TLLEQ Teletouch Communications Inc (CE)

Teletouch Communications, Inc. (OTCBB: TLLE), a leading U.S. cellular services provider and consumer electronics distributor, reported audited consolidated results on Form 10-Q and announced financial results for the first quarter ended August 31, 2012.

1st Quarter Results – Financial (as reported)

• Total operating revenues of $5.22 million
• Income from continuing operations of $0.38 million
• EBITDA from continuing operations of $0.60 million
• Net loss of $0.11 million
• Reduced total liabilities by $2.36 million

1st Quarter Results – Financial (adjusted for non-cash and significant non-recurring items)

• Adjusted income from continuing operations of $0.56 million
• Adjusted EBITDA from continuing operations of $0.78 million
• Adjusted net income of $0.07 million

1st Quarter Highlights - Business

• In June 2012, signed National Distribution Agreement with TCT Mobile Multinational, Limited to sell Alcatel OneTouch® branded cellular handsets. Initial inventory expected to be available by late September to early October 2012.
• In July 2012, hired 30+ year industry veteran and former head of CellStar USA, Timmy Monico, as new distribution division VP and leader of worldwide wholesale sales.
• Sold legacy Two-Way Radio/Public Safety Equipment business to DFW Communications, Inc. for approximately $1.5 million in August 2012.
• Negotiated term sheet with prospective new lender for senior revolving and term credit facilities to replace current credit facility with Thermo Credit LLC. The due diligence process started in late August 2012, with closing targeted for end of October 2012.

“As we prepare for our initial handset deliveries and the related sales growth in our wholesale distribution division, we are making solid progress in the basic blocking and tackling of running the overall business,” stated T. A. "Kip" Hyde, Jr., President, Chief Operating Officer and Director of Teletouch. “With the sale of the two-way radio and public safety equipment division, we continue to pay down debt and reduce our total liabilities. Through segment cost reductions and AT&T subscriber transfer fees, our operating income from continuing operations increased over half-a-million dollars from the same period last year to approximately $375,000 for this year’s quarter. Similarly, our net loss from continuing operations was reduced by over $600,000 from the prior fiscal year’s first quarter results. After guidance from the State, we filed a petition for redetermination and hearing, in order to facilitate and complete the process of creating a formal compromise and payment arrangement for the sales tax assessment with the State of Texas. When adjusted for non-cash stock compensation expense and other items, we generated net income of $73,000 for the quarter.”

Hyde continued, “We are now substantially through due diligence with a new lender to replace Thermo Credit, with closing currently targeted for October 2012 month-end. Once closed, this new senior facility is designed to facilitate growth in our wholesale distribution segment, as well as support our ongoing cellular services segment. When combined with our latest distribution agreement with Unimax Communications for the import and sales of UMX® branded low cost CDMA handsets, we feel we are well positioned for strong performance through the back half of this fiscal year.”

EARNINGS CONFERENCE CALL:

The Company’s fiscal first quarter 2013 earnings conference call is scheduled on October 24, 2012, at 4:15 p.m. Eastern (3:15 p.m. Central). To join, participants will call 866-901-2585 or 404-835-7099. Callers will be asked to provide their first and last names, email address, company and/or financial institution name, as applicable. Participants are advised to dial in approximately 10-15 minutes before the conference call is scheduled to begin. After information is given to the operator, participants will be placed on music-hold prior to the start of the call, then all added to call at start. After the speakers conclude their prepared remarks, the moderator will provide instructions to all calling participants on how to queue up their questions.

