EXHIBIT 99.1
For Immediate Release Investor Contact: Wesley B. Wampler
April 14, 2003 Director of Investor Relations
Phone: 540-949-3447
wamplerwes@ntelos.com
Media Contact: Mike Minnis
Public Relations Manager
Phone: 540-946-7290
minnism@ntelos.com
NTELOS Reports 2002 Results - Performance Exceeds Guidance for 2002
Announces Significant Restructuring Steps: $75 million Investment
Commitment and Lender Support
Announces Guidance for 2003
WAYNESBORO, VA - April 14, 2003 - NTELOS (OTCBB: NTLOQ) today reported
consolidated operating revenues for the year 2002 of $262.7 million compared to
$215.1 million reported for the year 2001, an increase of 22%. For 2002,
consolidated operating loss and net loss applicable to common shares was $424.6
million and $509.4 million, respectively, after a fourth-quarter asset
impairment charge of $402.9 million.
Consolidated EBITDA (operating income (loss) before depreciation and
amortization and asset impairment charges) was $61.2 million for 2002, compared
to $20.5 million reported for the year 2001. This amount exceeds the Company's
guidance range for 2002 of $52 million to $58 million, reflecting the
substantial growth in operating revenues and the Company's focus on cost control
measures throughout the year. Annual consolidated operating expenses for 2002,
before depreciation and amortization and asset impairment charges, increased
less than 4% over 2001.
For the fourth quarter 2002, consolidated operating revenues were $69.7 million
and consolidated operating loss was $399.8 million. Before the asset impairment
charges, fourth quarter 2002 had consolidated operating income of $3.1 million
compared to a consolidated operating loss of $18.6 million in fourth quarter
2001. Consolidated EBITDA was $20.9 million for the fourth quarter 2002, an
amount exceeding annual consolidated EBITDA for 2001.
As described in a prior press release, an anticipated asset impairment charge
was recognized in fourth quarter 2002, pursuant to SFAS 142 and 144, relating to
the value of the Company's long-lived assets, including radio spectrum licenses
and other intangible assets, property, plant and equipment and goodwill, to
reflect revisions to its future expected cash flows and depressed industry
valuations of telecommunications assets. The fourth quarter 2002 asset
impairment charge was $402.9 million.
Also in previous press releases and filings with the Securities and Exchange
Commission (SEC), the Company announced that to complete development and
implementation of a restructuring plan, NTELOS and certain of its subsidiaries
voluntarily filed petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of
Virginia on March 4, 2003.
The Company previously reported selected customer results for fourth quarter
where wireless PCS customer growth, with net additions of 15,446, was the
strongest of 2002, resulting in 266,467 wireless PCS customers at year-end.
NTELOS' EBITDA from wireless PCS operations increased for the fourth quarter to
a record $7.1 million, bringing the total for 2002 to $14.8 million, ahead of
Company guidance of $11 million to $14 million. This amount compares to a loss
of $20.7 million for 2001, marking a one-year improvement of $35.5 million.
Quarterly and annual records were also achieved in NTELOS' wireline segments,
with EBITDA of $15.8 million for fourth quarter 2002 and $50.3 million for the
year 2002, exceeding Company guidance for 2002 wireline EBITDA of $39.5 million
to $42.0 million.
"Continued customer growth and record levels of EBITDA achieved by our wireless
and wireline segments demonstrate continued improvements in the Company's
operations," said James S. Quarforth, chief executive officer. Quarforth
continued, "We believe that this progress, combined with plans for our financial
restructuring, will provide the Company with increased financial flexibility, an
improved liquidity position and a strengthened capital structure. We are
providing service to customers in the normal course of business and emphasize
that our continuing focus on service will not be impacted by our restructuring."
Operating Revenues for the fourth quarter of 2002 were $69.7 million, compared
to $56.9 million for fourth quarter 2001, an increase of 22%. Wireless operating
revenues for fourth quarter 2002 were $41.8 million compared to $31.2 million in
fourth quarter 2001, an increase of 34%. Strong customer growth in the third and
fourth quarters combined with continued growth in wholesale and roaming revenues
were the primary factors in these improvements. Wireline operating revenues for
fourth quarter 2002 were $26.2 million, an increase of 13% over the $23.2
million reported for fourth quarter 2001. Stable revenues for the ILEC, Network
and Internet segments were complemented by a 22% sequential quarterly growth in
CLEC revenues.
EBITDA for the fourth quarter of 2002 was $20.9 million, compared to $4.3
million for fourth quarter 2001. Wireless EBITDA for fourth quarter 2002 was
$7.1 million compared to a loss of $7.0 million for fourth quarter 2001. While
wireless revenues grew 2% from third to fourth quarter 2002, wireless operating
expenses decreased by 6% over this period, reflecting continued cost reduction
initiatives. Wireline EBITDA for fourth quarter 2002 was $15.8 million, a 45%
increase over $10.9 million for fourth quarter 2001. Every wireline segment
demonstrated sequential quarterly growth in EBITDA from the previous quarter,
with increases of 11% for ILEC, 59% for CLEC, 9% for Network and 28% for
Internet.
Business Segment Highlights
Wireless
o PCS: The Company previously reported customer results for fourth quarter
2002, with PCS net customer additions of 15,446, the most of any quarter
for the year. Gross additions of higher-value, under-contract, post
pay-like (post pay and nAdvance) subscribers represented 94% of total gross
additions.
Post-pay and nAdvance net additions for the quarter totaled 17,248 and
these subscribers represented 94% of the total 266,467 wireless PCS
customers at quarter and year-end. Rate plan distribution remained
essentially unchanged with 71% of post pay subscribers on nNetwork, 20% on
nTown, 9% on nRegion and less than 1% on nNation plans. Monthly post-pay
subscriber churn improved 24 basis points from the previous quarter to
2.83%.
Average monthly revenue per subscriber (ARPU, without outcollect roaming)
for post-pay subscribers was $47 for fourth quarter 2002. ARPU for nAdvance
customers was $45 for the quarter, also its average for the year 2002.
Overall ARPU was $44 for the fourth quarter with an average of $45 for the
year.
