Madison River Capital, LLC Announces 2005 Third Quarter and Nine Months Unaudited Financial and Operating Results

Business Wire, Nov 3, 2005

MEBANE, N.C. -- Madison River Capital, LLC today announced its unaudited financial and operating results for the third quarter and nine months ended September 30, 2005. Highlights of the third quarter of 2005 include:

--Net operating income of $15.8 million in the third quarter, a 13.8% increase over the same period last year;

--Broadband connections increased to 44,403, an increase of 19.8% from a year ago;

--Residential broadband penetration of 35.7%; and

--Refinancing of secured long-term debt and $102.0 million redemption of 13.25% senior notes decreases cost of long-term debt and increases cash flow.

2005 Third Quarter Financial and Operating Results

The Company reported an increase in net operating income of $1.9 million, or 13.8%, to $15.8 million in the third quarter ended September 30, 2005 from $13.9 million in the third quarter ended September 30, 2004. Total revenues in the third quarter ended September 30, 2005 were $49.2 million compared to $50.5 million in the third quarter ended September 30, 2004, a decrease of $1.3 million, or 2.5%. In addition, the Company reported a net loss of $3.3 million in the third quarter of 2005 compared to net income of $1.2 million in the third quarter of 2004, a change of $4.5 million.

Adjusted Operating Income (1) is computed as net operating income (loss) before depreciation, amortization and non-cash long-term incentive plan, or LTIP, expenses. Please refer to Footnote 1 - "Non-GAAP Financial Measures" for a reconciliation of Adjusted Operating Income to net operating income (loss). For the third quarter ended September 30, 2005, Adjusted Operating Income was $23.5 million, a decrease of $1.4 million, or 5.6%, from Adjusted Operating Income of $24.9 million reported in the third quarter ended September 30, 2004. The decrease can be attributed primarily to the writeoff of $1.7 million in professional service fees and other expenses related to a registration statement filed by Madison River Communications Corp.

The increase in net operating income is attributed primarily to a $2.4 million change in the Company's non-cash LTIP expenses. The reversal of LTIP accruals for employees no longer with the Company resulted in a benefit of approximately $1.5 million being recognized in the third quarter of 2005 compared to LTIP expenses of $0.9 million being recognized in the third quarter of 2004. In addition, in the third quarter of 2004, the Company had accrued approximately $1.7 million for repairs and restoration work at its Alabama rural telephone company related to damages from a hurricane. A similar charge for hurricane related expenses of $0.8 million was recognized in the third quarter of 2005 for damages at its Alabama rural telephone company and its edge-out operations in New Orleans, Louisiana. The difference between the two charges resulted in an increase of approximately $0.9 million in net operating income in 2005 compared to 2004. Partially offsetting these increases was the recognition of a $1.7 million charge for professional fees and other related expenses for the filing of a registration statement by Madison River Communications Corp. The Form S-1 has not yet become effective. These fees and expenses were deferred pending completion of the initial public offering at which time they would have been netted against the proceeds of the offering. Based on guidance in the Securities and Exchange Commission's Staff Accounting Bulletin Topic 5, the Company expensed these deferred costs in the third quarter of 2005 as the result of its decision to delay the initial public offering pending improvement in market conditions. The Company intends to keep the Form S-1 in the registration process.

The decrease in revenues includes a $1.5 million decrease in local service revenues in the third quarter of 2005 compared to the same period in 2004, primarily from a decrease in network access revenues. Network access revenues in the third quarter of 2004 included nonrecurring revenues from certain one-time wireless settlements and other carrier access revenues in addition to settlements for updated cost study filings which included filings to reflect the impact of the $1.7 million in hurricane-related expenses recorded in the third quarter of 2004. In the third quarter of 2005, the Company also recognized certain nonrecurring revenues for settlements of updated cost study filings and other carrier access revenues, but not to the extent of the nonrecurring revenues recognized in the third quarter of 2004 resulting in a decrease in network access revenues. Excluding these nonrecurring amounts from each of the third quarter of 2005 and the third quarter of 2004, local service revenues in the third quarter of 2005 would have decreased slightly.

Revenues from edge-out services and miscellaneous telecommunications revenues each decreased $0.3 million, respectively. Partially offsetting these decreases, Internet and enhanced data revenues increased $0.7 million as the result of an increase in the number of broadband connections in service and long distance revenues increased $0.2 million.