APCS Alamosa Holdings (MM)

Highlights: -- Income from Operations increased 166% to $34.9 million compared to first quarter pro-forma of $13.1 million -- Adjusted EBITDA increased 33% to $91.7 million compared to first quarter pro-forma of $69.0 million -- Exchanged 222,817 preferred stock units for 16.8 million newly issued shares of common stock -- As previously announced: - Subscribers increased approximately 52,000 to 1.447 million - Average monthly customer churn declined to 2.1 percent Alamosa Holdings, Inc. (NASDAQ: APCS), a PCS Affiliate of Sprint (NYSE: FON) today reported financial and operational results for the second quarter ended June 30, 2005. Reported results also reflect customer results for net subscriber additions, total direct subscribers and average monthly customer churn previously reported on July 15, 2005. For comparison purposes, the Company is also providing condensed pro-forma statements of operations and certain operating metrics for the four quarters of 2004 and the first quarter of 2005, assuming the acquisition of AirGate PCS, Inc. had taken place at the beginning of the respective quarters. Total consolidated revenue for the second quarter was $339.4 million comprised of: $237.7 million in subscriber revenues, $90.0 million in travel revenues (including wholesale and resale) and $11.7 million in product sales revenues. Total consolidated revenue grew by 7% from the first quarter of 2005 and 22% from the second quarter of 2004, on a pro-forma basis. Total consolidated Adjusted EBITDA was $91.7 million for the second quarter compared to pro-forma total consolidated Adjusted EBITDA of $69.0 million in the first quarter of 2005 and $68.6 million in the second quarter of 2004. Income from Operations increased 166% or $21.8 million sequentially to $34.9 million in the second quarter from $13.1 million in the first quarter on a pro-forma basis. On a year over year basis, Income from Operations increased $19.7 million on a pro-forma basis. The increase reflects the scale the Company is creating from growth in its subscriber base and growth in its roaming and wholesale revenue. The Company reported a second quarter net loss of $5.6 million or $0.04 per common share, after preferred stock dividends and inducement premiums of approximately $5.6 million and a $14.9 million loss on derivatives associated with the preferred stock due to early conversions and the increase in fair value of stock warrants. The second quarter loss compares to a reported net loss of $3.1 million or $0.02 per common share, after preferred stock dividends, during the first quarter of 2005. On a pro-forma basis, the consolidated Company net loss was $3.9 million for the first quarter of 2005 and $20.1 million during the second quarter of 2004. During the quarter, the Company exchanged 222,817 preferred stock units for 16.8 million shares of newly issued common stock. In addition, the Company spent approximately $39.6 million on fixed asset additions including the launch of 117 new sites, 30 of which were in the former AirGate properties, in the second quarter increasing the covered population to 19.7 million. Net subscriber additions totaled 52,000 during the second quarter, including 3,000 purchased subscribers, compared to 81,000 net additions in the first quarter and 47,000 net additions in the same quarter one year ago on a pro-forma basis. The Company ended the second quarter with 1.447 million subscribers, a 22% increase over 1.188 million subscribers one year ago. The Company reported combined average monthly customer churn of 2.1 percent for the second quarter, compared to 2.3 percent in the first quarter of 2005 and 2.2 percent one year ago on a pro-forma basis. "The second quarter of 2005 was another great quarter for Alamosa. It was highlighted by passing the 1 million customer benchmark in the original Alamosa territories along with new records in terms of Revenues, Adjusted EBITDA and average monthly customer churn," said David E. Sharbutt, Chairman and Chief Executive Officer of Alamosa Holdings, Inc. "Although net subscriber additions in the second quarter were seasonally lower, we achieved solid subscriber growth and continued our positive customer retention trends. We continued to expand and improve the network and distribution system in the Southeast and further rationalized our balance sheet through several induced preferred stock exchanges that significantly reduces our dividend requirements." Mr. Sharbutt concluded by stating, "We are focused on execution and the growth of our business for the second half of 2005." -0- *T SUMMARY OF SECOND QUARTER 2005 OPERATING STATISTICS (a) Consolidated