UPCS Ubiquitel Inc. (MM)

CONSHOHOCKEN, Pa., Oct. 25 /PRNewswire-FirstCall/ -- UbiquiTel Inc. (NASDAQ:UPCS), a PCS Affiliate of Sprint Nextel Corporation (NYSE:S), today reported financial and operating results for the quarter ended September 30, 2005. Highlights for the 3rd Quarter 2005: -- Net income for the third quarter 2005 was $6.2 million, or $0.06 per diluted share, compared to $1.5 million, or $0.02 per diluted share, in the third quarter 2004. In the third quarter 2005, the company incurred $1.7 million of expense associated with litigation against Sprint Nextel and $0.8 million for restructuring charges relating to its sales organization. Excluding these charges, net income was $8.7 million, or $0.09 per diluted share. -- Adjusted EBITDA in the third quarter 2005 grew 29% to approximately $29.9 million from the same period a year ago. Excluding the above charges, Adjusted EBITDA in the third quarter 2005 grew 40% to approximately $32.4 million from the same period a year ago. -- Service revenues in the third quarter 2005 grew 11% to approximately $105.0 million from the same period a year ago. -- Net subscriber additions for the quarter were approximately 10,700, bringing total subscribers, excluding resellers, to approximately 434,300. Churn was 2.6% in the third quarter 2005 compared to 2.9% in the third quarter 2004. "Excluding Sprint Nextel litigation expense and restructuring charges, our Adjusted EBITDA margin grew to 31% compared to 29% in the second quarter 2005 and 25% in the third quarter 2004," said Donald A. Harris, chairman and CEO of UbiquiTel Inc. "During the third quarter 2005, we completed a restructuring of our sales organization and re-focused our marketing towards our fastest growing segments, markets and products. We expect our new plans to pay dividends in the fourth quarter in terms of improved subscriber growth and lower CPGA." Total revenues were approximately $108.8 million for the third quarter 2005, comprised of $71.7 million of subscriber revenues, $33.3 million of roaming and wholesale revenues and $3.8 million of equipment revenues. Subscriber revenues increased 10% from the third quarter 2004. Roaming and wholesale revenues increased 15% over the same period. Operating income grew 36% to $16.4 million in the third quarter 2005. Conference Call to be held October 26th at 11:00 a.m. ET UbiquiTel's management will conduct a conference call on Wednesday, October 26, at 11:00 a.m., Eastern Time, to discuss its results for the quarter ended September 30, 2005 and 2005 guidance. Investors and interested parties may listen to the call via a live webcast accessible through the company's website, http://www.ubiquitelpcs.com/. To listen, please register and download audio software at the site at least 15 minutes prior to the start of the call. The call may be accessed by dialing (866) 770-7125 (domestic) or (617) 213-8066 (international), passcode: 86212774. The webcast will be archived on the site, while a telephone replay of the call will be available for 7 days beginning at 1:00 p.m., Eastern Time, October 26, at 888-286-8010 or 617-801-6888, passcode: 40004342. SUMMARY OF QUARTERLY OPERATING AND FINANCIAL METRICS: Q3 2005 Q2 2005 Q3 2004 (Restated) Net additions 10,700 14,600 17,500 Churn 2.6% 2.3% 2.9% Ending subscribers 434,300 423,600 383,400 Penetration-Covered POPs 5.2% 5.1% 4.9% Reseller subscribers 127,100 120,600 78,200 ARPU $56 $56 $58 CPGA $493* $517 $488 CCPU $42** $40 $42 Adjusted EBITDA $29.9 million*** $29.2 million $23.2 million Capital expenditures $7.7 million $20.1 million $2.1 million Free cash flow $5.8 million $4.4 million $9.8 million Covered POPs 8.3 million 8.3 million 7.9 million Minutes of use per subscriber 1,003 1,009 910 System minutes 1,544 million 1,491 million 1,235 million Reseller minutes 93 million 90 million 65 million Roaming minutes-Inbound 361 million 334 million 321 million Roaming minutes-Outbound 201 million 192 million 176 million Roaming inbound to outbound ratio 1.8 to 1 1.7 to 1 1.8 to 1 * Includes $19 per gross add, or $0.8 million, for restructuring charges. ** Includes $2 per user, or $1.7 million, of expense associated with litigation against Sprint Nextel. *** Includes $2.5 million for restructuring charges and Sprint Nextel litigation expense. About UbiquiTel Inc. UbiquiTel is the exclusive provider of Sprint digital wireless mobility communications network products and services under the Sprint brand name to midsize markets in the Western and Midwestern United States that include a population of approximately 10.8 million residents and cover portions of California, Nevada, Washington, Idaho, Wyoming, Utah, Indiana, Kentucky and Tennessee. Financial Measures and Definitions of Terms Used UbiquiTel provides certain financial measures that are calculated in accordance with accounting principles generally accepted in the United States (GAAP) and adjustments to GAAP (non-GAAP) to assess the company's financial performance. In addition, the company uses certain