-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sxyvk9S8+flrDWP7dYoj0im2It7fLXN+OzqqEfNLzbOQVJa9SQs1dHQdgLMjG4KG uEtFGJC8I5yYX1LG8S8Q/A== 0001086844-03-000002.txt : 20030117 0001086844-03-000002.hdr.sgml : 20030117 20030116200751 ACCESSION NUMBER: 0001086844-03-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030115 ITEM INFORMATION: FILED AS OF DATE: 20030117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRGATE PCS INC /DE/ CENTRAL INDEX KEY: 0001086844 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 582422929 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27455 FILM NUMBER: 03516936 BUSINESS ADDRESS: STREET 1: 233 PEACHTREE ST NE STREET 2: SUITE 1700 CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4045257272 MAIL ADDRESS: STREET 1: 233 PEACHTREE ST STREET 2: SUITE 1700 CITY: ATLANTA STATE: GA ZIP: 30303 8-K 1 form8k011503.txt PRESS RELEASE DATED JANUARY 15, 2003 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 15, 2003 AirGate PCS, Inc. (Exact name of registrant as specified in its charter) Delaware 027455 58-2422929 -------- ------ ---------- (State or other Jurisdiction (Commission File No.) (I.R.S. Employer of Incorporation) Identification No.) 233 Peachtree Street, N.E. 30303 Harris Tower, Suite 1700, (Zip Code) Atlanta, Georgia (Address of principal executive offices) Registrant's telephone number, including area code: (404) 525-7272 Not Applicable (Former name or former address, if changed since last report) Item 9. Regulation FD Disclosure. On January 15, 2003, AirGate PCS, Inc., a Delaware corporation ("AirGate"), issued a press release announcing its financial and operating results for its fourth quarter and fiscal year ended September 30, 2002, and the filing of its Annual Report on Form 10-K. A copy of the press release referenced above is attached hereto as Exhibit 99.1. Item 7. Financial Statements and Exhibits. (c) Exhibits. Exhibit No. Description 99.1 Press Release of AirGate PCS, Inc. dated January 15, 2003 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AIRGATE PCS, INC. Date: January 16, 2003 By: /s/ William H. Seippel ----------------------------------- William H. Seippel Chief Financial Officer EX-99.1 3 exhibit_8k011503.txt PRESS RELEASE DATED JANUARY 15, 2003 Exhibit 99.1 Contact: Will Seippel Chief Financial Officer 404-525-7272 AIRGATE PCS, INC. ANNOUNCES FOURTH QUARTER AND FISCAL YEAR-END 2002 RESULTS; FILING OF 10-K ATLANTA (January 15, 2003) - AirGate PCS, Inc., (NASDAQ/NM: PCSA), a PCS Affiliate of Sprint, today announced financial and operating results for its fourth quarter and fiscal year ended September 30, 2002, and the filing of its Annual Report on Form 10-K. Total revenues for the fourth fiscal quarter ended September 30, 2002 were $137.2 million compared with $62.3 million for fiscal 2001. The 2001 results did not include iPCS, Inc., which was acquired by the Company on November 30, 2001. The Company reported a net loss of ($615.0) million, or ($23.83) per share, for the three months ended September 30, 2002, compared with a net loss of ($25.0) million, or ($1.88) per share, in the fourth fiscal quarter of 2001. The loss included a ($556.2) million charge, or ($21.55) per share, associated with the impairment of goodwill and tangible and intangible assets related to iPCS, Inc. For the fiscal year ended September 30, 2002, the Company reported revenues of $456.6 million compared with revenues of $172.1 million for fiscal 2001. The Company reported a net loss of ($996.6) million, or ($41.96) per share, for the fiscal year ended September 30, 2002, compared with a net loss of ($111.0) million, or ($8.48) per share, for fiscal 2001. The loss included a total of ($817.4) million, or ($34.42) per share, associated with the impairment of goodwill and tangible and intangible assets related to iPCS, Inc. EDITDA, defined as earnings before interest, taxes, depreciation and amortization, excluding non-cash stock compensation expenses, loss on disposal of property and equipment, and impairment charges, was ($8.9) million for the fourth quarter of fiscal 2002. EBITDA was ($40.0) million for fiscal 2002. During 2002, the Company recorded significant write-downs in the carrying value of goodwill and tangible and intangible assets associated with its wholly-owned unrestricted subsidiary, iPCS. These impairment write-downs were taken in accordance with the accounting guidance prescribed by SFAS No. 142 and No. 144. The purpose