Teletouch Reports Second Quarter 2013 Fiscal Year Results

  Teletouch Reports Second Quarter 2013 Fiscal Year Results

Business Wire

FORT WORTH, Texas -- January 22, 2013

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 its second fiscal
quarter ended November 30, 2012.

2^nd Quarter Results – Financial

  *Total operating revenues of $5.00 million
  *Income from continuing operations of $0.06 million
  *EBITDA from continuing operations of $0.28 million
  *Net loss from continuing operations of $0.38 million

Year-to-Date Highlights – Financial (as reported)

  *Total operating revenues of $10.22 million
  *Income from continuing operations of $0.43 million
  *EBITDA from continuing operations of $0.88 million
  *Net loss from continuing operations of $0.49 million
  *Reduced total liabilities by $2.47 million

Material Subsequent Event - Settlement of Texas Sales Tax Obligation

  *On January 7, 2013, the Company entered into a settlement agreement with
    the State of Texas (“State”) related to the prior reported sales tax
    obligation of its wholly owned subsidiary, Progressive Concepts, Inc.
    (”PCI”), assessed following an audit of tax periods from January 2006
    through October 2009;
  *The settlement reduced PCI’s total sales tax obligation from approximately
    $1.91 million to $1.41 million as of the settlement date, i.e.,
    approximately $0.50 million in penalties and interest will be waived by
    the State once the tax obligation is paid pursuant to the terms of the
    settlement, as further described below;
  *Terms of settlement:

       *Settlement obligation to State - $1,413,888 (actual tax assessed from
         audit);
       *$625,000 down payment ($150,000 was prior paid voluntarily through
         December 1, 2012, with the remaining $475,000 paid January 10, 2013);
       *Beginning February 15, 2013, PCI shall make 35 payments of $22,000
         each month, with a final payment of $18,888 due January 15, 2016
         (total of $788,888);
       *Total settlement obligation amount due is interest free;
       *All penalties and interest will be waived by the State after the
         settlement obligation is paid in full;

  *As the settlement and related current obligation was agreed to (and
    financed at zero interest) by the State prior to the Company’s 2^nd
    quarter financials being released, $1.1 million of the total obligation
    has been reclassified as a long term obligation on the Consolidated
    Balance Sheet as of November 30, 2012.

“This year’s quarter is not easily compared to last year’s same period, as we
settled the AT&T litigation in late November 2011,” stated T. A. "Kip" Hyde,
Jr., President, Chief Operating Officer and Director of Teletouch. “For a more
comparable view, adjusted EBITDA for the second quarter was $0.29 million
versus an adjusted EBITDA of $0.36 million for the same period last year.
Adjusted Operating Income increased to $0.07 million from an adjusted
Operating Income of $0.03 million last year. Our adjusted net loss from
continuing operations decreased to $0.37 million from $0.59 million in the
prior year’s quarter. While all-in-all, we maintained a reasonably comparable
quarter, we are still not where we need to be to drive solid top and
bottom-line growth.”

Hyde continued, “Although we expected to close our new senior credit facility
during the quarter, a requirement by our prospective new lender to resolve the
State of Texas sales tax obligation, and related ongoing negotiations with our
current lender, Thermo Credit on payment and inter-creditor terms, have caused
unexpected delays. We reached favorable terms with the State in mid-December
and completed the settlement agreement in early January, but the negotiations
with Thermo Credit continue. At this point, Thermo must agree to terms
acceptable to our new lender for the new financing to move forward. We are
optimistic that both lenders will reach agreement shortly and our new
financing will be completed. However, at this point, we can just watch and
wait.”

“Meanwhile, our operations suffer each day that we do not have a new credit
facility in place to finance needed inventory purchases, expand wholesale
partnership opportunities, and support our cellular operations. While we have
faced some early challenges in executing on our wholesale business growth
plan, we remain committed to the distribution business as the long-term growth
engine for the Company. We are working to focus this business unit on fewer
key product lines and generating larger customer relationships, in the
expectation that these activities will provide substantial growth, especially
by leveraging our expected new financing options.”

