NTELOS Holdings Corp. (“the Company,” NASDAQ: NTLS), a leading
wireless nationwide voice and data communications provider with
operations in Virginia, West Virginia, Pennsylvania, Kentucky,
Ohio, Maryland and North Carolina, today announced operating
results for its third quarter of 2011. The Company completed the
spinoff of Lumos Networks Corp. (“Lumos Networks”), its wireline
operations, on October 31, 2011. These results for the third
quarter of 2011 and for the nine months ended September 30, 2011
include the wireline operations, consistent with historical
consolidated and segment reporting.
“We are delighted to have completed the separation of our
wireless and wireline operations,” said James A. Hyde, president
and chief executive officer of the Company. “This event is clearly
the most significant in the company’s 114 year history and reflects
our commitment to best positioning both companies for the future.
It is truly an exciting time as both companies now move forward
with highly-focused strategies to capitalize on the growth
opportunities unique to each. The process required a tremendous
amount of work on the part of employees in both companies and the
successful completion is a testament to their dedication and
efforts.”
Operating highlights for the third quarter of 2011 include:
- Consolidated adjusted EBITDA (a
non-GAAP measure) was $63.5 million, up 15% over third quarter
2010
- Smartphone and data card sales
represented 76% of wireless postpay gross additions for the
quarter
- Wireless Sprint wholesale revenues for
third quarter 2011 were $35.4 million
- Wireless adjusted EBITDA was $39.6
million, up 9% over third quarter 2010 and 10% over the previous
quarter
Recent Developments
Separation Complete: The Company completed the separation
of its wireless and wireline operations with the spin-off of Lumos
Networks (Nasdaq: LMOS) on October 31, 2011. A reverse split of one
share for every two shares of the Company’s common stock was
completed on this date, after market close, and stockholders of
record on October 24, 2011 received one share of Lumos Networks
common stock for every share of the Company’s common stock held,
after giving effect to the reverse split. In conjunction with the
separation, the Company received a cash distribution from Lumos
Networks of $315 million and paid down $283 million of its credit
facility. The common stock of both the Company and Lumos Networks
began trading separately and “regular-way” at the open on the
Nasdaq Stock Market on November 1, 2011. The Company’s common stock
will trade under the symbol “NTLSD” for approximately 20 trading
days following the separation and will resume trading under the
symbol “NTLS” thereafter.
Declaration of Dividend: On November 3, 2011, the
Company’s Board of Directors declared a quarterly cash dividend on
its common stock in the amount of $0.42 per share to be paid on
January 12, 2012 to stockholders of record on December 16, 2011.
This quarterly dividend is the first for the Company declared on a
post-reverse split, post separation basis.
Business Segment Highlights
Wireless
- Wireless operating revenues for the
third quarter 2011 were $107.3 million, up 7% from third quarter
2010 primarily due to an $8.3 million increase in Sprint wholesale
revenues. Subscriber revenues were $62.5 million compared to $66.1
million in third quarter 2010 due to declines in both postpay and
prepay subscriber revenues. Subscriber revenues for second quarter
2011 were $63.5 million.
- Adjusted EBITDA for Wireless was $39.6
million for the third quarter 2011 compared to $36.4 million for
third quarter 2010, an increase of 9%.
- Retail subscribers were 414,990 as of
September 30, 2011, down 9,806 from the end of the previous
quarter. The subscriber loss was primarily the result of
seasonally-higher third quarter customer churn and slightly lower
sales. Voluntary postpay churn remained stable for the quarter.
Total subscriber churn for third quarter 2011 was 3.7%. Wireless
postpay subscribers were 295,091 at quarter end with postpay gross
subscriber additions of 16,527.
- Prepay gross subscriber additions were
20,015, up 14% from third quarter 2010 and up 4% from second
quarter 2011. These results are primarily due to the continued
success of the $45 per month, all-inclusive rate plan introduced in
June 2011, which eliminated a competitive pricing disadvantage and,
through anticipated churn reductions, potentially enhances lifetime
revenues.
- Revenues from the Sprint wholesale
agreement were $35.4 million for third quarter 2011, up 31% from
third quarter 2010.
- Sales of smartphones represented 66% of
postpay gross additions for third quarter 2011, compared to 17% in
third quarter 2010; sales of smartphones and data cards combined
represented 76% of postpay gross additions. Additionally, nearly
10,000 postpay devices were upgraded to smartphones during third
quarter 2011, compared to approximately 5,200 in third quarter
2010. These related costs are fully reflected in the quarter, while
revenues are expected to continue to benefit future periods. At
September 30, 2011, smartphone and data card penetration of the
postpay subscriber base was 34% compared to 18% at September 30,
2010.
- Postpay ARPU was $56.26 for the third
quarter of 2011, compared to $57.53 for the third quarter of 2010.
Postpay data ARPU for the third quarter increased $1.96, or 14%,
from $14.06 in third quarter 2010, to $16.02.
“We exercised disciplined cost control during the expected
seasonally slow third quarter sales period. This, combined with
continued growth in the Sprint wholesale business, resulted in the
10% sequential increase in adjusted EBITDA,” said Hyde. “We are
encouraged by the increasing wholesale revenues and are optimistic
the improvements we have made in our distribution channels, brand
and value proposition, and device lineup will drive a strong fourth
quarter in our retail business.”
Wireline
Wireline operating revenues for the third quarter 2011 were
$49.5 million compared to $33.8 million for third quarter 2010,
reflecting contributions of FiberNet results. Adjusted EBITDA for
Wireline was $24.8 million for the third quarter 2011, compared to
$19.7 million in third quarter 2010, also reflective of FiberNet
results.