of the write-downs was to record property and equipment, goodwill and other intangible assets at their fair value. In the second fiscal quarter, the Company recorded a goodwill impairment of $261.2 million. In the fourth fiscal quarter, the impairment of goodwill and tangible and intangible assets related to iPCS was $556.2 million. As indicated in a December 30, 2002 press release, a delay in filing AirGate's Annual Report on Form 10-K provided additional time to allow the Company to complete a review of balances owed to the Company by Sprint, as well as the Company's subscriber accounts receivable balances. This review did not impact financial information or disclosures in prior reports on Form 10-Q or 10-K. In connection with this review of accounts receivable, the Company has reclassified approximately $10 million of subscriber accounts receivable for the fiscal year ended September 30, 2002 to a receivable from Sprint. The Company believes at least $10 million is payable from Sprint, but Sprint has acknowledged only $5.8 million is owed to AirGate. The Company is in discussions with Sprint regarding the differences and has provided for these discussions in its consolidated financial statements. Filing of the Form 10-K and the delivery of the Company's audited financial statements and related information to AirGate lenders under its senior secured credit facility and the trustee for its notes cure any potential AirGate default. As previously announced, liquidity is an issue for iPCS in the near term. The Company retained Houlihan Lokey Howard & Zukin Capital to review iPCS' revised long range business plan, the strategic alternatives available to iPCS, and to assist iPCS in developing and implementing a plan to improve its capital structure. iPCS has undertaken efforts to restructure its arrangements with its secured lenders, its public note holders and others. Based upon a review of the historical and expected operating results of iPCS, the Company believes that iPCS will be required to seek protection from its creditors under the federal bankruptcy laws in the near term either as part of a consensual restructuring or in an effort to affect a court administered reorganization. "During this challenging period, we realized we had to reposition the Company for the next phase in the wireless industry," said Thomas M. Dougherty, president and chief executive officer of AirGate PCS. "We are taking aggressive actions to elevate our business efficiency and effectiveness by restructuring our organizations, reducing capital and other expenditures, and improving cash flow. We also are focused on strengthening the credit quality of new subscribers and reducing churn while continuing to build a mutually-beneficial relationship with Sprint. Although 2003 is likely to see significantly slower growth in net new subscribers, we expect that the pace of growth will be complemented by improved liquidity and financial performance. -MORE- "Further, we anticipate that the launch of PCS VisionSM, Sprint's third-generation technology, in our territories will provide an additional vehicle to support future subscriber and revenue growth," Dougherty added. "Vision-enabled PCS devices take and receive pictures, check personal and corporate e-mail, play games with full-color graphics and polyphonic sounds, and browse the Internet wirelessly with speeds that equal or exceed a home computer's dial-up connection. We are pleased to be able to offer a broad portfolio of Vision-enabled devices that incorporate voice and data functionality, expanded memory, high-resolution and larger color screens that allow greater mobility, convenience and productivity." Additional financial and operating highlights for the fourth quarter of fiscal 2002 include the following: o The Company added 22,387 net new customers, net of an adjustment for subscribers not reasonably expected to pay. As a result, the Company had a total of 554,833 subscribers as of September 30, 2002. o Average revenue per subscriber (ARPU) was $60 for the quarter, an increase from $56 in the third quarter of 2002. o Total roaming revenue was $35.7 million for the fourth fiscal quarter of 2002, compared with $32.0 million for the third quarter of 2002. Roaming expense was $25.4 million for the quarter, compared with $21.8 million for the previous quarter. During 2002, the reciprocal roaming rate paid by Sprint and its affiliates was $0.10 per minute. Sprint has