results include Holding Company activity, which is not presented separately Alamosa Alamosa Alamosa Holdings Inc. Holdings Inc. Holdings Inc. Alamosa (consolidated)(a) (consolidated)(a) (consolidated)(a) (combined) Q2 2005 Q1 2005 Q2 2004 ----------------- ----------------- ----------------- Service Revenue (millions) $ 327.7 $ 303.3 $ 198.6 Adjusted EBITDA (millions) $ 91.7 $ 69.0 $ 68.6 Net income (loss) (millions) $ (5.6) $ (3.9) $ (20.1) ---------------- ---------------- ---------------- Total Direct Subscribers 1,447,000 1,395,000 1,188,000 Net Additions (including purchased subscribers) 52,000 81,000 47,000 Wholesale/ Resale Subscribers 282,000 266,000 112,000 ----------------- ---------------- ---------------- ARPU (including roaming & wholesale) $ 77 $ 75 $ 76 ARPU (without roaming & wholesale) $ 56 $ 55 $ 56 CCPU (including roaming) $ 43 $ 41 $ 43 CCPU (without roaming) $ 29 $ 29 $ 31 CPGA $ 361 $ 358 $ 356 ---------------- ---------------- ---------------- Other Select Operating Alamosa Alamosa Alamosa Metrics (Q2 (consolidated)(a) (consolidated)(a) (consolidated)(a) 2005) ----------------- ----------------- ----------------- Cash & ST investment at period-end (millions) $ 159.9 $ 106.3 $ 43.9 Fixed Asset Additions during period (millions) $ 39.6 $ 24.3 $ 15.3 ---------------- ---------------- ---------------- Licensed POPs (millions) 23.2 15.8 7.4 Covered POPs (millions) 19.7 13.3 6.4 Churn (net of 30 day returns) 2.1% 2.0% 2.4% Penetration - Covered POPs 7.3% 7.6% 6.7% ---------------- ---------------- ---------------- Total Voice System Minutes of Use (MOUs) (millions) 4,520 3,066 1,454 Average Voice MOUs Per User (without roaming) 767 723 869 Average Voice MOUs Per User (including roaming) 953 904 1,069 Inbound Roaming Minutes (millions) 983 676 307 Inbound Wholesale & Resale Minutes (millions) 260 235 25 Outbound Roaming Minutes (millions) 796 538 258 ---------------- ---------------- ---------------- *T BUSINESS OUTLOOK The following business outlook for 2005 may be materially affected by competitive conditions, continued development and acceptance of new Vision products and services, changes in pricing plans, the integration of AirGate PCS, Inc., the pending business combination between Sprint and Nextel and general economic conditions, among other things (See "Forward Looking Statements" below): -0- *T AirGate AirGate Alamosa From Pro- Pro-Forma February Forma Combined Alamosa 16, 2005 Combined Year Year ---------------- ---------- --------- ---------- -------- ----------- Adjusted $ 250 $ 65 $ 315 $ 71.5 $ 321.5 EBITDA million million million million million Fixed Asset $ 90 $ 50 $ 140 Additions million million million Net Subscriber Additions 165,000 40,000 205,000 56,000 221,000 Average Monthly Churn - less than 2.4% 2.6% 2.5% 2.6% 2.5% *T CURRENT DEVELOPMENT As announced on August 8, 2005, AirGate PCS, Inc., a wholly-owned subsidiary of Alamosa, filed a lawsuit against Sprint, certain of its affiliates and Nextel Communications, Inc. in the Delaware Court of Chancery alleging, among other things, that following the completion of their pending merger, Sprint may breach the exclusivity covenants contained in its management agreement with AirGate and that Nextel unlawfully interfered with AirGate's exclusive rights under such agreement. The complaint seeks, among other things, an order directing Sprint and its affiliates to specifically perform their contractual obligations under their agreements with AirGate, an injunction preventing Sprint and Nextel from taking any action or entering into any agreement that would violate the exclusivity covenants contained in the agreements, a declaratory judgment declaring the rights, remedies and obligations of the parties under the agreements, and damages or other relief. SECOND QUARTER EARNINGS RELEASE & CONFERENCE CALL Alamosa has scheduled a conference call, which will be broadcast live over the Internet, on Wednesday, August 10, 2005 at 9:00 a.m. ET. Investors and analysts may access the call live via phone by dialing 913-981-5543 and asking for the Alamosa call 10 minutes prior to the start time or listen live over the Internet by logging on to www.alamosapcs.com or www.earnings.com. A telephonic replay of the conference call will be available through Wednesday, August 17, 2005, and may be accessed by calling 719-457-0820 and using the passcode 9400564. An audio archive will be available shortly after the call on the company's website at www.alamosapcs.com or www.earnings.com for 30 days. ABOUT ALAMOSA Alamosa Holdings, Inc. is the largest (based on number of subscribers) PCS Affiliate of Sprint (NYSE: FON), which operates the