- Competitive Wireline:
Representing 75% of total wireline revenues, Competitive revenues
for third quarter 2011 were $37.1 million, compared to $19.9
million in third quarter 2010. Pro forma for the FiberNet
acquisition and before intercompany wireless eliminations,
Competitive revenues were $38.6 million and $115.4 million for the
third quarter and the first nine months of 2011, respectively,
compared to $39.1 million and $116.5 million for the same periods
last year, respectively. On a pro forma basis, revenues from
Enterprise Data Services, SMB/Residential data and wholesale for
third quarter 2011 increased $2.2 million, or 11%, over third
quarter 2010 and increased $5.7 million, or 10%, for the first nine
months of 2011 compared to the first nine months of 2010. During
the second and third quarters of 2011, NTELOS wireline expanded
Metro Ethernet and IP-based services into 29 new market areas in
West Virginia, Pennsylvania and Maryland. Wholesale revenues
continued gains, as cell sites with fiber increased by 23, to $9.4
million during the third quarter 2011.
Growth from data products was mitigated by
revenue decreases in competitive voice, long distance and other
legacy products resulting primarily from anticipated off-network,
voice customer churn in the acquired markets. On a pro forma basis,
revenues from legacy products were down $2.2 million, or 14% and
$5.4 million, or 12%, for the third quarter and the first nine
months of 2011, respectively, compared to the same periods last
year. Adjusted EBITDA for Competitive Wireline was $15.8 million
for the third quarter 2011, compared to $9.2 million in third
quarter 2010 and $14.2 million pro forma third quarter 2010. For
the first nine months of 2011, pro forma adjusted EBITDA was $45.8
million, a 9% increase over $42.0 million pro forma for the first
nine months of 2010.
- RLEC: RLEC revenues for
the third quarter of 2011 were $12.4 million and were down 11% from
third quarter 2010 and down $0.5 million, or 4% from second quarter
2011, reflecting access revenue losses. The biennial regulatory
access rate reset effective July 1, 2011 negatively impacted RLEC
revenues by approximately $0.6 million in the third quarter of
2011, compared to the previous quarter. RLEC adjusted EBITDA, with
a margin of 73%, was $9.0 million for third quarter 2011, compared
to $10.5 million in third quarter 2010.
Michael B. Moneymaker, president of Lumos Networks said, “We
continue to see strong growth in revenues from enterprise data
products, particularly in the newly integrated markets, and
wireless carrier backhaul is driving significant wholesale revenue
increases across the footprint.” He continued, “With market data
demand only in early stages, we are well positioned for continued
sales successes in these key segments.”
Conference Call
The Company will host a conference call with investors and
analysts to discuss its third quarter and year-to-date 2011 results
tomorrow, November 8, 2011 at 10:00 a.m. ET. To participate,
please dial 1-877-317-6789 [1-866-605-3852 in Canada and
1-412-317-6789 internationally] approximately 10 minutes before the
scheduled start of the call. The conference call will also be
accessible live on the Investor Relations section of the nTelos
website at www.ir.ntelos.com.
An archive of the conference call will be available online at
www.ir.ntelos.com beginning approximately two hours after the call
and continuing until November 21, 2011. A replay will also be
available via telephone by dialing 1-877-344-7529 [1-412-317-0088
internationally] and entering access code 10006250 beginning
approximately two hours after the call and continuing until
November 21, 2011.
Business Outlook
The Company will provide financial guidance updates on the Third
Quarter 2011 Earnings Conference Call scheduled for tomorrow,
November 8, 2011, at 10:00 A.M. ET.
Statements made will be based on management’s current
expectations. These statements are forward-looking and actual
results may differ materially. Please see “Special Note from the
Company Regarding Forward-Looking Statements.”
Non-GAAP Measures
Adjusted EBITDA is defined as net income attributable to NTELOS
Holdings Corp. before interest, income taxes, depreciation and
amortization, accretion of asset retirement obligations, gain/loss
on derivatives, net income attributable to noncontrolling
interests, other expenses/income, equity based compensation
charges, acquisition related charges, and costs related to the
planned separation of the wireless and wireline companies.
ARPU, or average monthly revenues per subscriber/unit with
service, is computed by dividing service revenues per period by the
weighted average number of subscribers with service during that
period. Please see the footnotes in the exhibits for a complete
definition of this measure.
Adjusted EBITDA is a key metric used by investors to determine
if the Company is generating sufficient cash flows to continue to
generate shareholder value, provide liquidity for future growth and
continue to fund dividends and dividend increases, and the
increased weight of this metric reflects the Company’s increased
focus on improving this key metric. ARPU provides management useful
information concerning the appeal of NTELOS rate plans and service
offerings and the Company’s performance in attracting and retaining
high value customers.
Adjusted EBITDA and ARPU are non-GAAP financial performance
measures. They should not be considered in isolation or as an
alternative to measures determined in accordance with GAAP. Please
refer to the exhibits and materials posted on the Company’s website
for a reconciliation of these non-GAAP financial performance
measures to the most comparable measures reported in accordance
with GAAP and for a discussion of the presentation, comparability
and use of such financial performance measures.
About NTELOS
NTELOS Holdings Corp. (NASDAQ: NTLS), operating through its
subsidiaries as “nTelos Wireless,” is headquartered in Waynesboro,
VA, and provides high-speed, dependable nationwide voice and data
coverage for, as of September 30, 2011, approximately 415,000
retail subscribers based in Virginia, West Virginia and portions of
Maryland, North Carolina, Pennsylvania, Ohio and Kentucky. nTelos’s
licensed territories have a total population of approximately 8
million residents, of which its wireless network covers
approximately 5.8 million residents. nTelos is also the exclusive
wholesale provider of network services to Sprint Nextel in the
western Virginia and West Virginia portions of its territories for
all Sprint CDMA wireless customers. Additional information about
NTELOS is available at www.ntelos.com or
www.facebook.com/nteloswireless and
www.twitter.com/#!/ntelos_wireless.
