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ITC^DeltaCom Announces Third Quarter 2009 Results

HUNTSVILLE, Ala., Nov. 9 /PRNewswire-FirstCall/ -- ITC^DeltaCom, Inc. (OTC: ITCD.OB), a leading provider of integrated communications services to customers in the southeastern United States, today announced its operating and financial results for the quarter ended September 30, 2009. For the 2009 third quarter, ITC^DeltaCom reported total operating revenues of $116.4 million, a net loss of $(2.1) million, and adjusted EBITDA* of $23.1 million.

"Since late 2008, the Company's emphasis has been on adjusted EBITDA growth, increased cash flow, and cost containment, resulting in record adjusted EBITDA in successive quarters, despite the worsening economic downturn," said Randall E. Curran, ITC^DeltaCom's Chief Executive Officer. "We have also continued to invest in our network at the highest levels in this decade and are now emphasizing investments that position the Company for future revenue growth."

Among its operating results for the third quarter of 2009, ITC^DeltaCom:

  • recorded operating income of $5.3 million compared to operating income of $2.4 million for the third quarter of 2008 and a net loss of ($2.1) million compared to a net loss of ($5.3) million for the third quarter of 2008 and ($2.7) million for the second quarter of 2009;
  • increased adjusted EBITDA, as defined by us, by 4.4% over the third quarter of 2008 and 7.0% over the second quarter of 2009 to $23.1 million;
  • experienced a decrease in total operating revenues of $8.3 million, or 6.7%, from the third quarter of 2008 and $2.2 million, or 1.9%, from the second quarter of 2009;
  • experienced a decrease in business local, data and Internet revenues of $3.9 million, or 4.5%, from the third quarter of 2008 and $2.2 million, or 2.6%, from the second quarter of 2009;
  • ended the quarter with approximately 423,200 retail voice lines in service, of which 87.4% were provided on our own network, which represented an increase from 84.8% provided on our own network at the end of the third quarter of 2008;
  • increased our core, facilities-based business retail voice lines in service by approximately 1,000 lines over the third quarter of 2008, while experiencing a decrease in total retail business voice lines in service of approximately 11,800 lines from the third quarter of 2008 due to a decline in resale and commercial agreement lines;
  • continued to derive benefit from investments in process redesign and other efficiency gains, resulting in selling, operations and administration expense equal to 35.5% of total operating revenues compared to 36.0% of total operating revenues for the third quarter of 2008;
  • generated $14.6 million in net cash provided by operating activities, which represented a decrease of $6.6 million from the third quarter of 2008 and a decrease of $6.8 million from the second quarter of 2009; and
  • generated $12.8 million of adjusted unlevered free cash flow**, as defined by us, which represented a decrease of 9.2% from the third quarter of 2008, and an increase of 38.4% over the second quarter of 2009.

"We continue to reduce costs through network optimization and process improvements that will strengthen our business and enhance our customers' experience," said Richard E. Fish, ITC^DeltaCom's Chief Financial Officer. "We've generated over $36 million of adjusted unleveraged free cash flow in the first nine months of 2009 and ended the quarter with cash and cash equivalents of $77.5 million."

Additional information about ITC^DeltaCom's business and operating results is contained in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 filed with the Securities and Exchange Commission.

* Adjusted EBITDA is defined by ITC^DeltaCom as net income (loss) before interest income and expense, net, provision for income taxes, depreciation and amortization, stock-based compensation, non-cash loss on extinguishment of debt, debt issue cost write-off, prepayment penalties on debt, equity commitment fees, restructuring expenses, merger-related expenses, asset impairment loss and other income or loss, all as disclosed in the consolidated statements of operations and comprehensive loss. Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles. For a quantitative reconciliation of adjusted EBITDA to net loss, as net loss is calculated in accordance with generally accepted accounting principles, see the accompanying table captioned "Adjusted EBITDA Reconciliation."

** Adjusted unlevered free cash flow is defined by ITC^DeltaCom as adjusted EBITDA (as defined above) less capital expenditures (including equipment purchased through capital leases) and changes in accounts payable - construction, all as disclosed in the consolidated statements of cash flows. Adjusted unlevered free cash flow is not a measurement of financial performance under generally accepted accounting principles. For a quantitative reconciliation of adjusted unlevered free cash flow to net cash provided by operating activities, as net cash provided by operating activities is calculated in accordance with generally accepted accounting principles, see the accompanying table captioned "Adjusted Unlevered Free Cash Flow Reconciliation."

