-----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, BvjIrD5cZjXyGtlznaRmnXJ1bp3J0VGpbk0Zo4i2JzDFlWu44D6CEAd02KN8kxLx ljXux9/ZS5Cq/F+1wpgvAg== 0001086844-04-000022.txt : 20040217 0001086844-04-000022.hdr.sgml : 20040216 20040217105829 ACCESSION NUMBER: 0001086844-04-000022 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040217 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20040217 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: 04604853 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 form8k021704.txt FORM 8-K DATED 2/17/04 UNITED STATES 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): February 17, 2004 AIRGATE PCS, INC. (Exact name of Registrant as specified in its charter) Delaware 027455 58-2422929 (State or other (Commission File Number) (IRS Employer jurisdiction of Identification incorporation) Number) Harris Tower, 233 Peachtree Street N.E., Suite 1700 30303 Atlanta, Georgia (Address of principal executive offices) (Zip Code) (404) 525-7272 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) Item 9. Regulation FD Disclosure. On February 16, 2004, AirGate PCS, Inc., a Delaware corporation ("AirGate"), issued a press release announcing its financial and operating results for its first fiscal quarter ended December 31, 2003. 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 December 16, 2004. 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: December 17, 2004 By: /s/ William H. Seippel _______________________ Name: William H. Seippel Title: Chief Financial Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1 Press Release of AirGate PCS, Inc. dated December 16, 2004. EX-99.1 3 ex99_1.txt EARNINGS RELEASE DATED FEBRUARY 17, 2004 [GRAPHIC OMITTED] Contact: Will Seippel Chief Financial Officer 404-525-7272 AIRGATE PCS, INC. ANNOUNCES FIRST QUARTER FISCAL 2004 RESULTS ---------------------------- FINANCIAL RECAPITALIZATION APPROVED ATLANTA (February 16, 2004) - AirGate PCS, Inc. (OTCBB: PCSA.OB), a PCS Affiliate of Sprint, today announced financial and operating results for its first fiscal quarter ended December 31, 2003. Consistent with its guidance announced earlier this month, recent highlights and operating highlights of the quarter include the following: o Financial recapitalization to be completed on February 20, 2004. o Loss from continuing operations improved to ($11.1) million from ($19.4) million in the first fiscal quarter of 2003. Net income improved to $173.0 million from a net loss of ($47.7) million in the first fiscal quarter of 2003. o EBITDA, earnings before interest, taxes, depreciation and amortization, was $11.8 million, an increase of $9.4 million from $2.4 million in the first fiscal quarter of 2003. Debt restructuring expenses of $2.3 million were included in operating expenses for the first fiscal quarter of 2004. o Cash and cash equivalents increased to $60.0 million from $54.1 million at the end of fiscal year 2003 and from $0.9 million a year ago. First Quarter Financial Overview and Key Operating Metrics Financial and operating metrics, which include non-GAAP financial measures, for the quarters ended December 31, 2003 and 2002 include the following:
For the Quarters Ended December 31, -------------------------------------------------------------- Increase Increase 2003 2002 (Decrease) $ (Decrease) % -------------------------------------------------------------- Selected Financial Data Revenue 81,503 $ 81,865 $ (362) (0.4%) Operating expenses 81,454 91,098 (9,644) (10.6%) Loss from continuing operations (11,110) (19,427) 8,317 42.8% Discontinued operations 184,115 (28,247) 212,362 N/M Net income (loss) 173,005 (47,674) 220,679 N/M Capital expenditures 1,599 5,626 (4,027) (71.6%) Cash and cash equivalents, end of period 60,043 944 59,099 N/M
For the Quarters Ended December 31, -------------------------------------------------------------- Increase Increase 2003 2002 (Decrease) $ (Decrease) % -------------------------------------------------------------- Key Operating Metrics and Non-GAAP Financial Measures Total subscribers, end of period 359,898 352,809 7,089 2.0% Subscriber gross additions 35,601 55,621 (20,020) (36.0%) Subscriber net additions 438 13,670 (13,232) (96.8%) Churn 3.10% 3.43% (0.33%) N/M ARPU $57.62 $57.74 $(0.12) (0.2%) CPGA 508 375 133 35.6% EBITDA (in thousands) $11,816 2,386 9,430 395.2%