largest all-digital, all-CDMA Third-Generation (3G) wireless network in the United States. Alamosa has the exclusive right to provide digital wireless mobility communications network services under the Sprint brand name throughout its designated territory located in Texas, New Mexico, Oklahoma, Arizona, Colorado, Utah, Wisconsin, Minnesota, Missouri, Washington, Oregon, Arkansas, Kansas, Illinois, California, Georgia, South Carolina, North Carolina and Tennessee. Alamosa's territory includes licensed population of 23.2 million residents, including 15.8 million residents in Alamosa's territories and 7.4 million residents in the recently acquired AirGate properties. ABOUT SPRINT Sprint offers an extensive range of innovative communication products and solutions, including global IP, wireless, local and multi-product 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. FORWARD LOOKING STATEMENTS Statements contained in this news release that are forward-looking statements including "Business Outlook" data and statements containing terms such as "can", "may", "will", "expect", "plan", and similar terms and statements about the benefits of the merger between Alamosa and AirGate PCS, Inc, are subject to various risks and uncertainties. Such forward-looking statements are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 and are made based on management's current expectations or beliefs as well as assumptions made by, and information currently available to, management. A variety of factors could cause actual results to differ materially from those anticipated in Alamosa's forward-looking statements, including the following factors: Alamosa's dependence on its affiliation with Sprint; shifts in populations or network focus; changes or advances in technology; changes in Sprint's national service plans or fee structure with us; change in population; difficulties in network construction; increased competition in our markets and adverse changes in financial position, condition or results of operations and as outlined in the "Business Outlook" section of this release, competitive conditions, continued development and acceptance of new Vision products and services, changes in pricing plans, the integration of AirGate PCS, Inc., the pending business combination between Sprint and Nextel and general economic conditions, among other things. For a detailed discussion of these and other cautionary statements and factors that could cause actual results to differ from Alamosa's forward-looking statements, please refer to Alamosa's filings with the Securities and Exchange Commission, especially in the "risk factors" sections of Alamosa's Annual Report on Form 10-K for the year ended December 31, 2004 and in subsequent filings with the Securities and Exchange Commission. Investors and analysts should not place undue reliance on forward-looking statements. Definitions of Operating and Non-GAAP Financial Measures We provide readers financial measures generated using generally accepted accounting principles ("GAAP") and using adjustments to GAAP ("Non-GAAP"). These financial measures reflect conventions or standard measures of liquidity, profitability or performance commonly used by the investment community in the telecommunications industry for comparability purposes. The Non-GAAP financial measures used in this release include the following: -- Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") are defined as net income/(loss) plus income taxes, net interest expense, depreciation expense, amortization expense and other non-cash expense items. Adjusted EBITDA is a measure used by the investment community in the telecommunications industry for comparability and is not intended to represent the results of our operations in accordance with GAAP. The financial measures and other operating metrics used in this release include the following: -- ARPU, or average monthly revenue per user, is a measure used to determine the average monthly subscriber revenue earned for subscribers based in our territory. This measure is calculated by dividing subscriber revenues (ARPU) or total service revenues (ARPU with roaming) in our consolidated statement of operations by our average daily subscribers during the period divided by the number of months in the period. -- CCPU, or cash cost per user, is a measure of the costs to operate our business on a per subscriber basis consisting of costs of service and operations, general and administrative expenses and debt exchange expenses in our consolidated statement of operations, plus handset subsidies on equipment sold to existing subscribers (CCPU with roaming) less roaming charges paid to