CORRECTING and REPLACING Nextel Partners Reports Record 2003 Results and Positive Free Cash Flow in Fourth Quarter 2003.Business Editors CORRECTION CORRECTION,punishment. Chastisement by one having authority of a person who has committed some offence, for the purpose of bringing him to legal subjection. 2. It is chiefly exercised in a parental manner, by parents, or those who are placed in loco parentis. ...by Business Wire KIRKLAND Kirkland, city (1990 pop. 40,052), King co., W Wash., a suburb of Seattle on Lake Washington; inc. 1905. The city produces semiconductors, transformers, prefabricated metal buildings, heating and navigation equipment, computer peripherals, motor vehicles, apparel, , Wash.--(BUSINESS WIRE)--Feb. 23, 2004 In BW6171 issued Feb. 23, 2004: At the end of the table titled "NEXTEL (Nextel Communications, Inc., Reston, VA, www.nextel.com) A wireless communications carrier founded in New Jersey in 1987 as Fleet Call, a two-way radio service. Throughout the late 1980s and 1990s, the company acquired a large number of SMR (Specialized Mobile Radio) operators and turned PARTNERS, INC inc - /ink/ increment, i.e. increase by one. Especially used by assembly programmers, as many assembly languages have an "inc" mnemonic. Antonym: dec. . AND SUBSIDIARIES Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Consolidated Balance Sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. ," the following information was unintentionally omitted by Business Wire:
For the Three Months Ended
-----------------------------------------------
December 31, September 30, June 30, March 31,
2003 2003 2003 2003
------------ ------------- --------- ----------
Net capital
expenditures
(excludes capitalized
interest) (4) $ 32,633 $ 40,546 $ 32,913 $ 55,753
=========== ============ ======== =========
The corrected release reads: NEXTEL PARTNERS REPORTS RECORD 2003 RESULTS AND POSITIVE FREE CASH FLOW IN FOURTH QUARTER 2003 -- First Quarter of Positive Free Cash Flow of $1.5 Million -- Positive Net Cash from Operating Activities of $57.7 Million for Fourth Quarter 2003 -- Full Year Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become Increases by $181.2 Million to $183.8 Million -- First Full Year of Positive Net Cash from Operating Activities of $87.2 Million -- Net Loss Decreases by $77.4 Million to $205.1 Million in 2003 -- $1.1 Billion of Debt Refinancings and Redemptions to Date -- $56.6 Million Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. Net Interest Savings from Balance Sheet Improvements -- 40% Subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. Growth with 355,400 Net Subscriber Additions in 2003 -- 49% Annual Growth in Service Revenue to $964.4 Million Nextel Partners, Inc. (Nasdaq:NXTP) today reported very strong financial and operating results for 2003, including $183.8 million of Adjusted EBITDA, a $181.2 million increase compared to the prior year's Adjusted EBITDA of $2.6 million. For the fourth quarter of 2003, Adjusted EBITDA was $67.4 million, representing a service revenue margin of 24%. Partners generated its first quarter of positive free cash flow in the amount of $1.5 million during the fourth quarter of 2003, one quarter earlier than the company had expected as discussed on its third quarter 2003 earnings call. Net cash provided by operating activities was $57.7 million for the fourth quarter of 2003 compared to $610,000 used in operating activities for the same period in 2002, and was $87.2 million for the year ended December December: see month. 31, 2003 compared to $116.5 million used in operating activities for the full year 2002. Service revenues grew 49% over the prior year to $964.4 million and were $276.7 million in the fourth quarter of 2003, a 45% increase over the prior year's fourth quarter. Net loss decreased $77.4 million to $205.1 million in 2003. Partners added 88,500 subscribers during the fourth quarter to end the year with 1,233,200 digital subscribers, an increase of 355,400, from the 877,800 subscribers at the end of the previous year. "2003 was a breakthrough year for Nextel Partners as we continued our rapid growth. Strong demand for our differentiated services Offerings that can be classified by type, or quality, of service. For example, a differentiated services network could prioritize real time traffic for a higher fee. enabled Partners to continue our record of industry-leading growth," said John Chapple Field Marshal Sir John Lyon Chapple, GCB, CBE (born 27 May 1931) was Chief of the General Staff, the professional head of the British Army. Army career Educated at Haileybury College and Trinity College, Cambridge John Chapple was commissioned into the 2nd Gurkhas in , Partners' Chairman, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and President. "During the year, subscriber growth of 40% boosted total revenues to over $1 billion. Our strong operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. drove significant Adjusted EBITDA growth resulting in positive free cash flow -- ahead of schedule and for the first time in Partners' history. In 2004 Partners will continue to focus on balanced growth strategies -- expanding distribution channels, enhancing our service offering and elevating customer satisfaction -- as we strive to increase our share of what we believe are the best wireless subscribers in the industry." Average monthly revenue per subscriber unit A Subscriber Unit, or SU is a broadband radio that is installed at a business or residential location to connect to an Access Point to