[May 16, 2005] Horizon PCS Announces First Quarter Results Tweet CHILLICOTHE, Ohio --(Business Wire)-- May 16, 2005 -- Horizon PCS, Inc. (Pink Sheets:HZPS), a PCS Affiliate of Sprint (NYSE:FON), today announced financial results for its first quarter ended March 31, 2005. -0- *T Reported Ex-NTELOS (1) 3 Months Ended 3 Months Ended March 31, March 31, 2005 2004 2004 (Successor)(Predecessor)(Predecessor) ---------------------------------------------------------------------- Gross Subscribers Adds 19,900 23,700 15,700 ---------------------------------------------------------------------- Net Subscriber Adds 2,400 (3,700) (3,000) ---------------------------------------------------------------------- Ending Subscribers 183,900 288,900 195,200 ---------------------------------------------------------------------- Churn, excluding 30-day deactivations 2.9% 2.9% 3.0% ---------------------------------------------------------------------- ARPU (including roaming) $78 $71 --- ---------------------------------------------------------------------- ARPU (excluding roaming) $51 $53 --- ---------------------------------------------------------------------- CPGA $337 $299 --- ---------------------------------------------------------------------- CCPU (including roaming) $57 $60 --- ---------------------------------------------------------------------- CCPU (excluding roaming) $42 $48 --- ---------------------------------------------------------------------- *T (1) Results exclude NTELOS Markets (as defined below). On June 15, 2004, Horizon completed its settlement agreements with Sprint PCS and exited the markets in Virginia and West Virginia that were previously operated under a Network Services Agreement with NTELOS, Inc. (the "NTELOS Markets"). The statistics shown in the "Ex- NTELOS" column above have been adjusted to remove the results of operations from the NTELOS Markets. All of the other financial results and operating statistics cited in this press release, except those noted in the table above and the section entitled "First Quarter Highlights" below, include Horizon's financial and operating results in the NTELOS Markets through June 15, 2004, and thus may not be indicative of Horizon's financial and operating results for future periods. First Quarter Highlights -- Subscriber revenues were $27.7 million for the 2005 first quarter compared to $45.7 million in the 2004 first quarter, which included $15.9 million of subscriber revenues in the 2004 first quarter associated with the NTELOS Markets. Sprint travel, roaming and wholesale revenues were $15.2 million and $16.2 million for the three months ended March 31, 2005 and 2004, respectively. The 2004 first quarter included $4.7 million of roaming revenues associated with the NTELOS Markets. Excluding the NTELOS Markets from the 2004 first quarter, Sprint travel, roaming and wholesale revenues were up approximately $3.7 million, representing a 32% year over year increase in the 2005 first quarter. -- Horizon's operating loss was $20.8 million in the 2005 first quarter versus an operating loss of $11.1 million in the 2004 first quarter. The 2005 first quarter operating results included a $17.4 million increase in depreciation and amortization expense. The increase was principally due to accelerated depreciation on network switching equipment being retired and replaced with new Nortel Networks equipment, which is expected to be completed by year-end, as well as an increase in amortization of intangible assets due to fresh start accounting. In addition, during the 2005 first quarter Horizon recorded a $0.7 million reduction in operating expenses related to a gain on the previously announced sale of certain operating markets to Sprint PCS. Operating results for the 2004 first quarter included $5.5 million of operating expenses incurred in connection with Horizon's reorganization and emergence from bankruptcy on October 1, 2004. -- Adjusted EBITDA was $4.9 million for the 2005 first quarter compared to $2.6 million for the 2004 first quarter. The 2005 first quarter included $1.4 million in expenses related to the proposed merger with iPCS. Excluding merger related expenses from the 2005 first quarter, Adjusted EBITDA improved by $0.8 million from the 2004 fourth quarter, despite increased selling expenses related to higher gross subscriber additions. -- Excluding the NTELOS Markets from the 2004 fourth quarter, gross subscriber additions of 19,900 in the 2005 first quarter increased nearly 27% from the 2004 first quarter and 14% from the 2004 fourth quarter. Gross subscriber additions were up from the seasonally high fourth quarter due to a ramp up in selling and marketing efforts since the Company's emergence from bankruptcy on October 1, 2004. -- As of March 31, 2005, Horizon PCS served approximately 183,900 subscribers, of which 80% were prime credit class and 83% were under contract. For the three months ended March 31, 2005, our net subscribers increased by approximately 800 subscribers, which included the addition of approximately 2,400 subscribers and the sale of the interest in approximately 1,600 subscribers to Sprint. -- Churn excluding 30-day returns was 2.9% in the 2005 first quarter, compared to 3.2% in the 2004 fourth quarter. -- At March 31, 2005, Horizon had cash, cash equivalents and marketable securities of approximately $50.4 million. Capital