IPCX iPCS, Inc., a Wireless Affiliate of Sprint, Reports Financial and Operating Results for the Quarter Ended December 31, 2004
iPCS, Inc., a Wireless Affiliate of Sprint, Reports Financial and Operating Results for the Quarter Ended December 31, 2004
SCHAUMBURG, Ill.
Burson-Marsteller
Mark Spencer, 312-596-3628
iPCS, Inc. (Pink Sheets:IPCX), a wireless Affiliate of Sprint, today reported financial and operating results for the quarter ended December 31, 2004. iPCS owns and operates the Sprint nationwide wireless network in 40 markets in four Midwestern states.
Highlights for the Quarter:
-- Total revenues of approximately $56.0 million
-- Net loss of approximately $7.7 million or $0.83 per share
-- Adjusted EBITDA of approximately $8.7 million
-- Capital expenditures of approximately $5.8 million
-- Subscriber Activity Results:
-- Gross activations of approximately 32,900
-- Net additions of approximately 8,600
-- Monthly churn, net of 30 day deactivations, of 2.9%
-- Ending subscribers of approximately 249,200
"The results reflect the continuation of our efforts to grow our distribution channels and subscriber base in 2005 and beyond," said Timothy M. Yager, President and Chief Executive Officer of the Company. "During the quarter, we added three new retail stores and ended the calendar year with 15 stores. In addition, we increased the number of co-branded dealers and expanded our sales organization to better coordinate activities with our independent and national third party channels. Lastly, the growth of our wholesale business was very strong and we look to continued success with our partners. We remain excited about our business and the opportunities to increase value for all of our stakeholders in 2005."
iPCS has scheduled a conference call on Tuesday, February 8, 2005, at 9:00 a.m. Eastern Time (8:00 a.m. Central Time). To listen to the call, dial 1-800-510-0178 at least five minutes before the conference call begins using a pass code of 87370191. Those calling in from international locations should dial 1-617-614-3450 and use the same pass code. A replay of the call will be available at 1:00 p.m. Eastern Time February 8, 2005. To access the replay, dial 1-888-286-8010 using a pass code of 74515436. To access the replay from international locations, dial 1-617-801-6888 and use the same pass code. The call will also be webcast and can be accessed at the Investor Relations page of the iPCS website at www.ipcswirelessinc.com. Replay of the webcast and the call will be available through midnight on February 15, 2005.
Upon emergence from Chapter 11 bankruptcy on July 20, 2004, the Company applied fresh-start accounting effective as of July 2, 2004. As a result, the reported historical financial statements of the Company for periods prior to July 2, 2004 are not comparable to those of the Company for periods ending after July 2, 2004. Activity of the Company for any periods after July 2, 2004 is included in the post-bankruptcy, or "Successor Company" financial statements. Activity of the Company for periods prior to July 2, 2004 is included in the pre-bankruptcy, or "Predecessor Company" financial statements. In accordance with generally accepted accounting principles, the reported historical financial statements of the Predecessor Company for periods ending prior to July 2, 2004 cannot be added to those of the Successor Company.
About iPCS, Inc.
iPCS is the wireless Affiliate of Sprint with the exclusive right to sell wireless mobility communications, network products and services under the Sprint brand in 40 markets in Illinois, Michigan, Iowa and eastern Nebraska with approximately 7.8 million residents. The territory includes key markets such as Grand Rapids, Michigan, Champaign-Urbana and Springfield, Illinois, and the Quad Cities of Illinois and Iowa. iPCS is headquartered in Schaumburg, Illinois. For more information, please visit our website at www.ipcswirelessinc.com.
About Sprint
Sprint offers an extensive range of innovative communication products and solutions, including global IP, wireless, local and multiproduct bundles. A Fortune 100 company with more than $27 billion in annual revenues in 2004, Sprint is widely recognized for developing, engineering and deploying state-of-the-art network technologies, including the United States' first nationwide all-digital, fiber-optic network; an award-winning Tier 1 Internet backbone; and one of the largest 100-percent digital, nationwide wireless networks in the United States. For more information, visit www.sprint.com/mr.