send/receive high speed data wired or wirelessly. Devices commonly referred to as a Subscriber Unit include cable modems, mobile phones, etc. , or ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. , was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $68 for the full year and $69 in the fourth quarter of 2003 -- remaining among the highest in the wireless industry. Inclusive of inclusive of prep. Taking into consideration or account; including. roaming The ability to use a communications device such as a cellphone or PDA and be able to move from one cell or access point to another without losing the connection. revenues, ARPU was approximately $77 for the full year and $78 in the fourth quarter of 2003. Average monthly churn rate (1) The percentage of customers who cancel their online, cellphone or other subscription service during a certain time period. (2) The percentage of employees who leave the company during a certain time period. See churning. improved to 1.4% in the fourth quarter, a record low for the company, and was 1.6% for the full year in 2003. "Nextel Partners delivered record results in 2003," said Barry Barry, Welsh Barri, town (1991 pop. 45,053) and port, Vale of Glamorgan, S Wales, on the Bristol Channel. Once a major coal-exporting port, its more diversified export products include cement, flour, and steel products. Rowan rowan ash tree which guards against fairies and witches. [Br. Folklore: Briggs, 344] See : Protection , Partners' Chief Financial Officer and Treasurer TREASURER. An officer entrusted with the treasures or money either of a private individual, a corporation, a company, or a state. 2. It is his duty to use ordinary diligence in the performance of his office, and to account with those whose money he has. . "We are very pleased to have exceeded expectations on key financial metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. including revenues and Adjusted EBITDA and achieved positive free cash flow ahead of schedule. Amidst a·midst prep. Variant of amid. [Middle English amiddes : amidde; see amid + -es, adverbial suffix; see -s3.] a very challenging environment, subscriber growth was a robust 40%, ARPU for the year was sustained at prior year levels, while churn churn: see butter. improved over the course of the year to set record lows for the company. Fourth quarter lifetime revenue per subscriber (LRS LRS Lawyer Referral Service (Ontario) LRS Library Research Service LRS Linear Referencing System (transportation engineering) LRS Logistics Readiness Squadron (USAF) ) of $4,929 (implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by ARPU and churn), a company best, ranks Partners' customers among the most valuable in the industry. During the year, Partners also significantly improved its financial position with $1.1 billion of debt refinancings and redemptions reducing our cost of debt and further reinforcing re·in·force also re-en·force or re·en·force tr.v. re·in·forced, re·in·forc·ing, re·in·forc·es 1. To give more force or effectiveness to; strengthen: The news reinforced her hopes. our potential for continued free cash flow and future earnings." During the fourth quarter, Partners retired $111.3 million principal amount at maturity of its senior notes and Series B redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. in exchange for cash, including proceeds from the company's sale of 10 million newly issued Class A shares in a public offering completed on November November: see month. 19. During the fourth quarter, the company also refinanced its $475 million senior credit facility, reducing the annualized interest expense of the facility by over $7 million and extending its maturity by more than two years. On a combined basis, the company's debt refinancings and redemptions of $1.142 billion since the fourth quarter of 2002 are anticipated to result in net annualized interest savings of approximately $56.6 million. The loss attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to common stockholders in the fourth quarter of 2003 was $25.0 million, or $0.10 per share, including losses related to the early retirement of debt totaling $20.7 million, or $0.08 per share. Net of this item, the fourth quarter loss attributable to common stockholders was $4.3 million, or $0.02 per share. The loss attributable to common stockholders for the full year 2003 was $207.2 million, or $0.82 per share, including losses related to the early retirement of debt totaling $95.1 million, or $0.38 per share. Net of this item, the 2003 loss attributable to common stockholders was $112.1 million, or $0.44 per share. Fourth quarter 2003 net capital expenditures, excluding capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. , were $32.6 million. Net capital expenditures for the full year of 2003, excluding capitalized interest, were $161.8 million, down 35% from 2002 net capital expenditures of $250.8 million. During the year, Partners added approximately 290 cell sites to its network, bringing the total number of sites to approximately 3,600 at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . Non-GAAP Financial Measures The information presented in this press release and in the attached financial tables includes financial information prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting in the U.S., or GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , as well as other financial measures that may be considered non-GAAP financial measures, including free cash flow, Adjusted EBITDA, service revenue