expenditures were approximately $2.3 million for the 2005 first quarter. In accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code," Horizon adopted fresh start accounting as of October 1, 2004, and Horizon's emergence from Chapter 11 resulted in a new reporting entity. With respect to the periods prior to October 1, 2004, Horizon has been designated "Predecessor Company" and with respect to the periods as of and subsequent to October 1, 2004, Horizon has been designated as "Successor Company." Under the fresh start accounting, Horizon's reorganization equity value was allocated to the assets based on their respective fair values and was in conformity with SFAS No. 141 "Business Combinations." As a result of the implementation of fresh start accounting, Horizon's financial statements from and after October 1, 2004 are not comparable to its financial statements for prior periods. Bill McKell, chairman and CEO of Horizon PCS, said, "We completed a very busy quarter at Horizon, which included signing of the previously announced merger agreement with iPCS and reaching price simplification terms with Sprint. Despite these major resource diversions, we were able to continue to improve operationally with growth in both Adjusted EBITDA and gross subscriber additions. We are pleased with our performance overall and with the direction of the Company. We expect our pending merger with iPCS, Inc. to close this summer." About Horizon PCS Horizon PCS is a PCS Affiliate of Sprint, with the exclusive right to market Sprint wireless mobility communications network products and services to a total population of approximately 7.2 million in portions of 11 contiguous states. Its markets are located between Sprint's Chicago, New York and Knoxville markets and connect or are adjacent to 12 major Sprint markets. As a PCS Affiliate of Sprint, Horizon markets wireless mobile communications network products and services under the Sprint and Sprint PCS brand names. For more information, visit www.horizonpcs.com. About Sprint Sprint offers an extensive range of innovative communication products and solutions, including global IP, wireless, local and multiproduct bundles. A Fortune 100 company with more than $27 billion in annual revenues in 2004, Sprint is widely recognized for developing, engineering and deploying state-of-the-art network technologies, including the United States' first nationwide all-digital, fiber-optic network; an award-winning Tier 1 Internet backbone; and one of the largest 100-percent digital, nationwide wireless networks in the United States. For more information, visit www.sprint.com/mr. Adjusted EBITDA and Other Information Horizon PCS 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 Horizon's financial performance. In addition, Horizon uses certain non-financial terms, such as churn, CPGA, ARPU and CCPU, which are metrics used in the wireless communications industry and are not measures of financial performance under GAAP. A non-GAAP financial measure is defined as a numerical measure of historical or future financial performance, financial position or cash flows that (a) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet, statement of cash flow (or equivalent statements); or (b) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. The non-GAAP financial measures reflect standard measures of liquidity, profitability or performance and the non-financial metrics reflect industry conventions, both of which are commonly used by the investment community. These terms as used by Horizon may not be comparable to the use of these terms by other companies. The non-GAAP financial measures used in this press release are reconciled in an attachment to this release, and should be considered in addition to, not as a substitute for, the information prepared in accordance with GAAP. EBITDA is computed as operating loss plus depreciation and amortization. Adjusted EBITDA is computed as EBITDA plus non-cash compensation, (gain) loss on sale of property and equipment, restructuring charges, and impairment of Sprint PCS licenses and property and equipment. This information should not be considered as an alternative to net income, operating profit, cash flows from operations, or any other operating or liquidity performance measure prescribed by accounting principles generally accepted in the United States. CPGA - Cost per gross add summarizes the average cost to acquire new subscribers during the period. CPGA is the income statement components of selling and marketing and cost of equipment (net of equipment revenue), divided by the total new gross subscribers acquired during the period. CCPU - Cash cost per user is the monthly cash costs to operate the business on a per user basis consisting of cost of service and general and administrative expenses, divided by the weighted average monthly subscribers for the period and divided by the number of months in the period. ARPU - Average revenue per user summarizes the average monthly revenue per customer. ARPU is computed by dividing service revenues and roaming revenues for the period by the weighted average monthly subscribers for the period and divided by the number of months in the period. Churn - Average monthly churn is used to measure the rate at which subscribers based in our territory deactivate service on a voluntary or involuntary basis. We calculate