Teletouch Communications, Inc. (AMEX: TLL) today reported on its
quarterly financial results filed on Form 10-Q for the third
quarter ended February 28, 2006. Total revenues for the third
quarter of fiscal 2006 declined approximately 14.4% to $5.02
million compared with $5.87 million in the third quarter of fiscal
2005. Cash and cash equivalents increased nearly 41% to
approximately $1.80 million at the end of the third quarter
compared with $1.28 million at the 2005 fiscal year ended, May 31,
2005. The Company recorded Net Income of approximately $0.02
million, or $0.00 earnings per share versus a loss of $0.54
million, or $0.12 loss per share in the comparable quarter of
fiscal 2005. Reporting on a segment basis, the decline in total
Paging revenues for the second quarter slowed slightly to
approximately 18.4% or $3.70 million compared with $4.52 million in
the prior-year period, in line with the Company's estimates.
However, the decline in net pager subscribers slowed significantly
in the third quarter 2006 compared to the second quarter 2006.
Total third quarter over second quarter 2006 pagers in service were
essentially flat at 121,800 versus 125,500 in service at the end of
the second quarter. As indicated above, the year-over-year
comparative quarters analysis shows total pagers in service
declined approximately 25% through the period ended February 28,
2006, that is when compared with 162,300 pagers in service at
February 28, 2005. However, the relative increase in the decline
rate is due to the July, 2005 sale of approximately 15,000
subscribers to Satellink Communications. When accounting for this
sale, the overall decline rate actually slowed to approximately
15.7%. Total Two-way radio service and product sales were down 8.9%
to $1.18 million in the quarter, from $1.3 million in the
comparable 2005 quarter. The decline was due primarily to a
reduction in and the timing of certain homeland security related
hardware product sales; recurring service revenues increased
approximately 13.2% during the current period over the comparative
2005 period. Total Other service and product revenues, including
the Company's Telemetry unit increased approximately 215% to $0.15
million in the third quarter of 2006, compared to $0.05 million
during the same period in 2005. Although there were increased
subscriber activations in the period, the overall increase is
largely attributable to the Company's decision to exit the
telemetry hardware sales and its subsequent successful efforts to
liquidate much of the remaining telemetry-related hardware
inventory for cash. The Company reported Net Income of $0.02 during
the third quarter 2006, compared to a loss of $0.54 million during
the prior year quarter on significantly improved operating income
to $0.13 million for the third quarter of fiscal 2006, from a loss
of $0.67 million in the prior year comparable period. The reduction
in operating loss was primarily due to the Company's continued cost
reductions across all departments. "It is notable that this is the
first quarter since August 2003 that the Company has been able to
report positive net income derived solely from its operating
businesses," stated Teletouch CEO, T. A. "Kip" Hyde, Jr. "This is a
testament to the team's success in slowing pager attrition by
generating new adds and renewals, reducing expenses and corporate
overhead everywhere possible to match our revenue base. These were
the primary factors in Teletouch reporting an increase in its cash
and cash equivalents, as well as operating income of $132,000 and
net income of $19,000 for the third quarter of fiscal 2006." Hyde
continued, "While we do estimate a net loss through the fourth
quarter due to continued paging revenue declines and expected
additional one-time costs for the professional fees related to the
sale of the Company's paging business, we are confident that we
will continue to manage the business effectively through this
process. "We continue to work on the sale of our legacy paging
business, but have been delayed due to the SEC's review and
comments to our preliminary proxy. As we work to complete our
response to the SEC, we are also exploring alternative transactions
for the Company that, if completed prior to the paging sale, could
eliminate the need for shareholder approval. We still hope to
complete the paging sale by mid-2006. Once completed, we expect the
sale of the paging assets to generate sufficient cash to enable
Teletouch to support the embedded overhead costs of a public
company, and allow the return of the Company to a successful growth
model." About Teletouch Communications Teletouch offers a
comprehensive suite of telecommunications services to enterprise