Sprint PCS (CCPU before roaming). These costs are divided by average daily subscribers during the period divided by the number of months in the period to calculate CCPU. -- CPGA, or cost per gross addition, is used to measure the average cost we incur to add a new subscriber in our territory. Costs we incur in calculating this measure include handset subsidies on new subscriber activations, commissions, rebates and other selling and marketing costs. We calculate CPGA by dividing (a) the sum of cost of products sold and selling and marketing expenses associated with transactions with new subscribers during the measurement period, less product sales revenues associated with transactions with new subscribers during the measurement period, by (b) the total number of subscribers activated in our territory during the period (net of activations deactivated within 30 days and activations due to transfers from Sprint PCS and other PCS Affiliates of Sprint into our territory). -- 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 service area and those who deactivated within 30 days of activation) as a percentage of our average daily subscriber base during the period divided by the number of months during the period. -- Licensed POPs represent the number of residents (usually expressed in millions) in our territory in which we have an exclusive right to provide wireless mobility communications services under the Sprint brand name in the PCS wireless spectrum. The number of residents located in our territory does not represent the number of wireless subscribers that we serve or expect to serve in our territory. -- Covered POPs represent the number of residents (usually expressed in millions) covered by our portion of the PCS network of Sprint in our territory. The number of residents covered by our network does not represent the number of wireless subscribers that we serve or expect to serve in our territory. -0- *T ALAMOSA HOLDINGS,INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (dollars in thousands, except share information) June 30, December 31, 2005 2004 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 69,298 $ 129,917 Short term investments 90,642 50,418 Customer accounts receivable, net 85,399 44,687 Receivable from Sprint 20,677 24,809 Interest receivable 228 216 Inventory 13,845 9,136 Prepaid expenses and other assets 19,476 13,170 Deferred customer acquisition costs 5,614 6,337 Deferred tax asset 4,450 4,230 ------------ ------------ Total current assets 309,629 282,920 Property and equipment, net 539,684 441,808 Debt issuance costs, net 8,561 9,086 Early redemption option on preferred stock 7,451 21,387 Goodwill 245,087 -- Intangible assets, net 793,839 416,716 Other noncurrent assets 5,671 4,188 ------------ ------------ Total assets $ 1,909,922 $ 1,176,105 ============ ============ LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLEPREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 29,207 $ 24,692 Accrued expenses 55,007 43,916 Payable to Sprint 35,902 35,852 Interest payable 23,589 21,076 Deferred revenue 25,844 22,549 Current installments of capital leases 110 110 ------------ ------------ Total current liabilities 169,659 148,195 ------------ ------------ Long term liabilities: Capital lease obligations 695 749 Other noncurrent liabilities 9,413 5,835 Deferred tax liability 33,844 16,362 Senior notes 1,092,872 739,141 ------------ ------------ Total long term liabilities 1,136,824 762,087 ------------ ------------ Total liabilities 1,306,483 910,282 ------------ ------------ Commitments and contingencies -- -- Mandatorily redeemable convertible preferred stock: Series B preferred stock, $.01 par value; 750,000 shares authorized; 225,363 and 478,987 shares issued and outstanding, respectively 75,820 161,148 Series C preferred stock, $.01 par value; 500,000 shares authorized; no shares issued -- -- ------------ ------------ Total mandatorily redeemable convertible preferred stock 75,820 161,148 ------------ ------------ Stockholders' equity: Preferred stock, $.01 par value; 8,750,000 shares authorized; no shares issued -- -- Common stock, $.01 par value; 290,000,000 shares authorized; 162,659,994 and 114,895,245 shares issued and outstanding, respectively 1,627 1,149 Additional paid-in capital 1,285,186 860,425 Accumulated deficit (757,080) (756,834) Unearned compensation (2,114) (65) ------------ ------------ Total stockholders' equity 527,619 104,675 ------------ ------------ Total liabilities and stockholders' equity $ 1,909,922 $ 1,176,105 ============ ============ ALAMOSA HOLDINGS, INC CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (dollars in thousands, except