average monthly churn based on the number of subscribers deactivated during the period (net of transfers out of our territory and those who deactivated within 30 days of activation) as a percentage of our average monthly subscriber base during the period divided by the number of months during the period. This press release contains statements about future events and expectations that are forward-looking statements. Any statement in this press release that is not a statement of historical fact may be deemed to be a forward-looking statement, which involves known and unknown risks, uncertainties and other factors which may cause the company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We assume no obligation to update or revise such forward-looking statements or provide reasons why actual results may differ. For example, our expectations about our future growth and the benefits from the planned merger and/or new equipment purchased from Nortel may prove inaccurate due to factors such as the impact of competition, the effects of our bankruptcy and restructuring, risks associated with our relationship with Sprint, the availability of handsets and delays in our network build-out. For further information on the risks inherent in Horizon PCS' business, see the "Risk Factors" section in Amendment No. 1 to the Company's S-4 Registration Statement filed with the Securities and Exchange Commission (the "Commission") on April 28, 2005. On April 15, 2005, iPCS filed a registration statement on Form S-4 with the Commission containing iPCS' and Horizon PCS' preliminary joint proxy statement/prospectus regarding their proposed merger. Stockholders are urged to read the preliminary joint proxy statement/prospectus regarding the proposed transaction and the definitive joint proxy statement/prospectus when it becomes available, because it contains, or will contain, important information. Stockholders will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about iPCS and Horizon PCS, without charge, at the Commission's internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and other filings with the Commission by iPCS and Horizon PCS can also be obtained without charge, when they become available, by directing a request, as applicable, to iPCS, Inc., 1901 N. Roselle Road, Suite 500, Schaumburg, IL 60195, Attention: Edmund L. Quatmann; or Horizon PCS, Inc., 68 E. Main Street, Chillicothe, OH 45601, Attention: Pete Holland. -0- *T HORIZON PCS, INC. Consolidated Statements of Operations (Unaudited) Successor Predecessor Company Company -------------- -------------- Three Months Three Months Ended Ended March 31, 2005 March 31, 2004 -------------- -------------- Operating revenues: Subscriber revenues $27,730,982 $45,658,557 Roaming revenues 15,216,495 16,241,595 Equipment revenues 1,063,379 1,275,362 -------------- -------------- Total operating revenues 44,010,856 63,175,514 -------------- -------------- Operating expenses: Cost of service (exclusive of items shown below) 23,703,411 44,055,153 Cost of equipment 2,073,233 1,734,049 Selling and marketing 5,702,086 6,614,123 General and administrative (exclusive of items shown below) 7,620,115 8,128,787 Reorganization (income) expense - 5,520,401 Non-cash compensation 835,543 48,348 Depreciation and amortization 25,565,966 8,189,322 Gain on sale of subscribers (720,317) - -------------- -------------- Total operating expenses 64,780,037 74,290,183 -------------- -------------- Operating loss (20,769,181) (11,114,669) Interest income and other, net 273,644 148,621 Interest expense, net of capitalized interest (3,566,494) (2,065,149) -------------- -------------- Loss before income tax benefit (24,062,031) (13,031,197) Income tax benefit - - -------------- -------------- Net loss (24,062,031) (13,031,197) Preferred stock dividend - (3,309,519) -------------- -------------- Net loss attributable to common shareholders $(24,062,031) $(16,340,716) ============== ============== Basic and diluted loss per share attributed to common stockholders $(2.70) ============== Weighted-average common shares outstanding 8,915,952 ============== HORIZON PCS, INC. Consolidated Balance Sheets As of March 31, 2005, and December 31, 2004 Successor Successor Company Company ------------- ------------- March 31, December 31, 2005 2004 (Unaudited) (Audited) ------------- ------------- ASSETS Current assets: Cash and cash equivalents $50,380,262 $55,540,540 Accounts receivable, net of allowance for doubtful accounts 9,325,386 10,353,496 Equipment inventory 403,698 387,967 Prepaid expenses and other current assets 1,140,788 1,703,024 ------------- ------------- Total current assets 61,250,134 67,985,027 Other assets: Debt issuance costs, net of amortization 3,940,388 4,071,734 Deferred activation expense and other assets 723,499 443,914 Intangible assets, net 102,514,282 111,432,516 ------------- ------------- Total other assets 107,178,169 115,948,164 Property and equipment, net 91,900,257 106,258,330 ------------- ------------- Total assets $260,328,560 $290,191,521 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $3,080,348 $4,690,792 Accrued liabilities 1,300,850 1,267,038 Accrued interest 3,041,233 6,437,934 Accrued real estate, personal property and other taxes 6,036,284 6,360,404 Payable to Sprint 3,529,270 5,063,351 Deferred service revenue 3,949,869 3,938,128 ------------- ------------- Total