notified the Company it is decreasing this rate to $0.058 per minute on January 1, 2003. o Churn was 4.0 percent in the fiscal fourth quarter, compared with 3.2 percent in the prior quarter. o Capital expenditures in the quarter were $19.7 million, compared with $28.9 million in the previous quarter, bringing total capital expenditures for the year to $97.1 million. AirGate PCS will hold a conference call to discuss this press release tomorrow, Thursday, January 16, 2003, at 9:00 a.m. ET. A live broadcast of the conference call will be available on-line at www.airgatepcsa.com or www.companyboardroom.com. To listen to the live call, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call through the close of business on February 14, 2003. About AirGate PCS AirGate PCS, Inc., including its unrestricted subsidiary iPCS, is the PCS Affiliate of Sprint with the exclusive right to sell wireless mobility communications network products and services under the Sprint brand in territories within seven states located in the Southeastern and Midwestern United States. The territories include over 14.6 million residents in key markets such as Grand Rapids, Michigan; Charleston, Columbia, and Greenville-Spartanburg, South Carolina; Augusta and Savannah, Georgia; Champaign-Urbana and Springfield, Illinois; and the Quad Cities areas of Illinois and Iowa. AirGate PCS is among the largest PCS Affiliates of Sprint. About Sprint Sprint operates the nation's largest all-digital, all-PCS wireless network, already serving more than 4,000 cities and communities across the country. Sprint has licensed PCS coverage of more than 280 million people in all 50 states, Puerto Rico and the U.S. Virgin Islands. In August 2002, Sprint became the first wireless carrier in the country to launch next generation services nationwide delivering faster speeds and advanced applications on Vision-enabled phones and devices. For more information on products and services, visit www.sprint.com/mr. Sprint PCS is a wholly-owned tracking stock of Sprint Corporation trading on the NYSE under the symbol "PCS." Sprint is a global communications company with approximately 75,000 employees worldwide and $26 billion in annual revenues and is widely recognized for developing, engineering and deploying state-of-the art network technologies Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This news release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about AirGate, iPCS, the wireless industry, our beliefs and our management's assumptions. 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. -MORE- Factors that could cause actual results to differ include: the liquidity and potential restructuring of iPCS, including the potential loss of all value in the iPCS common stock held by AirGate; the unsettled nature of the wireless market; the current economic slowdown; the potential to continue to experience a high rate of customer turnover; our ability to predict future customer growth, as well as other key operating metrics; the competitiveness and impact of Sprint PCS pricing plans, products and services; the ability to successfully launch and leverage 3G products and services; customer credit quality; our ability to retain customers; the ability of Sprint PCS to provide back office, customer care and other services; the prices charged by Sprint for its 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; the potential need for additional sources of liquidity; impacts of spending cuts on network quality, customer retention and customer growth; anticipated future losses; the significant level of indebtedness of each of AirGate and iPCS; adequacy of bad debt and other reserves; and the volatility of AirGate PCS' stock price. For a detailed discussion of these and other cautionary statements and factors that could cause actual results to differ from those contained in this news release, please refer to AirGate PCS' filings with the Securities and Exchange Commission ("SEC"), especially in the "risk factors" section of AirGate PCS' Form 10-K for the fiscal year ended September 30, 2002 and in subsequent filings with the SEC. Except as otherwise required under federal securities laws and the rules and regulations of the SEC, we do 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. Definitions of Terms Used: The following are terms used in the press release. None are measures of financial performance under generally accepted accounting principles