EX-99 2 release.txt EX 99.1 - PRESS RELEASE DATED AUGUST 11, 2004 AirGate PCS [LOGO] Contact: Bill Loughman Chief Financial Officer 404-525-7272 AIRGATE PCS, INC. ANNOUNCES THIRD QUARTER FISCAL 2004 RESULTS -------------------------- COMPANY REPORTS NET INCOME OF $2.2 MILLION AND EBITDA OF OVER $20 MILLION ATLANTA (August 11, 2004) - AirGate PCS, Inc. (Nasdaq: PCSA), a PCS Affiliate of Sprint, today announced financial and operating results for its third fiscal quarter and nine months ended June 30, 2004. Highlights of the quarter include the following: o Net income for the quarter was $2.2 million, or $0.18 per share, compared with a loss of ($8.2) million, or ($1.59) per share in the third fiscal quarter of 2003. o EBITDA, earnings before interest, taxes, depreciation and amortization, was $20.2 million compared with $14.1 million in the third fiscal quarter of 2003. o Gross additions were 38,223 compared with 38,919 in the third fiscal quarter of 2003. o Churn decreased to 2.55% in the third fiscal quarter of 2004 from 2.90% in the third fiscal quarter of 2003 and 2.92% in the second fiscal quarter of 2004. o Net additions were 7,434 compared with 5,593 in the third fiscal quarter of 2003. o Cash and cash equivalents increased to $62.0 million as of June 30, 2004 from $48.6 million at March 31, 2004 and from $30.8 million at June 30, 2003. Financial Overview and Key Operating Metrics Financial and operating metrics, which include non-GAAP financial measures, for the quarters and the nine months ended June 30, 2004 and 2003, include the following:
For the Quarters Ended June 30, ---------------------------------------------------- 2004 2003 Change % Change ---------------------------------------------------- Selected Financial Data (dollars in thousands) Revenue $ 86,038 $ 83,186 $ 2,852 3.4% Operating expenses 77,821 80,701 (2,880) (3.6%) Net income (loss) 2,175 (8,247) 10,422 N/M Capital expenditures 4,442 3,715 727 19.6% Cash and cash equivalents, end of period 61,962 30,793 31,169 101.2% Key Operating Metrics and Non-GAAP Financial Measures Total subscribers, end of period 375,241 364,157 11,084 3.0% Subscriber gross additions 38,223 38,919 (696) (1.8%) Subscriber net additions 7,434 5,593 1,841 32.9% Churn 2.55% 2.90% (0.35%) N/M ARPU $ 58.35 $ 59.90 $ (1.55) (2.6%) CPGA $ 330 $ 381 $ (51) (13.4%) EBITDA (in thousands) $ 20,232 $ 14,073 $ 6,159 43.8%
AirGate PCS' Announces Third Quarter Fiscal 2004 Results Page 2 April 11, 2004
For the Nine Months Ended June 30, ---------------------------------------------------- 2004 2003 Change % Change ---------------------------------------------------- Selected Financial Data (dollars in thousands) Revenue $ 245,577 $ 241,800 $ 3,777 1.6% Operating expenses 236,041 245,074 (9,033) (3.7%) Loss from continuing operations (18,811) (34,372) 15,561 N/M Discontinued operations 184,115 (42,571) 226,686 N/M Net income (loss) 165,304 (76,943) 242,247 N/M Capital expenditures 11,803 10,375 1,434 13.8% Cash and cash equivalents, end of period 61,962 30,793 31,169 101.2% Key Operating Metrics and Non-GAAP Financial Measures Total subscribers, end of period 375,241 364,157 11,084 3.0% Subscriber gross additions 115,565 137,543 (21,978) (16.0%) Subscriber net additions 15,781 25,018 (9,237) (36.9%) Churn 2.83% 3.30% (0.47%) N/M ARPU $ 57.13 $ 58.47 $ (1.34) (2.3%) CPGA $ 374 $ 344 $ 30 8.7% EBITDA (in thousands) $ 45,210 $ 31,558 $ 13,652 43.3%
Management Commentary "We are very pleased to report the third quarter of fiscal 2004 represented the first quarter of achieving positive income from continuing operations in AirGate's history," said Thomas M. Dougherty, president and chief executive officer of AirGate PCS. "In addition, we also reported EBITDA in excess of $20 million, marking the sixth consecutive quarter for double-digit EBITDA for AirGate. These strong results provide the Company with a solid foundation to build upon as we continue our transition to pursuing a more aggressive growth-oriented strategy. "During the third quarter, we realized significant improvements in our churn rate with a 37 basis point sequential improvement," Dougherty continued. "We attribute this improvement in churn to favorable seasonable trends which tend to result in lower involuntary churn and to initiatives we implemented during the quarter to address voluntary churn and improve prime customer retention." "Revenues have been strong as subscriber service revenues have held steady with the increased penetration of subscribers using data services," Dougherty continued. "Also, as has traditionally been the case during our third fiscal quarter, we realized significant growth in inbound roaming minutes as non-AirGate wireless users traveled to vacation