per share amounts) For the three months ended June 30, --------------------------- 2005 2004 ------------ ------------ Revenues: Subscriber revenues $ 237,692 $ 133,569 Roaming and wholesale revenues 89,967 51,705 ------------ ------------ Service revenues 327,659 185,274 Product sales 11,720 8,055 ------------ ------------ Total revenue 339,379 193,329 ------------ ------------ Costs and expenses: Cost of service and operations 162,596 91,062 Cost of products sold 29,953 16,379 Selling and marketing 46,011 31,839 General and administrative expenses 9,135 5,706 Merger related expenses -- -- Depreciation and amortization 55,905 25,523 Loss on disposal of property and equipment 131 2,604 Non-cash compensation 716 25 ------------ ------------ Total costs and expenses 304,447 173,138 ------------ ------------ Income from operations 34,932 20,191 Loss on debt extinguishment (482) -- Gain (loss) on derivative instrument (14,925) (11,926) Interest and other income 1,573 221 Interest expense (25,295) (18,952) ------------ ------------ Loss before income taxes (4,197) (10,466) Income tax (expense) benefit 4,193 (240) ------------ ------------ Net loss (4) (10,706) Preferred stock dividend (851) (2,576) Preferred stock conversion premium (4,777) (6,441) ------------ ------------ Net loss attributable to common stockholders $ (5,632)$ (19,723) ============ ============ Net loss per common share, basic and diluted $ (0.04)$ (0.19) ============ ============ Weighted average common shares outstanding, basic and diluted 157,080,740 101,885,776 ============ ============ For the six months ended June 30, --------------------------- 2005 2004 ------------ ------------ Revenues: Subscriber revenues $ 427,672 $ 258,315 Roaming and wholesale revenues 158,144 94,858 ------------ ------------ Service revenues 585,816 353,173 Product sales 21,335 16,846 ------------ ------------ Total revenue 607,151 370,019 ------------ ------------ Costs and expenses: Cost of service and operations 284,871 177,278 Cost of products sold 58,532 36,162 Selling and marketing 91,288 62,832 General and administrative expenses 18,315 11,423 Merger related expenses 1,280 -- Depreciation and amortization 96,559 52,907 Loss on disposal of property and equipment 107 2,910 Non-cash compensation 1,487 51 ------------ ------------ Total costs and expenses 552,439 343,563 ------------ ------------ Income from operations 54,712 26,456 Loss on debt extinguishment (482) (13,101) Gain (loss) on derivative instrument (14,076) 746 Interest and other income 2,673 389 Interest expense (47,649) (37,187) ------------ ------------ Loss before income taxes (4,822) (22,697) Income tax (expense) benefit 4,576 (557) ------------ ------------ Net loss (246) (23,254) Preferred stock dividend (3,000) (5,796) Preferred stock conversion premium (5,506) (6,441) ------------ ------------ Net loss attributable to common stockholders $ (8,752)$ (35,491) ============ ============ Net loss per common share, basic and diluted $ (0.06) $ (0.36) ============ ============ Weighted average common shares outstanding, basic and diluted 143,090,447 98,688,272 ============ ============ ALAMOSA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands) For the six months ended June 30, -------------------------- 2005 2004 ------------- ------------ Cash flows from operating activities: Net loss $ (246) $ (23,254) Adjustments to reconcile net loss to net cash provided by operating activities: Non-cash compensation 1,487 51 Non-cash interest expense on derivative instruments -- 6 Non-cash accretion of asset retirement obligations 144 91 Non-cash (gain) loss on derivative instruments 14,076 (746) Provision for bad debts 5,173 4,114 Depreciation and amortization of property and equipment 48,681 35,945 Amortization of intangible assets 47,878 16,962 Amortization of financing costs included in interest expense 454 488 Amortization of debt premium (1,442) -- Loss on debt extinguishment 482 13,101 Interest accreted on discount notes 13,171 12,056 Deferred income taxes (220) -- Loss on disposal of property and equipment 107 2,910 Merger related expenses 1,280 -- (Increase) decrease in: Receivables (985) (12,579) Inventory (378) 17 Prepaid expenses and other assets (1,394) 1,633 Increase (decrease) in: Accounts payable and accrued expenses (54,271) 10,891 ------------- ------------ Net cash provided by operating activities 73,997 61,686 ------------- ------------ Cash flows from investing activities: Proceeds from sale of assets 214 380 Purchases of property and equipment (65,617) (42,636) Net cash paid in business combination (69,831) -- Merger related expenses (436) -- Change in restricted cash -- 1 Change in short term investments 4,400 (50,119) ------------- ------------ Net cash used in investing activities (131,270) (92,374) ------------- ------------ Cash flows from financing activities: Proceeds from issuance of senior notes -- 250,000 Redemption of senior notes (6,800) -- Repayments of borrowings under senior secured debt -- (200,000) Merger related expenses (844) -- Debt issuance costs -- (8,100) Preferred stock dividends (3,793) (6,053) Preferred stock conversion premium -- (116) Stock options exercised 7,876 719 Shares issued to employee stock purchase plan 267 492 Proceeds from restricted stock sales 2 -- Payments on capital leases (54) (330) ------------- ------------ Net cash provided by (used in) financing activities (3,346) 36,612 ------------- ------------ Net increase (decrease) in cash and cash equivalents (60,619) 5,924 Cash and cash equivalents at beginning of period 129,917 99,644 ------------- ------------ Cash and cash equivalents at end of period $ 69,298 $ 105,568 ============= ============ Supplemental disclosure of non-cash financing and investing activities: Stock issued in business combination $ 330,848 $ -- Warrants assumed in business combination 2,568 -- Fair value of assets acquired in business combination 879,084 -- Fair value of liabilities assumed in business combination (441,518) -- Conversion of preferred stock 85,328 65,626 Preferred stock issued in debt exchange -- 51 Non-cash fixed asset additions 127 -- Asset retirement obligations capitalized 321 75 Capitalized lease obligations incurred -- 67 Change in accounts payable for purchases of property and equipment 3,855 (11,186) ALAMOSA HOLDINGS INC. BALANCE SHEETS AS OF JUNE 30, 2005 Alamosa AirGate PCS, Alamosa (Delaware), Inc. Holdings, Inc. Inc. ------------ ------------- ------------ ASSETS Current Assets: Cash and cash equivalents $55,206 $4,366 $69,298 Short term investments 51,087 39,549 90,642 Customer accounts receivable, net 58,761 26,638 85,399 Receivable from Sprint 17,285 3,392 20,677 Interest receivable 228 -- 228 Intercompany receivable 20,606 -- -- Inventory 10,024 3,821 13,845 Prepaid expenses and other assets 12,146 7,019 19,476 Deferred customer acquisition costs 5,362 252 5,614 Deferred tax asset 4,230 7,611 4,450 ------------ ------------- ------------ Total current assets 234,935 92,648 309,629 Property and equipment, net 449,040 90,644 539,684 Debt issuance costs, net 8,561 -- 8,561 Early redemption option on preferred stock -- -- 7,451 Goodwill -- 255,305 245,087 Intangible assets, net 401,583 392,256 793,839 Other noncurrent assets 4,268 1,403 5,671 ------------ ------------- ------------ Total assets $1,098,387 $832,256 $1,909,922 ============ ============= ============ LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $23,808 $5,399 $29,207 Accrued expenses 51,027 14,787 55,007 Payable to Sprint 23,424 12,478 35,902 Interest payable 21,077 2,512 23,589 Intercompany payable -- 3,010 -- Deferred revenue 19,890 5,954 25,844 Current installments of capital leases 110 -- 110 ------------ ------------- ------------ Total current liabilities 139,336 44,140 169,659 Capital lease obligations 695 -- 695 Other noncurrent liabilities 6,018 1,070 9,413 Deferred tax liability 16,605 27,700 33,844 Senior notes 745,923 346,949 1,092,872 ------------ ------------- ------------ Total liabilities 908,577 419,859 1,306,483 ------------ ------------- ------------ Mandatorily redeemable convertible preferred stock -- -- 75,820 ------------ ------------- ------------ Stockholders' Equity: Preferred stock -- -- -- Common stock -- -- 1,627 Additional paid-in capital 932,059 424,560 1,285,186 Accumulated deficit (740,512) (12,163) (757,080) Unearned compensation (1,737) -- (2,114) ------------ ------------- ------------ Total stockholders' equity 189,810 412,397 527,619 ------------ ------------- ------------ Total liabilities and stockholders' equity $1,098,387 $832,256 $1,909,922 ============ ============= ============ ALAMOSA HOLDINGS, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2005 Alamosa AirGate PCS, Alamosa (Delaware), Inc. Holdings, Inc. Inc. ------------ ------------- ------------ Revenues: Subscriber revenues $163,871 $73,821 $237,692 Roaming and wholesale revenues 66,289 24,776 89,967 ------------ ------------- ------------ Service revenues 230,160 98,597 327,659 Product sales 8,715 3,005 11,720 ------------ ------------- ------------ Total revenue 238,875 101,602 339,379 Costs and expenses: Cost of service and operations 110,615 53,079 162,596 Cost of products sold 22,255 7,698 29,953 Selling and marketing 33,618 12,393 46,011 General and administrative expenses 3,509 5,373 