About Lumos Networks
Lumos Networks is a fiber-based service provider in the
Mid-Atlantic region serving carrier, business and residential
customers over a dense fiber network offering data, voice and IP
services. With headquarters in Waynesboro, VA, Lumos Networks
serves Virginia, West Virginia and portions of Pennsylvania,
Kentucky, Ohio, and Maryland over a 5,800 route-mile fiber network.
Detailed information about Lumos Networks is available at
www.lumosnetworks.com.
SPECIAL NOTE FROM THE COMPANY REGARDING FORWARD-LOOKING
STATEMENTS
Any statements contained in this press release or made on the
above-referenced conference call that are not statements of
historical fact, including statements about our beliefs and
expectations, are forward-looking statements and should be
evaluated as such. The words “anticipates,” “believes,” “expects,”
“intends,” “plans,” “estimates,” “targets,” “projects,” “should,”
“may,” “will” and similar words and expressions are intended to
identify forward-looking statements. Such forward-looking
statements reflect, among other things, our current expectations,
plans and strategies, and anticipated financial results, all of
which are subject to known and unknown risks, uncertainties and
factors that may cause our actual results to differ materially from
those expressed or implied by these forward-looking statements.
Many of these risks are beyond our ability to control or predict.
Because of these risks, uncertainties and assumptions, you should
not place undue reliance on these forward-looking statements.
Furthermore, forward-looking statements speak only as of the date
they are made. We do not undertake any obligation to update or
review any forward-looking information, whether as a result of new
information, future events or otherwise. Important factors with
respect to any such forward-looking statements, including certain
risks and uncertainties that could cause actual results to differ
from those contained in the forward-looking statements, include,
but are not limited to: (i) for the wireless business: rapid
development and intense competition in the telecommunications
industry; adverse economic conditions; operating and financial
restrictions imposed by our senior credit facility; cash and
capital requirements; declining prices for services we provide; the
potential to experience a high rate of customer turnover; the
dependence on our affiliation with Sprint Nextel (“Sprint”); a
potential increase in roaming rates and wireless handset subsidy
costs; increased costs to support continued growth of data usage on
our network; the potential for Sprint to build networks in our
markets; federal and state regulatory fees, requirements and
developments; loss of our cell sites; the rates of penetration in
the wireless telecommunications industry; our reliance on certain
suppliers and vendors; and other unforeseen difficulties that may
occur; and (ii) for the wireline business: intense competition in
wireline industry; its ability to successfully integrate the
operations of the FiberNet business; its failure to realize
synergies and cost savings from the acquisition of the FiberNet
business or delay in realization thereof; adverse economic
conditions; operating and financial restrictions imposed wireline
business by its credit facilities; the cash and capital
requirements; declining prices for services it provides; the
potential to experience a high rate of customer turnover; federal
and state regulatory fees, requirements and developments; reliance
on certain suppliers and vendors; and other unforeseen difficulties
that may occur. These risks and uncertainties are not intended to
represent a complete list of all risks and uncertainties inherent
in the wireline and wireless businesses, and should be read in
conjunction with the more detailed cautionary statements and risk
factors included in our SEC filings, including our Annual Reports
filed on Forms 10-K, and in the SEC filings of Lumos Networks
Corp., including its registration statement filed on Form 10.
Exhibits:
- Condensed Consolidated Balance
Sheets
- Condensed Consolidated Statements of
Operations
- Summary of Operating Results
- Reconciliation of Net Income
Attributable to NTELOS Holdings Corp. to Operating Income
- Reconciliation of Operating Income to
Adjusted EBITDA
- Wireline Customers and Network
Statistics
- Wireless Customer Detail
- Wireless Key Performance Indicators
(KPI)
- Wireless ARPU Reconciliation
- Unaudited Pro Forma Financial
Statements of NTELOS Holdings Corp.
NTELOS Holdings Corp.
Condensed Consolidated Balance Sheets
unaudited
September 30, 2011 December 31, 2010
(in thousands)
ASSETS Current Assets Cash $
26,363 $ 15,676 Restricted cash 1 8,498 9,210 Accounts receivable,
net 56,596 56,308 Inventories and supplies 9,301 7,120 Other
receivables 4,621 2,398 Income tax receivable 1,115 11,008
Prepaid expenses and other 14,042
12,217 120,536 113,937
Securities and investments 1,435 1,236 Property,
plant and equipment, net 601,066 566,949 Other Assets
Goodwill 198,278 198,278 Franchise rights 32,000 32,000 Customer
relationship intangibles, net 62,214 75,601 Trademarks and other
intangibles, net 6,173 7,636 Radio spectrum licenses in service
115,449 115,449 Radio spectrum licenses not in service 16,865
16,859 Deferred charges and other assets
18,315 15,612 449,294
461,435 Total Assets $ 1,172,331
$ 1,143,557
LIABILITIES AND EQUITY
Current Liabilities Current portion of long-term debt $ 8,659 $
8,567 Accounts payable 36,792 31,593 Dividends payable 11,822
11,749 Advance billings and customer deposits 22,615 23,304 Accrued
compensation 6,625 8,792 Accrued interest 86 3,727 State income tax
payable 1,165 - Accrued operating taxes 5,699 3,168 Other
accrued liabilities 6,711 6,986
100,174 97,886 Long-Term
Liabilities Long-term debt 736,114 740,526 Other long-term
liabilities 148,888 125,894
885,002 866,420 Equity
187,155 179,251 Total
Liabilities and Equity $ 1,172,331 $ 1,143,557
1
During 2010, the Company received Federal stimulus awards,
providing 50% funding, to bring broadband services and
infrastructure to Alleghany County, Virginia and to provide
wireless broadband service and infrastructure to Hagerstown,
Maryland. The Company was required to deposit 100% of its portion
for both grants ($9.2 million) into pledged accounts in advance of
any reimbursements, to be drawn down ratably following
reimbursement approvals.