ABOUT ITC^DELTACOM, INC.

ITC^DeltaCom, Inc., headquartered in Huntsville, Alabama, provides, through its operating subsidiaries, integrated telecommunications and technology services to businesses and other communications providers in the southeastern United States. ITC^DeltaCom has a fiber optic network spanning 15,965 route miles, including more than 12,020 route miles of owned fiber, and offers a comprehensive suite of voice and data communications services, including local, long distance, broadband data, Internet connectivity, wireless voice and data services, and customer premise equipment. ITC^DeltaCom is one of the largest competitive telecommunications providers in its primary eight-state region. For more information about ITC^DeltaCom, visit ITC^DeltaCom's web site at http://www.deltacom.com.

FORWARD-LOOKING STATEMENTS

Except for the historical and present factual information contained herein, this release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this release, the words "anticipate," "believe," "estimate," "expect," "intend," "plan" and similar expressions as they relate to ITC^DeltaCom, Inc. or its management are intended to identify these forward-looking statements. All statements by the Company regarding its expected financial position, revenues, liquidity, cash flow and other operating results, balance sheet improvement, business strategy, financing plans, forecasted trends related to the markets in which it operates, legal proceedings and similar matters are forward-looking statements. The Company's actual results could be materially different from its expectations because of various risks. These risks, some of which are discussed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, and in the Company's subsequent SEC reports, include the Company's dependence on new product development, rapid technological and market changes, the Company's dependence upon rights of way and other third-party agreements, debt service and other cash requirements, liquidity constraints and risks related to future growth and rapid expansion. Other important risk factors that could cause actual events or results to differ from those contained or implied in the forward-looking statements include, without limitation, customer attrition, delays or difficulties in deployment and implementation of colocation arrangements and facilities, appeals of or failures by third parties to comply with rulings of governmental entities, inability to meet installation schedules, general economic and business conditions, failure to maintain underlying service/vendor arrangements, competition, adverse changes in the regulatory or legislative environment, and various other factors beyond the Company's control. ITC^DeltaCom disclaims any responsibility to update these forward-looking statements, whether as a result of new information, future developments or otherwise.



                               ITC^DeltaCom, Inc.
                              Financial Highlights
                                  (Unaudited)
                   (In thousands, except share and per share data)


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

    OPERATING REVENUES:
    Integrated
     communications
     services               $97,668     $103,398     $299,797      $311,224
    Wholesale services       14,564       16,502       44,807        49,566
    Equipment sales
     and related services     4,167        4,817       12,373        14,258

    TOTAL OPERATING
     REVENUES               116,399      124,717      356,977       375,048

    COSTS AND EXPENSES:
    Cost of services
     and equipment, excluding
     depreciation and
     amortization            52,627      58,246      163,731       174,075
    Selling, operations and
     administration          41,378      44,893      126,865       137,965
    Depreciation and
     amortization            17,110      19,218       51,245        56,479

    Total operating
     expenses               111,115     122,357      341,841       368,519

    OPERATING INCOME          5,284       2,360       15,136         6,529

    OTHER (EXPENSE) INCOME:
    Interest expense         (7,453)     (7,901)     (22,544)      (24,087)
    Interest income               9         273           38         1,149
    Other income (expense)       43         (68)         (89)          360

    Total other expense, net (7,401)     (7,696)     (22,595)      (22,578)

    LOSS BEFORE INCOME TAXES (2,117)     (5,336)      (7,459)      (16,049)

    INCOME TAX EXPENSE            -           -            -             -

    NET LOSS                 (2,117)     (5,336)      (7,459)      (16,049)
    PREFERRED STOCK DIVIDENDS
     AND ACCRETION                -           -            -        (7,073)

    NET LOSS
     APPLICABLE TO
     COMMON STOCKHOLDERS    $(2,117)    $(5,336)     $(7,459)     $(23,122)

