . To access the call, dial 1-800-257-3401,
or outside the United States, dial 1-303-262-2138. A pass code is
not required. A replay of the call will be available beginning at
approximately 12:00 p.m. (EDT), May 15, 2006, through May 22, 2006,
at the above websites or by calling 1-800-405-2236 or, outside the
United States, 1-303-590-3000. The pass code for the replay is
11060621#. Non-GAAP Measures VALOR uses certain non-GAAP financial
measures in evaluating its performance and liquidity. These include
adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA), Adjusted EBITDA margin and "Cash
Available to Pay Dividends." These non-GAAP financial measures are
by definition not measures of financial performance under generally
accepted accounting principles and are not alternatives to
operating income or net income reflected in the statement of
operations or to cash flow as reflected in the statement of cash
flows and are not necessarily indicative of cash available to fund
all cash flow needs. VALOR presents Adjusted EBITDA because
covenants in its credit facility contain ratios based on this
measure. A reconciliation of the differences between these non-GAAP
financial measures to the most comparable financial measures
calculated and presented in accordance with GAAP are included in
the schedules that follow. Adjusted EBITDA is defined in the credit
facility as: (1) consolidated adjusted net income, as defined
therein; plus (2) the following items, to the extent deducted from
consolidated adjusted net income: (a) interest expense; (b)
provision for income taxes; (c) depreciation and amortization; (d)
certain expenses related to VALOR's initial public offering of
common stock, its recent debt recapitalization and the other
transactions described in "Use of Proceeds" in its registration
statement for its initial public offering of common stock completed
February 9, 2005; (e) other nonrecurring or unusual costs or losses
incurred after the closing date of its new credit facility, to the
extent not exceeding $10.0 million; (f) unrealized losses on
financial derivatives recognized in accordance with SFAS No. 133;
(g) losses on sales of assets other than in the ordinary course of
business; and (h) all other non- cash charges that represent an
accrual for which no cash is expected to be paid in a future
period; minus (3) the following items, to the extent any of them
increases consolidated adjusted net income; (v) income tax credits;
(w) interest and dividend income (other than in respect of Rural
Telephone Finance Cooperative patronage distribution); (x) gains on
asset disposals not in the ordinary course of business; (y)
unrealized gains on financial derivatives recognized in accordance
with SFAS No. 133; and (z) all other non-cash income. Adjusted
EBITDA margin is equal to adjusted EBITDA divided by total revenue.
Adjusted EBITDA margin measures the proportion of Adjusted EBITDA
remaining after deducting operating expenses. Cash Available to Pay
Dividends is defined herein as Adjusted EBITDA less the sum of (i)
any item excluded from the calculation of Adjusted EBITDA that has
been or will be settled in cash, (ii) cash interest expense, (iii)
capital expenditures, (iv) required cash pension contributions in
excess of expense, and (v) cash income taxes. VALOR considers
Adjusted EBITDA, Adjusted EBITDA margin and Cash Available to Pay
Dividends (CAPD) as important indicators to investors in the
company's common stock because CAPD provides information related to
the company's ability to provide cash flows to service debt, fund
capital expenditures and pay dividends. If VALOR's Adjusted EBITDA
were to decline below certain levels, covenants in its credit
facility that are based on Adjusted EBITDA, including its interest
coverage ratio and total leverage ratio covenants, may be violated
and could cause, among other things, a default or mandatory
prepayment under its credit facility, or result in its inability to
pay dividends. Adjusted EBITDA, Adjusted EBITDA margin and CAPD are
not measures in accordance with GAAP, and should not be considered
a substitute for operating income, net income or any other measure
of financial performance reported in accordance with GAAP. In
addition, Adjusted EBITDA, Adjusted EBITDA margin and CAPD should
not be used as a substitute for VALOR's various cash flow measures
(e.g., operating, investing and financing cash flows). The non-GAAP
financial measures used by VALOR may not be comparable to similarly
titled measures of other companies. While VALOR utilizes these
non-GAAP financial measures in managing and analyzing its business
and financial condition and believes these measures are useful to
management and to investors for the reasons described above, these
non-GAAP financial measures have certain shortcomings. In
particular, Adjusted EBITDA does not represent the residual cash
flow available for discretionary expenditures, since items such as
debt repayments and interest payments are not deducted from such
measure. Management compensates for the shortcomings of these
measures by utilizing them in conjunction with their comparable
GAAP financial measures. The information in this press release
should be read in conjunction with the financial statements and
footnotes contained in documents filed periodically with the U.S.