Wireless PCS sales generated through the Company's direct sales channels
for fourth quarter 2002 were 69%, resulting in 31% of gross additions
achieved through the indirect agent channel. Costs of acquisition per gross
addition (CPGA) decreased to $290 for fourth quarter, the lowest for any
quarter in 2002, reflecting reduced indirect channel selling costs and
lower handset subsidies. CPGA for the year 2002 averaged $302 compared to
$344 for 2001.
Wireline
o Telephone (ILEC): Access lines at the end of the quarter were 52,014. ILEC
operating revenues for the fourth quarter of 2002 were $12.8 million,
compared to $11.3 million in fourth quarter 2001. EBITDA for the fourth
quarter of 2002 was $9.6 million, compared to $7.4 million in fourth
quarter 2001. ILEC revenues from the third to fourth quarter were impacted
favorably as bad debt reserves for WorldCom, Inc. were lowered. ILEC access
minutes of use for fourth quarter were 67.9 million, a 3% increase over
fourth quarter 2001.
o Competitive Local Exchange (CLEC): Business access lines ended the year
2002 at 43,815, representing increases of 30% over fourth quarter 2001 and
5% over the previous quarter. Operating revenues for fourth quarter 2002
were $6.8 million, compared to $4.9 million in fourth quarter 2001,
reflecting approximately $0.5 million of favorable reserve adjustments and
access revenue increases associated with the beginning of the collegiate
academic year. Revenues recorded from reciprocal compensation were $0.6
million for fourth quarter 2002, compared to $0.7 million and $0.6 million
in fourth quarter 2001 and third quarter 2002, respectively. CLEC access
revenues were negatively impacted by FCC mandated reciprocal compensation
rate reductions, which occurred in mid and late 2002. At current run-rates,
however, management estimates that future exposure is minimal. Total
revenues from reciprocal compensation for 2002 were $2.4 million compared
to $3.7 million in 2001. CLEC EBITDA for fourth quarter 2002 was $2.7
million, compared to $0.6 million in fourth quarter 2001. EBITDA margin for
fourth quarter 2002 was 39%.
o Network: Operating revenues for fourth quarter 2002 were $2.1 million,
compared to $2.4 million in fourth quarter 2001. EBITDA for the fourth
quarter 2002 was $1.8 million, compared to $2.2 million in fourth quarter
2001. Carriers-carrier rate reductions continued to flatten this segment's
revenue, but EBITDA margins remained high at 81% for the year 2002.
o Internet/DSL: Operating revenues for fourth quarter 2002 were $4.6 million,
compared to $4.6 million in fourth quarter 2001. EBITDA for fourth quarter
2002 was $1.7 million, compared to $0.7 million in fourth quarter 2001. As
part of the Company's previously announced cost control initiatives,
operations were ceased in certain dial-up Internet markets and rates were
increased in others, both of which has resulted in some loss of dial-up
customers. While Internet segment revenues for the quarter were flat due to
this loss, growth in DSL and the impact of the cost control initiatives
allowed EBITDA for this segment to set a new high, with a margin of 38%.
Total DSL subscribers at year-end were 5,534, a 38% increase over year-end
2001. In fourth quarter 2002, the Company recorded a dial-up customer
adjustment (reduction) of approximately 5,000 related to the consolidation
of the billing systems from acquired Internet companies. This adjustment
had no financial impact. Dial-up Internet ended the quarter with 61,486
customers.
Asset Impairments
The general slowdown of the entire telecommunications industry and increased
competition experienced in the wireless PCS industry has resulted in a decrease
of several industry analysts' projections, including subscriber growth, average
revenue per unit (ARPU), and subscriber churn improvement. This decrease in
industry-wide projections, combined with an economic environment not conducive
to strategic transactions, such as mergers and acquisitions, has resulted in
dramatic decreases in the value of wireless PCS and other telecommunications
assets.
In response to these changed industry conditions, NTELOS performed a
comprehensive evaluation of the Company's long-term business plan and made
several modifications including a reduction in subscriber growth, a decrease in
ARPU, a slower improvement in subscriber churn, and less growth in wholesale
revenues.
Pursuant to SFAS 142 and 144 and based on a revised cash flow forecast, the
Company, together with an independent appraisal firm, has performed an
assessment of the value of its long lived assets including property, plant and
equipment, goodwill, radio spectrum licenses and other intangible assets for the
year ended December 31, 2002. Based on this assessment, the Company recognized
asset impairment charges relating to the value of these assets of $402.9
million. The majority of this impairment, $367.0 million, is attributable to the
reduction in values of PCS radio spectrum licenses, write-off of goodwill and
other intangibles and an impairment of certain wireless network equipment. In
addition, the Company recognized a $20.9 million write-down of goodwill related
to its Network segment and a $15.0 million reduction in the values of wireless
cable licenses, goodwill and network equipment.
Capital Restructuring
As previously reported, on March 4, 2003, the Company filed a voluntary petition
for relief under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Virginia, Richmond Division. The
bankruptcy case was commenced in order to consummate a financial restructuring
of the Company.
In order to meet ongoing obligations during the reorganization process, the
Company entered into a $35 million debtor-in-possession financing facility (the
"DIP Financing Facility"), subject to court approval. On March 5, 2003, the
court granted access to up to $10 million of the DIP Financing Facility, with
access to the full $35 million subject to final court approval, certain state
regulatory approvals and the banks' receiving satisfactory assurances regarding
the senior noteholders' proposed $75 million investment in the Company upon
emergence from bankruptcy. On March 24, 2003, the court entered a final order
authorizing the Company to access up to $35 million under the DIP Financing
Facility and, as of April 11, 2003, the Company satisfied all other conditions
to full access to the DIP Financing Facility.
The Company anticipates that the plan of reorganization (the "Plan") will be
funded by two sources of capital: (i) an equity investment made by certain
holders of senior notes of an aggregate of $75 million in exchange for new 9%
convertible notes ("New Notes") and (ii) a credit facility which permits the
Company to continue to have access to its current $225 million of outstanding
term loans with a $36 million revolver commitment ("Exit Financing Facility").