    BASIC AND DILUTED
     NET LOSS PER SHARE
     APPLICABLE TO COMMON
     STOCKHOLDERS            $(0.03)     $(0.07)      $(0.09)       $(0.29)

    BASIC AND DILUTED
     WEIGHTED AVERAGE
     COMMON SHARES
     OUTSTANDING         81,136,456  80,748,659   80,987,101    79,300,183

    COMPREHENSIVE
     INCOME (LOSS)
    NET LOSS                $(2,117)    $(5,336)     $(7,459)     $(16,049)
    OTHER COMPREHENSIVE
     INCOME (LOSS)
    Change in unrealized gains
     on derivative instrument
     designated as cash flow
     hedging instrument, net
     of tax                   2,275       1,187        5,610           774

    COMPREHENSIVE
     INCOME (LOSS)             $158     $(4,149)     $(1,849)     $(15,275)






                                 ITC^DeltaCom, Inc.
                                Quarterly Highlights
                                    (Unaudited)
                                  (In thousands)


                                                Three Months Ended
                                  Sept.     June      March     Dec.     Sept.
                                   30,       30,        31,      31,      30,
                                  2009      2009       2009     2008     2008

    Integrated communications
     services revenues:
    Long distance and access    $15,375   $15,529   $16,021  $16,312   $17,229
    Business local, data and
     internet                    82,293    84,524    86,055   86,445    86,169

    Total integrated
     communications services
     revenues                    97,668   100,053   102,076  102,757   103,398

    Wholesale services
     revenues:
    Broadband transport          12,284    12,237    12,664   12,983    13,046
    Local interconnection           181       308       740    1,034     1,193
    Directory assistance and
     operator services              986     1,019     1,029    1,093     1,146
    Other                         1,113     1,061     1,185    1,122     1,117

    Total wholesale services
     revenues                    14,564     14,625   15,618   16,232    16,502

    Equipment sales and
     related services
     revenues                     4,167      3,925    4,281    3,826     4,817

    Total operating revenues    116,399    118,603  121,975  122,815   124,717

    COSTS AND EXPENSES:
    Cost of services and
     equipment, excluding
     depreciation and
     amortization                52,627     54,627   56,477   58,824    58,246
    Selling, operations and
     administration expense       41,378    41,817   43,670   45,158    44,893
    Depreciation and
     amortization                 17,110    17,216   16,919   17,035    19,218

    Total operating expenses     111,115   113,660  117,066  121,017   122,357

    OPERATING INCOME              $5,284     $4,943   $4,909  $1,798    $2,360








                               ITC^DeltaCom, Inc.
                         Quarterly Highlights (continued)
                                   (Unaudited)

                                     Sept.    June     March    Dec.     Sept.
                                      30,      30,      31,      31,      30,
                                     2009     2009     2009     2008     2008

    Retail business voice lines
     in service(1)
    UNE-T and other UNE lines(2)  369,752  372,413  369,787  369,496   368,724
    Increase (decrease) from
     previous quarter              (0.7)%     0.7%     0.1%     0.2%      1.8%
                                   53,456   56,022   59,017   62,629    66,300
    Resale and commercial
     agreement lines(3)
    Decrease from previous quarter (4.6)%   (5.1)%   (5.8)%   (5.5)%    (5.5)%

    Total retail business voice
     lines in service             423,208  428,435  428,804  432,125   435,024


    Wholesale voice lines in
     service(4)                     6,969    8,625   12,489    26,151   38,203
    Decrease from previous quarter (19.2)%  (30.9)%  (52.2)%   (31.5)%  (5.9)%

    Total business voice lines
     in service (5)              430,177  437,060  441,293   458,276   473,227


    Number of employees (6)        1,437    1,452    1,511     1,565     1,615


    (1) Lines in service include only voice lines in service.  Conversion of
        data services provided to customers to a voice line equivalent is not
        included.
    (2) Facilities-based service offering in which ITC^DeltaCom provides local
        service through its owned and operated switching facilities.
    (3) Represent voice lines for local and mobile services provided under
        commercial agreements and by reselling incumbent local exchange
        carrier tariff offerings.
    (4) Represents primary rate interface circuits provided as part of
        ITC^DeltaCom's local interconnection services for Internet service
        providers.
    (5) Reported net of lines disconnected or canceled.
    (6) Includes full-time and part-time employees.