margin, ARPU, LRS, net capital expenditures, net loss excluding the gain (loss) on early retirement of debt, and loss attributable to common stockholders excluding the gain (loss) on early retirement of debt. Generally, a non-GAAP financial measure is a numerical numerical expressed in numbers, i.e. Arabic numerals of 0 to 9 inclusive. numerical nomenclature a numerical code is used to indicate the words, or other alphabetical signals, intended. measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. As described more fully in the notes to the attached financial tables, management believes these non-GAAP measures provide meaningful additional information about our performance and our ability to service our long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and other fixed obligations and to fund our continued growth. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. Reconciliations from GAAP results to these non-GAAP financial measures are provided in the notes to the attached financial tables. In addition, to view these and other reconciliations and information about how to access the conference call discussing Nextel Partners' fourth quarter results, visit the 'Investor Relations' tab at www.nextelpartners.com. Fourth Quarter 2003 Results Conference Call -- Tuesday Tuesday: see week. , February February: see month. 24, 2004 Nextel Partners will be hosting its fourth quarter 2003 conference call on Tuesday, February 24, 2004 at 11:00 AM EST EST electroshock therapy. EST abbr. electroshock therapy . The call-in call-in adj. Being in a format such that listeners or viewers are invited to have their telephone conversations with the host or guests on a show broadcast to other listeners: a call-in radio show. n. number is 1-888-540-9242 or 1-484-630-1056. The passcode is PARTNER. Instant replay of the call will be available until Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , March 19, 2004 by calling 1-800-839-3414 or 1-402-998-0916. The conference call will also be available via a live webcast. To listen to the live call, please go to http://www.nextelpartners.com at least fifteen minutes early to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , and install any necessary software. For those who cannot listen to the live broadcast, it will be archived on the website following the call. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. A number of the matters and subject areas discussed in this press release that are not historical or current facts deal with potential future circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or and developments, including without limitation, matters related to Nextel Partners' growth strategies and future free cash flow and earnings. The words "believe," "expect," "intend," "estimate," "assume" and "anticipate," variations of such words and similar expressions identify forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , but their absence does not mean that a statement is not forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. . The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. future expectations generally, and also may materially differ from Nextel Partners' actual future experience involving any one or more of such matters and subject areas. Nextel Partners has attempted to identify, in context, certain of the factors that it currently believes may cause actual future experience and results to differ from Nextel Partners' current expectations regarding the relevant matter or subject area. Such risks and uncertainties include the economic conditions in our targeted markets, performance of our technologies, competitive conditions, customer acceptance of our services, access to sufficient capital to meet operating and financing needs and those additional factors that are described from time to time in Nextel Partners' reports filed with the SEC, including Nextel Partners' annual reports on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the years ended December 31, 2002 and 2003 and its quarterly filings on Form 10-Q Form 10-Q See 10-Q. . This press release speaks only as of its date, and Nextel Partners disclaims any duty to update the information herein. Nextel Partners, Inc., (Nasdaq:NXTP), based in Kirkland, Wash., has the exclusive right to provide digital wireless communications wireless communications System using radio-frequency, infrared, microwave, or other types of electromagnetic or acoustic waves in place of wires, cables, or fibre optics to transmit signals or data. services using the Nextel brand name in mid-sized and rural markets in 31 states where approximately 53 million people reside. Nextel Partners offers its customers the same fully integrated, digital wireless communications services available from Nextel Communications Nextel Communications, styled NEXTEL, (Former NASDAQ: NXTL) which is now known as the Sprint Nextel Corporation was a telecommunications firm based in the United States. Known for providing a nation-wide mobile communications system. (Nextel) including Nationwide Direct Connect(R), cellular voice, cellular wireless Internet access See how to access the Internet. and short messaging See SMS. , all in a single wireless phone. Nextel Partners customers can seamlessly access these services anywhere on Nextel's or Nextel Partners' all-digital wireless network, which currently covers 293 of the top 300 U.S. markets. To learn more about Nextel Partners, visit www.nextelpartners.com. To learn more about Nextel's services, visit www.nextel.com.