This Exit Financing Facility also provides that the term loans and any new
borrowings under the revolver will be at current rates and existing maturities.
On April 10, 2003, the Company entered into a Plan Support Agreement (the "Plan
Support Agreement") with a majority of the lenders under its senior credit
facility. The Plan Support Agreement provides that the lenders will agree to
support a "Conforming Plan," which must include the following: (i) financing
upon emergence from bankruptcy on agreed terms, (ii) cancellation of, or
conversion into equity of the reorganized company upon emergence from bankruptcy
of, substantially all of the Company's outstanding debt and equity securities,
(iii) outstanding indebtedness on the effective date of the Plan consisting of
only certain hedge agreements, Exit Financing Facility, New Notes, existing
government loans and certain capital leases, (iv) consummation of the sale of
New Notes on the effective date of the Plan and (v) repayment of the DIP
Financing Facility and the $36 million outstanding under the revolver.
On April 10, 2003, the Company also entered into a Subscription Agreement with
certain holders of senior notes for the sale of $75 million aggregate principal
amount of New Notes. The Plan Support Agreement and Subscription Agreement are
subject to, among other things, confirmation of a Conforming Plan.
The Plan Support Agreement provides that a Conforming Plan and accompanying
disclosure statement must be filed with the court prior to May 31, 2003 and that
a disclosure statement, reasonably acceptable to the lenders, must be approved
by the court no later than August 15, 2003. In addition, the Plan Support
Agreement obligates the Company to have filed a Conforming Plan, solicited votes
and conducted a confirmation hearing prior to September 30, 2003.
For more information regarding the Plan Support Agreement and Subscription
Agreement, including conditions to the consummation of such agreements, please
refer to the Company's Form 8-K dated April 10, 2003, which attaches copies of
the agreements.
While a Plan has not been submitted, the Company anticipates that the Plan will
constitute a Conforming Plan, with the conversion of existing debt securities
into substantially all of the common ownership of the reorganized Company. The
Company also anticipates that the holders of common and preferred stock of the
Company will be entitled to little or no recovery. Accordingly, the Company
anticipates that all, or substantially all, of the value of all investments in
the Company's common and preferred stock will be lost.
Subsequent to the Chapter 11 filing, NASDAQ delisted NTELOS common stock from
the NASDAQ National Market as of March 13, 2003. The Company's stock is
currently trading on the Over the Counter Bulletin Board ("OTCBB") under the
ticker symbol "NTLOQ". The OTCBB is a regulated quotation service that displays
real-time quotes, last-sale prices and volume information in over-the-counter
equity securities and trades may be executed in usual fashion. Continued listing
on the OTCBB requires market-maker sponsorship and there can be no assurance
that the Company's common stock will continue to be actively traded or that
liquidity for the Company's common stock will not be adversely affected.
In light of the Chapter 11 filing, the NTELOS board of directors decided to
postpone the annual shareholders' meeting historically held the second week of
May. The board of directors will designate the next annual meeting date at the
appropriate time. For more information about NTELOS' capital restructuring,
please refer to the Company's form 10-K for 2002, filed with the Securities and
Exchange Commission.
Guidance for 2003
For the year 2003, the Company estimates PCS customer growth of 25,000 to 30,000
net subscriber additions; capital expenditures are projected to be between $58
million and $66 million; and consolidated EBITDA is expected to be $80 million
to $85 million, before capital restructuring charges. This consolidated EBITDA
(a non-GAAP measure) guidance range is based on 2003 estimates of $65 million to
$75 million for depreciation and amortization expense; $10 million to $15
million for capital restructuring charges; and a range of an operating loss of
$10 million to an operating income of $10 million. These estimates are subject
to change depending upon the terms of the final plan of reorganization including
the settlement terms for liabilities and do not reflect adjustments that may
occur in accordance with the AICPA Statement of Position 90-07 ("Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code") ("SOP
90-07"), which the Company will adopt for its financial reporting in periods
ending after emergence from bankruptcy.
EXHIBITS -- Financial Statements & Schedules (following pages)
o Condensed Consolidated Statement of Operations
o Condensed Consolidated Balance Sheets
o Summary Operating Results
o Summary Operating Results - Reconciliation of Operating Income (Loss) to
EBITDA (a non-GAAP measure)
o Customer Summary Table
o Wireless PCS Customer Detail
o Wireless PCS Key Performance Indicators
NTELOS Inc. (OTCBB: NTLOQ) is an integrated communications provider with
headquarters in Waynesboro, Virginia. NTELOS provides products and services to
customers in Virginia, West Virginia, Kentucky, Tennessee and North Carolina,
including wireless digital PCS, dial-up Internet access, high-speed DSL
(high-speed Internet access), and local and long distance telephone services.
Detailed information about NTELOS is available online at www.ntelos.com.
This press release and oral statements made from time to time by representatives
of the Company may contain "forward-looking statements" concerning the Company's
future expectations, financial and operating projections, plans, strategies and
the trading market for its securities, including the Company's ability to
finalize the terms of a plan of reorganization acceptable to the Company's
senior noteholders and bank group. Forward-looking statements made by the
Company are based on a number of assumptions, estimates and projections. These
statements are not guarantees of future performance and involve risks and
uncertainties, including those relating to (i) the impact of the bankruptcy
filing on the Company's business, (ii) the interest of market makers and others
in maintaining an active market for the Company's securities, (iii) the
Company's ability to operate under debtor-in-possession financing, (iv) the
Company's ability to develop, prosecute, confirm and consummate a plan of
reorganization, (v) the Company's ability to maintain vendor, lessor and
customer relationships while in bankruptcy, (vi) the additional expenses
associated with bankruptcy as well as the possibility of unanticipated expenses,
and (vii) market conditions and competition in the communications industry
generally and those set forth in documents filed by the Company with the
Securities and Exchange Commission, and any significant deviations from these
assumptions could cause actual results, performance or achievements of the
Company to differ materially from those expressed or implied by such
forward-looking statements. The Company undertakes no obligation to revise or
update such forward-looking statements to reflect current events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
To supplement its financial statements presented on a GAAP basis, throughout
this document the Company references non-GAAP measures, such as EBITDA, to
measure operating performance. Management believes EBITDA to be a meaningful
indicator of the Company's performance that provides useful information to
investors regarding the Company's financial condition and results of its
operations. Presentation of EBITDA is consistent with the Company's past
practice and EBITDA is a non-GAAP measure commonly used in the communications
industry and by financial analysts and others who follow the industry to measure
operating performance. EBITDA should not be construed as an alternative to
operating income or cash flows from operating activities (both of which are
determined in accordance with generally accepted accounting principles) or as a
measure of liquidity. A reconciliation of EBITDA to operating income (loss) is
provided with the Company's Condensed Consolidated Statement of Operations and
Summary Operating Results.