Notable financial effects during the first fiscal quarter of 2004 include: o A reduction to roaming revenues of approximately $0.9 million resulting from a correction in Sprint's billing system with respect to data-related inbound roaming revenues, which the Company continues to examine. o A reduction of cost of service and roaming of $3.8 million related to a year-end settlement of 2003 Sprint service bureau fees and Sprint's decision to discontinue their billing system conversion, $3.1 million of which was a non-cash item that was previously disputed and not paid. o An increase of general and administrative expenses related to debt restructuring costs of $2.3 million. o Net income was positively affected by a $184.1 million non-monetary gain from disposition of discontinued operations resulting from the elimination of the investment in iPCS. Notable financial effects during the first fiscal quarter of 2003 include: o A reduction of cost of service and roaming of $1.3 million related to a year-end settlement of 2002 Sprint service bureau fees. o Net income was negatively affected by losses of ($28.2) million from the discontinued operations of iPCS. Discontinued Operations of iPCS On October 17, 2003, AirGate irrevocably transferred all of its shares of iPCS common stock to a trust for the benefit of AirGate shareholders. As of the date of the transfer to the trust, the iPCS investment ($184.1 million credit balance carrying amount) was eliminated and recorded as a non-monetary gain on disposal of discontinuing operations. The results of iPCS for all periods presented are reported as discontinued operations. Therefore, the results of continuing operations reflect the operations of AirGate and its restricted subsidiaries only. Management Commentary "Our efforts on the recapitalization plan were successful with the tender of more than 99% of the 13.5% notes and the required approvals from our shareholders," said Thomas M. Dougherty, president and chief executive officer of AirGate PCS. "I want to thank our shareholders, bondholders and secured lenders for their support during this process as well as all those who contributed to making this a successful transaction. I look forward to the continued support of all our stakeholders as we move on to the next stage of our growth. With our newly restructured balance sheet providing us additional flexibility, we look forward to being able to increase our focus on our operations and improve our results further." "We are pleased with the results of the first fiscal quarter of 2004," Dougherty continued. "We have continued to produce solid operating results and to strengthen our financial position. Over the last year, we increased our cash and cash equivalents to $60.0 million from $0.9 million. While we expect cash and cash equivalents to be reduced by approximately $14 million due to cash payments related to the recapitalization, we believe we will remain in a strong financial position." Future Guidance As highlighted in the Company's press release from February 2, 2004, consistent with competitive industry practices, Sprint is continually assessing its current product and service offerings and considering changes that may enhance those offerings. Potential changes being considered are designed to, among other things, increase subscriber satisfaction and reduce churn. Such changes could entail risks to AirGate, including the risk that potential losses in revenue and ARPU may not be offset by any improvements in market share, customer satisfaction, churn or cost structure over the short or long term. AirGate also continually assesses marketing opportunities and its growth strategy. AirGate may consider marketing opportunities to address specific customer segments, which may change the overall mix of prime and sub-prime credit subscribers in its subscriber base, and may include adjustments to its deposit policy. During the second fiscal quarter of 2004, the Company anticipates net cash outflows related to the prepayment of a portion of the credit facility and expenses in connection with the recapitalization to total approximately $14 million. Reverse Stock Split On February 12, 2004, the Company announced that its shareholders had approved a 1-for-5 reverse stock-split of its capital stock effective February 13, 2004. As a result of the reverse stock split, shareholders will receive one share of common stock, and cash resulting from the elimination of any fractional shares, in exchange for each five shares of common stock currently outstanding. Conference Call AirGate PCS will hold a conference call to discuss this press release Tuesday, February 17, 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.fulldisclosure.