ITC^DeltaCom Reports 2007 Fourth Quarter and Full-Year Results

HUNTSVILLE, Ala., March 20 /PRNewswire-FirstCall/ -- ITC^DeltaCom, Inc. (BULLETIN BOARD: ITCD) , a leading provider of integrated communications services to customers in the southeastern United States, today reported its operating and financial results for the quarter and the year ended December 31, 2007.

For the quarter ended December 31, 2007, ITC^DeltaCom reported total operating revenues of $122.0 million, a net loss of $(11.6) million, and EBITDA* of $19.7 million (excluding stock-based compensation as explained below). For the year ended December 31, 2007, ITC^DeltaCom reported total operating revenues of $492.1 million, a net loss of $(177.0) million, and EBITDA* of $77.0 million (excluding certain one-time costs and losses and stock-based compensation associated with the Company's refinancing and recapitalization consummated on July 31, 2007 as explained below).

"Our investments in new products and customer service enhancements resulted in strong customer growth in 2007, with a 15% increase in our core facilities-based retail business lines," said Randall E. Curran, ITC^DeltaCom's Chief Executive Officer. He continued, "At the same time, we've maintained focus on increasing the efficiency of our network, and we're pleased to see the results of all of these initiatives in our 2007 results."

Among its operating highlights for the fourth quarter and the year, ITC^DeltaCom:

-- Increased EBITDA (excluding $9.2 million of stock-based compensation
and $122.4 million of costs and losses from the extinguishment of debt
and unused equity commitment in connection with the refinancing and
recapitalization transactions it completed on July 31, 2007), to $77.0
million for the year, which represented a 19% increase over 2006 EBITDA
of $64.7 million (excluding $2.6 million of stock-based compensation,
$500,000 of restructuring expenses and $330,000 cost of hurricane
impact);

-- Increased EBITDA (excluding $4.5 million of stock-based compensation)
to $19.7 million for the quarter, which represented a 19.4% increase
over EBITDA of $16.5 million (excluding $684,000 of stock-based
compensation and $22,000 restructuring expenses) for the fourth quarter
of 2006;

-- Increased unlevered free cash flow to $9.2 million for the quarter
compared to $7.3 million for the fourth quarter of 2006, an increase of
26%;

-- Expanded its customer base by adding approximately 43,500 core
facilities-based retail business voice lines in service (including both
UNE-T and UNE lines), representing 15% growth from year end 2006 to
year end 2007 and increased those lines as a percentage of total retail
business voice lines in service from 75% to 81%;

-- Grew business local, data and Internet revenues by $21.7 million for
the 2007 year, or 9.3%, and increased equipment sales for the 2007 year
by 7.9% over 2006;

-- Reduced cost of services and equipment as a percentage of total
operating revenues to 47.2% for the 2007 year from 50.1% for the 2006
year by eliminating excess costs from our network;

-- Strengthened its balance sheet by reducing its outstanding debt by
approximately $63 million, reducing its annual borrowing costs by
approximately $25 million, and eliminating approximately $7 million of
annual in-kind dividends on its formerly outstanding preferred stock
through the refinancing and recapitalization transactions completed on
July 31, 2007, and

-- Generated more than $30 million in unlevered free cash flow for the
year.

"We're pleased to report strong growth in our core retail revenues, increased operating profitability, and over $30 million in unlevered free cash flow during 2007," said Richard E. Fish, Executive Vice President and Chief Financial Officer. "In addition, we completed refinancing transactions in 2007 that we believe have resulted in substantial enhancements to shareholder value."

* EBITDA represents net income (loss) before interest, taxes,
depreciation and amortization, all as disclosed in the consolidated
statements of operations and comprehensive loss. EBITDA is not a
measurement of financial performance under accounting principles
generally accepted in the United States. For information about
management's reasons for providing data with respect to EBITDA, the
limitations associated with the use of EBITDA and a quantitative
reconciliation of EBITDA to net loss, as net loss is calculated in
accordance with generally accepted accounting principles, see the
accompanying table captioned "EBITDA Reconciliation."