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except for per share amounts)
(unaudited)
For the Three
Months Ended For the Year Ended
December 31, December 31,
------------------- ---------------------
2003 2002 2003 2002
-------- -------- ---------- ---------
REVENUES:
Service revenues $276,687 $190,553 $ 964,386 $ 646,169
Equipment revenues 19,365 5,209 54,658 24,519
-------- -------- ---------- ---------
Total revenues (1) 296,052 195,762 1,019,044 670,688
OPERATING EXPENSES:
Cost of service revenues 85,707 70,773 318,038 267,266
Cost of equipment revenues
(1) 32,857 21,291 114,868 87,130
Selling, general and
administrative 110,123 85,310 402,300 313,668
-------- -------- ---------- ---------
ADJUSTED EBITDA (2) 67,365 18,388 183,838 2,624
Stock based compensation 352 3,560 1,092 12,670
Depreciation and
amortization 35,896 29,384 135,417 101,185
-------- -------- ---------- ---------
INCOME (LOSS) FROM
OPERATIONS 31,117 (14,556) 47,329 (111,231)
Interest expense, net (3) (35,459) (41,372) (152,294) (164,583)
Interest income 881 1,020 2,811 7,091
Gain (loss) on early
retirement of debt (20,676) 4,427 (95,093) 4,427
-------- -------- ---------- ---------
LOSS BEFORE DEFERRED INCOME
TAX PROVISION (24,137) (50,481) (197,247) (264,296)
Deferred income tax
provision (836) (2,400) (7,811) (18,188)
-------- -------- ---------- ---------
NET LOSS (24,973) (52,881) (205,058) (282,484)
Mandatorily redeemable
preferred stock
dividends (3) - (1,041) (2,141) (3,950)
-------- -------- ---------- ---------
LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $(24,973) $(53,922) $ (207,199) $(286,434)
======== ======== ========== =========
Loss per share attributable
to common stockholders,
basic and diluted: $ (0.10) $ (0.22) $ (0.82) $ (1.17)
======== ======== ========== =========
Weighted average number of
shares outstanding, basic
and diluted 256,982 246,549 252,440 244,933
======== ======== ========== =========
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2003 2002
---------- ----------
Cash and cash equivalents $ 122,620 $ 67,522
Short-term investments 146,191 127,507
Accounts receivable, net of allowance $14,873
and $10,197, respectively 150,219 130,459
Subscriber equipment inventory 24,007 16,413
Other current assets 19,006 15,593
---------- ----------
Total current assets 462,043 357,494
---------- ----------
Property, plant and equipment, net 1,025,096 1,000,076
FCC licenses, net of accumulated amortization
of $8,744 371,898 348,440
Other long-term assets 30,273 29,915
---------- ----------
Total assets $1,889,310 $1,735,925
========== ==========
Current liabilities $ 185,425 $ 161,567
Long-term debt 1,653,539 1,424,600
Other long-term liabilities 63,642 38,408
---------- ----------
Total liabilities 1,902,606 1,624,575
Mandatorily redeemable preferred stock (3) - 34,971
Total stockholders' equity (deficit) (13,296) 76,379
---------- ----------
Total liabilities and stockholders' equity
(deficit) $1,889,310 $1,735,925
========== ==========
Digital units in service 1,233,200 877,800
========== ==========
For the Three Months Ended
-----------------------------------------------
December 31, September 30, June 30, March 31,
2003 2003 2003 2003
------------ ------------- --------- ----------
Net capital
expenditures
(excludes capitalized
interest) (4) $ 32,633 $ 40,546 $ 32,913 $ 55,753
=========== ============ ======== =========
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the Three
Months Ended For the Year Ended
December 31, December 31,
-----------------------------------------
2003 2002 2003 2002
-------- -------- --------- ---------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net loss $(24,973) $(52,881) $(205,058) $(282,484)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 35,896 29,384 135,417 101,185
(Gain) Loss on early
retirement of debt 20,676 (4,427) 95,093 (4,427)
Other non-cash items in
net loss 4,488 21,267 43,454 93,746
Change in current assets
and liabilities 21,615 6,047 18,248 (24,489)
-------- -------- --------- ---------
Net cash provided by
(used in) operating
activities $ 57,702 $ (610) $ 87,154 $(116,469)
-------- -------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (32,728) (54,872) (179,794) (274,911)
FCC licenses (1,657) (272) (16,026) (52,156)
Proceeds from sale and
maturities of short-term
investments, net (1,881) 16,781 (18,684) 125,419
-------- -------- --------- ---------
Net cash from
investing
activities $(36,266) $(38,363) $(214,504) $(201,648)
-------- -------- --------- ---------
CASH FLOWS PROVIDED BY (USED
IN) FINANCING ACTIVITIES:
Net cash provided by
(used in) financing
activities $(17,041) $ 15,082 $ 182,448 $ 81,280
-------- -------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 4,395 $(23,891) $ 55,098 $(236,837)
CASH AND CASH EQUIVALENTS,
beginning of period $118,225 $ 91,413 67,522 $ 304,359
-------- -------- --------- ---------
CASH AND CASH EQUIVALENTS,
end of period $122,620 $ 67,522 $ 122,620 $ 67,522
======== ======== ========= =========
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
Supplemental Schedule
(in thousands, except ARPU, Lifetime Revenue per Subscriber and Per
Share Data)
(unaudited)
(1) Impact of SEC Staff Accounting Bulletin (SAB) No. 101- Revenue
Recognition and Emerging Issues Task Force (EITF) No. 00-21-Revenue
Arrangements with Multiple Deliverables (EITF No. 00-21)
We adopted EITF No. 00-21, "Revenue Arrangements with Multiple
Deliverables" beginning July 1, 2003 using the "prospective" method of
adoption. Under EITF No. 00-21, we are no longer required to consider
whether a customer is able to realize utility from the phone in the
absence of the undelivered service. Given that we meet the criteria
stipulated in EITF No. 00-21, we account for the sale of a phone as a
unit of accounting separate from the subsequent service to the
customer. Accordingly, we began recognizing revenue from phone
equipment sales and the related cost of phone equipment revenues when
title to the phone equipment passes to the customer beginning July 1,
2003. In accordance with EITF No. 00-21, we also report activation
fees as part of equipment revenues effective July 1, 2003. Previously,
in accordance with SAB No. 101, "Revenue Recognition in Financial
Statements," activation fees and handset revenues were deferred and
recognized over three years, the estimated customer relationship
period. Concurrently, related costs for the handsets were deferred,
but only to the extent of deferred revenues, resulting in no change to
income (loss) from operations. Since we adopted EITF No. 00-21
prospectively, all previously deferred activation fees, handset
revenues and related costs for the handsets will continue to be
amortized over their remaining customer relationship period. The
following is a summary of the revenues and cost of equipment revenues
(handset costs) as reported and without the effect of SAB No. 101 and
EITF No. 00-21. (In December of 2003, the SEC staff issued SAB No.