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 March 17, 2004 About AirGate PCS AirGate PCS, Inc. is the PCS Affiliate of Sprint with the right to sell wireless mobility communications network products and services under the Sprint brand in its territory within three states located in the Southeastern United States. The territory includes over 7.4 million residents in key markets such as Charleston, Columbia, and Greenville-Spartanburg, South Carolina; Augusta and Savannah, Georgia; and Asheville, Wilmington and the Outer Banks of North Carolina. # # # This news release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about the wireless industry, the recapitalization plan, 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 forecasted in such forward-looking statements. Factors that could cause actual results to differ include: our dependence on the success of Sprint's wireless business; the competitiveness and impact of Sprint wireless pricing plans and PCS products and services; intense competition in the wireless market and the unsettled nature of the wireless market; the potential to continue to experience a high rate of customer turnover; the ability of Sprint to provide back office billing, subscriber care and other services and the quality and costs of such services or, alternatively, our ability to outsource all or a portion of these services at acceptable costs and the quality of such services; subscriber credit quality; the ability to successfully leverage 3G products and services; inaccuracies in financial information provided by Sprint; new charges and fees, or increased charges and fees, imposed by Sprint; the impact and outcome of disputes with Sprint; our ability to predict future customer growth, as well as other key operating metrics; the impact of spending cuts on network quality, customer retention and customer growth; rates of penetration in the wireless industry; our significant level of indebtedness and debt covenant requirements; the impact and outcome of legal proceedings between other PCS Affiliates of Sprint and Sprint; the potential need for additional sources of capital and liquidity; risks related to our ability to compete with larger, more established businesses; anticipated future losses; rapid technological and market change; an adequate supply of subscriber equipment; the current economic slowdown; 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 SEC, especially in the "risk factors" section of AirGate PCS' Form 10-K/A for the fiscal year ended September 30, 2003, 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. Financial Measures and Key Operating Metrics In this press release, the Company uses several key operating metrics and non-GAAP financial measures. In Schedule I, the Company defines each of these metrics and provides a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure. These financial measures and operating metrics are a supplement to GAAP financial information and should not be considered as an alternative to, or more meaningful than, net income (loss), cash flow or operating income (loss) as determined in accordance with GAAP. SCHEDULE I Financial Measures and Key Operating Metrics We use certain operating and financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America, or GAAP. A non-GAAP financial measure is defined as a numerical measure of a company's financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of income or statement of cash flows; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure so calculated and presented. Terms such as subscriber net additions, average revenue per user ("ARPU"), churn and cost per gross addition ("CPGA") are important operating metrics used in the wireless telecommunications industry. These metrics are important to compare us to other wireless service providers. ARPU and CPGA also assist management in budgeting and CPGA also assists management in quantifying the incremental costs to acquire a new subscriber. Except for churn and net subscriber additions, we have included a reconciliation of these metrics to the most directly comparable GAAP financial measure. Churn and subscriber net additions are operating statistics with no comparable GAAP financial measure. ARPU and CPGA are supplements to GAAP financial information and should not be considered an alternative to, or more meaningful than, revenues, expenses, loss from continuing operations, or net income (loss) as determined in accordance with GAAP. Earnings before interest, taxes, depreciation and amortization, or "EBITDA", is a performance metric we use and which is used by other companies. Management believes that EBITDA is a useful adjunct to loss from continuing operations and other measurements under GAAP because it is a meaningful measure of a company's performance, as interest, taxes, depreciation and amortization can vary significantly between companies due in part to differences in accounting policies, tax strategies, levels of indebtedness, capital purchasing practices and interest rates. EBITDA also assists