UPCS Ubiquitel Inc. (MM)

CONSHOHOCKEN, Pa., May 10 /PRNewswire-FirstCall/ -- UbiquiTel Inc. (NASDAQ:UPCS), a PCS Affiliate of Sprint Nextel (NYSE:S), today reported financial and operating results for the quarter ended March 31, 2006. Highlights for the 1st Quarter 2006: -- The company added approximately 3,800 net subscribers during the first quarter 2006 bringing total subscribers, excluding reseller subscribers, to approximately 451,700. Churn was 2.8% in the first quarter 2006 compared to 2.6% in the first quarter 2005. -- Service revenues grew 9% to $105.2 million from the same period a year ago. -- Net income for the first quarter 2006 was $6.4 million, or $0.06 per diluted share, compared to $2.5 million, or $0.02 per diluted share, in the first quarter 2005. In the first quarter 2006, the company incurred $2.8 million of expense associated with litigation against Sprint Nextel. Excluding the litigation expense, net income in the first quarter 2006 was $8.1 million, or $0.08 per diluted share. -- Adjusted EBITDA for the first quarter 2006 grew 30% to $32.1 million from the same period a year ago. Excluding Sprint Nextel litigation expense, Adjusted EBITDA grew 42% from the same period a year ago. Total revenues were $109.4 million for the first quarter 2006, comprised of $74.6 million of subscriber revenues, $30.6 million of roaming and wholesale revenues and $4.2 million of equipment revenues. Operating income was $20.0 million for the quarter, representing a 54% increase from the first quarter 2005. On April 20, 2006, the company and Sprint Nextel Corporation ("Sprint Nextel") announced an agreement for Sprint Nextel to acquire the company for approximately $1.3 billion, including the assumption of approximately $300 million of net debt. Under the terms of the agreement, Sprint Nextel will acquire all of the company's outstanding common shares for $10.35 per share in an all-cash merger. The merger is subject to the approval of the company's shareholders and customary regulatory approvals, and is expected to be completed in the second quarter of 2006. As part of the agreement, the company and Sprint Nextel have agreed to stay the litigation pending in the Delaware Court of Chancery and to dismiss the litigation with prejudice upon the closing of the merger. 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. SUMMARY OF QUARTERLY OPERATING AND FINANCIAL METRICS: Q1 2006 Q4 2005 Q1 2005 Net additions 3,800 13,600 14,400 Churn 2.8% 2.7% 2.6% Ending subscribers 451,700 447,900 412,900 Penetration- Covered POPs 5.4% 5.4% 5.0% Covered POPs 8.3 million 8.3 million 8.3 million Reseller subscribers 150,600 145,000 112,200 ARPU $55 $55 $55 CPGA $427 $445 $497 CCPU $41(1) $42(2) $40 Adjusted EBITDA $32.1 million(1) $26.8 million(2) $24.6 million Capital expenditures $4.0 million $5.5 million $10.0 million Free cash flow $4.6 million $24.2 million $(7.9) million Minutes of use per subscriber 973 987 941 System minutes 1,535 million 1,530 million 1,378 million Reseller minutes 107 million 94 million 91 million Roaming minutes- Inbound 311 million 328 million 314 million Roaming minutes- Outbound 194 million 196 million 172 million Roaming inbound to outbound ratio 1.6 to 1 1.7 to 1 1.8 to 1 (1) Includes approximately $2 per user, or $2.8 million, of expense associated with litigation against Sprint Nextel. (2) Includes approximately $2 per user, or $2.6 million, of expense associated with litigation against Sprint Nextel. 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 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 revenues. ARPU is computed by dividing subscriber revenues 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 revenues. In addition, it provides a gauge to compare the company's subscriber revenues 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 and share-based payment expense. 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 the costs to the company of acquiring 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, less share-based payment expense, 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 before income tax expense, interest expense, interest income, depreciation, amortization and accretion and share- based payment 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. Free cash flow summarizes the cash flow from operating activities and capital expenditures and is computed by adding net cash provided by operating activities and capital expenditures. 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; UbiquiTel's ability to satisfy the conditions to closing the pending merger with Sprint Nextel (including shareholder approval) and the costs and consequences of not closing the merger; the effect of the pending merger with Sprint Nextel on UbiquiTel's business and its relationships with subscribers, employees and suppliers; 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, 2005, as amended, 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. -Financial Tables Follow- UbiquiTel Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) (In thousands, except per share data) March 31, 2006 December 31, 2005 ASSETS CURRENT ASSETS: Cash and cash equivalents $126,535 $121,127 Accounts receivable, net of allowance for doubtful accounts of $3,354 and $3,435 at March 31, 2006 and December 31, 2005, respectively 25,360 30,082 Inventory 3,028 4,777 Prepaid expenses and other assets 16,435 17,411 Deferred income taxes 20,325 20,290 Total current assets 191,683 193,687 