** Unlevered free cash flow is defined by ITC^DeltaCom as net cash
provided by operating activities, less capital expenditures, changes in
accrued capital-related costs and equipment purchased through capital
leases plus interest expense net of interest income, debt prepayment
penalties paid in cash and equity commitment fees paid, all as
disclosed in the consolidated statements of cash flows or the
consolidated statements of operations and comprehensive loss.
Unlevered free cash flow is not a measurement of financial performance
under accounting principles generally accepted in the United States.
For information about management's reasons for providing data with
respect to unlevered free cash flow, the limitations associated with
the use of unlevered free cash flow and a quantitative reconciliation
of 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 "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 consumers in the southeastern United States. ITC^DeltaCom has a fiber optic network spanning approximately 15,800 route miles, including more than 11,800 route miles of owned fiber, and offers a comprehensive suite of voice and data communications services, including local, long distance, broadband data communications, Internet connectivity, and customer premise equipment to end-user customers. 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, 2007, and in the Company's subsequent SEC reports, include the Company's dependence on new product development, rapid technological and market change, 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.

Investor Contact:
Richard E. Fish
Chief Financial Officer
256-382-3827
richard.fish@deltacom.com

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

Year Ended December 31,
2007 2006

OPERATING REVENUES:
Integrated communications services $395,573 $381,766
Wholesale services 70,590 81,785
Equipment sales and related services 25,985 24,089

TOTAL OPERATING REVENUES 492,148 487,640

COSTS AND EXPENSES:
Cost of services and equipment,
excluding depreciation and amortization 232,192 244,278
Selling, operations and administration
expense 192,085 182,873
Depreciation and amortization 74,166 59,832
Total operating expenses 498,443 486,983

OPERATING INCOME (LOSS) (6,295) 657

OTHER (EXPENSE) INCOME:
Interest expense (50,598) (57,625)
Interest income 2,293 2,678
Prepayment penalties on debt extinguished (8,208) - Debt issuance cost write-off (7,298) - Loss on extinguishment of debt (105,269) - Cost of unused equity commitment (1,620) - Other income (expense) (31) 831
Total other expense, net (170,731) (54,116)

LOSS BEFORE INCOME TAXES (177,026) (53,459)

INCOME TAX EXPENSE - -
NET LOSS (177,026) (53,459)
PREFERRED STOCK DIVIDENDS AND ACCRETION (39,306) (7,445)
CHARGE DUE TO PREFERRED STOCK REDEMPTION
AND CONVERSION (44,250) -
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(260,582) $(60,904)

BASIC AND DILUTED NET LOSS PER COMMON SHARE $(6.68) $(3.25)

BASIC AND DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 39,001,228 18,751,067

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

Three Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2007 2007 2007 2007 2006
Integrated communications
services revenues: (1)
Long distance and
access $18,146 $19,476 $20,220 $19,568 $19,534
Business local, data
and internet 81,162 80,904 79,072 77,025 75,317

Total integrated
communications services
revenues 99,308 100,380 99,292 96,593 94,851
Equipment sales and
related services revenues 5,780 7,027 6,285 6,893 5,827
Wholesale services
revenues:
Broadband transport 13,287 13,613 13,986 13,976 14,318
Local interconnection 1,279 1,434 1,644 1,900 1,507
Directory assistance and
operator services 1,344 1,402 1,387 1,429 1,985
Other 982 906 978 1,043 1,285

Total wholesale services
revenues 16,892 17,355 17,995 18,348 19,095

Total operating revenues 121,980 124,762 123,572 121,834 119,773

COSTS AND EXPENSES:
Cost of services and
equipment, excluding
depreciation and
amortization 56,577 58,838 58,668 58,109 56,722
Selling, operations and
administration expense 50,239 48,713 46,146 46,963 47,376
Depreciation and
amortization 19,079 19,449 18,260 17,378 16,448
Restructuring - - - 24 22

Total operating
expenses 125,895 127,000 123,074 122,474 120,568

OPERATING INCOME (LOSS) $(3,915) $(2,238) $498 $(640) $(795)

(1) Certain amounts have been reclassified for presentation purposes.