management in evaluating operating performance and is sometimes used to evaluate performance for executive compensation. We have included below a presentation of the GAAP financial measure most directly comparable to EBITDA, which is loss from continuing operations, as well as a reconciliation of EBITDA to loss from continuing operations. We have also provided a reconciliation to net cash provided by (used in) operating activities as supplemental information. EBITDA is a supplement to GAAP financial information and should not be considered an alternative to, or more meaningful than, net income (loss), loss from continuing operations, cash flow or operating income (loss) as determined in accordance with GAAP. EBITDA has distinct limitations as compared to GAAP information such as net income (loss), loss from continuing operations, cash flow or operating income (loss). By excluding interest and income taxes for example, it may not be apparent that both represent a reduction in cash available to the Company. Likewise, depreciation and amortization, while non-cash items, represent generally the decreases in the value of assets that produce revenue for the Company. ARPU, churn, CPGA and EBITDA as used by the Company may not be comparable to a similarly titled measure of another company. The following terms used in this report have the following meanings: o "ARPU" summarizes the average monthly service revenue per user, excluding roaming revenue. The Company excludes roaming revenue from its ARPU calculation because this revenue is generated from customers of Sprint and other carriers that use our network and not directly from our subscribers. ARPU is computed by dividing average monthly service revenue for the period by the average subscribers for the period. o "Churn" is the average monthly rate of subscriber turnover that both voluntarily and involuntarily discontinued service during the period, expressed as a percentage of the average subscribers for the period. Churn is computed by dividing the number of subscribers that discontinued service during the period, net of 30-day returns, by the average subscribers for the period. o "CPGA" summarizes the average cost to acquire new subscribers during the period. CPGA is computed by adding the income statement components of selling and marketing (including commissions), cost of equipment and activation costs (which are included as a component of cost of service and roaming) and reducing that amount by the equipment revenue recorded. That net amount is then divided by the total new subscribers acquired during the period. o "EBITDA" means earnings before interest, taxes, depreciation and amortization. AIRGATE PCS, INC. AND SUBSIDIARIES CONDENSED BALANCE SHEETS AT DECEMBER 31, 2003 (dollars in thousands, except share and per share amounts) December 31, September 30, 2003 2003 --------------- ----------------- (unaudited) Assets Current assets: Cash and cash equivalents $ 60,043 $ 54,078 Accounts receivable, net of allowance for doubtful accounts of $4,203 and $4,635 20,997 26,994 Receivable from Sprint 15,728 15,809 Inventories 2,606 2,132 Prepaid expense 5,722 2,107 Other current assets 252 145 --------------- ----------------- Total current assets 105,348 101,265 Property and equipment, net of accumulated depreciation and amortization of $141,753 and $129,986 167,902 178,070 Financing costs 6,568 6,682 Direct subscriber activation costs 3,219 3,907 Other assets 997 992 --------------- ----------------- Total assets $ 284,034 $ 290,916 =============== ================= Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 5,237 $ 5,945 Accrued expense 7,887 12,104 Payable to Sprint 46,056 45,069 Deferred revenue 8,291 7,854 Current maturities of long-term debt 23,194 17,775 -------------- ----------------- Total current liabilities 90,665 88,747 Deferred subscriber activation fee revenue 5,521 6,701 Other long-term liabilities 2,000 1,841 Long-term debt, excluding current maturities 389,734 386,509 Investment in iPCS - 184,115 -------------- ----------------- Total liabilities 487,920 667,913 Commitments and contingencies - - Stockholders' deficit: Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued and outstanding - - Common stock, $.01 par value; 150,000,000 shares authorized; 25,961,191 shares issued and outstanding at December 31, 2003 and September 30, 2003 259 259 Additional paid-in-capital 923,888 923,888 Unearned stock compensation (97) (203) Accumulated deficit (1,127,936) (1,300,941) --------------- ----------------- Total stockholders' deficit (203,886) (376,997) --------------- ----------------- Total liabilities and stockholders' deficit $ 284,034 $ 290,916 ================= ================= AIRGATE