NTELOS Inc.
- -------------------------------------------------------------------------------------------------------------
Condensed Consolidated Statement of Operations (In thousands except per share amounts)
- -------------------------------------------------------------------------------------------------------------
Three Months Ended
Dec 31, 2002 Dec 31, 2001
- -------------------------------------------------------------------------------------------------------------
(Unaudited)
------------------------------------
Operating Revenues
Wireless Communications $ 41,754 $ 31,240
Wireline Communications 26,247 23,215
Other Communications Services 1,709 2,466
- -------------------------------------------------------------------------------------------------------------
69,710 56,921
- -------------------------------------------------------------------------------------------------------------
Operating Expenses, before depreciation and amortization
Cost of Wireless Sales (exclusive of items shown separately below) 11,714 13,181
Maintenance and Support 15,294 16,496
Customer Operations 16,944 18,876
Corporate Operations 3,223 4,038
Operational and Capital Restructuring Charges (1) 1,592 -
Depreciation and Amortization (2),(4) 17,850 22,891
Asset Impairment Charges (3) 402,880 -
- -------------------------------------------------------------------------------------------------------------
469,497 75,482
- -------------------------------------------------------------------------------------------------------------
Operating Loss (399,787) (18,561)
Other Income (Expenses)
Equity Loss from Investee - West Virginia PCS Alliance (5) - -
Gain on Sale of Assets (6) - 8,878
Interest Expense (19,786) (19,262)
Other Income (Expenses) (7) 542 1,637
- -------------------------------------------------------------------------------------------------------------
(419,031) (27,308)
Income Taxes (Benefit) 391 (7,887)
- -------------------------------------------------------------------------------------------------------------
(419,422) (19,421)
Minority Interests in Losses of Subsidiaries 64 487
- -------------------------------------------------------------------------------------------------------------
Net Loss (419,358) (18,934)
Dividend Requirements on Preferred Stock 5,189 4,617
- -------------------------------------------------------------------------------------------------------------
Loss Applicable to Common Shares $ (424,547) $ (23,551)
=============================================================================================================
- -------------------------------------------------------------------------------------------------------------
Loss per Common Share - Basic & Diluted $ (24.10) $ (1.39)
=============================================================================================================
Average Shares Outstanding - Basic & Diluted 17,617 16,917
- -------------------------------------------------------------------------------------------------------------
Reconciliation of Operating Loss to EBITDA (a non-GAAP measure) (8)
- -------------------------------------------------------------------------------------------------------------
Operating Loss $ (399,787) $ (18,561)
Depreciation and Amortization (2),(4) 17,850 22,891
Asset Impairment Charges (3) 402,880 -
- -------------------------------------------------------------------------------------------------------------
EBITDA (8) $ 20,943 $ 4,330
=============================================================================================================
- -------------------------------------------------------------------------------------------------------------
Condensed Consolidated Statement of Operations (In thousands except per share amounts)
- -------------------------------------------------------------------------------------------------------------
Twelve Months Ended
Dec 31, 2002 Dec 31, 2001
- -------------------------------------------------------------------------------------------------------------
(Unaudited)
--------------------------------------
Operating Revenues
Wireless Communications $ 156,860 $ 118,832
Wireline Communications 96,916 86,485
Other Communications Services 8,951 9,746
- -------------------------------------------------------------------------------------------------------------
262,727 215,063
- -------------------------------------------------------------------------------------------------------------
Operating Expenses, before depreciation and amortization
Cost of Wireless Sales (exclusive of items shown separately below 48,868 47,808
Maintenance and Support 64,408 62,508
Customer Operations 66,007 65,657
Corporate Operations 17,914 18,586
Operational and Capital Restructuring Charges (1) 4,285 -
Depreciation and Amortization (2),(4) 82,924 82,281
Asset Impairment Charges (3) 402,880 -
- -------------------------------------------------------------------------------------------------------------
687,286 276,840
- -------------------------------------------------------------------------------------------------------------
Operating Loss (424,559) (61,777)
Other Income (Expenses)
Equity Loss from Investee - West Virginia PCS Alliance (5) - (1,286)
Gain on Sale of Assets (6) 8,472 31,845
Interest Expense (78,351) (76,251)
Other Income (Expenses) (7) (1,454) 5,679
- -------------------------------------------------------------------------------------------------------------
(495,892) (101,790)
Income Taxes (Benefit) (6,464) (34,532)
- -------------------------------------------------------------------------------------------------------------
(489,428) (67,258)
Minority Interests in Losses of Subsidiaries 481 3,545
- -------------------------------------------------------------------------------------------------------------
Net Loss (488,947) (63,713)
Dividend Requirements on Preferred Stock 20,417 18,843
- -------------------------------------------------------------------------------------------------------------
Loss Applicable to Common Shares $ (509,364) $ (82,556)
=============================================================================================================
- -------------------------------------------------------------------------------------------------------------
Loss per Common Share - Basic & Diluted $ (29.34) $ (5.02)
=============================================================================================================
Average Shares Outstanding - Basic & Diluted 17,358 16,442
- -------------------------------------------------------------------------------------------------------------
Reconciliation of Operating Loss to EBITDA (a non-GAAP measure) (8)
- -------------------------------------------------------------------------------------------------------------
Operating Loss $ (424,559) $ (61,777)
Depreciation and Amortization (2),(4) 82,924 82,281
Asset Impairment Charges (3) 402,880 -
- -------------------------------------------------------------------------------------------------------------
EBITDA (8) $ 61,245 $ 20,504
=============================================================================================================
Note: Certain amounts in the prior year have been reclassified to conform
to current year presentation.