PROPERTY AND EQUIPMENT, NET 238,071 244,163 CONSTRUCTION IN PROGRESS 3,458 2,169 DEFERRED FINANCING COSTS, NET 8,740 9,184 GOODWILL 38,138 38,138 INTANGIBLES, NET 59,185 60,261 DEFERRED INCOME TAXES 8,973 13,038 OTHER LONG-TERM ASSETS 2,174 2,223 Total assets $550,422 $562,863 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $244 $240 Accounts payable 3,824 11,062 Accrued expenses 17,926 18,230 Accrued compensation and benefits 2,233 4,770 Interest payable 3,456 13,825 Taxes payable 3,326 2,677 Deferred revenue 12,473 12,455 Other 3,252 3,165 Total current liabilities 46,734 66,424 LONG-TERM LIABILITIES, EXCLUDING CURRENT MATURITIES 423,381 423,475 OTHER LONG-TERM LIABILITIES 11,136 11,357 Total long-term liabilities 434,517 434,832 Total liabilities 481,251 501,256 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, par value $0.001; 10,000 shares authorized; 0 shares issued and outstanding at March 31, 2006 and December 31, 2005 - - Common stock, par value $0.0005; 240,000 shares authorized; 94,440 and 94,209 shares issued and outstanding at March 31, 2006 and December 31, 2005, respectively 47 47 Additional paid-in-capital 313,501 312,305 Accumulated deficit (244,377) (250,745) Total stockholders' equity 69,171 61,607 Total liabilities and stockholders' equity $550,422 $562,863 UbiquiTel Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2006 2005 REVENUES: Subscriber revenues $74,647 $66,892 Roaming and wholesale revenues 30,553 29,606 Service revenues 105,200 96,498 Equipment revenues 4,226 3,433 Total revenues 109,426 99,931 COSTS AND EXPENSES: Cost of service and operations (exclusive of depreciation as shown separately below) 48,134 44,006 Cost of products sold 7,501 10,385 Selling and marketing 14,527 15,926 General and administrative 7,501 4,988 Non-cash compensation - (521) Depreciation, amortization and accretion 11,777 12,157 Total costs and expenses 89,440 86,941 OPERATING INCOME 19,986 12,990 INTEREST INCOME 1,552 526 INTEREST EXPENSE (10,834) (10,935) INCOME BEFORE INCOME TAXES 10,704 2,581 INCOME TAX EXPENSE (4,336) (129) NET INCOME $6,368 $2,452 NET INCOME PER COMMON SHARE: BASIC $0.07 $0.03 DILUTED $0.06 $0.02 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: BASIC 94,280 93,103 DILUTED 99,260 98,644 UbiquiTel Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three Months Ended March 31, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $6,368 $2,452 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred financing costs 444 439 Amortization of debt premium (31) (32) Amortization of intangible assets 1,076 1,076 Depreciation and accretion 10,701 11,080 Share-based payment expense 373 (521) Deferred income taxes 4,030 69 Gain on disposal of equipment (132) (71) Changes in operating assets and liabilities exclusive of capital expenditures, net (14,139) (12,334) Net cash provided by operating activities 8,690 2,158 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,046) (10,031) Net cash used in investing activities (4,046) (10,031) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 85 106 Proceeds from exercise of stock options 738 327 Repayment of other long-term debt (59) (54) Net cash provided by financing activities 764 379 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,408 (7,494) CASH AND CASH EQUIVALENTS, beginning of period 121,127 91,781 CASH AND CASH EQUIVALENTS, end of period $126,535 $84,287 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $20,790 $20,847 Cash paid for income taxes 196 3 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY: Network equipment acquired but not yet paid $1,821 $5,372 UbiquiTel Inc. and Subsidiaries Reconciliation of Adjusted EBITDA and Non-GAAP Financial Measures (Unaudited) Three Months Ended March 31, 2006 2005 ADJUSTED EBITDA: Net income $6,368,000 $2,452,000 Income tax expense 4,336,000 129,000 Interest expense 10,834,000 10,935,000 Interest income (1,552,000) (526,000) Depreciation, amortization and accretion 11,777,000 12,157,000 Share-based payment expense 373,000 (521,000) Adjusted EBITDA 32,136,000 24,626,000 Sprint Nextel litigation expense 2,839,000 - Adjusted EBITDA excluding Sprint Nextel litigation expense $34,975,000 $24,626,000 AVERAGE REVENUE PER USER (ARPU): Subscriber revenues $74,647,000 $66,892,000 Average subscribers 449,352 404,300 ARPU $55 $55 CASH COST PER USER (CCPU): Cost of service and operations $48,134,000 $44,006,000 Add: General and administrative 7,501,000 4,988,000 Less: Share-based payment expense (293,000) - Total cash costs 55,342,000 48,994,000 Sprint Nextel litigation expense (2,839,000) - Total cash costs excluding Sprint Nextel litigation expense $52,503,000 $48,994,000 Average subscribers 449,352 404,300 CCPU $41 $40 Sprint Nextel litigation expense (2) - CCPU excluding Sprint Nextel litigation expense $39 $40 COST PER GROSS ADDITION (CPGA): Selling and marketing $14,527,000 $15,926,000 Add: Cost of products sold 7,501,000 10,385,000 Less: Equipment revenue (4,226,000) (3,433,000) Less: Share-based payment expense (80,000) - Total cost of gross additions $17,722,000 $22,878,000 Gross additions 41,500 46,000 CPGA $427 $497 FREE CASH FLOW: Net cash provided by operating activities $8,690,000 $2,158,000 Capital expenditures (4,046,000) (10,031,000) Free cash flow $4,644,000 $(7,873,000) DATASOURCE: UbiquiTel Inc. CONTACT: Brighid de Garay of UbiquiTel, +1-610-832-3311, or +1-610-453-7495 Web site: http://www.ubiquitelpcs.com/

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