PCS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 2003 (Unaudited) (dollars in thousands, except share and per share amounts) For the Quarters Ended December 31, ---------------------------- 2003 2002 ------------ ------------- Revenue: Service revenue $ 62,173 $ 59,933 Roaming revenue 16,483 18,910 Equipment revenue 2,847 3,022 ------------ ------------- Total revenue 81,503 81,865 Operating Expense: Cost of service and roaming (exclusive of depreciation and amortization as shown separately below) 42,465 51,384 Cost of equipment 6,586 6,847 Selling and marketing expense 14,125 16,797 General and administrative expense 6,407 4,077 Non-cash stock compensation expense 106 176 Depreciation and amortization of property and equipment 11,767 11,619 Loss (gain) on disposal of property and equipment (2) 198 ------------ ------------- Total operating expense 81,454 91,098 ------------ ------------- Operating income (loss) 49 (9,233) Interest income 157 - Interest expense (11,316) (10,194) ------------ ------------- Loss from continuing operations before income tax (11,110) (19,427) Income tax - - ------------- ------------- Loss from continuing operations (11,110) (19,427) Discontinued Operations: Loss from discontinued operations - (28,247) Gain on disposal of discontinued operations net of $0 income tax expense 184,115 - ------------- ------------- Income (loss) from discontinued operations 184,115 (28,247) ------------- ------------- Net income (loss) $ 173,005 $ (47,674) ============= ============= Basic and diluted weighted-average number of shares outstanding 25,961,191 25,824,149 Basic and diluted earnings (loss) per share: Loss from continuing operations $ (0.43) $ (0.75) Income (loss) from discontinued operations 7.09 (1.09) ------------- ------------- Net income (loss) $ 6.66 $ (1.84) ============= ============= AIRGATE PCS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND KEY OPERATING STATISTICS (dollars in thousands except per unit data)
For the Quarters Ended December 31, ------------------------------------------------------- Increase Increase 2003 2002 (Decrease)$ (Decrease) % ---------- ------------- ------------ ------------- Total subscribers, end of period 359,898 352,809 7,089 2.0% Subscriber gross additions 35,601 55,621 (20,020) (36.0%) Subscriber net additions 438 13,670 (13,232) (96.8%) ARPU $ 57.62 $ 57.74 $ (0.12) (0.2%) Churn 3.10% 3.43% (0.33%) N/M CPGA $ 508 $ 375 $ 133 35.6% EBITDA $ 11,816 $ 2,386 $ 9,430 395.2%
For the Quarters Ended December 31, ---------------------------------------------- Increase Increase 2003 2002 (Decrease)$ (Decrease)% --------- --------- ----------- --------- Average Revenue Per User (ARPU): Service revenue $ 62,173 $ 59,933 $ 2,240 3.7% Average subscribers 359,679 345,974 13,705 4.0% ARPU $ 57.62 $ 57.74 $ (0.12) (0.2%) For the Quarters Ended December 31, ------------------------------------------------- Increase Increase 2003 2002 (Decrease)$ (Decrease)% ----------- ---------- ---------- ---------- Cost Per Gross Addition (CPGA): Selling and marketing expense $ 14,125 $ 16,797 $ (2,672) (15.9%) Plus: activation costs 221 214 7 3.3% Plus: cost of equipment 6,586 6,847 (261) (3.8%) Less: equipment revenue (2,847) (3,022) 175 5.8% --------- --------- --------- --------- Total acquisition costs $ 18,085 $ 20,836 $ (2,751) (13.2%) ========= ========= ========== ========= Gross additions 35,601 55,621 (20,020) (36.0%) CPGA $ 508 $ 375 $ 133 35.6% For the Quarters Ended December 31, ----------------------------------------------- Increase Increase 2003 2002 (Decrease)$ (Decrease)% ---------- ---------- ---------- ----------- Loss from continuing operations $ (11,110) $ (19,427) $ 8,317 42.8% Depreciation and amortization of property and equipment 11,767 11,619 148 1.3% Interest income (157) - (157) (N/M) Interest expense 11,316 10,194 1,122 11.0% ----------- ----------- --------- ---------- EBITDA $ 11,816 $ 2,386 $ 9,430 395.2% =========== =========== ========= ========== For the Quarters Ended December 31, ---------------------------------------------- Increase Increase 2003 2002 (Decrease)$ (Decreasee)% ---------- --------- ----------- ----------- Net cash provided by (used in) operating activities $ 8,261 $ (2,811) $ 11,072 393.9% Change in operating assets and liabilities 2,360 5,835 (3,475) (59.6%) Interest income (157) - (157) (N/M) Interest expense 11,316 10,194 1,122 11.0% Accretion of interest (9,150) (7,970) (1,180) (14.8%) Provision for doubtful accounts (405) (2,186) 1,781 81.5% Other (409) (676) 267 39.5% ---------- --------- --------- --------- EBITDA $ 11,816 $ 2,386 $ 9,430 395.2% ========== ========= ========= ========= -END- -----END PRIVACY-ENHANCED MESSAGE-----