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

Three Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2007 2007 2007 2007 2006

Retail business voice
lines in service(1)
UNE-T and UNE lines(2) 339,534 327,915 316,267 309,178 295,995
Increase from
previous quarter 3.5% 3.7% 2.3% 4.5% 4.1%
Resale and UNEP
lines(3) 78,976 83,697 89,454 94,373 98,847
(Decrease) from
previous quarter (5.6%) (6.4%) (5.2)% (4.5)% (3.1)%

Total retail business
voice lines in service 418,510 411,612 405,721 403,551 394,842

Wholesale voice lines
in service(4) 40,319 42,596 46,345 49,427 47,702
Increase (decrease)
from previous quarter (5.3%) (8.1%) (6.2)% 3.6% (10.4)%

Total business voice
lines in service (5) 458,829 454,208 452,066 452,978 442,544

Number of employees (6) 1,800 1,813 1,807 1,867 1,975

(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
transport through its owned and operated switching facilities.
(3) Resale service offering in which ITC^DeltaCom provides local service
through a leased switch port and loop from the local operating
company.
(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): Dec. 31, Dec. 31,
2007 2006

Cash and cash equivalents (unrestricted) $57,505 $67,643
Working capital 42,179 24,009
Total assets 398,366 435,582
Long-term liabilities 306,535 338,512
Convertible redeemable preferred stock 34,351 74,170
Stockholders' deficit (23,924) (91,039)
Total liabilities and stockholders' deficit 398,366 435,582

Year Ended December 31,
Other Financial Data: 2007 2006

Capital expenditures(1) $50,489 $46,880
Cash flows provided by operating activities 23,163 28,676
Cash flows used in investing activities 50,745 46,913
Cash flows provided by financing activities 17,444 16,520
EBITDA(2)(3) (54,555) 61,320

Three Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
Other Financial Data: 2007 2007 2007 2007 2006
(Unaudited)

Capital expenditures(1) $12,215 $11,508 $13,105 $13,661 $13,092
Cash flows (used in)
provided by:
Operating activities 13,740 (5,712) 8,739 6,396 6,154
Investing activities (12,552) (11,767) (13,269) (13,157) (13,622)
Financing activities (2,111) 22,817 (3,079) (183) 17,534

EBITDA (2)(3)(4) 15,151 (105,225) 18,769 16,750 15,762

Unlevered free cash
flow (5) 9,240 3,222 10,677 7,433 7,287

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

Notes:
(1) Includes equipment purchased through capital leases and changes in
accrued capital related costs.
(2) EBITDA represents net income (loss) before interest, taxes,
depreciation and amortization. EBITDA is not a measurement of
financial performance under accounting principles generally accepted
in the United States. For information about management's reasons for
providing data with respect to EBITDA and the limitations associated
with the use of EBITDA, and for a quantitative reconciliation of
EBITDA to net loss, as net loss is calculated in accordance with
generally accepted accounting principles, see the accompanying table
captioned "EBITDA Reconciliation."
(3) EBITDA in the table above includes the following items for the
reported periods in 2007 and 2006:

Year Ended December 31,
Items included in EBITDA: 2007 2006

Restructuring expenses $24 $501
Non-cash loss on extinguishment of debt 105,269 - Debt issue cost write-off 7,298 - Prepayment penalties on debt 8,208 - Equity commitment fee 1,620 - Stock-based compensation(6) 9,169 2,569
Hurricane Katrina impact - 330
$131,588 $3,400

(4) For 2007 and 2006 three-month periods, EBITDA included the following:

Three Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2007 2007 2007 2007 2006
(Unaudited)
Items included in EBITDA:
(Unaudited)
Restructuring expenses $- $- $- $24 $22
Non-cash loss on
extinguishment of
debt - 105,269 - - - Debt issue cost
write-off - 7,298 - - - Prepayment penalties
on debt - 8,208 - - - Equity commitment fee - 1,620 - - - Stock-based
compensation(6) 4,470 3,268 710 721 684
$4,470 $125,663 $710 $745 $706

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

Notes: (continued)

(5) Unlevered free cash flow is defined by ITC^DeltaCom as net cash
provided by operating activities, less capital expenditures, changes
in accrued capital related costs and equipment purchased through
capital leases plus interest expense net of interest income, debt
prepayment penalties paid in cash and equity commitment fees paid all
as disclosed in the condensed consolidated statements of cash flows or
the condensed consolidated statements of operations. Unlevered free
cash flow is not a measurement of financial performance under
accounting principles generally accepted in the United States. For
information about management's reasons for providing data with respect
to unlevered free cash flow, the limitations associated with the use
of unlevered free cash flow and a quantitative reconciliation of
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 "Unlevered Free Cash Flow
Reconciliation."