Hyde added, “Until then, the cellular business remains the key income driver
of our operations. The rate of cellular subscriber attrition remains within
our expectations, but the ongoing subsidies required for cellular phones used
for subscriber contract renewals are straining our liquidity. Of particular
note, during the quarter, not only was the iPhone 5 launched, but also the
price of the iPhone 4 was significantly reduced, which combined with the start
of the holiday season, resulted in substantially increased demand from our
cellular subscribers for new cellular handsets, increasing the negative impact
on our cash and earnings. Although the net present value of the required
two-year services contract renewal and related transfer value at the end of
our AT&T contract far exceeds the up-front subsidy on each handset, the
subsidized amount is recognized immediately, which negatively impacts current
earnings and cash. Until our new credit facility is in place, we are actively
monitoring subscriber upgrade activity and may have to curtail certain
subsidies and services over time.”

Hyde concluded, “The delays in completing the new financing have clearly
impacted all areas of our business. We see many opportunities to grow, but
need the additional liquidity that a new credit facility will provide in order
to act upon them. At this point, it is clear that the timing of an agreement
between our new lender and Thermo Credit is not within our control. Until
then, we will continue to review all of our corporate expense structures and
look for available ways to improve our overall profitability. However, we
remain optimistic that a new facility will be implemented in the relatively
near future, and once put in place, we expect to drive new sales growth
through the back half of the fiscal year.”

EARNINGS CONFERENCE CALL:

The Company’s fiscal second quarter 2013 earnings conference call is scheduled
on January 30, 2013, 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 its second fiscal quarter ended November 30, 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 November 30, 2012, filed on January 22, 2013 for complete financials and
additional information]:

Teletouch Communications, Inc.
(in thousands, except shares and per share amounts)
                                                                 
                   Three Months Ended
                   November 30      November 30                      
                   2012             2011             $ Change         % Change
Summary
Operating
Results:
Service revenue    $ 3,411          $ 3,853          $ (442       )   -11.5  %
Product sales       1,592          2,422          (830       )   -34.3  %
revenue
Total operating      5,003            6,275            (1,272     )   -20.3  %
revenues
                                                                      
Cost of service      (671       )     (941       )     270            -28.7  %
Cost of products    (1,675     )    (2,395     )    720           -30.1  %
sold
                                                                      
Gross margin on      2,740            2,912            (172       )   -5.9   %
service revenue
Gross margin on
product sales       (83        )    27             (110       )   (G)
revenue
Gross margin on     2,657          2,939          (282       )   -9.6   %
total revenue
                                                                      
Operating income
from continuing      59               8,440            (8,381     )   -99.3  %
operations
                                                                      
Net income
(loss) from          (376       )     7,817            (8,193     )   (G)
continuing
operations
                                                                      
Net loss from
discontinued         (48        )     (29        )     (19        )   65.5   %
operations (F)
                                                                      
Net income         $ (424       )   $ 7,788          $ (8,212     )   (G)
(loss)
                                                                      
Basic income
(loss) per share
of common stock    $ (0.01      )   $ 0.16           $ (0.17      )   (G)
from continuing
operations
                                                                      
Diluted income
(loss) per share
of common stock    $ (0.01      )   $ 0.15           $ (0.16      )   (G)
from continuing
operations
                                                                      
Weighted average
shares
outstanding:
Basic                48,742,335       48,739,368       2,967          0.0    %
                                                                      
Diluted              48,742,335       52,147,924       (3,405,589 )   -6.5   %
                                                                      
EBITDA, Adjusted
EBITDA,
Operating Income
and Net Income
(Loss) from
Continuing
Operations
Reconciliation:
Net income
(loss) from        $ (376       )   $ 7,817          $ (8,193     )   (G)
continuing
operations
Add back:
Depreciation and     222              332              (110       )   -33.1  %
amortization
Interest expense     374              523              (149       )   -28.5  %
Income tax          61             100            (39        )   -39.0  %
expense
EBITDA from
continuing           281              8,772            (8,491     )   -96.8  %
operations (A)
Adjustments:
Non-cash stock
compensation         6                40               (34        )   -85.0  %
expense
Severance costs      4                -                4              100.0  %
Litigation costs
(AT&T                -                149              (149       )   -100.0 %
arbitration) (C)
Gain on
settlement with      -                (10,000    )     10,000         -100.0 %
AT&T (D)
Management
bonuses related     -              1,400          (1,400     )   -100.0 %
to settlement
with AT&T (E)
Total               10             (8,411     )    8,421         (G)
adjustments
Adjusted EBITDA
from continuing      291              361              (70        )   -19.4  %
operations (B)
                                                                      