(1) A restructuring charge was reported during the first, second and fourth
quarters of 2002 for $4.3 million relating to severance costs and pension
curtailment costs for employees affected by the reduction in force
activity, lease termination obligations associated with the exit of certain
facilities and financial restructuring legal and advisor costs.
(2) The Company adopted Statement of Financial Accounting Standard (SFAS) No.
142, Goodwill and Other Intangible Assets, on January 1, 2002. In
accordance with the provisions of SFAS No. 142, the Company discontinued
amortization of goodwill, wireless PCS spectrum licenses and the assembled
workforce intangible asset as of that date, as these assets are considered
indefinite-lived intangible assets and are not subject to amortization.
(3) The Company performed its annual impairment testing of goodwill and
intangible assets with indefinite lives as of October 1, 2002 in accordance
with SFAS No. 142. Additionally, the Company performed impairment testing
on other long term assets in accordance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, during the fourth quarter
based on the presence of impairment indicators. Results of this testing
were negatively impacted by continued pricing pressures and other
competitive factors and market condition variables affecting the Company
and the industry sector's financial projections and market valuations.
Accordingly, the Company recognized impairment on its wireless PCS
licenses, goodwill and other intangible assets totaling $350.3 million.
Additionally, certain wireless PCS property, plant and equipment was
required to be restated to fair market value which resulted in a $16.7
million impairment charge and certain wireless cable property, plant and
equipment was required to be restated to fair market value which resulted
in a $1.1 million impairment charge. Additionally, the network segment
goodwill was determined to be impaired resulting in a $20.9 million
impairment charge. Finally, licenses, goodwill and certain of the wireless
cable property, plant and equipment were also determined to be impaired
resulting in a $13.9 million impairment charge.
(4) Depreciation and amortization includes charges of approximately $1.1
million in fourth quarter 2002 related to accelerated depreciation of
certain wireless digital PCS equipment replaced during the quarter or to be
replaced in 2003 pursuant to the Company's previously announced amendment
to the Horizon/Sprint network services agreement, which is conditional upon
an upgrade to 3G-1XRTT technology to facilitate high-speed data
applications. Approximately $15.0 million of such charges were incurred in
2002.
(5) The West Virginia PCS Alliance, L.C. was consolidated into operations
effective February 13, 2001 concurrent with the effective date of the R&B
Communications merger.
(6) During the year ended December 31, 2002, the Company has recognized an $8.5
million gain on the sale of certain PCS licenses, with total proceeds of
$18.0 million (net $14.0 million after debt pay-down and fees).
(7) Other income (expenses) includes a $1.1 million permanent impairment
recorded in second quarter 2002 for the Company's investment in WorldCom,
Inc.
(8) Represents operating income (loss) before depreciation and amortization and
asset impairment charges. The Company references non-GAAP measures, such as
EBITDA, to measure operating performance. Management believes EBITDA to be
a meaningful indicator of the Company's performance that provides useful
information to investors regarding the Company's financial condition and
results of its operations. Presentation of EBITDA is consistent with the
Company's past practice and EBITDA is a non-GAAP measure commonly used in
the communications industry and by financial analysts and others who follow
the industry to measure operating performance. EBITDA should not be
construed as an alternative to operating income or cash flows from
operating activities (both of which are determined in accordance with
generally accepted accounting principles) or as a measure of liquidity.
- --------------------------------------------------------------------------------------------------------------
NTELOS Inc.
- --------------------------------------------------------------------------------------------------------------
Condensed Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------------------------
(In thousands)
- --------------------------------------------------------------------------------------------------------------
Dec 31, 2002 Dec 31, 2001
ASSETS
Current Assets (1) $ 55,167 $ 75,852
Restricted Cash - 18,094
Securities and Investments 8,696 13,963
Property, Plant & Equipment, net (2) 434,455 465,944
Other Assets (2) 231,203 623,033
- --------------------------------------------------------------------------------------------------------------
Total Assets $ 729,521 $ 1,196,886
==============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities (3) $ 714,110 $ 82,697
Long-Term Debt 18,960 612,416
Other Long-Term Liabilities 52,441 61,613
Minority Interests 523 847
Redeemable Convertible Preferred Stock 286,164 265,747
Shareholders' Equity (Deficit) (342,677) 173,566
- --------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity (Deficit) $ 729,521 $ 1,196,886
==============================================================================================================
Note: Certain amounts in the prior year have been reclassified to conform
to current year presentation.
(1) At December 31, 2002, the Company had cash of $12.2 million. At December
31, 2001, the Company had cash of $7.3 million and restricted cash of $36.2
million, of which $18.1 million was classified in current assets.
(2) The Company performed its annual impairment testing of goodwill and
intangible assets with indefinite lives as of October 1, 2002 in accordance
with SFAS No. 142. Additionally, the Company performed impairment testing
on other long term assets in accordance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, during the fourth quarter
based on the presence of impairment indicators. Results of this testing
were negatively impacted by continued pricing pressures and other
competitive factors and market condition variables affecting the Company
and the industry sector's financial projections and market valuations.
Accordingly, the Company recognized impairment on its wireless PCS
licenses, goodwill and other intangible assets totaling $350.3 million.
Additionally, certain wireless PCS property, plant and equipment was
required to be restated to fair market value which resulted in a $16.7
million impairment charge and certain wireless cable property, plant and
equipment was required to be restated to fair market value which resulted
in a $1.1 million impairment charge. Additionally, the network segment
goodwill was determined to be impaired resulting in a $20.9 million
impairment charge. Finally, licenses, goodwill and certain of the wireless
cable property, plant and equipment were also determined to be impaired
resulting in a $13.9 million impairment charge.