NTELOS Holdings Corp.
Condensed
Consolidated Statements of Operations Three months
ended: Nine-months ended: unaudited
(in thousands, except per share amounts)
September 30, 2011 September 30, 2010
September 30, 2011 September 30, 2010
Operating Revenues $ 156,927 $ 134,267 $ 466,973 $ 404,140
Operating Expenses 1 Cost of sales and services (exclusive of items
shown separately below) 53,642 43,582 158,899 128,086 Customer
operations 32,512 29,360 101,719 88,829 Corporate operations 2,3
12,428 8,563 33,442 27,177 Depreciation and amortization 27,002
21,736 78,398 65,329 Accretion of asset retirement
obligations 205 219
588 556
125,789 103,460
373,046 309,977 Operating Income
31,138 30,807 93,927 94,163 Other Income (Expenses) Interest
expense (8,409 ) (11,124 ) (27,787 ) (31,238 ) Loss on derivatives
18 - (233 ) - Other (expense) income, net 23
(645 ) (1,592 )
(614 ) 22,770 19,038 64,315 62,311 Income Tax Expense
9,022 7,847
26,085 25,009 Net Income 13,748 11,191
38,230 37,302 Net Income Attributable to Noncontrolling
Interests (483 ) (368 ) (1,408 ) (1,146 )
Net Income
Attributable to NTELOS Holdings Corp. $ 13,265
$ 10,823 $ 36,822 $ 36,156
Basic and Diluted Earnings per Common Share
Attributable to NTELOS Holdings Corp. Stockholders: 4 Income
per share - basic $ 0.64 $ 0.52 $ 1.77 $ 1.75 Income per share -
diluted $ 0.63 $ 0.52 $ 1.75 $ 1.74 Weighted average shares
outstanding - basic 20,799 20,682 20,767 20,650 Weighted average
shares outstanding - diluted 21,084 20,874 21,049 20,830
Cash Dividends Declared per Share - Common Stock $ 0.56 $ 0.56 $
1.68 $ 1.68 Note: First nine months of 2011 includes
the operating results of FiberNet, acquired on December 1, 2010.
1 Includes equity based compensation charges related to all
of the Company’s share-based awards and the Company’s 401(k)
matching contributions of $1.8 million and $1.5 million for the
third quarters of 2011 and 2010, respectively; and $5.4 million and
$4.2 million for the nine months ended September 30 of 2011 and
2010, respectively. 2 First quarter 2010 included a $0.9
million charge related to severance benefits pursuant to an
executive employment agreement. Please see Form 8-K filed with the
SEC on March 12, 2010 for additional information. 3 Third
quarter 2011 includes $3.4 million of legal and consulting
services, and other costs associated with the spearation of the
wireless and wireline operations; for the nine months ended
September 30, 2011, these costs were $5.3 million. 4 All
share and per-share amounts presented in this quarterly report on
Form 10-Q have been adjusted for the impact of the reverse stock
split which occurred after market close on October 31, 2011 in
connection with the Business Separation.
NTELOS Holdings
Corp.
Summary of Operating Results
unaudited (in
thousands)
Three months ended: Nine months ended:
September 30, 2010
September 30, 2011 September 30, 2010
September 30, 2011 Operating Revenues
Wireless PCS Operations $ 100,372 $ 107,316 $ 304,020 $ 316,371
Subscriber Revenues 65,983 62,742 199,920 191,430
Wholesale/Roaming Revenues, net 28,713 37,057 85,060 103,462
Equipment Revenues 5,316 7,143 17,949 20,365 Other Revenues 360 374
1,091 1,114 Wireline Operations Competitive Wireline 19,851
37,085 58,148 111,387 RLEC 13,933
12,422 41,595
38,919 Wireline Total 33,784 49,507 99,743
150,306 Other 111 104 377 296
$ 134,267 $
156,927 $ 404,140
$ 466,973 Operating Expenses (before
depreciation & amortization, asset impairment charges,
accretion of asset retirement obligations, equity based
compensation, acquisition related charges and costs related to the
planned separation of the wireless and wireline companies, a
non-GAAP Measure of operating expenses) Wireless PCS Operations
$ 63,956 $ 67,720 $ 191,090 $ 204,141 Cost of Sales and Services -
Cost of Sales - Equipment 7,246 8,472 21,622 25,469 Cost of Sales -
Access & Other 9,669 8,824 28,283 25,863 Maintenance and
Support 15,870 17,342 46,266 49,999 Customer Operations 25,301
26,945 76,517 83,867 Corporate Operations 5,870 6,137 18,402 18,943
Wireline Operations Competitive Wireline 10,687
21,255 31,669 65,329 RLEC 3,428
3,413 11,028
10,309 Wireline Total 14,115 24,668 42,697 75,638
Other 1 1,112 1,016 5,274 3,499
$ 79,183 $
93,404 $ 239,061
$ 283,278 Adjusted EBITDA (a non-GAAP
Measure) 1 Wireless PCS Operations $ 36,416 $ 39,596 $ 112,930 $
112,230 Wireline Operations Competitive Wireline 9,164
15,830 26,479 46,058 RLEC 10,505
9,009 30,567
28,610 Wireline Total 19,669 24,839 57,046 74,668
Other 1 (1,001 ) (912 ) (4,897 ) (3,203 )
$ 55,084
$ 63,523 $ 165,079
$ 183,695 Capital Expenditures
2 Wireless PCS Operations $ 9,669 $ 14,208 $ 29,625 $ 35,051
Wireline Operations Competitive Wireline 5,339 10,765 22,361
38,389 RLEC 2,411
4,249 7,811 10,426
Wireline Total 7,750 15,014 30,172 48,815 Other 2 2,291
6,297 7,445 12,150
$
19,710 $ 35,519
$ 67,242 $ 96,016
Adjusted EBITDA less Capital Expenditures (a non-GAAP
measure) Wireless PCS Operations $ 26,747 $ 25,388 $ 83,305 $
77,179 Wireline Operations Competitive Wireline 3,825 5,065
4,118 7,669 RLEC 8,094
4,760 22,756
18,184 Wireline Total 11,919 9,825 26,874 25,853
Other 1 (3,292 ) (7,209 ) (12,342 ) (15,353 )
$ 35,374 $
28,004 $ 97,837
$ 87,679 1 First quarter 2010
includes a $0.9 million charge related to severance benefits
pursuant to an executive employment agreement. Please see Form 8-K
filed with the SEC on March 12, 2010 for additional information.