Definitions of Operating and Non-GAAP Financial Measures
iPCS provides readers financial measures calculated using generally accepted accounting principles ("GAAP") and using adjustments to GAAP ("Non-GAAP"). These financial measures reflect conventions or standard measures of liquidity, profitability or performance commonly used by the investment community in the telecommunications industry for comparability purposes.
The Non-GAAP financial measures used in this release include the following:
-- EBITDA represents earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA represents EBITDA as adjusted for reorganization costs, cancellation of debt income, gain or loss on the disposition of property and equipment and non-cash stock compensation expense. Adjusted EBITDA is a measure used by the investment community in the telecommunications industry for comparability and is not intended to represent the results of our operations in accordance with GAAP.
-- ARPU, or average revenue per user, is a measure of the average monthly subscriber revenue earned for subscribers based in our territory, excluding roaming revenue. This measure is calculated by dividing subscriber revenues in our consolidated statement of operations by the number of our average monthly subscribers during the period divided by the number of months in the period.
-- CCPU, or cash cost per user, is a measure of the costs to operate our business on a per subscriber basis consisting of costs of service and operations, general and administrative expenses in our consolidated statement of operations, plus handset subsidies on equipment sold to existing subscribers, less reorganization costs. These costs are divided by average monthly subscribers in our territory during the period divided by the number of months in the period to calculate CCPU.
-- CPGA, or cost per gross addition, is used to measure the average cost we incur to add a new subscriber in our territory. Costs we incur in calculating this measure include handset subsidies on new subscriber activations, commissions, rebates and other selling and marketing costs. We calculate CPGA by dividing (a) the sum of cost of products sold and selling and marketing costs associated with transactions with new subscribers during the measurement period, less product sales revenues associated with transactions with new subscribers during the measurement period, by (b) the total number of subscribers activated in our territory during the period.
-- Average monthly churn is used to measure the rate at which subscribers based in our territory deactivate service on a voluntary or involuntary basis. We calculate average monthly churn based on the number of subscribers deactivated during the period (net of transfers out of our territory and those who deactivated within 30 days of activation) as a percentage of our average monthly subscriber base during the period divided by the number of months during the period.
-- Licensed POPs represent the number of residents in our territory in which we have an exclusive right to provide wireless mobility communications services under the Sprint brand name. The number of residents located in our territory does not represent the number of wireless subscribers that we serve or expect to serve in our territory.
-- Covered POPs represent the number of residents covered by our portion of the wireless network of Sprint in our territory. The number of residents covered by our network does not represent the number of wireless subscribers that we serve or expect to serve in our territory.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This news release contains forward-looking statements that are based on management's current expectations, beliefs, estimates, forecasts and projections about iPCS and the wireless industry. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. The following factors, among others, could cause actual results to differ: dependence on affiliation with Sprint; the effect of fresh start accounting; the final resolution of any remaining claims to be paid in cash as a result of the bankruptcy filing; the timing and ultimate completion of any tower sales; the competitive nature of the wireless market; the potential of mergers and acquisitions or territory expansions; changes in Sprint's affiliate strategy as a result of the proposed merger with Nextel or any other business combination; the potential to experience a high rate of customer turnover; management's ability to predict future customer growth, as well as other key operating metrics; the competitiveness and impact of Sprint pricing plans, products and services; the ability to successfully leverage 3G products and services; customer credit quality; the ability of Sprint to provide back office, customer care and other services; consumer purchasing patterns; potential fluctuations in quarterly results; an adequate supply of subscriber equipment; risks related to our ability to compete with larger, more established businesses; rapid technological and market change; risks related to future growth and expansion; rates of penetration in the wireless industry; and adequacy of bad debt and other reserves.