Adjusted
Operating Income
from Continuing
Operations
Reconcilation:
Operating income
from continuing    $ 59             $ 8,440          $ (8,381     )   -99.3  %
operations
Total               10             (8,411     )    8,421         (G)
adjustments
Adjusted
operating income     69               29               40             137.9  %
from operations
(B)
                                                                      
Adjusted Net
Income (Loss)
from Continuing
Operations
Reconciliation:
Net income
(loss) from        $ (376       )   $ 7,817          $ (8,193     )   (G)
continuing
operations
Total               10             (8,411     )    8,421         (G)
adjustments
Adjusted net
loss from            (366       )     (594       )     228            (G)
continuing
operations (B)
                                                                      
Notes:
(A) Teletouch's EBITDA means Net income (loss) from continuing operations
before depreciation and amortization, interest expense and income tax expense.
EBITDA is non-GAAP measure that the Company believes allows for a more
complete analysis of our results.
                                                                      
(B) Teletouch's Adjusted EBITDA, Adjusted operating income and Adjusted net
income (loss) from continuing operations means EBITDA, Operating income 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 September 30, 2009. PCI commenced the binding arbitration to seek relief
for damages PCI had incurred as AT&T had prevented PCI from selling the iPhone
and other AT&T exclusive products and services that PCI had 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) As a result of the settlement and release agreement that was executed with
AT&T on November 23, 2011, the Company recorded the initial consideration of
$10,000,000 as a gain, which was included in the operating income on the
Company's consolidated statement of operations for the three and six months
ended November 30, 2011. The initial consideration was comprised of a
$5,000,000 cash payment and $5,000,000 credit against PCI's outstanding
accounts payable to AT&T.
                                                                      
(E) The Compensation Committee of the Company's Board of Directors approved a
bonus for executive and management personnel due to the successful settlement
of the litigation against AT&T in November 2011 and in light of the fact that
no bonuses were awarded during fiscal year 2011 due primarily to a decrease in
earnings caused by delays in this litigation outside of the Company's control.
                                                                      
(F) 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 received approximately
$1,169,000 of cash consideration for the sale of the assets of the two-way
radio and public safety equipment business.
                                                                      
(G) Percent change is not provided if either the latest period or the year-ago
period contains a loss.



Teletouch Communications, Inc.
(in thousands, except shares and per share amounts)
                                                                  
                 Six Months Ended
                 November 30        November 30                      
                 2012               2011             $ Change         % Change
Summary
Operating
Results:
Service revenue  $  7,134           $ 7,979          $ (845       )   -10.6  %
Product sales      3,089           5,782          (2,693     )   -46.6  %
revenue
Total operating     10,223            13,761           (3,538     )   -25.7  %
revenues
                                                                      
Cost of service     (1,340      )     (1,945     )     605            -31.1  %
Cost of products   (3,154      )    (5,767     )    2,613         -45.3  %
sold
                                                                      
Gross margin on     5,794             6,034            (240       )   -4.0   %
service revenue
Gross margin on
product sales      (65         )    15             (80        )   (G)
revenue
Gross margin on    5,729           6,049          (320       )   -5.3   %
total revenue
                                                                      
Operating income
from continuing     434               8,286            (7,852     )   -94.8  %
operations
                                                                      
Net income
(loss) from         (487        )     7,102            (7,589     )   (G)
continuing
operations
                                                                      
Net loss from
discontinued        (145        )     (86        )     (59        )   (G)
operations (F)
                                                                      
Net income       $  (632        )   $ 7,016          $ (7,648     )   (G)
(loss)
                                                                      
Basic income
(loss) per share
of common stock  $  (0.01       )   $ 0.14           $ (0.16      )   (G)
from continuing
operations
                                                                      
Diluted income
(loss) per share
of common stock  $  (0.01       )   $ 0.14           $ (0.15      )   (G)
from continuing
operations
                                                                      
Weighted average
shares
outstanding:
Basic               48,742,335        48,739,184       3,151          0.0    %
                                                                      