104, "Revenue Recognition," which updated SAB No. 101 to reflect the
impact of the issuance of EITF No. 00-21.)
For the Three
Months Ended For the Year Ended
December 31, December 31,
------------------ -------------------
2003 2002 2003 2002
-------- -------- -------- ---------
Service revenues as reported $276,687 $190,553 $964,386 $ 646,169
Activation fees deferred (SAB
No.101) - 1,685 3,319 5,989
Activation fees amortization
(SAB No. 101) (1,079) (878) (4,325) (2,792)
Activation fees to equipment
revenues (EITF No. 00-21) 2,156 - 4,256 -
-------- -------- -------- ---------
Total service revenues without
SAB No. 101 and EITF No. 00-21
effect $277,764 $191,360 $967,636 $ 649,366
-------- -------- -------- ---------
Equipment revenues as reported 19,365 5,209 54,658 24,519
Equipment revenues deferred
(SAB No. 101) - 9,416 19,947 31,031
Equipment revenues
amortization (SAB No. 101) (6,046) (5,693) (25,380) (19,263)
Activation fees from service
revenues (EITF No. 00-21) (2,156) - (4,256) -
-------- -------- -------- ---------
Total equipment revenues without
SAB No. 101 and EITF No. 00-21
effect $ 11,163 $ 8,932 $ 44,969 $ 36,287
-------- -------- -------- ---------
Cost of equipment revenues as
reported $ 32,857 $ 21,291 $114,868 $ 87,130
Equipment revenues deferred
(SAB No. 101) - 11,101 23,266 37,020
Equipment revenues
amortization (EITF No. 00-21) (7,125) (6,571) (29,705) (22,055)
-------- -------- -------- ---------
Total cost of equipment revenues
without SAB No. 101 and EITF
No. 00-21 effect $ 25,732 $ 25,821 $108,429 $ 102,095
-------- -------- -------- ---------
Income (loss) from operations as
reported $ 31,117 $(14,556) $ 47,329 $(111,231)
======== ======== ======== =========
Income (loss) from operations
without SAB No. 101 and EITF
No. 00-21 effect $ 31,117 $(14,556) $ 47,329 $(111,231)
======== ======== ======== =========
(2) Adjusted EBITDA
The term "EBITDA" refers to a financial measure that is defined as
earnings (loss) before interest, taxes, depreciation and amortization;
we use the term "Adjusted EBITDA" to reflect that our financial
measure also excludes cumulative effect of change in accounting
principle, loss from disposal of assets, gain (loss) from early
extinguishment of debt and stock-based compensation. Adjusted EBITDA
is commonly used to analyze companies on the basis of leverage and
liquidity. However, Adjusted EBITDA is not a measure determined under
GAAP in the United States of America and may not be comparable to
similarly titled measures reported by other companies. Adjusted EBITDA
should not be construed as a substitute for operating income or as a
better measure of liquidity than cash flow from operating activities,
which are determined in accordance with GAAP. We have presented
Adjusted EBITDA to provide additional information with respect to our
ability to meet future debt service, capital expenditure and working
capital requirements. The following schedule reconciles Adjusted
EBITDA to net cash provided by (used in) operating activities reported
on our Consolidated Statements of Cash Flows, which we believe is the
most directly comparable GAAP measure:
For the Three For the Year Ended
Months Ended
December 31, December 31,
---------------- -------------------
2003 2002 2003 2002
------- ------- -------- ---------
Net cash provided by (used in)
operating activities
(as reported on Consolidated
Statements of Cash Flows) $57,702 $ (610) $ 87,154 $(116,469)
Adjustments to reconcile to
Adjusted EBITDA:
Cash paid interest expense, net of
capitalized amount 9,809 21,489 103,485 98,777
Interest income (881) (1,020) (2,811) (7,091)
Change in working capital 735 (1,471) (3,990) 27,407
------- ------- -------- ---------
Adjusted EBITDA $67,365 $18,388 $183,838 $ 2,624
======= ======= ======== =========
(3) Impact of Statement of Financial Accounting Standards (SFAS)
Number 150-Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
In May 2003, the Financial Accounting Standards Board (FASB)
issued SFAS No. 150, "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity." This statement
establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It required that an
issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances) because that financial
instrument embodies an obligation of the issuer. This statement was
effective for all freestanding financial instruments entered into or
modified after May 31, 2003; otherwise it was effective at the
beginning of the first interim period beginning after June 15, 2003.