For a detailed discussion of these and other cautionary statements and factors that could cause actual results to differ from any forward-looking statements, please refer to iPCS' filings with the Securities and Exchange Commission (the "SEC"), particularly the 2004 Annual Report on Form 10-K and in any subsequent filings with the SEC. Investors and analysts should not place undue reliance on forward-looking statements. The forward-looking statements in this news release speak only as of the date hereof and, except as otherwise required under federal securities laws and the rules and regulations of the SEC, iPCS does not have any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.
Tables to Follow:
iPCS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands, except per share amounts)
----------------------------------------------------------------------
Successor Successor
Company Company
------------- -------------
December 31, September 30,
2004 2004
------------- -------------
Assets
Current Assets:
Cash and cash equivalents $59,958 $57,760
Accounts receivable, net of allowance for
doubtful accounts of $2,034 and $1,217,
respectively 14,184 14,772
Receivable from Sprint 12,640 13,264
Inventories, net of reserves for
excess/obsolescence of $87 and $50,
respectively 1,657 1,310
Prepaid expenses 3,419 3,127
Other current assets 98 21
------------- -------------
Total current assets 91,956 90,254
Property and equipment, net 119,818 134,931
Financing costs 6,534 6,497
Customer activation costs 628 451
Intangible assets, net of accumulated
amortization of $6,099 and $3,051,
respectively 75,813 78,861
Other assets 1,147 1,314
------------- -------------
Total assets $295,896 $312,308
============= =============
Liabilities and Stockholders' Equity
(Deficiency)
Current Liabilities:
Accounts payable $3,894 $2,742
Accrued expenses 13,853 20,880
Payable to Sprint 22,626 24,404
Deferred revenue 5,886 5,764
Current maturities of long-term debt and
capital lease obligations 8 7
------------- -------------
Total current liabilities 46,267 53,797
Customer activation fee revenue 628 451
Other long-term liabilities 2,251 3,614
Long-term debt and capital lease
obligations, excluding current maturities 165,397 165,400
------------- -------------
Total liabilities 214,543 223,262
------------- -------------
Commitments and contingencies - -
------------- -------------
Stockholders' Equity (Deficiency):
Perferred stock, par value $.01 per share;
25,000,000 shares authorized; none issued - -
Common stock, par value $.01 per share;
75,000,000 shares authorized, 8,744,164
shares issued and outstanding 87 87
Additional paid-in-capital 95,275 95,275
Unearned compensation (317) (340)
Accumulated deficiency (13,692) (5,976)
------------- -------------
Total stockholders' equity 81,353 89,046
------------- -------------
Total liabilities and stockholders' equity $295,896 $312,308
============= =============
iPCS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except per share amount)
----------------------------------------------------------------------
Successor Predecessor
Company Company
------------- -------------
For the Three For the Three
Months Ended Months Ended
December 31, December 31,
2004 2003
------------- -------------
Revenues:
Service revenue $38,585 $34,628
Roaming revenue 15,748 12,080
Equipment and other 1,664 1,352
------------- -------------
Total revenues 55,997 48,060
------------- -------------
Operating Expenses:
Cost of service and roaming (exclusive of
depreciation, as shown separately below) (29,602) (28,470)
Cost of equipment (5,720) (5,063)
Selling and marketing (10,026) (6,162)
General and administrative (1,993) (904)
Reorganization expense - (1,788)
Non-cash stock compensation expense (23) -
Depreciation (8,459) (9,525)
Amortization of intangible assets (3,048) -
Gain (loss) on disposal of property and
equipment (13) 2
------------- -------------
Total operating expenses (58,884) (51,910)
------------- -------------
Operating loss (2,887) (3,850)
Interest income 137 27
Interest expense (4,974) (2,329)