2 Includes information technology capital expenditures of
$2.9 million and $3.9 million for the quarter and nine months ended
September 30, 2011, respectively, in connection with the separation
of the wireless and wireline operations.
NTELOS Holdings
Corp.
Reconciliation of Net Income Attributable to NTELOS Holdings
Corp. to Operating Income (in thousands)
Three months ended: Nine months ended:
September 30, 2010 September
30, 2011 September 30, 2010 September 30,
2011 Net income attributable to NTELOS
Holdings Corp. $ 10,823 $
13,265 $ 36,156 $ 36,822 Net
income attributable to noncontrolling interests 368
483 1,146
1,408 Net Income 11,191 13,748 37,302 38,230 Interest
expense 11,124 8,409 31,238 27,787 (Gain) loss on derivatives - (18
) - 233 Income taxes 7,847 9,022 25,009 26,085 Other expense
(income) 645 (23 ) 614
1,592
Operating income
$ 30,807 $ 31,138
$ 94,163 $ 93,927
Wireless $ 21,702 $ 24,646 $ 68,844 $ 67,972 Competitive
Wireline 5,214 8,361 14,690 23,469 RLEC 6,933 5,373 19,740 17,706
Other (3,042 ) (7,242 ) (9,111 )
(15,220 )
Operating income $
30,807 $ 31,138 $
94,163 $ 93,927
NTELOS Holding Corp.
Reconciliation of Operating Income to
Adjusted EBITDA
(dollars in thousands)
2010 2011 Wireless
Competitive Wireless Competitive
PCS Wireline RLEC
Other Total PCS
Wireline RLEC Other
Total
For The Three Months Ended September
30
Operating Income $ 21,702 $ 5,214 $ 6,933 $ (3,042 ) $
30,807 $ 24,646 $ 8,361 $ 5,373 $ (7,242 ) $ 31,138 Depreciation
and amortization 14,348 3,896
3,474 18
21,736 14,592
7,367 3,530 1,513
27,002 Sub-total: 36,050
9,110 10,407
(3,024 ) 52,543 39,238
15,728 8,903
(5,729 ) 58,140 Accretion of
asset retirement obligations 198 15 5 1 219 175 24 6 - 205 Equity
based compensation 168 18 93 1,194 1,473 183 78 100 1,428 1,789
Acquisition related charges 1 - 21 - 828 849 - - - (10 ) (10 )
Business separation charges 2 -
- - -
- - -
- 3,399
3,399 Adjusted EBITDA $ 36,416 $ 9,164
$ 10,505 $ (1,001 ) $ 55,084
$ 39,596 $ 15,830 $ 9,009
$ (912 ) $ 63,523 Adjusted EBITDA
Margin 36.3 % 46.2 % 75.4 % NM 41.0 % 36.9 % 42.7 % 72.5 % NM 40.5
%
For The Nine Months Ended September 30
Operating Income $ 68,844 $ 14,690 $ 19,740 $ (9,111 ) $
94,163 $ 67,972 $ 23,469 $ 17,706 $ (15,220 ) $ 93,927 Depreciation
and amortization 42,981 11,755
10,535 58
65,329 43,183
22,288 10,588 2,339
78,398 Sub-total: 111,825
26,445 30,275
(9,053 ) 159,492
111,155 45,757 28,294
(12,881 ) 172,325
Accretion of asset retirement obligations 580 (41 ) 16 1 556 502 67
18 1 588 Equity based compensation 525 54 276 3,327 4,182 573 219
298 4,274 5,364 Acquisition related charges 1 - 21 - 828 849 - 15 -
55 70 Business separation charges 2 -
- - -
- - -
- 5,348
5,348 Adjusted EBITDA $ 112,930
$ 26,479 $ 30,567 $ (4,897 ) $
165,079 $ 112,230 $ 46,058
$ 28,610 $ (3,203 ) $ 183,695
Adjusted EBITDA Margin 37.1 % 45.5 % 73.5 % NM 40.8 % 35.5 % 41.3 %
73.5 % NM 39.3 % 1 Acquisition related charges
represent legal and professional fees related to the acquisition of
FiberNet that closed on December 1, 2010. 2 Charges for
legal and consulting services costs in connection with the
separation of the wireless and wireline operations.
NTELOS Holdings Corp.