We identified that our mandatorily redeemable preferred stock was
within the scope of this statement and effective July 1, 2003
reclassified it as long-term debt. Additionally, the mandatorily
redeemable preferred stock dividends were recorded as interest expense
beginning on July 1, 2003. We redeemed all of our outstanding Series B
mandatorily redeemable preferred stock on November 21, 2003. The
following schedule shows the impact of SFAS No. 150 had it been
effective in the prior period.
For the Three
Months Ended For the Year Ended
December 31, December 31,
------------------ --------------------
2003 2002 2003 2002
-------- -------- --------- ---------
Net Loss $(24,973)$(52,881) $(205,058)$(282,484)
Add: Mandatorily redeemable
preferred stock dividends - $ (1,041) (2,141) (3,950)
-------- -------- --------- ---------
Net Loss including
classification of preferred
stock dividends as interest
expense $(24,973)$(53,922) $(207,199)$(286,434)
======== ======== ========= =========
Net Loss per share including
mandatorily redeemable
preferred stock dividends $ (0.10)$ (0.22) $ (0.82)$ (1.17)
======== ======== ========= =========
Weighted average number of
common shares outstanding-
basic and diluted 256,982 246,549 252,440 244,933
======== ======== ========= =========
(4) Net Capital Expenditures
Net capital expenditures exclude capitalized interest and are
offset by net proceeds from the sale and lease-back transactions of
telecommunication towers and related assets to third parties accounted
for as operating leases. Net capital expenditures as defined are not a
measure determined under GAAP in the United States of America and may
not be comparable to similarly titled measures reported by other
companies. Net capital expenditures should not be construed as a
substitute for capital expenditures reported on our Consolidated
Statements of Cash Flows, which is determined in accordance with GAAP.
We report net capital expenditures in this manner because we believe
it reflects the net cash used by us for capital expenditures and to
satisfy the reporting requirements for our debt covenants. The
following schedule reconciles net capital expenditures to capital
expenditures reported on our Consolidated Statements of Cash Flows,
which we believe is the most directly comparable GAAP measure:
For the
For the Three Months Ended Year
----------------------------------- Ended
March June September December December
31, 30, 30, 31, 31,
2003 2003 2003 2003 2003
-------------------------- -------- ---------
Capital expenditures (as
reported on Consolidated
Statements of Cash
Flows) $65,267 $19,557 $ 62,242 $32,728 $179,794
Less: cash paid portion
of capitalized interest (321) (355) (352) (255) (1,283)
Less: cash proceeds from
sale and lease-back
transactions accounted
for as operating leases (892) (5,358) (142) (468) (6,860)
Change in capital
expenditures accrued or
unpaid (8,301) 19,069 (21,202) 628 (9,806)
------- -------- -------- ------- --------
Net capital expenditures $55,753 $32,913 $ 40,546 $32,633 $161,845
======= ======== ======== ======= ========
Other Non-GAAP Reconciliations:
Service Revenue Margin
The measure "service revenue margin" is a non-GAAP measure that is
determined by dividing "Adjusted EBITDA" (see Note 2 above) by service
revenue (as reported on our Consolidated Statements of Operations).