non-financial terms, such as churn, which are metrics used in the wireless communications industry and are not measures of financial performance under GAAP. The non-GAAP financial measures reflect industry measures of liquidity, profitability or performance and the non-financial metrics reflect industry conventions, both of which are commonly used by the investment community for comparability purposes. The reconciliation of the non-GAAP financial measures with comparable measures under GAAP and the determination of non-financial metrics used in this release are included in an attachment to this release. Because the company does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, the company does not provide reconciliations to GAAP of its forward-looking financial measures. The non-financial metrics and non- GAAP financial measures used in this release include the following: Churn is the monthly rate of customer turnover expressed as the percentage of customers of the beginning customer base that both voluntarily and involuntarily discontinued service during the period. Churn is computed by dividing the number of customers that discontinued service during the month, net of 30 day returns, by the beginning customer base for the period. ARPU is average revenue per user and summarizes the average monthly service revenue per customer, excluding roaming and wholesale revenue. ARPU is computed by dividing subscriber revenue by the average subscribers for the period. The company believes ARPU is a useful measure to assist in evaluating the company's past and forecasting its future subscriber revenue. In addition, it provides a gauge to compare the company's subscriber revenue to that of other wireless communications providers, although other wireless communications providers may include or exclude certain items from their calculations which may make the comparison less meaningful. CPGA is cost per gross addition and summarizes the average cost to acquire new customers during the period. CPGA is computed by adding the statement of operations components of selling and marketing and the cost of products sold, and reducing that amount by the equipment revenue recorded. The net result of these components is then divided by the gross customers acquired during the period. The company believes CPGA is a useful measure used to compare the company's average cost to acquire a new subscriber to that of other wireless communications providers, although other wireless communications providers may include or exclude certain items from their calculations which may make the comparison less meaningful. The inclusion of cost of products sold net of the equipment revenues earned is critical to the company's understanding of how much it costs the company to acquire a new customer. CCPU is cash cost per user and summarizes the average monthly cash costs to provide digital wireless mobility communications services per customer. CCPU is computed by dividing the sum of cost of service and operations and general and administrative expenses by the average subscribers for the period. The company's calculation of CCPU excludes depreciation, amortization and accretion expenses. The company believes CCPU is a useful measure used to compare the company's cash cost of operations per customer to that of other wireless communications providers, although other wireless communications providers may include or exclude certain items from their calculations which may make the comparison less meaningful. Adjusted EBITDA represents net income (loss) before income tax expense, gain on debt retirements, interest expense, interest income, depreciation, amortization and accretion and non-cash compensation expense. The company believes Adjusted EBITDA is an important operating measure for comparability to other wireless companies and it is not intended to represent the results of the company's operations in accordance with GAAP. Adjusted EBITDA should not be considered as a substitute for net income, income from operations, net cash provided by operating activities or any other operating or liquidity measure prepared in accordance with GAAP. Additionally, the company's Adjusted EBITDA computation may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by service revenues. Free cash flow summarizes the cash flow from operating activities and capital expenditures and is computed by adding net cash provided by operating activities, capital expenditures and proceeds from disposal of equipment. The company believes free cash flow is an important measure of liquidity to meet the company's debt service requirements. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements contained in this news release that are forward-looking statements are subject to various risks and uncertainties. Such forward- looking statements are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 and are made based on management's current expectations or beliefs as well as assumptions made by, and information currently available to, management. A variety of factors could cause actual results to differ materially from those anticipated in UbiquiTel's forward-looking statements, including the following factors: UbiquiTel's dependence on its affiliation with Sprint; the impact of the Sprint-Nextel merger on UbiquiTel's affiliation with Sprint as well as Sprint's competitiveness in the wireless industry; the outcome of UbiquiTel's, and any other PCS affiliate of Sprint's, litigation with Sprint concerning the Sprint-Nextel merger; changes in Sprint's affiliation strategy as a result of the Sprint-Nextel merger or any other merger involving Sprint Nextel; the competitiveness of and changes in Sprint's pricing plans, products and services; increased competition in UbiquiTel's markets; rates of penetration in the wireless communications industry; the potential to experience a high rate of customer turnover; customer quality; potential declines in roaming and wholesale revenue; UbiquiTel's reliance on the timeliness, accuracy and sufficiency of financial and other data and information received from Sprint; the ability of Sprint to provide back office, customer care and other services; UbiquiTel's debt level; adequacy of bad debt and other reserves; UbiquiTel's ability to manage anticipated growth and rapid expansion; changes in population; changes or advances in technology; effects of mergers and consolidations within the wireless communications industry and unexpected announcements or developments from others in the wireless communications industry; and general market and economic conditions. Certain of these and other applicable risks, cautionary statements and factors that could cause actual results to differ from UbiquiTel's forward-looking statements are included in UbiquiTel's filings with the Securities and Exchange Commission ("SEC"), specifically in the "Business.Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of its Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and in subsequent filings with the SEC. Except as otherwise required under federal securities laws and the rules and regulations of the SEC, the company does not have any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. UbiquiTel Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except per share data) September 30, 2005 December 31, 2004 ASSETS CURRENT ASSETS: Cash and cash equivalents $96,420 $91,781 Accounts receivable, net of allowance for doubtful accounts of $3,300 and $3,358 at September 30, 2005 and December 31, 2004, respectively 24,695 22,609 Inventory, net 3,068 4,025 Prepaid expenses and other assets 18,862 17,680 Total current assets 143,045 136,095 PROPERTY AND EQUIPMENT, NET 247,944 243,679 CONSTRUCTION IN PROGRESS 5,280 1,867 DEFERRED FINANCING COSTS, NET 9,627 10,868 GOODWILL 38,138 38,138 INTANGIBLES, NET 61,337 64,565 OTHER LONG-TERM ASSETS 2,189 2,595 Total assets $507,560 $497,807 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $235 $223 Accounts payable 6,641 3,124 Accrued expenses 15,447 18,824 Accrued compensation and benefits 4,054 4,591 Interest payable 3,456 13,825 Taxes payable 3,016 2,672 Deferred revenue 12,509 12,274 Other 2,258 1,501 Total current liabilities 47,616 57,034 LONG-TERM LIABILITIES, EXCLUDING CURRENT MATURITIES 423,568 423,893 OTHER LONG-TERM LIABILITIES 13,838 11,462 Total long-term liabilities 437,406 435,355 Total liabilities 485,022 492,389 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, par value $0.001; 10,000 shares authorized; 0 shares issued and outstanding at September 30, 2005 and December 31, 2004 - - Common stock, par value $0.0005; 240,000 shares authorized; 94,047 and 93,016 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively 47 46 Additional paid-in-capital 307,879 303,830 Accumulated deficit (285,388) (298,458) Total stockholders' equity 22,538 5,418 Total liabilities and stockholders' equity $507,560 $497,807 UbiquiTel Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 REVENUES: (Restated) (Restated) Subscriber revenue $71,645 $65,334 $208,432 $183,880 Roaming and wholesale revenue 33,338 29,094 94,557 73,475 Service revenue 104,983 94,428 302,989 257,355 Equipment revenue 3,780 3,320 11,898 10,384 Total revenues 108,763 97,748 314,887 267,739 COSTS AND EXPENSES: Cost of service and operations (exclusive of depreciation, amortization and accretion as shown separately below) 47,536 43,346 136,781 124,515 Cost of products sold 7,752 10,340 28,059 28,473 Selling and marketing 17,442 17,132 50,253 49,961 General and administrative 6,163 3,697 16,104 12,591 Non-cash compensation 310 (226) 1,392 - Depreciation, amortization and accretion 13,140 11,369 38,175 38,004 Total costs and expenses 92,343 85,658 270,764 253,544 OPERATING INCOME 16,420 12,090 44,123 14,195 INTEREST INCOME 847 207 1,992 482 INTEREST EXPENSE (10,845) (10,453) (32,644) (29,253) GAIN ON DEBT RETIREMENT - - 40 1,109 INCOME (LOSS) BEFORE INCOME TAXES 6,422 1,844 13,511 (13,467) INCOME TAX EXPENSE (188) (325) (441) (477) NET INCOME (LOSS) $6,234 $1,519 $13,070 $(13,944) NET INCOME (LOSS) PER SHARE: BASIC $0.07 $0.02 $0.14 $(0.15) DILUTED $0.06 $0.02 $0.13 $(0.15) WEIGHTED AVERAGE SHARES OUTSTANDING: BASIC 93,759 92,812 93,396 92,703 DILUTED 99,374 96,825 98,935 92,703 UbiquiTel Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Nine Months Ended September 30, 2005 2004 (Restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $13,070 $(13,944) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization of deferred financing costs 1,333 1,073 Amortization of debt discount (93) 811 Amortization of intangible assets 3,228 3,228 Depreciation and accretion 34,947 34,776 Interest accrued on discount notes - 9,253 Non-cash compensation from stock options granted to employees 1,392 - Deferred income taxes 197 231 (Gain) loss on disposal of equipment (286) 119 Gain on debt retirement (40) (1,109) Changes in operating assets and liabilities exclusive of capital expenditures, net (13,691) 837 Net cash provided by operating activities 40,057 35,275 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (37,809) (18,522) Proceeds from disposal of equipment 5 - Net cash used in investing activities (37,804) (18,522) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of 9.875% senior notes - 265,302 Repayments under senior secured credit facility - (230,000) Repayment of 14% Series B senior discount notes - (12,478) Purchase of 14% senior discount notes (14) (15,872) Financing costs (92) (8,296) Change in book cash overdraft - (5,671) Proceeds from issuance of common stock 323 176 Proceeds from exercise of stock options and warrants 2,384 133 Repayment of other long-term debt (166) (234) Repurchase of common stock (49) - Net cash provided by (used in) financing activities 2,386 (6,940) NET INCREASE IN CASH AND CASH EQUIVALENTS 4,639 9,813 CASH AND CASH EQUIVALENTS, beginning of period 91,781 57,225 CASH AND CASH EQUIVALENTS, end of period $96,420 $67,038 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $41,757 $17,553 Cash paid for taxes 257 27 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY: Network equipment acquired but not yet paid $4,866 $ - UbiquiTel Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Measures and Determination of Non-Financial Metrics (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 ADJUSTED EBITDA: (Restated) (Restated) Net income (loss) $6,234,000 $1,519,000 $13,070,000 $(13,944,000) Income tax expense 188,000 325,000 441,000 477,000 Gain on debt retirement - - (40,000) (1,109,000) Interest expense 10,845,000 10,453,000 32,644,000 29,253,000 Interest income (847,000) (207,000) (1,992,000) (482,000) Depreciation, amortization and accretion 13,140,000 11,369,000 38,175,000 38,004,000 Non-cash compensation 310,000 (226,000) 1,392,000 - Adjusted EBITDA 29,870,000 23,233,000 83,690,000 52,199,000 Sprint Nextel litigation expense and restructuring charges 2,552,000 - 2,552,000 - Adjusted EBITDA excluding Sprint Nextel litigation expense and restructuring charges $32,422,000 $23,233,000 $86,242,000 $52,199,000 AVERAGE REVENUE PER USER (ARPU): Subscriber revenues $71,645,000 $65,334,000 $208,432,000 $183,880,000 Average subscribers 428,970 374,895 416,500 357,030 ARPU $56 $58 $56 $57 CASH COST PER USER (CCPU): Cost of service and operations $47,536,000 $43,346,000 $136,781,000 $124,515,000 Add: General and administrative 6,163,000 3,697,000 16,104,000 12,591,000 Total cash costs 53,699,000 47,043,000 152,885,000 137,106,000 Sprint Nextel litigation expense (1,726,000) - (1,726,000) - Total cash costs excluding Sprint Nextel litigation expense $51,973,000 $47,043,000 $151,159,000 $137,106,000 Average subscribers 428,970 374,895 416,500 357,030 CCPU $42 $42 $41 $43 Sprint Nextel litigation expense (2) - (1) - CCPU excluding Sprint Nextel litigation expense $40 $42 $40 $43 COST PER GROSS ADDITION (CPGA): Selling and marketing $17,442,000 $17,132,000 $50,253,000 $49,961,000 Add: Cost of products sold 7,752,000 10,340,000 28,059,000 28,473,000 Less: Equipment revenue (3,780,000) (3,320,000) (11,898,000) (10,384,000) Total cost of gross additions 21,414,000 24,152,000 66,414,000 68,050,000 Restructuring charges (826,000) - (826,000) - Cost of gross additions excluding restructuring charges $20,588,000 $24,152,000 $65,588,000 $68,050,000 Gross additions 43,500 49,500 132,300 147,800 CPGA $493 $488 $502 $460 Restructuring charges (19) - (6) - CPGA excluding restructuring charges $474 $488 $496 $460 FREE CASH FLOW: Net cash provided by operating activities $13,450,000 $11,950,000 $40,057,000 $35,275,000 Capital expenditures (7,691,000) (2,117,000) (37,809,000) (18,522,000) Proceeds from disposal of equipment 5,000 - 5,000 - Free cash flow $5,764,000 $9,833,000 $2,253,000 $16,753,000 DATASOURCE: UbiquiTel Inc. CONTACT: Dava Guerin of Guerin Public Relations, Inc., +1-215-914-2040 or +1-215-262-0740 (wireless); or Brighid de Garay of UbiquiTel Inc., +1-610-832-3311 or +1-610-453-7495 (wireless) Web site: http://www.ubiquitelpcs.com/

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