Iowa Telecom Reports Results For First Quarter Ended March 31, 2010

Iowa Telecommunications Services, Inc. (NYSE: IWA) today announced operating results for the first quarter ended March 31, 2010. Quarterly highlights for the Company include:

• Operating revenues were $67.4 million.
• Operating income was $14.8 million.
• Net income was $4.1 million or $0.11 per diluted share.
• Adjusted EBITDA (as defined herein) was $32.6 million.

“We’re pleased with our results for the quarter, which reflect the stability of our business,” said Alan L. Wells, Iowa Telecom Chairman and Chief Executive Officer. “Despite the challenging economic environment, our revenues and Adjusted EBTIDA increased sequentially over the fourth quarter of last year. We ended the quarter with 249,100 total telephone access lines, as well as 155,300 long distance subscribers, 95,900 DSL subscribers, 27,500 video subscribers and 9,100 dial up subscribers.

“Our previously announced agreement for Windstream Corporation to acquire our Company, in a transaction valued at approximately $1.1 billion, is proceeding as planned,” added Wells. “Our shareholders voted overwhelmingly to approve the merger agreement on March 25, 2010, with 97.8% of the votes cast in favor of the transaction. We continue to anticipate a closing in mid-year.”

FINANCIAL DISCUSSION FOR FIRST QUARTER 2010:

• Revenues and Sales were $67.4 million in the first quarter, compared to $61.3 million in the first quarter of 2009. The increase was primarily the result of the acquisition of the assets of Sherburne Tele Systems, Inc. in July 2009.
• Operating Costs and Expenses increased $6.2 million to $52.6 million in the first quarter of 2010, compared to $46.4 million in the first quarter of 2009. The 2010 period includes $5.0 million of expense (excluding depreciation and amortization) related to the Sherburne acquisition and $252,000 of transaction-related costs. The 2009 period included $1.2 million of transaction costs. Depreciation and amortization increased $2.3 million for 2010, as compared to the first quarter of 2009.
• Operating Income was $14.8 million, compared to $14.9 million in the first quarter of 2009.
• Interest Expense was $8.2 million, compared to $7.6 million in the first quarter of 2009.
• Earnings Before Income Taxes was $7.1 million, compared to $8.0 million in the first quarter of 2009.
• Income Tax Expense for the first quarter was $3.0 million, compared to $3.5 million in the first quarter of 2009. 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 $151,000 in cash income taxes during the first quarter, primarily related to alternative minimum tax and state income tax.
• Net Income was $4.1 million for the quarter, compared to net income of $4.5 million in the first quarter of 2009.
• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA as defined herein) was $32.6 million for the first quarter of 2010, compared with $31.5 million in the same period in 2009.
• Total Access Lines decreased by 3,900 during the first quarter of 2010, as compared to the fourth quarter in 2009, as ILEC access lines decreased by 3,000 lines and CLEC lines decreased by 900 lines. DSL subscribers increased by 700 while video subscribers increased by 400. Long distance subscribers decreased by 3,200 and dial-up Internet subscribers decreased by 1,100.

First Quarter 2010 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
		1 st Quarter			1 st Quarter			Change
		2010			2009			Amount				Percent
Revenue		$	67,406		$	61,288		$	6,118			10.0	%
Operating Income		$	14,827		$	14,862		$	(35	)		-0.2	%
Interest Expense		$	8,152		$	7,596		$	556			7.3	%
Earnings Before Income Taxes		$	7,119		$	7,980		$	(861	)		-10.8	%
Income Tax Expense		$	3,035		$	3,471		$	(436	)		-12.6	%
Net Income		$	4,084		$	4,509		$	(425	)		- 9.4	%
Basic Earnings Per Share		$	0.11		$	0.14		$	(0.03	)		-21.4	%
Diluted Earnings Per Share		$	0.11		$	0.14		$	(0.03	)		-21.4	%
Adjusted EBITDA (1)		$	32,622		$	31,451		$	1,171			3.7	%
Capital Expenditures		$	3,043		$	3,627		$	(584	)		-16.1	%
Dividends Paid		$	13,341		$	12,949		$	392			3.0	%
(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		1 st Quarter			1 st Quarter			Change
		2010 (4)			2009			Amount			Percent
Telephone Access Lines
ILEC Lines (1)		207,300			206,100			1,200			0.6	%
CLEC Lines (2)		41,800			32,400			9,400			29.0	%
Total Telephone Access Lines		249,100			238,500			10,600			4.4	%
Long Distance Subscribers		155,300			145,000			10,300			7.1	%
Dial-up Internet Subscribers		9,100			15,100			(6,000	)		-39.7	%
DSL Subscribers		95,900			78,200			17,700			22.6	%
Video Subscribers (3)		27,500			21,400			6,100			28.5	%
		1 st Quarter			4 th Quarter			Change
		2010 (4)			2009 (4)			Amount			Percent
Telephone Access Lines
ILEC Lines (1)		207,300			210,300			(3,000	)		-1.4	%
CLEC Lines (2)		41,800			42,700			(900	)		-2.1	%
Total Telephone Access Lines		249,100			253,000			(3,900	)		-1.5	%
Long Distance Subscribers		155,300			158,500			(3,200	)		-2.0	%
Dial-up Internet Subscribers		9,100			10,200			(1,100	)		-10.8	%
DSL Subscribers		95,900			95,200			700			0.7	%
Video Subscribers (3)		27,500			27,100			400			1.5	%
(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 2,100 wholesale lines subscribed at March 31, 2009, 1,700 at March 31, 2010 and 1,800 at December 31, 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 subscribers served via our facilities as well as subscribers of satellite services which we resell.
(4) Includes units acquired from Sherburne Tele Systems, Inc. as of July 1, 2009.