Diluted             48,742,335        51,967,097       (3,224,762 )   -6.2   %
                                                                      
EBITDA, Adjusted
EBITDA,
Operating Income
and Net Income
(Loss) from
Continuing
Operations
Reconciliation:
Net income
(loss) from      $  (487        )   $ 7,102          $ (7,589     )   (G)
continuing
operations
Add back:
Depreciation and    446               612              (166       )   -27.1  %
amortization
Interest expense    778               1,050            (272       )   -25.9  %
Income tax         143             134            9             6.7    %
expense
EBITDA from
continuing          880               8,898            (8,018     )   -90.1  %
operations (A)
Adjustments:
Non-cash stock
compensation        167               291              (124       )   -42.6  %
expense
Severance costs     24                1                23             2300.0 %
Litigation costs
(AT&T               -                 315              (315       )   -100.0 %
arbitration) (C)
Gain on
settlement with     -                 (10,000    )     10,000         -100.0 %
AT&T (D)
Management
bonuses related    -               1,400          (1,400     )   -100.0 %
to settlement
with AT&T (E)
Total              191             (7,993     )    8,184         (G)
adjustments
Adjusted EBITDA
from continuing     1,071             905              166            18.3   %
operations (B)
                                                                      
Adjusted
Operating Income
from Continuing
Operations
Reconcilation:
Operating income
from continuing  $  434             $ 8,286          $ (7,852     )   -94.8  %
operations
Total              191             (7,993     )    8,184         (G)
adjustments
Adjusted
operating income    625               293              332            113.3  %
from operations
(B)
                                                                      
Adjusted Net
Income (Loss)
from Continuing
Operations
Reconciliation:
Net income
(loss) from      $  (487        )   $ 7,102          $ (7,589     )   (G)
continuing
operations
Total              191             (7,993     )    8,184         (G)
adjustments
Adjusted net
loss from           (296        )     (891       )     595            (G)
continuing
operations (B)
                                                                      
Notes:
(A) Teletouch's EBITDA means Net income (loss) from continuing operations
before depreciation and amortization, interest expense and income tax expense.
EBITDA is non-GAAP measure that the Company believes allows for a more
complete analysis of our results.
                                                                      
(B) Teletouch's Adjusted EBITDA, Adjusted operating income and Adjusted net
income (loss) from continuing operations means EBITDA, Operating income 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 September 30, 2009. PCI commenced the binding arbitration to seek relief
for damages PCI had incurred as AT&T had prevented PCI from selling the iPhone
and other AT&T exclusive products and services that PCI had 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) As a result of the settlement and release agreement that was executed with
AT&T on November 23, 2011, the Company recorded the initial consideration of
$10,000,000 as a gain, which was included in the operating income on the
Company's considated statement of operations for the three and six months
ended November 30, 2011. The initial consideration was comprised of a
$5,000,000 cash payment and $5,000,000 credit against PCI's outstanding
accounts payable to AT&T.
                                                                      
(E) The Compensation Committee of the Company's Board of Directors approved a
bonus for executive and management personnel due to the successful settlement
of the litigation against AT&T in November 2011 and in light of the fact that
no bonuses were awarded during fiscal year 2011 due primarily to a decrease in
earnings caused by delays in this litigation outside of the Company's control.
                                                                      
(F) 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 received approximately
$1,169,000 of cash consideration for the sale of the assets of the two-way
radio and public safety equipment business.
                                                                      
(G) Percent change is not provided if either the latest period or the year-ago
period contains a loss.



Selected Balance Sheet Highlights
(in thousands)
                                                                 
                            November 30,   May 31,
                            2012           2012          $ Change     % Change
Cash                        $  1,257       $ 1,973       $ (716   )   -36.3  %
Current portion of Texas
sales and use tax              695           -             695        100.0  %
obligation
Current debt obligation        9,655         10,932        (1,277 )   -11.7  %
Long-term Texas sales and
use tax obligation, net        1,062         -             1,062      100.0  %
of current portion
                                                                      
Total liabilities              18,109        20,576        (2,467 )   -12.0  %
                                                                      
Current Assets                 6,808         8,814         (2,006 )   -22.8  %
Current Liabilities           17,047      20,476      (3,429 )   -16.7  %
Working Capital                (10,239 )     (11,662 )     1,423      12.2   %
                                                                             
                                                                             

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, Adjusted EBITDA, Adjusted income/(loss) from
operations and “Adjusted net income (loss)” in various places of our financial
discussion. EBITDA is defined by us as net income/(loss) 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, Income/(loss) from operations, and
Net income/(loss) are each adjusted by excluding the total non-cash,
significant and one-time charges identified by the Company to compute Adjusted
EBITDA, Adjusted income/(loss) from operations and Adjusted net income/(loss),
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.

Contact:

Teletouch Communications, Inc.
Amy Gossett, 800-232-3888
Investor Relations
investors@teletouch.com
 
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