Service revenue margin, as defined, is not a measure determined under
GAAP in the United States of America and may not be comparable to
similarly titled measures reported by other companies. We believe that
service revenue margin is a useful indicator of our ability to fund
future spending requirements, such as capital expenditures and other
investments, and our ability to incur and service debt. The following
schedule reflects the service revenue margin calculation and
incorporates the Adjusted EBITDA reconciliation set forth in Item 2
above:
For the Three For the Year
Months Ended Ended
December 31, December 31,
2003 2003
--------------------------------
Adjusted EBITDA (see Note 2) $ 67,365 $ 183,838
Divided by: service revenues
(as reported on Consolidated
Statements of Operations) $ 276,687 $ 964,386
---------------- --------------
Service revenue margin 24% 19%
================ ==============
ARPU - Average Revenue per Unit
ARPU is an industry term that measures total service revenues per
month from our subscribers divided by the average number of
subscribers in commercial service during the period. ARPU, itself, is
not a measurement determined under GAAP in the United States of
America and may not be similar to ARPU measures of other companies;
however, ARPU uses GAAP measures as the basis for calculation. We
believe that ARPU provides useful information concerning the appeal of
our rate plans and service offering and our performance in attracting
high value customers. The following schedule reflects the ARPU
calculation and provides a reconciliation of service revenues used for
the ARPU calculation to service revenues reported on our Consolidated
Statements of Operations, which we believe is the most directly
comparable GAAP measure to the service revenues measure used for the
ARPU calculation:
ARPU (without roaming revenues)
--------------------------------------
For the Three For the Year
Months ended Ended
December 31, December 31,
2003 2003
---------------------------
Service revenues (as reported on
Consolidated Statements of
Operations) $ 276,687 $ 964,386
Less: activation fees recognized for
SAB No. 101 (1,079) (1,006)
Add: activation fees reclassified for
EITF No. 00-21 2,156 4,256
Less: roaming revenues (33,405) (115,893)
------------- ------------
Service revenues for ARPU - three
months $ 244,359 $ 851,743
============= ============
Average units (subscribers) 1,184 1,051
============= ============
ARPU $ 69 $ 68
============= ============
ARPU (including roaming revenues)
-----------------------------------
For the Three For the Year
Months ended Ended
December 31, December 31,
2003 2003
---------------------------
Service revenues (as reported on
Consolidated Statements of
Operations) $ 276,687 $ 964,386
Less: activation fees recognized
for SAB No. 101 (1,079) (1,006)
Add: activation fees reclassified
for EITF No. 00-21 2,156 4,256
------------- ------------
Service plus roaming revenues for
ARPU - three months $ 277,764 $ 967,636
============= ============
Average units (subscribers) 1,184 1,051
============= ============
ARPU, including roaming revenues $ 78 $ 77
============= ============
LRS - Lifetime revenue per subscriber
LRS is an industry term calculated by dividing ARPU (see above) by
the subscriber churn rate. The subscriber churn rate is an indicator
of subscriber retention and represents the monthly percentage of the
subscriber base that disconnects from service. Subscriber churn is
calculated by dividing the number of handsets disconnected from
commercial service during the period by the average number of handsets
in commercial service during the period. LRS, itself, is not a
measurement determined under GAAP in the United States of America and
may not be similar to LRS measures of other companies; however, LRS
uses GAAP measures as the basis for calculation. We believe that LRS
is an indicator of the expected lifetime revenue of our average
subscriber, assuming that churn and ARPU remain constant as indicated.
We also believe that this measure, like ARPU, provides useful
information concerning the appeal of our rate plans and service
offering and our performance in attracting and retaining high value
customers. The following schedule reflects the LRS calculation:
For the Three
Months Ended
December 31, 2003
-------------------
ARPU (without roaming revenues) $ 69
Divided by: Churn 1.4%
------------------
Lifetime revenue per subscriber (LRS) $ 4,929
==================
Free Cash Flow (FCF)
We define free cash flow as net cash provided by (used in)
operating activities less capital expenditures and payments for FCC
licenses. Free cash flow is not a measurement determined under GAAP in
the United States of America and may not be similar to free cash flow
measures of other companies. We believe that free cash flow provides
useful information to investors, analysts and our management about the
amount of cash our business is generating, after interest payments and
reinvestments in the business, which may be used to fund scheduled
debt maturities and other financing activities, including refinancings
and early retirement of debt. Free cash flow is most directly
comparable to the GAAP measure of net cash provided by (used in)
operating activities reported on our Consolidated Statements of Cash
Flows. The following schedule reconciles free cash flow to net cash
provided by (used in) operating activities:
For the Three
Months Ended For the Year Ended
December 31, December 31,
------------------ --------------------
2003 2002 2003 2002