                                ITC^DeltaCom, Inc.
                 Balance Sheet and Other Financial Highlights
                                 (In thousands)



    Balance Sheet Data (at period end):        Sept. 30,    December
                                                 2009       31, 2008
                                             (Unaudited)
    Cash and cash equivalents
     (unrestricted)                             $77,463      $56,683
    Working capital                              51,172       33,902
    Total assets                                372,736      382,661
    Long-term liabilities                       305,064      307,880
    Stockholders' deficit                       (12,568)     (12,401)
    Total liabilities and
     stockholders' deficit                      372,736      382,661






                                                 Three Months Ended
                                   Sept.     June    March      Dec.     Sept.
                                    30,       30,      31,       31,      30,
                                   2009      2009     2009      2008     2008
    Other Financial Data:                          (Unaudited)
    ---------------------
    Capital expenditures(1)     $10,315   $13,465   $8,329   $29,843   $8,005
    Cash flows (used in)
     provided by:
        Operating activities     14,622    21,430   17,271    10,685   21,267
        Investing activities    (10,385)  (12,795)  (6,792)   (9,593) (33,257)
        Financing activities       (576)     (581)  (1,414)    2,918    4,417

    Adjusted EBITDA(2)           23,094    22,697   22,357    19,269   22,131
    Adjusted unlevered
     free cash flow(3)           12,779     9,232   14,028   (10,574)  14,126


    Notes:
    (1) Includes equipment purchased through capital leases and changes in
        accrued capital related costs.

    (2) Adjusted EBITDA is defined by ITC^DeltaCom as net income (loss) before
        interest income and expense, net, provision for income taxes,
        depreciation and amortization, stock-based compensation, non-cash loss
        on extinguishment of debt, debt issue cost write-off, prepayment
        penalties on debt, equity commitment fees, restructuring expenses,
        merger-related expenses, asset impairment loss and other income or
        loss, all as disclosed in the condensed consolidated statements of
        operations and comprehensive loss.  Adjusted EBITDA is not a
        measurement of financial performance under generally accepted
        accounting principles.  For a quantitative reconciliation of adjusted
        EBITDA to net loss, as net loss is calculated in accordance with
        generally accepted accounting principles, see the accompanying table
        captioned "Adjusted EBITDA Reconciliation."

    (3) Adjusted unlevered free cash flow is defined by ITC^DeltaCom as
        adjusted EBITDA, as defined above in Note (2), less capital
        expenditures (including equipment purchased through capital leases)
        and changes in accounts payable-construction, all as disclosed in the
        condensed consolidated statements of cash flows.  Adjusted unlevered
        free cash flow is not a measurement of financial performance under
        generally accepted accounting principles.  For a quantitative
        reconciliation of adjusted unlevered free cash flow to net cash
        provided by operating activities, as net cash provided by operating
        activities is calculated in accordance with generally accepted
        accounting principles, see the accompanying table captioned "Adjusted
        Unlevered Free Cash Flow Reconciliation."







                                ITC^DeltaCom, Inc.
                         Adjusted EBITDA Reconciliation
                                 (In thousands)
                                  (Unaudited)

Adjusted EBITDA is defined by ITC^DeltaCom as net income (loss) before interest income and expense, net, provision for income taxes, depreciation and amortization, stock-based compensation, non-cash loss on extinguishment of debt, debt issue cost write-off, prepayment penalties on debt, equity commitment fees, restructuring expenses, merger-related expenses, asset impairment loss and other income or loss, all as disclosed in the condensed consolidated statements of operations and comprehensive loss. Not all of these adjustments are applicable in every period. Adjusted EBITDA is not a financial measurement under generally accepted accounting principles ("GAAP"). ITC^DeltaCom's management uses adjusted EBITDA, together with financial measures prepared in accordance with GAAP, such as revenue, to assess ITC^DeltaCom's historical and prospective operating performance. Management uses adjusted EBITDA to enhance its understanding of ITC^DeltaCom's core operating performance, which represents management's views concerning ITC^DeltaCom's performance in the ordinary, ongoing and customary course of its operations. ITC^DeltaCom's management also uses adjusted EBITDA to evaluate ITC^DeltaCom's core operating performance relative to that of its competitors. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview--Adjusted EBITDA" in ITC^DeltaCom's Annual Report on Form 10-K for its 2008 fiscal year for additional information regarding management's reasons for including adjusted EBITDA data and for material limitations with respect to the usefulness of this measure. The following tables present adjusted EBITDA amounts for the fiscal quarters indicated and also sets forth a quantitative reconciliation of adjusted EBITDA to net loss, as net loss is calculated in accordance with GAAP (in thousands):

