Teletouch Reports Second Quarter 2010 Fiscal Year Results

Teletouch Communications, Inc. (OTC: TLLE), a leading U.S. wireless services and consumer electronics provider, today announced financial results for the second fiscal quarter ended November 30, 2009.

Quarterly Highlights

• Increased Gross billings to $21.11 million (a 6% increase over the prior year period)
• Increased Total operating revenues to $13.88 million (a 24% increase over the prior year period)
• Increased Operating income to $1.00 million (a 230% increase over the prior year period)
• Increased Adjusted EBITDA to $1.36 million (a 94% increase over the prior year period)
• Generated Net income of $0.38 million (a $0.77 million increase from a $0.39 million Net loss in the prior year period)

“Following a positive first quarter, Teletouch delivered an even stronger performance in the second fiscal quarter," stated T. A. “Kip” Hyde, Jr., President, Chief Operating Officer and Director of Teletouch. "Our ability to grow revenue and achieve solid earnings in the face of a bumpy economic climate, while also working through our challenges with AT&T (see 'Note' below), is a tribute to our dedicated employees who are focused on providing the best value and service to our retail and wholesale customers. I am very proud of our team and their overall performance thus far this year.”

Hyde added, “While maintaining a relatively predictable level of revenue decline in our direct-billed AT&T cellular services subscriber base, we have turned our focus to growing other segments of our business and I think that our results speak for themselves. For the quarter just ended, significant increases in our two-way radio and wholesale distribution segments helped solidify this quarter’s results, while new carrier partners and other products and services that we expect to launch over the coming months should help to ensure sustained positive operating results through the remainder of fiscal year 2010 (period ending May 31, 2010).”

Note: As reported on September 30, 2009, the Company’s subsidiary, Progressive Concepts, Inc. d/b/a Hawk Electronics ("PCI"), the largest remaining master distributor of AT&T cellular products and services in the U.S., initiated legal action against AT&T (NYSE: T) seeking a minimum $100 million in damages. The process of binding arbitration was commenced to seek relief for damages incurred when AT&T prevented the company from selling Apple, Inc.’s (Nasdaq: AAPL) popular iPhone and other "AT&T exclusive" products and services that PCI contends it is entitled by contract to provide to its customers. The action further asserts that AT&T has violated the longstanding non-solicitation agreement between the companies, by actively inducing customers to leave PCI for AT&T and employing predatory business practices. PCI is being represented in this matter by the Company’s long-time counsels at the national law firm of Bracewell & Giuliani LLP.

For a more detailed description of the Company’s legal action Notice and Initial Statement of Claim, please refer to the related Form 8-K, filed October 1, 2009 (available at the Company’s website: www.teletouch.com or on EDGAR at www.sec.gov).

For the quarter ended November 30, 2009, the Company announced the following results [the Summary results information and Tables below present selected financial data, including certain non-GAAP measures; see filing for complete data]:

Table 1 – Explanatory notes: The Company refers to the total amount invoiced to its customers for services or goods as “Gross Billings,” which is a non-GAAP financial measure. The Company believes Gross Billings is more comparable to the total operating revenues reported by its wireless competitors, and is a better measure of the total volume of cash generating transactions processed by the Company during each period, which the Company further believes provides a clearer understanding of the operations, costs and risks associated with the Company’s core cellular business.

The Company bills its customers in excess of its reportable GAAP revenues, in the form of “Gross cellular subscriber billings,” a non-GAAP financial measure, described as the total recurring monthly cellular service charges invoiced to the Company’s wireless subscribers. The Company takes 100% of the accounts receivable risk for all of its billings, before deducting a fixed percentage of the dollars invoiced for cellular usage that are payable to AT&T under the Company’s various distribution agreements.

Table 1 below denotes how the Company’s Gross cellular subscriber billings and the related revenue sharing deductions are combined to reach the GAAP results. That is, after deducting AT&T’s percentage revenue sharing, the remaining amounts (including billings for the Company’s own products and services), are retained by the Company as compensation for the services provided to these subscribers, such net amounts representing the revenue under GAAP that is reported by the Company (net revenue reporting). The “net revenue adjustment” amount is the total payment to AT&T for its component of the subscriber billings, and can be added back to GAAP “Service, rent and maintenance revenue” and “Total operating revenue” to better understand the Company’s total annual billings.

Summary financial results as follows:

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 in the report.

We refer to the term “EBITDA” or “Adjusted EBITDA” 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. Adjusted EBITDA will include the foregoing calculation, as well as certain other exclusions as may be defined therein when such term is used. Neither EBITDA nor Adjusted EBITDA are a measure 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. Also, EBITDA should not be considered as a measure of liquidity. Moreover, since EBITDA is not a measurement determined in accordance with GAAP, and thus is susceptible to varying interpretations and calculations, EBITDA, as presented, may not be comparable to similarly titled measures presented by other companies.

COMPANY FINANCIAL REPORTING STATUS NOTICE: Investors should be advised that Teletouch is now current with all prior annual and quarterly period reporting in accordance with the guidelines and requirements provided to the Company by the Securities and Exchange Commission (“SEC”), including certain Company-requested and SEC-granted relief from filing the Company’s delinquent fiscal 2007 Quarterly Reports. In December 2009, the Company filed its previously delinquent quarterly financial reports for the first, second and third quarters of its 2008 fiscal year, ended May 31, 2008, establishing currency in all required reporting, noting, however, that the filing of these previously delinquent reports does not mean that such filings are deemed "timely" for the purposes of certain corporate events, including specifically the availability of Form S-3 and Form S-8 stock registrations. The SEC also indicated to the Company that it would advise further consultation with SEC staff regarding when Teletouch would be deemed “fully up-to-date” in its filings, specifically for the purposes of the availability of Rule 144 resale of restricted securities, should such a need arise.

The Company’s filing of its fiscal 2009 Annual Report on Form 10-K (for the period ending May 31, 2009) began a period of “timely filing” for determining the Company's future eligibility for the various registration forms discussed above. The Company is timely in filing its first and second quarter financial reports on Form 10-Q and anticipates that its third quarter financial report on Form 10-Q and its annual report on Form 10-K for fiscal 2010 will also be filed timely.

About Teletouch Communications

For nearly 45 years, Teletouch has offered a comprehensive suite of telecommunications solutions, including cellular, two-way radio, GPS-telemetry and wireless messaging. Teletouch is a leading direct provider of AT&T products and services (voice, data and entertainment) to consumers, businesses and government agencies, as well as an operator of its own two-way radio network LTR systems in Texas. Teletouch operates a chain of 22 retail and agent stores under the “Teletouch” and “Hawk Electronics” brands, with a direct sales force and various websites including: www.hawkelectronics.com and www.hawkexpress.com. Emergency vehicle products related to its government sales unit are also available through its direct sales group and www.teletouchevp.com. In addition, PCI operates a national wholesale distribution business, PCI Wholesale, which serves major carrier agents, smaller retailers and rural cellular carriers, as well as automotive retailers and auto dealers, with related product sales and support available through www.pciwholesale.com and www.pcidropship.com, among other sites.

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.