destinations within our footprint. Our roaming revenues increased for the quarter year over year despite a drop in the roaming rate with Sprint of nearly 30% to $0.041 per minute." "On the operating expense side, our operating costs per subscriber improved over the same period last year with lower Sprint service bureau fees and lower bad debt expense due to improvements in the quality of our subscriber base," Dougherty continued. "In addition, we experienced only modest increases in network operating costs despite a nearly 30% increase in network minutes of use. Furthermore, we have carefully managed our investment in sales and marketing as we prepare to more aggressively expand our distribution capabilities." -MORE- AirGate PCS' Announces Third Quarter Fiscal 2004 Results Page 3 April 11, 2004 "We continued to focus on strengthening our balance sheet with cash and cash equivalents increasing to $62.0 million as of June 30, 2004, compared with $48.6 million in the prior quarter," Dougherty continued. "During the quarter, we paid down $3.3 million of principal on our credit facility reducing the outstanding amount to $134.5 million. By virtually any measure, we had a great quarter accentuated with our first profitable quarter from continuing operations." Conference Call AirGate PCS will hold a conference call to discuss this press release Thursday, August 12, 2004, at 9:00 a.m. ET. A live broadcast of the conference call will be available on-line at www.airgatepcsa.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 September 12, 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 territories within three states located in the Southeastern United States. The territories include 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 experience a continued high rate of subscriber 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; the impact of wireless local number portability; 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. -MORE- AirGate PCS' Announces Third Quarter Fiscal 2004 Results Page 4 April 11, 2004 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 The Company uses 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 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, the Company has 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 used by AirGate and by other companies. Management believes that EBITDA is a useful adjunct to income (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. The Company has included below a presentation of the GAAP financial measure most directly comparable to EBITDA, which is income (loss) from continuing operations, as well as a reconciliation of EBITDA to income (loss) from continuing operations. EBITDA is a supplement to GAAP financial information and should not be considered an alternative to, or more meaningful than, net income (loss), income (loss) from continuing operations, or operating income (loss) as determined in accordance with GAAP. EBITDA has distinct limitations as compared to GAAP information such as net income (loss), income (loss) from continuing operations, 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. -MORE- AirGate PCS' Announces Third Quarter Fiscal 2004 Results Page 5 April 11, 2004 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 equipment margin for handsets sold to new subscribers (equipment revenues less cost of equipment, which costs have historically exceeded the related revenues) and selling and marketing expenses related to adding new subscribers. Retail customer service expenses and the equipment margin on handsets sold to existing subscribers, including handset upgrade transactions, are excluded, as these costs are incurred specifically for existing subscribers. That net amount is then divided by the total new subscribers acquired during the period. Prior to June 30, 2004, the Company included upgrade costs for existing subscribers as a component of CPGA. The Company believes the measure is more meaningful and comparable if these costs are excluded given they relate to existing subscribers. For the quarter ended June 30, 2004, the Company has excluded handset upgrade costs from the CPGA calculation for all periods presented. o "EBITDA" means earnings before interest, taxes, depreciation and amortization. -MORE- AirGate PCS' Announces Third Quarter Fiscal 2004 Results Page 6 April 11, 2004 AIRGATE PCS, INC. Consolidated Balance Sheets (Dollars in thousands, except share and per share amounts)