in the United States. These terms as used by the Company may not be comparable to the use of these terms by other companies. EDITDA: EDITDA (earnings before interest, taxes, depreciation and amortization) is a financial measure used in the financial community. EDITDA as used in this release is EBITDA excluding non-cash stock compensation expense, loss on disposal of property and equipment and impairment losses. ARPU (average revenue per user): Summarizes the average monthly service revenue per customer, excluding roaming revenue. ARPU is computed by dividing service revenue by the average subscribers for the period, net of an adjustment for those customers not reasonably expected to pay. Churn: Churn is the monthly rate of customer turnover expressed as a percentage of the customer base that discontinued service during the month. Churn is computed by dividing the number of customers that discontinued the service during the month by the average subscribers for the period, net of an adjustment for 30 day returns and those customers not reasonably expected to pay. Net Additions: Net additions refer to the increase in total subscribers between periods, net of an adjustment for those customers not reasonably expected to pay. Ending Subscribers: Ending subscribers exclude an estimate of new subscribers added during the period who are not reasonably expected to pay. -MORE- AirGate PCS Reports Fourth Quarter Fiscal 2002 Results Page 6 January 15, 2003 AirGate PCS, Inc. and Subsidiaries Condensed Consolidating Balance Sheets at September 30, 2002 (dollars in thousands, except share and per share amounts)
AirGate PCS, Consolidated Inc. iPCS, Inc. Eliminations AirGate PCS, Inc. --------------- ---------- ---------------- ------------------- ASSETS Current Assets: Cash and cash equivalents $ 4,887 $ 27,588 $ - $ 32,475 Accounts receivable, net 24,245 13,882 - 38,127 Receivable from Sprint PCS 28,977 15,976 - 44,953 Inventories 4,136 2,597 - 6,733 Prepaid expenses 4,130 3,029 - 7,159 Other current assets 1,331 109 (1,114) 326 ---------------- ---------- ----------------- ----------------- Total current assets 67,706 63,181 (1,114) 129,773 Property and equipment, net 213,777 185,378 - 399,155 Intangible assets, net 1,428 26,899 - 28,327 Investment in subsidiary (99,212) - 99,212 - Financing costs - 8,118 - 8,118 Other assets 4,924 3,997 - 8,921 ---------------- ---------- ------------------ ------------------ Total assets $ 188,623 $ 287,573 $ 98,098 $ 574,294 ================= ========== ================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable and accrued expenses $ 20,245 $ 19,971 $ (1,114) $ 39,102 Payable to Sprint PCS 53,381 34,979 - 88,360 Deferred revenue 7,140 4,635 - 11,775 Current maturities of long term debt 44,957 309,979 - 354,936 and capital lease obligations ----------------- ---------- ----------------- ------------------- Total current liabilities 125,723 369,564 (1,114) 494,173 Long-term debt and capital lease obligations, excluding current maturities 354,264 564 - 354,828 Other long term liabilities 1,583 16,657 - 18,240 ------------------ ---------- ----------------- ------------------- Total liabilities 481,570 386,785 (1,114) 867,241 Stockholders' equity (deficit): Common stock 258 - - 258 Additional paid-in-capital 731,158 192,850 - 924,008 Unearned stock compensation (1,029) - - (1,029) Accumulated deficit (1,023,334) (292,062) 99,212 (1,216,184) ------------------ ----------- ----------------- ------------------- Total stockholders' (292,947) (99,212) 99,212 (292,947) equity (deficit) Total liabilities and stockholders' ------------------ ----------- ------------------ ------------------ equity (deficit) $ 188,623 $ 287,573 $ 98,098 $ 574,294 ================== =========== ================== ==================
Note 1: AirGate did not apply push down accounting for the acquisition of iPCS. Note 2: The $44,957 reflected as AirGate's current maturities of long-term debt includes $2,024 related to the current maturities of AirGate's senior credit facility and $42,933 related to the adjustments to fair value of iPCS' debt obligation under purchase accounting. -MORE- AirGate PCS Reports Fourth Quarter Fiscal 2002 Results Page 7 January 15, 2003 AirGate PCS, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (dollars in thousands, except share and per share amounts)