(6) $2.4 million of stock-based compensation in the three months ended
September 30, 2007 is attributable to required accounting treatment
for modification of compensatory equity awards as a result of the
recapitalization transactions consummated on July 31, 2007. $3.6
million of stock-based compensation in the three months ended December
31, 2007 is attributable to required accounting treatment for
compensatory equity awards as a result of the modification on December
21, 2007 of the terms of vesting for certain awards.

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

EBITDA represents net income (loss) before interest, taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States. The following table presents EBITDA amounts for the fiscal years and fiscal quarters indicated and also sets forth a quantitative reconciliation of EBITDA to net loss, as net loss is calculated in accordance with generally accepted accounting principles:

Year Ended December 31,
2007 2006
Net loss $(177,026) $(53,459)
Add: items not included in EBITDA:
Depreciation and amortization 74,166 59,832
Interest expense, net of interest income 48,305 54,947

EBITDA $(54,555) $61,320

Three Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2007 2007 2007 2007 2006
(Unaudited)

Net loss $(11,643) $(135,523) $(14,534) $(15,326) $(15,006)
Add: items not
included in EBITDA:
Depreciation and
amortization 19,079 19,449 18,260 17,378 16,448
Interest expense, net
of interest income 7,715 10,849 15,043 14,698 14,320

EBITDA $15,151 $(105,225) $18,769 $16,750 $15,762

ITC^DeltaCom has included data with respect to EBITDA because its management evaluates and projects the performance of ITC^DeltaCom's business using several measures, including EBITDA. Management considers EBITDA to be an important supplemental indicator of its operating performance, particularly as compared to the operating performance of its competitors, because this measure eliminates many differences among companies in financial, capitalization and tax structures, capital investment cycles and ages of related assets, as well as some recurring non-cash and non-operating supplemental information to investors regarding its operating performance and facilitates comparisons by investors between the operating performance of ITC^DeltaCom and the operating performance of ITC^DeltaCom's competitors. ITC^DeltaCom's management believes that consideration of EBITDA should be supplemental, because EBITDA has limitations as an analytical financial measure. These limitations include the following:

-- EBITDA does not reflect ITC^DeltaCom's cash expenditures, or future
requirements for capital expenditures, or contractual commitments;

-- EBITDA does not reflect the interest expense, or the cash requirements
necessary to service interest or principal payments, on ITC^DeltaCom's
indebtedness;

-- EBITDA does not reflect depreciation and amortization charges, and
although such are non-cash charges, the assets being depreciated and
amortized will often have to be replaced in the future and EBITDA does
not reflect any cash requirements for such replacements;

-- EBITDA does not reflect the effect of earnings or charges resulting
from matters ITC^DeltaCom's management considers not to be indicative
of its ongoing operations; and

-- EBITDA may be calculated in a different manner by other companies in
ITC^DeltaCom's industry, which limits its usefulness as a comparative
measure.

ITC^DeltaCom's management compensates for these limitations by relying primarily on its results under generally accepted accounting principles to evaluate its operating performance and by considering independently the economic effects of the foregoing items that are not reflected in EBITDA. As a result of these limitations, EBITDA should not be considered as an alternative to net income (loss), as calculated in accordance with generally accepted accounting principles, as a measure of operating performance, nor should it be considered as an alternative to cash flows, as calculated in accordance with generally accepted accounting principles, as a measure of liquidity.