June 30, September 30, 2004 2003 ----------------- ----------------- (unaudited) Assets Current assets: Cash and cash equivalents $ 61,962 $ 54,078 Accounts receivable, net of allowance for doubtful accounts of $4,009 and $4,635 26,219 26,994 Receivable from Sprint 14,371 15,809 Inventories 2,709 2,132 Prepaid expenses 3,519 2,107 Other current assets 306 145 ----------------- ----------------- Total current assets 109,086 101,265 Property and equipment, net of accumulated depreciation and amortization of $165,660 and $129,986 154,199 178,070 Financing costs 2,999 6,682 Direct subscriber activation costs 2,245 3,907 Other assets 1,046 992 ----------------- ----------------- Total assets $ 269,575 $ 290,916 ================= ================= Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 2,775 $ 5,945 Accrued expense 18,969 12,104 Payable to Sprint 50,215 45,069 Deferred revenue 8,694 7,854 Current maturities of long-term debt 19,156 17,775 ----------------- ----------------- Total current liabilities 99,809 88,747 Deferred subscriber activation fee revenue 3,829 6,701 Other long-term liabilities 2,273 1,841 Long-term debt, excluding current maturities 252,812 386,509 Investment in iPCS - 184,115 ----------------- ----------------- Total liabilities 358,723 667,913 Commitments and contingencies - - Stockholders' deficit: Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued and outstanding - - Common stock, $.01 par value; 30,000,000 shares authorized; 11,771,019 and 5,192,238 shares issued and outstanding at June 30, 2004 and September 30, 2003 118 52 Additional paid-in-capital 1,046,376 924,095 Unearned stock compensation (5) (203) Accumulated deficit (1,135,637) (1,300,941) ----------------- ----------------- Total stockholders' deficit (89,148) (376,997) ----------------- ----------------- Total liabilities and stockholders' deficit $ 269,575 $ 290,916 ================= ================= -MORE-
AirGate PCS' Announces Third Quarter Fiscal 2004 Results Page 7 April 11, 2004 AIRGATE PCS, INC. Consolidated Statements of Operations (Dollars in thousands, except share and per share amounts)
Quarter Ended Nine Months Ended June 30, June 30, ------------------------------- -------------------------------- 2004 2003 2004 2003 --------------- -------------- --------------- --------------- Revenue: Service revenue $ 65,037 $ 64,936 $ 188,866 $ 185,032 Roaming revenue 17,389 15,764 47,370 48,569 Equipment revenue 3,612 2,486 9,341 8,199 --------------- -------------- --------------- --------------- Total revenue 86,038 83,186 245,577 241,800 Operating Expense: Cost of service and roaming (exclusive of depreciation and amortization as shown separately below) 43,278 46,040 125,179 138,210 Cost of equipment 6,670 4,969 20,458 15,271 Selling and marketing expense 10,890 12,703 36,931 40,906 General and administrative expense 4,970 5,401 17,806 15,437 Depreciation and amortization of property and equipment 12,015 11,588 35,674 34,832 Loss (gain) on disposal of property and equipment (2) - (7) 418 --------------- -------------- --------------- --------------- Total operating expense 77,821 80,701 236,041 245,074 --------------- -------------- --------------- --------------- Operating income (loss) 8,217 2,485 9,536 (3,274) Interest income 188 38 510 63 Interest expense (6,230) (10,770) (28,857) (31,161) --------------- -------------- --------------- --------------- Income (loss) from continuing operations before income tax 2,175 (8,247) (18,811) (34,372) Income tax - - - - --------------- -------------- --------------- --------------- Income (loss) from continuing operations 2,175 (8,247) (18,811) (34,372) Discontinued Operations: Loss from discontinued operations - - - (42,571) Gain on disposal of discontinued operations net of $0 income tax expense - - 184,115 - --------------- -------------- --------------- --------------- Income (loss) from discontinued operations - - 184,115 (42,571) --------------- -------------- --------------- --------------- Net income (loss) $ 2,175 $ (8,247) $ 165,304 $ (76,943) =============== ============== =============== =============== Weighted-average number of shares outstanding Basic shares 11,769,976 5,187,967 8,359,868 5,179,483 Dilutive shares 11,857,479 5,187,967 8,359,868 5,179,483 Basic and diluted earnings (loss) per share: Basic: Income (loss) from continuing operations $ 0.18 $ (1.59) $ (2.25) $ (6.64) Income (loss) from discontinued operations - - 22.02 (8.22) --------------- -------------- --------------- --------------- Net income (loss) $ 0.18 $ (1.59) $ 19.77 $ (14.86) =============== ============== =============== =============== Diluted: Income (loss) from continuing operations $ 0.18 $ (1.59) $ (2.25) $ (6.64) Income (loss) from discontinued operations - - 22.02 (8.22) --------------- -------------- --------------- --------------- Net income (loss) $ 0.18 $ (1.59) $ 19.77 $ (14.86) =============== ============== =============== ===============