Three Months Ended Twelve Months Ended September 30, September 30, --------------------- ---------------------- 2002 2001 2002 2001 --------------------- ---------------------- Revwnues: Service revenue $ 96,943 $ 39,057 $ 327,365 $ 105,976 Roaming revenue 35,704 19,812 111,162 55,329 Equipment revenue 4,505 3,382 18,030 10,782 --------------------- ---------------------- 137,152 62,251 456,557 172,087 --------------------- ---------------------- Operating Expenses: Cost of services and roaming (exclusive of depreciation, as show separately below) (94,436) (40,274) (311,135) (116,732) Cost of equipment (13,486) (5,810) (43,592) (20,218) Selling and marketing (31,076) (22,448) (116,521) (71,617) General and administrative expenses (7,062) (3,593) (25,339) (15,742) Non-cash stock compensation expense (172) (439) (769) (1,665) Depreciation (22,333) (9,204) (70,197) (30,621) Amortization of intangible assets (9,955) - (39,332) (46) Impairment of goodwill (199,708) - (460,920) - Impairment of property and equipment (44,450) - (44,450) - Impairment of intangible assets (312,043) - (312,043) - Loss on disposal of property and equipment (1,074) - (1,074) - --------------------- ------------------------ Total operating expenses (735,795) (81,768) (1,425,372) (256,641) --------------------- ------------------------ Operating loss (598,643) (19,517) (968,815) (84,554) --------------------- ------------------------ Interest expense, net (16,341) (5,495) (56,563) (26,436) --------------------- ------------------------ Loss before income tax benefit (614,984) (25,012) (1,025,378) (110,990) --------------------- ------------------------ Income tax benefit - - 28,761 - --------------------- ------------------------ New loss $(614,984) $(25,012) $ (996,617) $(110,990) Basic and diluted net loss per share of common stock $ (23.83) $ (1.88) $ (41.96) $ (8.48) Basic and diluted weighted-average outstanding 25,805,998 13,333,127 23,751,507 13,089,285 common shares
-MORE- AirGate PCS Reports Fourth Quarter Fiscal 2002 Results Page 8 January 15, 2003 AirGate PCS, Inc. and Subsidiaries Condensed Consolidating Statements of Operations for the Year Ended September 30, 2002 (dollars in thousands, except share and per share amounts)
AirGate PCS, Consolidated Inc. iPCS, Inc. Eliminations AirGate PCS, Inc. ------------- ---------- ------------- ------------------ Revwnues: Service revenue $ 226,504 $ 100,861 $ - $ 327,365 Roaming revenue 74,013 37,923 (774) 111,162 Equipment revenue 13,027 5,296 (293) 18,030 ------------- ---------- ------------- ----------------- 313,544 144,080 (1,067) 456,557 Operating Expenses: Cost of services and roaming (exclusive of depreciation, as show separately below) (203,985) (107,924) 770 (311,135) Cost of equipment (27,778) (16,107) 293 (43,592) Selling and marketing (79,010) (37,511) - (116,521) General and administrative expenses (17,631) (7,708) - (25,339) Non-cash stock compensation expense (769) - - (769) Depreciation (40,678) (29,519) - (70,197) Amortization of intangible assets (35,803) (3,529) - (39,332) Impairment of goodwill (452,860) (8,060) - (460,920) Impairment of property and equipment - (44,450) - (44,450) Impairment of intangible assets (312,043) - - (312,043) Loss on disposal of property and equipment (1,074) - - (1,074) ----------- ---------- ------------ ------------ Total operating expenses (1,171,631) (254,808) 1,067 (1,425,372) ----------- ---------- ------------ ------------ Operating loss (858,087) (110,728) - (968,815) Interest expense, net (34,099) (22,464) - (56,563) Loss in subsidiary (133,192) - 133,192 - ----------- ---------- ------------ ------------ Loss before income tax benefit (1,025,378) (133,192) 133,192 (1,025,378) Income tax benefit (28,761) - - 28,761 ----------- ---------- ------------ ------------ New loss $ (996,617) $ (133,192) $ 133,192 $ (996,617) ============= =========== ============= ============= Calculation of EBITDA: Operating loss $ (858,087) $ (110,728) $ - $ (968,815) Non-cash stock compensation expense 769 - - 769 Depreciation 40,678 29,519 - 70,197 Amortization of intangible assets 35,803 3,529 - 39,332 Impairment of goodwill 452,860 8,060 - 460,920 Impairment of property and equipment - 44,450 - 44,450 Impairment of intangible assets 312,043 - - 312,043 Loss on disposal of property and equipment 1,074 - - 1,074 ----------- ---------- ------------ ------------ EBITDA, as defined $ (14,860) $ (25,170) $ - $ (40,030)
Note: AirGate did not apply push down accounting for the acquisition of iPCS. -----END PRIVACY-ENHANCED MESSAGE-----