users, including cellular, two-way radio communications,
GPS-telemetry and wireless messaging services throughout the United
States. TLL acquires, bills and supports a large, primarily
business and government base of subscribers, under its own network
of FCC licensed spectrum in Texas, Louisiana, Arkansas, Oklahoma,
Alabama, Missouri, Mississippi, Tennessee, and Florida. Teletouch's
common stock is traded on the American Stock Exchange under stock
symbol: TLL. Additional information about Teletouch can be found
at: www.teletouch.com. All statements in this news release that are
not based on historical fact are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
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 (which Sections were adopted as part of the
Private Securities Litigation Reform Act of 1995). While 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 "Additional Factors That May
Affect Our Business" in the Company's most recent Form 10-K and
10-Q filings, and amendments thereto. In addition, we operate in a
highly competitive and rapidly changing environment, and new risks
may arise. Accordingly, investors should not place any reliance on
forward-looking statements as a prediction of actual results. We
disclaim any intention to, and undertake no obligation to, update
or revise any forward-looking statement. -0- *T TELETOUCH
COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited) (in thousands, except shares and per share
amounts) Three Months Ended February 28, ------------------------
2006 2005 ------------ ----------- Operating revenues: Service,
rent, and maintenance revenue $ 4,054 $ 4,795 Product sales revenue
967 1,073 ------------ ----------- Total operating revenues 5,021
5,868 ------------ ----------- Operating expenses: Cost of service,
rent and maintenance (exclusive of depreciation and amortization
included below) 2,319 2,690 Cost of products sold 529 917 Selling
and general and administrative 1,588 2,125 Depreciation and
amortization 443 784 Loss (gain) on disposal of assets 10 21
------------ ----------- Total operating expenses 4,889 6,537
------------ ----------- Operating income (loss) 132 (669) Interest
expense, net (113) (121) ------------ ----------- Income (loss)
before income tax benefit 19 (790) Income tax benefit - (253)
------------ ----------- Net income (loss) 19 (537) Participation
rights of common stock purchase warrants in undistributed earnings
(2) - ------------ ----------- Net income (loss) applicable to
common shareholders $ 17 $ (537) ============ =========== Income
(loss) per share applicable to common shareholders: Basic $ - $
(0.12) ============ =========== Diluted $ - $ (0.12) ============
=========== Denominator for income (loss) per share - weighted
average number of common shares outstanding: Basic 48,740,163
4,546,980 ============ =========== Diluted 55,027,689 4,546,980
============ =========== Nine Months Ended February 28,
------------------------ 2006 2005 ------------ -----------
Operating revenues: Service, rent, and maintenance revenue $ 12,874
$ 15,231 Product sales revenue 3,072 3,455 ------------ -----------
Total operating revenues 15,946 18,686 ------------ -----------
Operating expenses: Cost of service, rent and maintenance
(exclusive of depreciation and amortization included below) 7,331
8,209 Cost of products sold 1,970 3,120 Selling and general and
administrative 5,136 6,152 Depreciation and amortization 1,707
2,518 Loss (gain) on disposal of assets 8 (30) ------------
----------- Total operating expenses 16,152 19,969 ------------
----------- Operating income (loss) (206) (1,283) Interest expense,
net (328) (332) ------------ ----------- Income (loss) before
income tax benefit (534) (1,615) Income tax benefit - (492)
------------ ----------- Net income (loss) (534) (1,123)
Participation rights of common stock purchase warrants in
undistributed earnings - - ------------ ----------- Net income
(loss) applicable to common shareholders $ (534) $ (1,123)
============ =========== Income (loss) per share applicable to
common shareholders: Basic $ (0.02) $ (0.25) ============
=========== Diluted $ (0.02) $ (0.25) ============ ===========
Denominator for income (loss) per share - weighted average number
of common shares outstanding: Basic 23,994,432 4,546,980
============ =========== Diluted 23,994,432 4,546,980 ============
=========== TELETOUCH COMMUNICATIONS, INC. Selected Balance Sheet
Highlights (in thousands) February 28, May 31, 2006 2005
----------------------- Cash and cash equivalents $ 1,804 $ 1,283
Current portion of long-term debt 108 74 Long-term debt, net of
current portion 55 102 *T
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