For the first quarter ended August 31, 2012, the Company announced the following results [the Tables below present selected financial data, including certain non-GAAP measures; see Teletouch’s Form 10-Q for its quarter ended August 31, 2012, filed on October 15, 2012 for complete financials and additional information]:

        Teletouch Communications, Inc. (in thousands, except shares and per share amounts)   Three Months Ended August 31, August 31,     2012 2011

$ Change

% Change

Summary Operating Results: Service revenue $ 3,723 $ 4,125 $ (402 ) -9.7 % Product sales revenue   1,497     3,360     (1,863 ) -55.4 % Total operating revenues 5,220 7,485 (2,265 ) -30.3 %   Cost of service (669 ) (1,004 ) 335 33.4 % Cost of products sold   (1,479 )   (3,373 )   1,894   56.2 %   Margin on service revenue 3,054 3,121 (67 ) -2.1 % Margin on product sales revenue   18     (13 )   31   (E) Margin on total revenue   3,072     3,108     (36 ) -1.2 %   Operating income (loss) from continuing operations 375 (154 ) 529 (E)   Net loss from continuing operations (111 ) (715 ) 604 84.5 %   Net loss from discontinued operations (D) (97 ) (57 ) (40 ) -70.2 %   Net loss $ (208 ) $ (772 ) $ 564 73.1 %   Basic loss per share of common stock from continuing operations $ 0.00 $ (0.02 ) $ 0.02 (E)   Weighted average shares outstanding: Basic 48,742,335 48,739,002 3,333 0.0 %    

EBITDA, Adjusted EBITDA, Operating Income and Net Income (Loss)from Continuing Operations Reconciliation:

Net loss from continuing operations $ (111 ) $ (715 ) $ 604 84.5 % Add back: Depreciation and amortization 224 280 (56 ) -20.0 % Interest expense 404 527 (123 ) -23.3 % Income tax expense   82     34     48   141.2 % EBITDA from continuing operations (A) 599 126 473 375.4 % Adjustments: Non-cash stock compensation expense 162 251 (89 ) -35.5 % Severance costs 22 1 21 2100.0 % Litigation costs (AT&T arbitration) (C)   -     167     (167 ) -100.0 % Total adjustments   184     419     (235 ) -56.1 % Adjusted EBITDA from continuing operations (B) 783

 

545 238 43.7 %  

Adjusted Operating Income from Continuing Operations Reconciliation:

Operating income (loss) from continuing operations 375 (154 ) 529 (E) Total adjustments   184     419     (235 ) -56.1 % Adjusted operating income from operations (B) 559 265 294 110.9 %  

Adjusted Net Income (Loss) from Continuing Operations Reconciliation:

Net loss $ (111 ) $ (715 ) $ 604 84.5 % Total adjustments   184     419     (235 ) -56.1 % Adjusted net loss from continuing operations (B) 73 (296 ) 369 (E)   Notes:

(A) Teletouch's EBITDA means Net income (loss) from continuing operations before depreciation and amortization, interest expense and income tax expense. EBITDA is a non-GAAP measure that the Company believes allows for a more complete analysis of our results.

 

(B) Teletouch's Adjusted EBITDA, Adjusted operating income (loss) and Adjusted net income (loss) from continuing operations means EBITDA, Operating income (loss) and Net income (loss) from Continuing Operations before non-cash stock compensation expense and significant items that do not occur on a routine basis. These adjusted measurements are non-GAAP measures that the Company believes allows for a more comparative analysis of our results to other periods.

  (C) The Company’s subsidiary, PCI, commenced binding arbitration against AT&T on 9/30/09. PCI commenced the binding arbitration to seek relief for damages PCI has incurred as AT&T has prevented PCI from selling the iPhone and other AT&T exclusive products and services that PCI has been contractually entitled to provide to its customers under its distribution agreements with AT&T. The litigation against AT&T was settled on November 23, 2011.  

(D) On August 11, 2012, Teletouch and DFW Communications, Inc. entered into an Asset Purchase Agreement (the "APA") to sell substantially all of the assets of the Company associated with the two-way radio and public safety equipment business. The sale of the business was approved by the Company's Board of Directors on August 10, 2012 and the Company initially received approximately $1,169,000 of cash consideration for the sale of the assets of the two-way radio and public safety equipment business with an additional payment of $300,000 due to the Company upon the subsequent sale of the real estate related to this business which is expected to close by November 30, 2012.