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

Unlevered free cash flow is defined by ITC^DeltaCom as net cash provided by operating activities, less capital expenditures, changes in accrued capital related costs and equipment purchased through capital leases plus interest expense net of interest income, debt prepayment penalties paid in cash and equity commitment fees paid, all as disclosed in the condensed consolidated statements of cash flows or the condensed consolidated statements of operations. Unlevered free cash flow is not a measurement of financial performance under accounting principles generally accepted in the United States. The following table presents unlevered free cash flow amounts for the years and fiscal quarters indicated and also sets forth a quantitative reconciliation of 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:

Year Ended December 31,
2007 2006
Net cash provided by operating activities $23,163 $28,676

Add:
Interest expense, net of interest income 48,305 54,947
Prepayment penalties on debt paid in cash 7,973 - Equity commitment fee 1,620 - Less:
Capital expenditures (47,888) (46,068)
Change in accrued capital related costs (1,158) (812)
Equipment purchased through capital leases (1,443) -
Unlevered free cash flow $30,572 $36,743

Three Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2007 2007 2007 2007 2006
(Unaudited)
Net cash provided by
operating activities $13,740 $(5,712)(1) $8,739 $6,396 $6,154

Add:
Interest expense,
net of interest
income 7,715 10,849 15,043 14,698 14,320
Prepayment penalties
on debt paid in cash - 7,973 - - - Equity commitment fee - 1,620 - - - Less:
Capital expenditures (14,053) (11,965) (12,826) (9,044) (16,556)
Change in accrued
capital related
costs 1,838 457 (279) (3,174) 3,464
Equipment purchased
through capital
leases - - - (1,443) (95)

Unlevered free cash flow $9,240 $3,222 $10,677 $7,433 $7,287

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

Notes:

(1) Cash payments of interest during the three months ended Sept. 30, 2007
included two quarterly interest payments and totaled $19.5 million
compared to interest expenses of $11.4 million recorded for this
period. Before the refinancing completed on July 31, 2007, interest
payments were due and made on the first day of each quarter. After the
refinancing, interest payments were due and made on the last day of
the quarter. The additional quarterly interest paid during the quarter
as a result of the refinancing totaled $9.9 million.

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

ITC^DeltaCom has included data with respect to unlevered free cash flow because its management considers unlevered free cash flow to be a useful, supplemental indicator of its operating performance because, when measured over time, 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.

-- ITC^DeltaCom's management believes that consideration of unlevered free
cash flow should be supplemental, however, because unlevered free cash
flow has limitations as an analytical financial measure. These
limitations include the following:

-- Unlevered free cash flow does not reflect ITC^DeltaCom's cash
expenditures for interest expense or accrued restructuring and merger
costs, prepayment penalties on debt paid in cash, equity commitment
fees, changes in restricted cash balances or proceeds from sales of
fixed assets;

-- ITC^DeltaCom does not pay income taxes due to net operating losses, and
therefore, generates greater unlevered free cash flow than a comparable
business that does pay income taxes;

-- Unlevered free cash flow is subject to variability on a quarterly basis
as a result of the timing of payments made or received related to
accounts receivable, accounts payable and other current operating
assets and liabilities; and

-- Unlevered free cash flow may be calculated in a different manner by
other companies in ITC^DeltaCom's industry, which limits its usefulness
as a comparative measure.

ITC^DeltaCom's management compensates for these limitations by relying primarily on its results under generally accepted accounting principles to evaluate its operating performance and by considering independently the economic effects of the foregoing items that are not reflected in unlevered free cash flow. As a result of these limitations, unlevered free cash flow should not be considered as a measure of liquidity nor as an alternative to net cash provided by operating activities, cash used in investing activities, cash provided by (used in) financing activities or change in cash and cash equivalents, as calculated in accordance with generally accepted accounting principles.

First Call Analyst:
FCMN Contact:

Source: ITC^DeltaCom, Inc.

CONTACT: Investors, Richard E. Fish, Chief Financial Officer,
ITC^DeltaCom, Inc., +1-256-382-3827, richard.fish@deltacom.com

Web site: http://www.deltacom.com/

NOTE TO EDITORS: In the company name ITC^DeltaCom noted in this news release, there is a caret between ITC and DeltaCom. This symbol may not appear properly in some systems.

2008-03-20 21:49:12 0317701 PRNEWSWIRE