Securities and Exchange Commission. About VALOR Communications
Group VALOR Communications Group is one of the largest providers of
telecommunications services in rural communities in the
southwestern United States. The company, through its subsidiary
VALOR Telecom, offers to residential, business and government
customers a wide range of telecommunications services, including:
local exchange telephone services, which covers basic dial-tone
service as well as enhanced services, such as caller
identification, voicemail and call waiting; long distance services;
and data services, such as providing digital subscriber lines.
VALOR Communications Group is headquartered in Irving, Texas. For
more information, visit http://www.valortelecom.com/ . Information
contained on our website does not comprise a part of this press
release. VALOR Communications Group ("VALOR") is a holding company
and has no direct operations. VALOR was formed for the sole purpose
of reorganizing the company's corporate structure and consummation
of our initial public offering in February 2005. VALOR's principal
assets are the direct and indirect equity interests in its
subsidiaries. As a result, the historical consolidated financial
results prior to the offering in February 2005 only reflect the
operations of VALOR Telecommunications, LLC. Safe Harbor Statement
Certain matters discussed in this press release may constitute
"forward- looking statements" within the meaning of Section 27A of
the Securities Act of 1933, Section 21E of the Securities Exchange
Act of 1934 and the Private Securities Litigation Reform Act of
1995. Words such as "believes," "anticipates," "expects,"
"intends," "estimates," "projects, " "outlook" and other similar
expressions, which are predictions of or indicate future events and
trends, typically identify forward-looking statements. Statements
in this press release regarding VALOR Communications Group's
business that are not historical facts, including our intention to
pay quarterly dividends, are forward-looking statements.
Forward-looking statements involve risks and uncertainties that
could cause actual results or the timing of events to differ
materially from those described in the forward-looking statements.
We cannot assure you that the expectations discussed in these
forward-looking statements will be attained. Some of the factors
that could cause actual results or the timing of certain events to
differ from those described in these forward-looking statements
include, without limitation: our leverage and debt service
obligations; the terms of our credit facility and our rights and
obligations thereunder; any adverse changes in government
regulation; the risk that we may not be able to retain existing
customers or obtain new customers; the risk of increased
competition in the markets we serve; our financial position,
results of operations and availability of capital; risks associated
with the impending merger with Alltel Wireline, including but not
limited to, the risk that the anticipated benefits from the merger
may not be realized, integration-related risks and challenges that
could negatively impact operations and financial results, the risk
that regulatory agencies could delay or impose conditions on
approval of the merger, which may diminish the anticipated benefits
of the merger and other risks detailed from time to time in our
filings with the Securities and Exchange Commission, including,
without limitation, the risks described in our amended proxy
statement/prospectus- information statement filed on May 2, 2006,
relating to our merger with Alltel Wireline and in our Annual
Report on Form 10-K filed on February 28, 2006 with the Securities
and Exchange Commission. We disclaim any obligation to publicly
update or revise any forward-looking statement, whether as a result
of new information, the occurrence of future events or otherwise,
except as required by law. Supplemental Schedules Consolidated
Statements of Operations A Condensed Consolidated Balance Sheets B
Condensed Consolidated Statements of Cash Flows C Non-GAAP Measures
- Adjusted EBITDA Calculation D Non-GAAP Measures - Cash Available
to Pay Dividends Reconciliation E Historical Operating Statistics F
Schedule A VALOR Communications Group, Inc. Consolidated Statements
of Operations (Dollars, except per share amounts, in thousands)
(Unaudited) Three months ended March 31, 2006 2005 Operating
revenues Local service $36,111 $38,650 Data services 9,640 7,469
Long distance services 10,151 10,368 Access services 29,789 30,292
Universal Service Fund 28,226 29,025 Other services 11,690 10,122
Total operating revenues 125,607 125,926 Operating expenses Cost of
service (exclusive of depreciation and amortization shown
separately below) 26,742 26,084 Selling, general and administrative
(exclusive of non-cash stock compensation shown separately below)
30,474 33,587 Non-cash stock based compensation 2,103 6,387
Depreciation and amortization 22,010 22,235 Total operating
expenses 81,329 88,293 Operating income 44,278 37,633 Operating
margin 35.3% 29.9% Other income (expense) Interest expense (20,615)
(26,048) Gain (loss) on interest rate hedging arrangements 304 (40)
Earnings from unconsolidated cellular partnerships 140 29 Loss on
debt extinguishment --- (29,262) Other income and (expense), net
713 83 Total other income (expense) (19,458) (55,238) Income (loss)
before income taxes and minority interest 24,820 (17,605) Income
tax expense (benefit) 8,819 (5,437) Income (loss) before minority
interest 16,001 (12,168) Minority interest --- 468 Net income
(loss) $16,001 $(12,636) Earnings (loss) per common share: Basic
$0.23 $(0.28)* Diluted $0.23 $(0.28)* Weighted average common
shares outstanding: Basic 69,778,760 69,367,007 * Diluted
69,778,760 69,367,007 * * Represents earnings per share and
weighted average shares outstanding for the period from the initial
public offering date of February 9, 2005 through March 31, 2005.