-------- -------- --------- ---------
Net cash provided by (used in)
operating activities (as
reported on Consolidated $ 57,702 $ (610) $ 87,154 $(116,469)
Statements of Cash Flows)
Aggregate adjustments to
reconcile net loss to net cash
provided by (used in)
operating activities (as
reported on Consolidated
Statements of Cash Flows) (82,675) (52,271) (292,212) (166,015)
-------- -------- --------- ---------
Net loss (as reported on
Consolidated Statements of
Operations) $(24,973)$(52,881) $(205,058)$(282,484)
Add: depreciation and
amortization 35,896 29,384 135,417 101,185
Add: non-cash items in net
loss 25,164 16,841 138,547 89,319
Less: net capital expenditures
(See Note 4 above) (32,633) (47,448) (161,845) (250,841)
Less: cash paid portion of
capitalized interest (See Note
4 above) (255) (312) (1,283) (1,993)
Less: FCC licenses (1,657) (272) (16,026) (52,156)
-------- -------- --------- ---------
Free cash flow (negative) $ 1,542 $(54,688) $(110,248)$(396,970)
======== ======== ========= =========
Net Loss Excluding the Gain (Loss) on Early Retirement of Debt
Net loss excluding the gain (loss) on early retirement of debt is
calculated using net loss and adding back the gain (loss) on early
retirement of debt. We show this non-GAAP financial measure to allow
us to compare our net loss in the periods ending December 31, 2003 to
the same periods in the prior year, in which we did not record a gain
(loss) on early retirement of debt. Net loss excluding the gain (loss)
on early retirement of debt is not a measure determined under GAAP in
the United States of America and may not be comparable to similarly
titled measures reported by other companies and should not be
construed as a substitute for net loss, which is determined in
accordance with GAAP. The following schedule reconciles net loss
excluding the gain (loss) on early retirement of debt to net loss
reported on our Consolidated Statement of Operations, which we believe
is the most directly comparable GAAP measure:
For the Three
Months Ended For the Year Ended
December 31, December 31,
------------------ --------------------
2003 2002 2003 2002
-------- -------- --------- ---------
Net loss (as reported on
Consolidated Statements of
Operations) $(24,973)$(52,881) $(205,058)$(282,484)
Add: (gain) loss on early
retirement of debt 20,676 $ (4,427) 95,093 $ (4,427)
-------- -------- --------- ---------
Net loss excluding the loss on
early retirement of debt $ (4,297)$(57,308) $(109,965)$(286,911)
======== ======== ========= =========
Loss Attributable to Common Stockholders Excluding the Gain (Loss) on
Early Retirement of Debt
Loss attributable to common stockholders excluding the gain (loss)
on early retirement of debt is calculated using loss attributable to
common stockholders (as reported on Consolidated Statements of
Operations) and adding back the gain (loss) on early retirement of
debt. We show this non-GAAP financial measure to allow us to compare
our loss attributable to common stockholders in the periods ending
December 31, 2003 to the same periods in the prior year, in which we
did not record a gain (loss) on early retirement of debt. We also use
this non-GAAP financial measure to calculate the loss per share
attributable to common stockholders excluding the gain (loss) on early
retirement of debt. Loss attributable to common stockholders excluding
the gain (loss) on early retirement of debt and loss per share
attributable to common stockholders excluding the gain (loss) on early
retirement of debt are not measures determined under GAAP in the
United States of America and may not be comparable to similarly titled
measures reported by other companies and should not be construed as
substitutes for loss attributable to common stockholders and loss per
share attributable to common stockholders, which are determined in
accordance with GAAP. The following schedule reconciles loss
attributable to common stockholders excluding the gain (loss) on early
retirement of debt and loss per share attributable to common
stockholders excluding the gain (loss) on early retirement of debt to
loss attributable to common stockholders and loss per share
attributable to common stockholders, respectively, as reported on our
Consolidated Statements of Operations, which we believe are the most
directly comparable GAAP measures:
For the Three
Months Ended For the Year Ended
December 31, December 31,
------------------ --------------------
2003 2002 2003 2002
-------- -------- --------- ---------
Loss attributable to common
stockholders (as reported on
Consolidated Statements of
Operations) $(24,973)$(53,922) $(207,199)$(286,434)
Add: (gain) loss on early
retirement of debt 20,676 $ (4,427) 95,093 (4,427)
-------- -------- --------- ---------
Loss attributable to common
stockholders excluding the
loss on early retirement of
debt $ (4,297)$(58,349) $(112,106)$(290,861)
======== ======== ========= =========
Loss per share attributable to
common stockholders, basic and
diluted (as reported on
Consolidated Statements of
Operations) $ (0.10)$ (0.22) $ (0.82)$ (1.17)
Add: (gain) loss per share on
early retirement of debt $ 0.08 $ (0.02) $ 0.38 $ (0.02)
-------- --------- --------- ---------
Loss per share attributable to common
stockholders excluding the loss
on early retirement of debt,
basic and diluted $ (0.02)$ (0.24) $ (0.44)$ (1.19)
======== ======== ========= =========
Weighted average number of
common shares outstanding,
basic and diluted 256,982 246,549 252,440 244,933
======== ======== ========= =========
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