Wireline Customers and
Network Statistics
Quarter Ended:
9/30/2010 12/31/2010 3/31/2011
6/30/2011 9/30/2011 Competitive
voice connections 1 49,474 134,071 129,734
127,561 125,500 RLEC Broadband Customers 2 14,728
14,706 14,643 14,542 14,947 Total Broadband Connections 2 25,302
32,994 33,453 33,774 34,747 Video Subscribers 2,669 2,849 2,997
3,152 3,439 RLEC Total Access Lines 36,233 35,422 34,920 34,489
33,840 On-Network Buildings 3 705 752 830 903 949 Fiber-Fed
Cell Sites 3 63 71 91 109 132 Co-Locations 142 143 144 146 147
Long-Haul Fiber Miles 4,940 4,941 5,767 5,788 5,801 1
Includes customer Primary Rate Interface (PRI) line equivalents at
23 lines per PRI. Excludes intercompany PRI lines. 2
Includes customers or customer equivalents for DSL, dedicated
Internet access, wireless portable broadband, broadband over fiber
and metro Ethernet. All revenues from broadband products, including
RLEC broadband, are recorded in the operating revenues of the
Competitive Wireline segment. 3 Includes statistics for
NTELOS only, excluding FiberNet.
NTELOS Holdings
Corp.
Wireless Customer
Detail
Nine months ended: Quarter
Ended:
9/30/10
12/31/10
3/31/11
6/30/11
9/30/11
9/30/2010
9/30/2011 Total Wireless Subscribers
Beginning Subscribers 439,348
433,698 432,433 429,510 424,796 438,529
432,433 Prepay 136,289 128,018 125,664 127,854 122,771
131,783 125,664 Postpay 303,059 305,680 306,769 301,656 302,025
306,746 306,769 Gross Additions 38,935 44,188 42,852 37,113
36,542 120,459 116,507 Prepay 17,484 22,899 24,992 19,193 20,015
65,371 64,200 Postpay 21,451 21,289 17,860 17,920 16,527 55,088
52,307 Disconnections 44,585 45,453 45,775 41,827 46,348
125,290 133,950 Prepay 25,539 25,194 23,071 24,471 23,425 68,521
70,967 Postpay 19,046 20,259 22,704 17,356 22,923 56,769 62,983
Net Additions (Losses) (5,650) (1,265) (2,923) (4,714)
(9,806) (4,831) (17,443) Prepay (8,055) (2,295) 1,921 (5,278)
(3,410) (3,150) (6,767) Postpay 2,405 1,030 (4,844) 564 (6,396)
(1,681) (10,676) Ending Subscribers 433,698 432,433 429,510
424,796 414,990 433,698 414,990 Prepay 128,018 125,664 127,854
122,771 119,899 128,018 119,899 Postpay 305,680 306,769 301,656
302,025 295,091 305,680 295,091
NTELOS Holdings Corp.
Wireless
Key Performance Indicators Three months ended:
Nine months ended: September 30,
2010 September 30, 2011 September 30, 2010
September 30, 2011 Average
Subscribers (weighted monthly) 435,042 418,923 439,930 425,391
Gross Subscriber Revenues ($000) $ 66,067 $ 62,546 $
200,352 $ 192,116 Revenue Accruals & Deferrals (6 ) 295 (208 )
(361 ) Eliminations & Other Adjustments (78 )
(99 ) (224 ) (325 )
Net
Subscriber Revenues ($000) $ 65,983 $ 62,742 $ 199,920 $
191,430
Average Monthly Revenue per Subscriber/Unit
(ARPU) 1 $ 50.62 $ 49.77 $ 50.60 $ 50.18
Average
Monthly Revenue per Postpay Subscriber/Unit (ARPU) 1 $ 57.53 $
56.26 $ 56.72 $ 56.86
Average Monthly Data Revenue per
Subscriber/Unit (ARPU) 1 $ 12.43 $ 16.17 $ 11.59 $ 15.38
Average Monthly Data Revenue per Postpay
Subscriber/Unit (ARPU) 1 $ 14.06 $ 16.02 $ 13.04 $ 15.94
Strategic Network Alliance Revenues ($000)
Home Voice $ 14,890 $ 17,433 $ 43,755 $ 50,624 Travel Voice
4,676 5,391 13,237
14,933 Total Voice 19,566
22,824 56,992
65,557 Home Data 3,941
5,443 11,047 14,733 Travel Data
2,686 7,136 6,492
18,818 Total Data 6,627
12,579 17,539
33,551 Revenue Minimum Adjustment 872
- 6,657 -
Total $ 27,065 $ 35,403 $
81,188 $ 99,108
Monthly Postpay
Subscriber Churn 2.1 % 2.6 % 2.1 % 2.3 %
Monthly Blended
Subscriber Churn 3.4 % 3.7 % 3.2 % 3.5 %
Total Cell
Sites (period ending) 1,299 1,337
EV-DO Cell
Sites (period ending; sub-set of Total Cell Sites above) 1,081
1,150
Cell Sites under the Strategic Network Alliance
Agreement (period ending; sub-set of Total Cell Sites above)
764 783 1 Average monthly revenues per
subscriber/unit in service, or ARPU, is an industry metric that
measures service revenues per period divided by the weighted
average number of handsets in service during that period. ARPU as
defined may not be similar to ARPU measures of other companies, is
not a measurement under GAAP and should be considered in addition
to, but not as a substitute for, the information contained in the
Company’s statement of operations. The Company closely monitors the
effects of new rate plans and service offerings on ARPU in order to
determine their effectiveness. ARPU provides management useful
information concerning the appeal of NTELOS rate plans and service
offerings and the Company’s performance in attracting and retaining
high value customers.
NTELOS Holdings Corp.