-MORE- AirGate PCS' Announces Third Quarter Fiscal 2004 Results Page 8 April 11, 2004 AIRGATE PCS, INC. Non-GAAP Financial Measures and Key Operating Statistics
For the Quarters Ended June 30, ------------------------------------------------------------------------ Increase Increase 2004 2003 (Decrease)$ (Decrease)% ------------ -------------- --------------- ------------------ Total subscribers, end of period 375,241 364,157 11,084 3.0% Subscriber gross additions 38,223 38,919 (696) (1.8%) Subscriber net additions 7,434 5,593 1,841 32.9% Churn 2.55% 2.90% (0.35%) NM ARPU $ 58.35 $ 59.90 $ (1.55) (2.6%) CPGA $ 330 $ 381 $ (51) (13.4%) EBITDA $ 20,232 $ 14,073 $ 6,159 43.8% For the Quarters Ended June 30, ------------------------------------------------------------------------ Increase Increase 2004 2003 (Decrease)$ (Decrease)% ------------ -------------- --------------- ------------------ Income (loss) from continuing operations $ 2,175 $ (8,247) $ 10,422 126.4% Depreciation and amortization of property and equipment 12,015 11,588 427 3.7% Interest income (188) (38) (150) 394.7% Interest expense 6,230 10,770 (4,540) 42.2% --------------- -------------- ------------------ EBITDA $ 20,232 $ 14,073 $ 6,159 43.8% =============== ============== ================== For the Quarters Ended June 30, ------------------------------------------------------------------------ Increase Increase 2004 2003 (Decrease)$ (Decrease)% ------------ -------------- --------------- ------------------ Average Revenue Per User (ARPU): Service revenue $ 65,037 $ 64,936 $ 101 0.2% Average subscribers 371,524 361,361 10,164 2.8% ARPU $ 58.35 $ 59.90 $ (1.55) (2.6%) For the Quarters Ended June 30, ------------------------------------------------------------------------ Increase Increase 2004 2003 (Decrease)$ (Decrease)% ------------ -------------- --------------- ------------------ Cost Per Gross Addition (CPGA): Selling and marketing expense $ 10,890 $ 12,703 $ (1,813) (14.3%) Plus: activation costs 706 333 373 112.0% Plus: cost of equipment 6,670 4,969 1,701 34.2% Less: costs for existing subscribers (2,039) (679) (1,360) 200.3% Less: equipment revenue (3,612) (2,486) (1,126) (45.3%) --------------- -------------- Total acquisition costs $ 12,615 $ 14,840 $ (2,225) (15.0%) =============== ============== Gross additions 38,223 38,919 (696) (1.8%) CPGA $ 330 $ 381 $ (51) (13.4%)
-MORE- AirGate PCS' Announces Third Quarter Fiscal 2004 Results Page 9 April 11, 2004 AIRGATE PCS, INC. Non-GAAP Financial Measures and Key Operating Statistics
For the Nine Months Ended June 30, ------------------------------------------------------------------------ Increase Increase 2004 2003 (Decrease)$ (Decrease)% ------------ -------------- --------------- ------------------ Subscriber gross additions 115,565 137,543 (21,978) (16.0%) Subscriber net additions 15,781 25,018 (9,237) (36.9%) Churn 2.83% 3.30% (0.47%) NM ARPU $ 57.13 $ 58.47 $ (1.34) (2.3%) CPGA $ 374 $ 344 $ 30 8.7% EBITDA $ 45,210 $ 31,558 $ 13,652 43.3% For the Nine Months Ended June 30, ------------------------------------------------------------------------ Increase Increase 2004 2003 (Decrease)$ (Decrease)% ------------ -------------- --------------- ------------------ Loss from continuing operations $ (18,811) $ (34,372) $ 15,561 45.3% Depreciation and amortization of property and equipment 35,674 34,832 842 2.4% Interest income (510) (63) (447) 709.5% Interest expense 28,857 31,161 (2,304) 7.4% --------------- -------------- ------------------ EBITDA $ 45,210 $ 31,558 $ 13,652 43.3% =============== ============== ================== For the Nine Months Ended June 30, ------------------------------------------------------------------------ Increase Increase 2004 2003 (Decrease)$ (Decrease)% ------------ -------------- --------------- ------------------ Average Revenue Per User (ARPU): Service revenue $188,866 $185,032 $ 3,834 2.1% Average subscribers 367,351 351,648 15,703 4.5% ARPU $ 57.13 $ 58.47 $ (1.34) (2.3%) For the Nine Months Ended June 30, ------------------------------------------------------------------------ Increase Increase 2004 2003 (Decrease)$ (Decrease)% ------------ -------------- --------------- ------------------ Cost Per Gross Addition (CPGA): Selling and marketing expense $ 36,931 $ 40,906 $ (3,975) (9.7%) Plus: activation costs 2,424 747 1,677 224.5% Plus: cost of equipment 20,458 15,271 5,187 34.0% Less: costs for existing subscribers (7,215) (1,396) (5,819) 416.8% Less: equipment revenue (9,341) (8,199) (1,142) (13.9%) --------------- -------------- Total acquisition costs $ 43,257 $ 47,329 $ (4,072) (8.6%) =============== ============== Gross additions 115,565 137,543 (21,978) (16.0%) CPGA $ 374 $ 344 $ 30 8.7%
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