Schedule B VALOR Communications Group, Inc. Condensed Consolidated
Balance Sheets (Dollars in thousands) (Unaudited) March 31,
December 31, 2006 2005 ASSETS Cash & cash equivalents $69,848
$64,178 Accounts receivable, net 54,496 59,973 Prepayments and
other current assets 12,434 11,724 TOTAL CURRENT ASSETS 136,778
135,875 NET PROPERTY, PLANT AND EQUIPMENT 707,578 717,529
INVESTMENTS AND OTHER ASSETS 1,112,948 1,109,377 TOTAL ASSETS
$1,957,304 $1,962,781 LIABILITIES AND EQUITY Total current
liabilities $89,027 $100,259 Long-term debt, net of current
maturities 1,180,555 1,180,555 Other long-term liabilities 121,638
110,199 TOTAL LIABILITIES 1,391,220 1,391,013 TOTAL STOCKHOLDERS'
EQUITY 566,084 571,768 TOTAL LIABILITIES AND EQUITY $1,957,304
$1,962,781 Schedule C VALOR Communications Group, Inc. Condensed
Consolidated Statements of Cash Flows (Dollars in thousands)
(Unaudited) Three months ended March 31, 2006 2005 Cash flow from
operating activities: Net income (loss) $16,001 $(12,636)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization 22,010 22,235
Loss on debt extinguishment --- 29,262 Non-cash stock compensation
expense 2,103 6,387 Changes in working capital (9,701) (3,824)
Other, net 11,462 (935) Net cash provided by operating activities
41,875 40,489 Cash flow from investing activities: Payments for
property, plant and equipment (10,234) (17,379) Redemption of RTFC
capital certificate --- 24,445 Other, net 4 298 Net cash (used in)
provided by investing activities (10,230) 7,364 Cash flow from
financing activities: Proceeds from issuance of long-term debt ---
400,000 Payments of long-term debt, net of proceeds from issuance
of debt (43) (800,165) Proceeds from issuance of common stock, net
of offering costs --- 412,746 Payments of debt issuance costs ---
(16,206) Cash dividends paid (25,138) --- Prepayment fees paid in
connection with the repayment of debt --- (19,393) Other, net (794)
(2,747) Net cash used in financing activities (25,975) (25,765) Net
increase in cash and cash equivalents 5,670 22,088 Cash and cash
equivalents at beginning of period 64,178 17,034 Cash and cash
equivalents at end of period $69,848 $39,122 Schedule D VALOR
Communications Group, Inc. Non-GAAP Measures - Adjusted EBITDA
Calculation (Dollars in thousands) (Unaudited) Three months ended
March 31, 2006 2005 Net income (loss) $16,001 $(12,636)
Adjustments: Income tax expense (benefit) 8,819 (5,437) Interest
expense 20,615 26,048 Depreciation and amortization 22,010 22,235
Minority interest --- 468 (Gain) loss on interest rate hedging
arrangements (304) 40 Earnings from unconsolidated cellular
partnerships (140) (29) Other income and (expense), net (713) (83)
Loss on debt extinguishment --- 29,262 Non-cash stock based
compensation 2,103 6,387 Excluded items (a) 249 2,193 Total
adjustments 52,639 81,084 Adjusted EBITDA $68,640 $68,448 (a)
Excluded items, as defined in the credit agreement: IPO cash
bonuses $249 $1,693 Expenses related to credit facility amendment
--- 500 Total excluded items, as defined in the credit agreement
$249 $2,193 Schedule E VALOR Communications Group, Inc. Non-GAAP
Measures - Cash Available to Pay Dividends Reconciliation (Dollars
in thousands) (Unaudited) Three months ended March 31, 2006 2005
Net cash provided by operating activities $41,875 $40,489
Adjustments: Interest expense 20,615 26,048 Amortization of debt
issuance costs (925) (910) Provision for doubtful accounts
receivable (1,076) (1,093) Changes in working capital 9,701 3,824