Other income 8 2
------------- -------------
Net loss $(7,716) $(6,150)
============= =============
Basic and diluted loss per share of common
stock
Loss available to common stockholders $(0.83) n/a
Weighted average common shares
outstanding 9,269,166 n/a
=============
iPCS, INC. AND SUBSIDIARIES
(UNAUDITED)
(In thousands)
----------------------------------------------------------------------
Successor Predecessor
Company Company
------------- -------------
For the Three For the Three
Months Ended Months Ended
December 31, December 31,
2004 2003
------------- -------------
Net loss $(7,716) $(6,150)
Net interest expense 4,837 2,302
Depreciation and amortization 11,507 9,525
------------- -------------
EBITDA 8,628 5,677
Non-cash stock compensation expense 23 -
Reorganization expense - 1,788
(Gain) loss on disposition of property and
equipment 13 (2)
------------- -------------
Adjusted EBITDA $8,664 $7,463
============= =============
iPCS, INC. AND SUBSIDIARIES
(UNAUDITED)
Summary of Operating Statistics
----------------------------------------------------------------------
Successor Company Successor Company Predecessor Company
----------------- ------------------ ------------------
For the Period
For the Three from July 2, 2004 For the Three
Months Ended through Months Ended
December 31, 2004 September 30, 2004 December 31, 2003
----------------- ------------------ ------------------
Subscribers
Gross
Additions 32,900 30,300 22,600
Net Additions 8,600 7,500 400
Total
Customers 249,200 240,500 220,500
Churn 2.9% 2.9% 3.0%
Average Revenue
Per User,
Monthly
Including
Roaming $74 $76 $71
Without
Roaming $53 $53 $53
Cash Cost Per
User, Monthly
Including
Roaming $44 $45 $46
Without
Roaming $31 $31 $35
Cost Per Gross
Addition $406 $368 $395
Licensed Pops
(Millions) 7.8 7.8 7.6
Covered Pops
(Millions) 5.9 5.9 5.9
Cell Sites 672 669 651
iPCS, INC. AND SUBSIDIARIES
(UNAUDITED)
Reconciliation of Non-GAAP Financial Measures
----------------------------------------------------------------------
Successor Company Successor Company Predecessor Company
----------------- ----------------- -------------------
For the Period
For the Three from July 2, 2004 For the Three
Months Ended through Months Ended
December 31, 2004 September 30, 2004 December 31, 2003
----------------- ------------------ ------------------
ARPU
Service revenue $38,585 $37,909 $34,628
Roaming revenue 15,748 15,829 12,080
----------------- ------------------ ------------------
Total service
revenue $54,333 53,738 $46,708
================= ================== ==================
Average
subscribers 244,276 236,505 219,288
Average revenue
per user
including
roaming,
monthly $74 $76 $71
Average revenue
per user
without
roaming,
monthly $53 $53 $53
CCPU
Cost of service
and roaming $29,602 $29,082 $28,470
less:
Activation
costs included
in cost of
service and
roaming 177 471 (466)
plus: General
and
administrative
expenses 1,993 1,705 904
less: Retail
equipment
upgrade
revenue (468) (289) (296)
plus: Retail
equipment cost
of upgrades 1,107 756 1,848
----------------- ------------------ ------------------
Total cash
costs
including
roaming $32,411 $31,725 $30,460
----------------- ------------------ ------------------
less: Roaming
expense (9,839) (9,645) (7,404)
----------------- ------------------ ------------------
Total cash
costs without
roaming $22,572 $22,080 $23,056
================= ================== ==================
Average
subscribers 244,276 236,505 219,288
Cash cost per
user, monthly $44 $45 $46
Cash cost per
user without
roaming,
monthly $31 $31 $35
CPGA
Selling and
marketing $10,026 $7,996 $6,162
plus:
Activation
costs included
in cost of
service and
roaming (177) (471) 466
less: Equipment
revenue, net
of upgrade
revenue (1,092) (1,193) (920)
plus: Cost of
equipment, net
of cost of
upgrades 4,613 4,828 3,215
----------------- ------------------ ------------------
Total costs of
acquisition $13,370 $11,160 $8,923
================= ================== ==================
Gross adds 32,905 30,307 22,588
Cost per gross
add $406 $368 $395