(3) As a result of the Company's Chapter 11 bankruptcy filing, a default for
non-payment of these interest payments and non-compliance with a debt to
capitalization covenant under its Senior Credit Facility, the Company has
classified borrowings under its Senior Credit Facility, Senior Notes and
Subordinated Notes as current liabilities at December 31, 2002. The
long-term portions of the remaining debt instruments continued to be
classified as Long-Term Debt at December 31, 2002. Additionally, the
covenant default noted above caused a cross default with the Company's
interest rate SWAP agreements, resulting in this long-term liability being
reclassified as current. The total of these reclassifications accounted for
$643.8 million of the current liabilities balance at December 31, 2002.
NTELOS Inc.
- ----------------------------------------------------------------------------------------------------------
Summary Operating Results
(In thousands)
- ----------------------------------------------------------------------------------------------------------
Unaudited Three Months Ended
-----------------------------------------------------------
Dec 31, 2002 Dec 31, 2001 Sept 30, 2002
- ----------------------------------------------------------------------------------------------------------
Operating Revenues
Wireless PCS Digital $ 41,754 $ 31,240 $ 40,790
Subscriber Revenues 29,073 22,771 29,074
Wholesale/Roaming Revenues 9,896 5,587 8,806
Equipment Revenues 2,436 2,355 2,480
Other Revenues 349 527 430
Wireline Operations
Telephone (ILEC) 12,799 11,314 12,091
CLEC 6,752 4,902 5,513
Network 2,071 2,375 2,010
Internet & DSL 4,625 4,624 4,576
-----------------------------------------------------------
Wireline Total 26,247 23,215 24,190
Other Operations (1) 1,709 2,466 3,122
- ----------------------------------------------------------------------------------------------------------
$ 69,710 $ 56,921 $ 68,102
==========================================================================================================
Operating Expenses (before depreciation &
amortization and asset write-down and
impairment charges, a non-GAAP Measure) (2)
Wireless PCS Digital $ 34,671 $ 38,233 $ 36,945
Cost of Sales - Equipment 6,765 8,362 6,950
Cost of Sales - Access & Other 4,920 4,757 5,726
Customer Care 2,034 1,595 1,972
Engineering & Operations 6,635 7,427 6,884
Selling & Marketing 10,945 12,599 11,447
General & Administrative 3,372 3,493 3,966
Wireline Operations
Telephone (ILEC) 3,215 3,897 3,438
CLEC 4,091 4,259 3,839
Network 276 197 365
Internet & DSL 2,886 3,946 3,222
-----------------------------------------------------------
Wireline Total 10,468 12,299 10,864
Other Operations (1),(2) 3,628 2,059 2,289
- ----------------------------------------------------------------------------------------------------------
$ 48,767 $ 52,591 $ 50,098
==========================================================================================================
EBITDA (3)(a non-GAAP Measure)
Wireless PCS Digital $ 7,083 $ (6,993) $ 3,845
Wireline Operations
Telephone (ILEC) 9,584 7,417 8,653
CLEC 2,661 643 1,674
Network 1,795 2,178 1,645
Internet & DSL 1,739 678 1,354
-----------------------------------------------------------
Wireline Total 15,779 10,916 13,326
Other Operations (1),(2) (1,919) 407 833
- ----------------------------------------------------------------------------------------------------------
$ 20,943 $ 4,330 $ 18,004
==========================================================================================================
- -------------------------------------------------------------------------------------
Unaudited Twelve Months Ended
--------------------------------------
Dec 31, 2002 Dec 31, 2001
- -------------------------------------------------------------------------------------
Operating Revenues
Wireless PCS Digital $ 156,860 $ 118,832
Subscriber Revenues 112,031 89,374
Wholesale/Roaming Revenues 33,885 19,922
Equipment Revenues 9,500 6,813
Other Revenues 1,444 2,723
Wireline Operations
Telephone (ILEC) 47,128 42,786
CLEC 22,858 17,347
Network 8,449 8,693
Internet & DSL 18,481 17,659
--------------------------------------
Wireline Total 96,916 86,485
Other Operations (1) 8,951 9,746
- -------------------------------------------------------------------------------------
$ 262,727 $ 215,063
=====================================================================================
Operating Expenses (before depreciation &
amortization and asset write-down and
impairment charges, a non-GAAP Measure) (2)
Wireless PCS Digital $ 142,021 $ 139,530
Cost of Sales - Equipment 28,287 28,633
Cost of Sales - Access & Other 20,379 19,113
Customer Care 7,671 7,111
Engineering & Operations 27,492 27,683
Selling & Marketing 41,025 41,841
General & Administrative 17,167 15,149
Wireline Operations
Telephone (ILEC) 14,520 15,330
CLEC 16,927 15,443
Network 1,596 1,428
Internet & DSL 13,561 16,314
--------------------------------------
Wireline Total 46,604 48,515
Other Operations (1),(2) 12,857 6,514
- -------------------------------------------------------------------------------------
$ 201,482 $ 194,559
=====================================================================================
EBITDA (3) (a non-GAAP Measure)
Wireless PCS Digital $ 14,839 $ (20,698)
Wireline Operations
Telephone (ILEC) 32,608 27,456
CLEC 5,931 1,904
Network 6,853 7,265
Internet & DSL 4,920 1,345
--------------------------------------
Wireline Total 50,312 37,970
Other Operations (1),(2) (3,906) 3,232
- -------------------------------------------------------------------------------------
$ 61,245 $ 20,504
=====================================================================================
Note: Certain amounts in the prior year have been reclassified to conform
to current year presentation.
(1) Other Operations includes Paging, Wireless Cable, Wireline Cable, Other
Communications Services and unallocated corporate operations, which
includes income from leasing excess building space. For third quarter 2002,
$1.1 million of revenue is included to record a lease buy out pertaining to
certain non-core Company owned buildings. See note 7 on condensed
consolidated statement of operations. Lease revenues recorded in this
category, which ceased as a result of the buy-out, were $0.5 million.
(2) Includes $4.3 million of restructuring charges for the year ended December
31, 2002. See note 1 on condensed consolidated statement of operations.