Wireless ARPU
Reconciliation Three months ended: Nine
months ended: September 30, 2010
September 30, 2011 September 30, 2010
September 30, 2011 Average Revenue per
Handset/Unit (ARPU) 1
(amounts in thousands except for subscribers and ARPU)
Operating Revenues $ 134,267 $ 156,927 $ 404,140 $ 466,973
Less: Wireline and other operating revenue (33,895 )
(49,611 ) (100,120 )
(150,602 ) Wireless communications revenue 100,372 107,316 304,020
316,371 Less: Equipment revenue from sales to new customers (1,695
) (2,284 ) (6,296 ) (6,213 ) Less: Equipment revenue from sales to
existing customers (3,621 ) (4,859 ) (11,653 ) (14,153 ) Less:
Wholesale revenue (28,713 ) (37,057 ) (85,060 ) (103,462 ) Plus
(Less): Other revenues, eliminations and adjustments
(276 ) (570 ) (659 ) (427
) Wireless gross subscriber revenue $ 66,067 $ 62,546 $ 200,352 $
192,116 Less: Paid in advance subscriber revenue (13,930 )
(11,946 ) (45,583 ) (37,170 ) (Less) Plus: Adjustments
211 (235 ) 151
(871 ) Wireless gross postpay subscriber revenue
$ 52,348 $ 50,365 $ 154,920
$ 154,075 Average subscribers
435,042 418,923
439,930 425,391 Total ARPU $
50.62 $ 49.77 $ 50.60 $
50.18 Average postpay subscribers
303,329 298,387 303,463
301,064 Postpay ARPU $ 57.53
$ 56.26 $ 56.72 $ 56.86
Wireless gross subscriber revenue $ 66,067 $ 62,546 $
200,352 $ 192,116 Less: Wireless voice and other feature revenue
(49,845 ) (42,218 )
(154,455 ) (133,230 ) Wireless data revenue $
16,222 $ 20,328 $ 45,897
$ 58,886 Average subscribers 435,042
418,923 439,930
425,391 Total Data ARPU $ 12.43
$ 16.17 $ 11.59 $ 15.38
Wireless gross postpay subscriber revenue $ 52,348 $ 50,365
$ 154,920 $ 154,075 Less: Wireless postpay voice and other feature
revenue (39,557 ) (36,028 )
(119,300 ) (110,889 ) Wireless postpay data
revenue $ 12,791 $ 14,337 $
35,620 $ 43,186 Average postpay
subscribers 303,329 298,387
303,463 301,064
Postpay data ARPU $ 14.06 $ 16.02
$ 13.04 $ 15.94 1 Average
monthly revenues per subscriber/unit with service, or ARPU, is an
industry metric that measures service revenues per period divided
by the weighted average number of subscribers with service during
that period. ARPU as defined may not be similar to ARPU measures of
other companies, is not a measurement under GAAP and should be
considered in addition to, but not as a substitute for, the
information contained in the Company’s statement of operations. The
Company closely monitors the effects of new rate plans and service
offerings on ARPU in order to determine their effectiveness. ARPU
provides management useful information concerning the appeal of
NTELOS rate plans and service offerings and the Company’s
performance in attracting and retaining high value customers.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS AND BALANCE
SHEET
On October 31, 2011 (the “Distribution Date”), NTELOS
Holdings Corp. completed the spin-off of its wireline operations
(the “Business Separation”) with the distribution to its
stockholders of all of the common stock of Lumos Networks Corp.
(“Lumos Networks”). A reverse split of one share for every two
shares of NTELOS Holdings Corp. (“NTELOS” or the “Company”) common
stock was completed after market close on October 31, 2011 and
before the distribution of Lumos Networks common stock to the
NTELOS stockholders. In the distribution, NTELOS stockholders of
record on October 24, 2011 received one share of Lumos
Networks common stock for every share of NTELOS common stock held,
after giving effect to the above-described reverse stock split.
Prior to the completion of the Business Separation, the two
companies entered into a Separation and Distribution Agreement and
other agreements that govern the post-Business Separation
relationship. These agreements allow for a settlement process
surrounding the transfer of assets and liabilities with the final
settlement occurring prior to December 31, 2011. After the
Distribution Date, the Company does not beneficially own any shares
of Lumos Networks and, following such date, will not consolidate
Lumos Networks financial results for the purpose of its own
financial results. Beginning with the Company’s annual financial
statements for 2011, the historical financial results of Lumos
Networks will be reflected in the Company’s consolidated financial
statements as discontinued operations.
The accompanying unaudited pro forma condensed consolidated
financial information presented below has been derived from the
Company’s unaudited condensed consolidated financial statements as
of and for each of the applicable periods shown below. The pro
forma adjustments to the pro forma condensed consolidated financial
information give effect to the Business Separation and the other
transactions contemplated by the Separation and Distribution
Agreement. This unaudited pro forma condensed consolidated
financial information should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and the Company’s unaudited consolidated
financial statements and notes related to those unaudited
consolidated financial statements included in the Company’s Form
10-Q for the each of the periods ended March 31, 2011,
June 30, 2011 and September 30, 2011.
Each of the unaudited pro forma condensed consolidated statement
of operations for the three month periods ended March 31, June 30
and September 30, 2011, and for the nine months ended September 30,
2011, and the unaudited pro forma condensed consolidated balance
sheet as of September 30, 2011 have each been prepared as if
the Business Separation occurred on January 1, 2011. The pro forma
adjustments are based on the best information available and
assumptions that management believes are reasonable. The unaudited
pro forma condensed consolidated financial information is for
illustrative and informational purposes only and is not intended to
represent or be indicative of what the Company’s results of
operations or financial position would have been had the
transactions contemplated by the Separation and Distribution
Agreement and related transactions occurred on the dates indicated.
The unaudited pro forma condensed consolidated financial
information also should not be considered representative of the
Company’s future results of operations or financial position.