current liabilities 20,937,854 27,757,647 Long-term liabilities: Long-term debt 125,000,000 125,000,000 Other long-term liabilities 3,864,870 3,961,136 Deferred activation revenue 558,434 278,848 ------------- ------------- Total long-term liabilities 129,423,304 129,239,984 ------------- ------------- Total liabilities 150,361,158 156,997,631 ------------- ------------- Stockholders' equity: Preferred stock, $0.0001 par value. Authorized 10,000,000 shares, none issued or outstanding - - Common stock, $0.0001 par value. Authorized 25,000,000 shares, 9,013,317 issued and outstanding at March 31, 2005 and 8,909,568 issued and outstanding at December 31, 2004 901 891 Additional paid-in capital 158,070,289 157,234,756 Accumulated deficit (48,103,788) (24,041,757) ------------- ------------- Total stockholders' equity 109,967,402 133,193,890 ------------- ------------- Total liabilities and stockholders' equity $260,328,560 $290,191,521 ============= ============= HORIZON PCS, INC. Consolidated Statements of Cash Flows (Unaudited) Successor Predecessor Company Company --------------- -------------- Three Months Three Months Ended Ended March 31, 2005 March 31, 2004 --------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(24,062,031) $(13,031,197) --------------- -------------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 25,565,966 8,189,322 Non-cash compensation expense 835,543 48,348 Non-cash interest expense 131,346 - Gain on sale of subscribers (720,317) - Bad debt expense 1,073,437 1,533,761 Loss on disposal of assets - - Change in: Accounts receivable (45,327) (3,521,251) Equipment inventory (15,731) (211,814) Interest receivable and other 562,235 (1,117,548) Accounts payable (1,610,444) 3,594,705 Accrued liabilities and deferred service revenue (3,675,268) 495,358 Liabilities subject to compromise - (309,205) Payable to Sprint (1,534,081) (400,572) Other assets and liabilities, net (96,265) (117,586) --------------- -------------- Total adjustments 20,471,094 8,183,518 --------------- -------------- Net cash flows from operating activities (3,590,937) (4,847,679) --------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net (2,298,175) (473,857) Proceeds from the sale of property and equipment 8,517 - Proceeds from selling subscribers, net 720,317 - --------------- -------------- Net cash flows from investing activities (1,569,341) (473,857) --------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of stock options - - Notes payable - borrowings - - Notes payable - repayments - - --------------- -------------- Net cash flows from financing activities - - --------------- -------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,160,278) (5,321,536) CASH AND CASH EQUIVALENTS, BEGINNING 55,540,540 70,651,046 --------------- -------------- CASH AND CASH EQUIVALENTS, ENDING $50,380,262 $65,329,510 =============== ============== HORIZON PCS, INC. Reconciliation of Adjusted EBITDA and Other Non-GAAP Financial Measures (Unaudited) Successor Predecessor Company Company -------------- -------------- Three Months Three Months Ended Ended March 31, 2005 March 31, 2004 -------------- -------------- EBITDA: Net loss $(24,062,031) $(13,031,197) Net interest expense 3,566,494 2,065,149 Depreciation and amortization 25,565,966 8,189,322 Gain on sale of subscribers (720,317) - Interest income and other net (273,644) (148,621) Income tax expense (benefit) - - Non-cash compensation expense 835,543 48,348 Restructuring items - 5,520,401 -------------- -------------- Adjusted EBITDA $4,912,011 $2,643,402 -------------- -------------- Provision for bad debts 1,073,437 1,533,761 Cash paid for reorganization expenses - (3,555,263) Non-cash interest items 131,346 - Net interest expense (3,566,494) (2,065,149) Working capital changes (6,141,237) (3,404,430) -------------- -------------- Net cash flow from operating activities $(3,590,937) $(4,847,679) ============== ============== HORIZON PCS, INC. Reconciliation of Adjusted EBITDA and Other Non-GAAP Financial Measures (Unaudited) Successor Predecessor Company Company -------------- -------------- Three Months Three Months Ended Ended March 31, 2005 March 31, 2004 -------------- -------------- ARPU: Subscriber revenues $27,730,982 $45,658,557 Roaming revenues 15,216,495 16,241,595 -------------- -------------- Total subscriber revenue $42,947,477 $61,900,152 ============== ============== Average subscribers 183,000 289,200 ARPU (including roaming) $78 $71 ARPU (excluding roaming) $51 $53 CPGA: Selling and marketing $5,702,086 $6,614,123 Cost of equipment 2,073,233 1,734,049 Equipment revenues (1,063,379) (1,275,362) -------------- -------------- Total cost of gross additions $6,711,940 $7,072,810 ============== ============== Gross additions 19,920 23,670 CPGA $337 $299 CCPU: Cost of service $23,703,411 $44,055,153 General and administrative 7,620,115 8,128,787 Restructuring items - 5,520,401 -------------- -------------- Total cash costs $31,323,526 $57,704,341 ============== ============== Roaming expense 8,217,633 10,926,552 -------------- -------------- Cash costs less roaming $23,105,893 $46,777,789 ============== ============== Average subscribers 183,000 289,200 CCPU $57 $60 CCPU (excluding restructuring) $57 $67 CCPU (excluding roaming) $42 $48 CCPU (excluding roaming and restructuring) $42 $54 *T [ Back To TMCnet.com's Homepage ]