(3) Represents operating income (loss) before depreciation and amortization and
asset impairment charges. The Company references non-GAAP measures, such as
EBITDA, to measure operating performance. Management believes EBITDA to be
a meaningful indicator of the Company's performance that provides useful
information to investors regarding the Company's financial condition and
results of its operations. Presentation of EBITDA is consistent with the
Company's past practice and EBITDA is a non-GAAP measure commonly used in
the communications industry and by financial analysts and others who follow
the industry to measure operating performance. EBITDA should not be
construed as an alternative to operating income or cash flows from
operating activities (both of which are determined in accordance with
generally accepted accounting principles) or as a measure of liquidity.
NTELOS Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Summary Operating Results - Reconciliation of Operating Income (Loss) to EBITDA
(a non-GAAP measure) (1) (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------
Wireless Telephone
PCS ILEC CLEC Network
- ------------------------------------------------------------------------------------------------------------------------------
For The Three Months Ended Dec. 31, 2001
Operating Income (Loss) $ (23,567) $ 5,618 $ (142) $ 1,618
Depreciation and Amortization 16,574 1,799 785 560
--------------------------------------------------------------------------------------------------------------------
EBITDA (1) $ (6,993) $ 7,417 $ 643 $ 2,178
====================================================================================================================
For The Twelve Months Ended Dec. 31, 2001
Operating Income (Loss) $ (80,115) $ 18,041 $ (629) $ 4,061
Depreciation and Amortization 59,417 9,415 2,533 3,204
--------------------------------------------------------------------------------------------------------------------
EBITDA (1) $ (20,698) $ 27,456 $ 1,904 $ 7,265
====================================================================================================================
For The Three Months Ended Mar. 31, 2002
Operating Income (Loss) $ (17,951) $ 4,456 $ (168) $ 971
Depreciation and Amortization 18,196 1,807 710 700
--------------------------------------------------------------------------------------------------------------------
EBITDA (1) $ 245 $ 6,263 $ 542 $ 1,671
====================================================================================================================
For The Three Months Ended Jun. 30, 2002
Operating Income (Loss) $ (12,540) $ 6,296 $ 247 $ 959
Depreciation and Amortization 16,206 1,812 807 783
--------------------------------------------------------------------------------------------------------------------
EBITDA (1) $ 3,666 $ 8,108 $ 1,054 $ 1,742
====================================================================================================================
For The Three Months Ended Sep. 30, 2002
Operating Income (Loss) $ (11,542) $ 6,690 $ 204 $ 825
Depreciation and Amortization 15,387 1,963 1,470 820
--------------------------------------------------------------------------------------------------------------------
EBITDA (1) $ 3,845 $ 8,653 $ 1,674 $ 1,645
====================================================================================================================
For The Three Months Ended Dec. 31, 2002
Operating Income (Loss) $ (371,219) $ 7,349 $ 1,714 $ (19,919)
Depreciation and Amortization 11,352 2,235 947 814
Asset Impairment Charges 366,950 - - 20,900
--------------------------------------------------------------------------------------------------------------------
EBITDA (1) $ 7,083 $ 9,584 $ 2,661 $ 1,795
====================================================================================================================
For The Twelve Months Ended Dec. 31, 2002
Operating Income (Loss) $ (413,252) $ 24,791 $ 1,997 $ (17,164)
Depreciation and Amortization 61,141 7,817 3,934 3,117
Asset Impairment Charges 366,950 - - 20,900
--------------------------------------------------------------------------------------------------------------------
EBITDA (1) $ 14,839 $ 32,608 $ 5,931 $ 6,853
====================================================================================================================
- ------------------------------------------------------------------------------------------------
Internet &
DSL Other Total
- ------------------------------------------------------------------------------------------------
For The Three Months Ended Dec. 31, 2001
Operating Income (Loss) $ (339) $ (1,749) $ (18,561)
Depreciation and Amortization 1,017 2,156 22,891
--------------------------------------------------------------------------------------
EBITDA (1) $ 678 $ 407 $ 4,330
======================================================================================
For The Twelve Months Ended Dec. 31, 2001
Operating Income (Loss) $ (2,578) $ (557) $ (61,777)
Depreciation and Amortization 3,923 3,789 82,281
--------------------------------------------------------------------------------------
EBITDA (1) $ 1,345 $ 3,232 $ 20,504
======================================================================================
For The Three Months Ended Mar. 31, 2002
Operating Income (Loss) $ (263) $ (2,125) $ (15,080)
Depreciation and Amortization 982 700 23,095
--------------------------------------------------------------------------------------
EBITDA (1) $ 719 $ (1,425) $ 8,015
======================================================================================
For The Three Months Ended Jun. 30, 2002
Operating Income (Loss) $ 621 $ (1,958) $ (6,375)
Depreciation and Amortization 487 563 20,658
--------------------------------------------------------------------------------------
EBITDA (1) $ 1,108 $ (1,395) $ 14,283
======================================================================================
For The Three Months Ended Sep. 30, 2002
Operating Income (Loss) $ 151 $ 355 $ (3,317)
Depreciation and Amortization 1,203 478 21,321
--------------------------------------------------------------------------------------
EBITDA (1) $ 1,354 $ 833 $ 18,004
======================================================================================
For The Three Months Ended Dec. 31, 2002
Operating Income (Loss) $ 941 $ (18,653) $ (399,787)
Depreciation and Amortization 798 1,704 17,850
Asset Impairment Charges - 15,030 402,880
--------------------------------------------------------------------------------------
EBITDA (1) $ 1,739 $ (1,919) $ 20,943
======================================================================================
For The Twelve Months Ended Dec. 31, 2002
Operating Income (Loss) $ 1,450 $ (22,381) $ (424,559)
Depreciation and Amortization 3,470 3,445 82,924
Asset Impairment Charges - 15,030 402,880
--------------------------------------------------------------------------------------
EBITDA (1) $ 4,920 $ (3,906) $ 61,245
======================================================================================
(1) Represents operating income (loss) before depreciation and amortization and
asset impairment charges. The Company references non-GAAP measures, such as
EBITDA, to measure operating performance. Management believes EBITDA to be
a meaningful indicator of the Company's performance that provides useful
information to investors regarding the Company's financial condition and
results of its operations. Presentation of EBITDA is consistent with the
Company's past practice and EBITDA is a non-GAAP measure commonly used in
the communications industry and by financial analysts and others who follow
the industry to measure operating performance. EBITDA should not be
construed as an alternative to operating income or cash flows from
operating activities (both of which are determined in accordance with
generally accepted accounting principles) or as a measure of liquidity.