NTELOS’s independent registered public accounting firm has not
examined, reviewed, compiled or applied agreed upon procedures to
the unaudited pro forma condensed consolidated financial
information presented herein and, accordingly, assumes no
responsibility for it.
The pro forma adjustments give effect to the following
transactions provided for in the Business Separation:
- the cash distribution from Lumos
Networks of $315 million (i) to settle with cash intercompany
debt owed by Lumos Networks as of the distribution date ($166
million as of June 30, 2011 on a pro forma basis) and
(ii) to fund NTELOS’s mandatory repayment on its credit
facility;
- the payment of $283 million on the
Company’s credit facility commensurate with the spin-off;
- the reverse split of one share for
every two shares of the Company’s common stock;
- the transfer to Lumos Networks of
assets and liabilities of the former RLEC and the Competitive
Wireline segments of NTELOS; and
- the transfer to Lumos Networks of all
other assets and liabilities related to the ongoing operations of
Lumos Network previously held by NTELOS or its subsidiaries.
See the notes to unaudited pro forma condensed consolidated
financial information for a more detailed discussion of these
events.
The Company expects to incur additional non-recurring separation
costs during the fourth quarter 2011 and into 2012. These costs are
expected to consist of, among other items (i) information
technology (“IT”) systems, licenses, and infrastructure,
(ii) financing, legal, advisory and regulatory costs,
(iii) marketing and facility costs and (iv) employee
retention and other. A majority of total estimated costs related to
the Business Separation were incurred prior to the date of the
Business Separation.
As mentioned above, the Company entered into a transition
services agreement with Lumos Networks under which the Company and
Lumos Networks will provide certain specified services to the other
on an interim basis. These services relate to IT, accounting,
network operations, facilities management, and purchasing and
procurement. The services will generally be provided for up to two
years following the distribution date unless a particular service
is terminated earlier pursuant to the agreement. The Company does
not anticipate that such costs will be materially different from
those allocated to the Company historically. The transition
services agreement is not reflected in this unaudited pro forma
condensed consolidated financial information.
The Company expects that it will incur expenses which previously
were allocated to the wireline segments which it will have to
absorb on a going-forward basis after the Business Separation. For
example, following the transition services periods, the Company’s
human resource cost related to treasury, tax, accounting, legal,
internal audit, human resources, investor relations, information
technology and other corporate functions may differ from the
expenses for such functions, a portion of which were allocated in
the Company’s historical financial statements to the wireline
segments and may differ significantly from those incurred during
the transition services period. Additionally, the Company
anticipates that such other expenses, including those related to
the board of directors and board sub-committees, audit and
centrally managed costs such as insurance and employee benefit
arrangements will be different from the related allocated expenses
in the Company’s historical financial statements. In some cases,
the Company expects that these expenses could be materially
higher.
NTELOS Holdings Corp.
Pro Forma Statements of Operations
1 Three months ended: Nine-months
ended: (unaudited) (in thousands)
March 31, 2011 June 30, 2011
September 30, 2011 September 30, 2011
Operating Revenues $ 104,873 $ 104,339 $ 107,396 $ 316,608
Operating Expenses Cost of sales and services (exclusive of items
shown separately below) 34,853 34,854 36,227 105,934 Customer
operations 29,211 29,879 27,846 86,936 Corporate operations 6,492
5,774 5,635 17,901 Depreciation and amortization and
accretion of asset retirement obligations 14,553
15,171 16,273
45,997 85,109
85,678 85,981
256,768 Operating Income 19,764 18,661 21,415 59,840
Other Income (Expenses) Interest expense (7,144 ) (5,542 ) (5,579 )
(18,265 ) Loss on derivatives (148 ) (103 ) 18 (233 ) Other
(expense) income, net (1,550 ) (72 )
(43 ) (1,665 ) 10,922 12,944 15,811
39,677 Income Tax Expense 4,196
5,704 6,161 16,061
Net Income 6,726 7,240 9,650 23,616 Net Income Attributable
to Noncontrolling Interests (409 ) (431 ) (481 ) (1,321 )
Net Income
Attributable to NTELOS Holdings Corp. $ 6,317
$ 6,809 $ 9,169 $ 22,295 1
The financial results in this presentation have been
adjusted to reflect certain operating revenues previously
eliminated from, and certain corporate expenses which were not
previously allocated to, the NTELOS Holdings Corp. wireless and
wireline segments. These allocations primarily represent corporate
support functions and corporate legal and professional fees,
including audit fees, and equity-based compensation expense related
to equity-based awards granted to employees in corporate support
functions.
NTELOS Holdings Corp.
Reconciliation of Pro Forma
Operating Income to Proforma Adjusted EBITDA Three
months ended: Nine-months ended: (dollars in
thousands)
March 31, 2011 June 30, 2011
September 30, 2011 September 30, 2011 Pro
Forma Operating Income $ 19,764 $ 18,661 $ 21,415 $ 59,840
Depreciation and amortization and accretion of asset retirement
obligations 14,553 15,171 16,273 45,997
Sub-total: 34,317 33,832 37,688 105,837 Equity
based compensation 1,136 1,077 1,005 3,218 Pro
Forma Adjusted EBITDA $ 35,453 $ 34,909 $
38,693 $ 109,055
NTELOS Holdings Corp.
Pro Forma Condensed Balance Sheet
September 30, 2011 (in thousands)
ASSETS Current Assets Cash and restricted cash $ 58,351
Other current assets 59,953 Securities and investments 1,364
Property, plant and equipment, net 292,878 Other
Assets 220,358 Total Assets $ 632,904
LIABILITIES AND EQUITY Current Liabilities $ 62,798
Long-Term Liabilities Long-term debt 454,560 Other long-term
liabilities 54,264 Equity 61,282 Total
Liabilities and Equity $ 632,904
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