Other, net (1,286) (2,020) Income tax expense (benefit) 8,819
(5,437) Deferred income taxes (8,619) 5,437 Other income and
(expense), net (713) (83) Excluded items (a) 249 2,193 Total
adjustments 26,765 27,959 Adjusted EBITDA (b) 68,640 68,448 Items
excluded from Adjusted EBITDA settled in cash: Cash income
(expenses) excluded from Adjusted EBITDA (c) 464 (2,110) Cash
interest expense (19,943) (26,451) Cash income taxes (200) ---
Capital expenditures (10,234) (17,379) Cash available to pay
dividends (b) $38,727 $22,508 Pro forma adjustments: Transaction
fees expensed (d) --- 500 Cash interest (e) --- 6,500 Cash taxes
(f) --- (100) Pro forma - cash available to pay dividends $38,727
$29,408 (a) Excluded items, as defined in the credit agreement: IPO
cash bonuses $249 $1,693 Expenses related to credit facility
amendment --- 500 Total excluded items, as defined in the credit
agreement $249 $2,193 (b) Adjusted EBITDA and Cash Available to Pay
Dividends are non-GAAP financial measures and by definition are not
measures of financial performance under generally accepted
accounting principles (GAAP). They should not be considered an
alternative to operating income (loss) or net income (loss)
reflected in the statement of operations or to cash flow as
reflected in the statement of cash flows and are not necessarily
indicative of cash available to fund all cash flow needs. (c)
Represents cash income (expenses) reflected above under Other
income and expense, net, and Excluded items that were excluded from
the calculation of Adjusted EBITDA. These items were received or
(paid) by us in cash and would have impacted the amount of cash
that would have been available to pay dividends. (d) Legal expenses
charged to expense in connection with the modification of our
credit facility that we completed in conjunction with our IPO and
reorganization. (e) Cash interest expense in the quarter ended
March 31, 2005 is approximately $6.5 million higher than it would
have been had the IPO and the related debt reduction occurred at
the beginning of the quarter. (f) Reflects estimated cash taxes we
expect to pay on our taxable income. Schedule F Historical
Operating Statistics 3/31/06 12/31/05 9/30/05 6/30/05 3/31/05
Access lines: Primary 464,799 468,225 474,723 480,717 488,165
Secondary 51,712 50,231 49,979 49,537 48,837 Total access lines (A)
516,511 518,456 524,702 530,254 537,002 Long distance subscribers
236,966 232,031 229,530 227,347 222,874 Penetration rate of total
access lines 46% 45% 44% 43% 42% DSL subscribers (B) 60,946 52,759
47,309 40,144 31,208 Penetration rate of total access lines 12% 10%
9% 8% 6% Penetration rate of total addressable lines (1) 16% 14%
13% 11% 9% Total connections (A+B) 577,457 571,215 572,011 570,398
568,210 Average monthly revenue per access line (ARPU) (2) $80.91
$80.49 $80.86 $78.75 $77.92 (1) Addressable lines are lines that
have DSL service available. (2) ARPU is computed by dividing the
total revenue for the quarter by the average of the access lines at
the beginning and end of the quarter. DATASOURCE: VALOR
Communications Group, Inc. CONTACT: investor relations, Keith
Terreri or Sheryl Seyer, +1-972-373-1296, or fax, +1-972-373-1150,
or , or media, Cynthia T. Cruz, +1-972-373-1134, or fax,
+1-469-420-2540, or , all of VALOR Communications Group, Inc. Web
site: http://www.earnings.com/ Web site:
http://www.valortelecom.com/
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