  (E) Percent change is not provided if either the latest period or the year-ago period contains a loss.           Selected Balance Sheet Highlights (in thousands)   August 31, May 31, 2012 2012

$ Change

% Change Cash $ 1,666 $ 1,973 $ (307 ) -15.6 % Current debt obligation 9,740 10,932 (1,192 ) -10.9 %   Total liabilities 18,215 20,576 (2,361 ) -11.5 %   Current Assets 7,274 8,814 (1,540 ) -17.5 %

Current Liabilities

  18,215     20,476     (2,261 ) -11.0 % Working Capital (10,941 ) (11,662 ) 721 -6.2 %  

Disclosure of Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles (“GAAP”). However, management believes the presentation of certain non-GAAP financial measures provides useful information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations, and that when GAAP financial measures are viewed in conjunction with the non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company’s ongoing operating performance. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for evaluating performance. For all non-GAAP financial measures in this release, we have provided corresponding GAAP financial measures for comparative purposes.

We refer to the term “EBITDA from continuing operations,” “Adjusted EBITDA from continuing operations,” “Adjusted income/(loss) from continuing operations” and “Adjusted net income/(loss) from continuing operations” in various places of our financial discussion. “EBITDA from continuing operations” is defined by us as “Net income/(loss) from continuing operations” before interest expense, income tax expense, and depreciation and amortization expense. The Company identifies its non-cash, significant and one-time charges each period, including non-cash stock compensation expense and significant litigation or restructuring costs and excludes these charges to compute certain non-GAAP adjusted operating measurements. “EBITDA from continuing operations,” “Income/(loss) from continuing operations,” and “Net income/(loss) from continuing operations” are each adjusted by excluding the total non-cash, significant and one-time charges identified by the Company to compute “Adjusted EBITDA from continuing operations,” “Adjusted income/(loss) from continuing operations” and “Adjusted net income/(loss) from continuing operations,” respectively (the “Non-GAAP Financial Measures”). The Non-GAAP Financial Measures are not measures of operating performance under GAAP and therefore should not be considered in isolation nor construed as an alternative to operating profit, net income/(loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP nor should they be considered as a measure of liquidity. Moreover, since the Non-GAAP Financial Measures are not measurements determined in accordance with GAAP, and thus are susceptible to varying interpretations and calculations, the Non-GAAP Financial Measures, as presented, may not be comparable to similarly titled measures presented by other companies.

About Teletouch Communications

For over 48 years, Teletouch has offered a comprehensive suite of wireless telecommunications solutions, including cellular, two-way radio, GPS-telemetry and wireless messaging. Today, Teletouch is a leading Authorized Service Provider and billing agent of AT&T (NYSE: T) products and services to consumers, businesses and government agencies, operating a chain of retail and authorized agent stores in North and Central Texas under its “Hawk Electronics” brand, in conjunction with its direct sales force, call center operations and various retail eCommerce websites, including: www.hawkelectronics.com, www.hawkwireless.com and www.hawkexpress.com.

Through its wholly owned subsidiary, Progressive Concepts, Inc., Teletouch operates a national distribution business, PCI Wholesale, primarily serving Tier 1 (AT&T, T-Mobile, Verizon, Sprint) cellular carrier agents, Tier 2, Tier 3 and rural carriers, as well as auto dealers and smaller consumer electronics retailers, with product sales and support available through www.pciwholesale.com and www.pcidropship.com, among other B2B oriented websites.

Teletouch's common stock is traded Over-The-Counter under stock symbol: TLLE. Additional information about the Teletouch family of companies can be found at www.teletouch.com.

All statements from Teletouch Communications, Inc. in this news release that are not based on historical fact are "forward-looking statements" within the meaning of the PSLRA 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. While the Company’s 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 “Risk Factors” in the Company’s most recent Form 10-K and 10-Q filings, and amendments thereto, as well as other public filings with the SEC since such date. The Company operates in a rapidly changing and competitive environment, and new risks may arise. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. The Company disclaims any intention to, and undertakes no obligation to, update or revise any forward-looking statement.