- ---------------------------------------------------------------------------------------------------------------------------
NTELOS Inc.
- ---------------------------------------------------------------------------------------------------------------------------
Customer Summary Table
- ---------------------------------------------------------------------------------------------------------------------------
Quarter Ended: 12/31/2001 3/31/2002 6/30/2002 9/30/2002 12/31/2002
- ---------------------------------------------------------------------------------------------------------------------------
Wireless PCS Digital Subscribers 223,805 228,281 237,978 251,021 266,467
ILEC Access Lines 52,036 51,936 51,943 51,835 52,014
CLEC Access Lines 33,598 35,876 38,946 41,641 43,815
Internet Subscribers 70,189 71,850 72,389 68,196 61,486
Digital Subscriber Lines 4,004 4,318 4,809 5,465 5,534
Paging Subscribers 14,708 13,684 12,818 11,855 10,890
Long Distance Subscribers 17,284 20,085 22,013 23,213 22,343
Cable Subscribers 15,332 15,098 14,469 12,883 12,384
NTELOS Inc.
- -----------------------------------------------------------------------------------------------------------------
Wireless PCS Customer Detail
- ----------------------------------------------------------------------------------------------------------------
Quarter Ended: 12/31/2001 3/31/2002 6/30/2002 9/30/2002 12/31/2002
- ----------------------------------------------------------------------------------------------------------------
Total PCS Subscribers
- ----------------------------------------------------------------------------------------------------------------
Beginning Subscribers 203,827 223,805 228,281 237,978 251,021
Pre-Pay 47,144 39,275 31,135 25,925 19,747
nAdvance 12,123 24,865 33,875 44,620
Post-Pay 156,683 172,407 172,281 178,178 186,654
Gross Additions 47,612 39,204 37,863 41,986 43,035
Pre-Pay 15,539 5,596 3,160 2,541 2,716
nAdvance 12,810 11,120 14,175 16,528
Post-Pay 32,073 20,798 23,583 25,270 23,791
Net Additions 19,978 4,476 9,697 13,043 15,446
Pre-Pay 4,254 (8,254) (5,191) (4,374) (1,802)
nAdvance 12,594 8,989 8,959 9,517
Post-Pay 15,724 136 5,899 8,458 7,731
Transfers Pre-Pay - 114 (19) (1,804) (740)
nAdvance 148 21 1,786 703
Post-Pay - (262) (2) 18 37
Ending Subscribers 223,805 228,281 237,978 251,021 266,467
Pre-Pay 39,275 31,135 25,925 19,747 17,205
nAdvance 12,123 24,865 33,875 44,620 54,840
Post-Pay 172,407 172,281 178,178 186,654 194,422
NTELOS Inc.
- ---------------------------------------------------------------------------------------------------------------------
Wireless PCS Key Performance Indicators
- ---------------------------------------------------------------------------------------------------------------------
Quarter Ended: 12/31/2001 3/31/2002 6/30/2002 9/30/2002 12/31/2002
- ---------------------------------------------------------------------------------------------------------------------
Average Subscribers (weighted monthly) 211,784 227,461 232,286 244,564 257,191
Gross Subscriber Revenues ($000) (1) $ 27,766 $ 30,548 $ 32,089 $ 33,128 $ 33,881
Revenue Accruals & Deferrals (938) (701) (657) (435) (956)
Uncollectible (4,048) (3,765) (3,459) (3,589) (3,823)
Other (9) (81) (90) (30) (29)
- ---------------------------------------------------------------------------------------------------------------------
Subscriber Revenues $ 22,771 $ 26,001 $ 27,883 $ 29,074 $ 29,073
Average Monthly Revenue per Subscriber
(ARPU) (1) $ 43.70 $ 44.77 $ 46.05 $ 45.15 $ 43.91
Cost of Acquisition per Gross Addition (2) $ 329 $ 300 $ 302 $ 316 $ 290
Monthly Post Pay Subscriber Churn 3.32% 3.98% 3.38% 3.07% 2.83%
Monthly Blended Subscriber Churn 4.35% 5.09% 4.04% 3.94% 3.58%
Cell Sites (Period Ending) 768 804 815 820 824
EBITDA (3) ($000) $ (6,993) $ 245 $ 3,666 $ 3,845 $ 7,083
Gross Wireless Property, Plant &
Equipment ($000) (4) $344,587 $353,289 $352,551 $352,939 $295,465
(1) Gross subscriber revenues include access, airtime, toll, incollect roaming
and miscellaneous other subscriber revenue. ARPU is calculated by dividing
gross subscriber revenues by the number of average subscribers. Revenue
deferrals and accruals, uncollectible revenue and intercompany eliminations
(other) are excluded to provide consistency for the ARPU calculation. A
reconciliation to subscriber revenues shown on the Summary Operating
Results schedule is provided.
(2) Cost of acquisition includes handset subsidy, marketing costs, advertising
costs, sales commissions and sales management costs.
(3) Represents operating income (loss) before depreciation and amortization and
asset impairment charges. The Company references non-GAAP measures, such as
EBITDA, to measure operating performance. Management believes EBITDA to be
a meaningful indicator of the Company's performance that provides useful
information to investors regarding the Company's financial condition and
results of its operations. Presentation of EBITDA is consistent with the
Company's past practice and EBITDA is a non-GAAP measure commonly used in
the communications industry and by financial analysts and others who follow
the industry to measure operating performance. EBITDA should not be
construed as an alternative to operating income or cash flows from
operating activities (both of which are determined in accordance with
generally accepted accounting principles) or as a measure of liquidity.
(4) Gross wireless property, plant & equipment excludes PCS licenses. Certain
wireless PCS property, plant and equipment was restated to fair market
value in accordance with SFAS 144, which resulted in a $16.7 million
impairment charge to net book values and a $59.7 million reduction of gross
wireless property, plant and equipment.