                                               Three Months Ended
                                 Sept.     June     March      Dec.     Sept.
                                  30,       30,       31,       31,      30,
                                 2009      2009      2009      2008     2008
                                                 (Unaudited)

    Net loss                  $(2,117)  $(2,746)  $(2,596)  $(6,848)  (5,336)
    Add: non-EBITDA items
     included in net loss:
     Interest income and
      expense, net              7,444     7,538     7,524     8,367    7,628
     Depreciation and
      amortization             17,110    17,216    16,919    17,035   19,218
     Stock-based compensation     700       538       529       436      553
     Other (income) loss          (43)      151       (19)      279       68

    Adjusted EBITDA           $23,094   $22,697   $22,357   $19,269  $22,131




                                ITC^DeltaCom, Inc.
                Adjusted Unlevered Free Cash Flow Reconciliation
                                 (In thousands)
                                  (Unaudited)

Adjusted unlevered free cash flow is defined by ITC^DeltaCom as adjusted EBITDA (as defined above) less capital expenditures (including equipment purchased through capital leases) and changes in accounts payable-construction, all as disclosed in the condensed consolidated statements of cash flows. Adjusted unlevered free cash flow is not a measurement of financial performance under GAAP. ITC^DeltaCom has included data with respect to adjusted unlevered free cash flow because its management considers adjusted unlevered free cash flow to be a useful, supplemental indicator of its operating performance. When measured over time, adjusted unlevered free cash flow provides supplemental information to investors concerning the growth rate in ITC^DeltaCom's operating results and its ability to generate cash flows to satisfy mandatory debt service requirements and make other mandatory, non-discretionary expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview--Adjusted Unlevered Free Cash Flow" in ITC^DeltaCom's Annual Report on Form 10-K for its 2008 fiscal year for additional information regarding management's reasons for including adjusted unlevered free cash flow data and for material limitations with respect to the usefulness of this measure. The following tables present adjusted unlevered free cash flow amounts for the fiscal quarters indicated and also sets forth a quantitative reconciliation of adjusted unlevered free cash flow to net cash provided by operating activities, as net cash provided by operating activities is calculated in accordance with GAAP (in thousands):

                                             Three Months Ended
                                 Sept.     June     March      Dec.     Sept.
                                  30,       30,       31,       31,      30,
                                 2009      2009      2009      2008     2008
                                                 (Unaudited)

    Net cash provided by
     operating activities     $14,622   $21,430   $17,271   $10,685   $21,267

    Adjustments to reconcile
     adjusted unlevered free
     cash flow to net cash
     provided by operating
     activities
    Elements included in net
     cash provided by (used
     in) operating activities
     not included in adjusted
     unlevered free cash flow:
    Total changes in current
     operating assets and
     liabilities                2,858    (4,671)      (154)   2,025    (5,204)
    Provision for doubtful
     accounts                  (1,225)   (1,050)    (1,680)  (1,200)     (950)
    Interest expense excluding
     amortization of debt
     issuance costs and debt
     discount, net of interest
     income                     6,839     6,932      6,917    7,759     7,018
    Other loss                      -        56          3        -         -

    Adjusted EBITDA            23,094    22,697     22,357   19,269    22,131
    Less:
    Capital expenditures      (10,437)  (12,490)   (10,096) (22,063)  (15,486)
    Change in accounts payable
     -construction                122      (975)     1,767   (7,780)    7,481

    Adjusted unlevered free
     cash flow                $12,779    $9,232    $14,028 $(10,574)  $14,126









    Investor Contact:
    Richard E. Fish
    Chief Financial Officer
    256-382-3827
    [email protected]

SOURCE ITC^DeltaCom, Inc.

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