9,135 Depreciation and amortization 28,107 27,798 55,905 Loss on disposal of property and equipment 131 -- 131 Non-cash compensation (47) 550 716 ------------ ------------- ------------ Income (loss) from operations 40,687 (5,289) 34,932 Loss on debt extinguishment (482) -- (482) Loss on derivative instruments -- -- (14,925) Interest and other income 831 706 1,573 Interest expense (19,566) (5,729) (25,295) ------------ ------------- ------------ Income (loss) before income taxes 21,470 (10,312) (4,197) Income tax (expense) benefit (5,493) 3,966 4,193 ------------ ------------- ------------ Net income (loss) $15,977 $(6,346) $(4) ============ ============= ============ ALAMOSA HOLDINGS, INC. STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005 Alamosa AirGate PCS, Alamosa (Delaware), Inc. Holdings, Inc. Inc. ------------ ------------- ------------ Revenues: Subscriber revenues $318,902 $108,770 $427,672 Roaming and wholesale revenues 126,895 32,916 158,144 ------------ ------------- ------------ Service revenues 445,797 141,686 585,816 Product sales 16,682 4,653 21,335 ------------ ------------- ------------ Total revenues 462,479 146,339 607,151 Costs and expenses: Cost of services and operations 212,098 74,440 284,871 Cost of products sold 46,406 12,126 58,532 Selling and marketing 70,138 21,150 91,288 General and administrative expenses 9,611 8,272 18,315 Merger related expenses 436 -- 1,280 Depreciation and amortization 54,456 42,103 96,559 Loss on disposal of property and equipment 107 -- 107 Non-cash compensation 556 550 1,487 ------------ ------------- ------------ Income (loss) from operations 68,671 (12,302) 54,712 Loss on debt extinguishment (482) -- (482) Loss on derivative instruments -- -- (14,076) Interest and other income 1,599 1,025 2,673 Interest expense (39,152) (8,497) (47,649) ------------ ------------- ------------ Income (loss) before income taxes 30,636 (19,774) (4,822) Income tax (expense) benefit (7,044) 7,611 4,576 ------------ ------------- ------------ Net income (loss) $23,592 $(12,163) $(246) ============ ============= ============ ALAMOSA HOLDINGS, INC. STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2005 Alamosa AirGate PCS, Alamosa (Delaware), Inc. Holdings, Inc. Inc. ------------ ------------- ------------ Cash flows from operating activities: Net income (loss) $23,592 $(12,163) $(246) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Non-cash compensation 556 550 1,487 Non-cash accretion of asset retirement obligation 115 29 144 Non-cash loss on derivative instruments -- -- 14,076 Provision for bad debts 3,863 1,310 5,173 Depreciation and amortization of property and equipment 39,323 9,358 48,681 Amortization of intangible assets 15,133 32,745 47,878 Amortization of financing costs included in interest expense 454 -- 454 Amortization of debt premium -- (1,442) (1,442) Loss on debt extinguishment 482 -- 482 Interest accreted on discount notes 13,171 -- 13,171 Deferred income taxes -- (7,611) (220) Loss on disposal of property and equipment 107 -- 107 Merger related expenses 436 -- 1,280 (Increase) decrease in: Receivable from/payable to Parent (22,136) 2,460 -- Receivables (10,426) 9,441 (985) Inventory (888) 510 (378) Prepaid expenses and other assets (59) (3,003) (1,394) Increase (decrease) in: Accounts payable and accrued expenses (6,466) (36,144) (54,271) ------------ ------------- ------------ Net cash provided by (used in) operating activities 57,257 (3,960) 73,997 ------------ ------------- ------------ Cash flows from investing activities: Proceeds from sale of assets 214 -- 214 Purchases of property and equipment (47,555) (18,062) (65,617) Net cash paid in business combination -- 36,314 (69,831) Merger related expenses (436) -- (436) Change in short term investments (676) 5,074 4,400 ------------ ------------- ------------ Net cash provided by (used in) investing activities (48,453) 23,326 (131,270) ------------ ------------- ------------ Cash flows from financing activities: Redemption of senior notes (6,800) -- (6,800) Merger related expenses -- -- (844) Preferred stock dividends -- -- (3,793) Stock options exercised -- -- 7,876 Shares issued to employee stock purchase plan -- -- 267 Proceeds from restricted stock sales -- -- 2 Capital distribution to Parent (73,876) (15,000) -- Payments on capital leases (54) -- (54) ------------ ------------- ------------ Net cash provided by (used in) financing activities (80,730) (15,000) (3,346) ------------ ------------- ------------ Net increase (decrease) in cash and cash equivalents (71,926) 4,366 (60,619) Cash and cash equivalents at beginning of period 127,132 -- 129,917 ------------ ------------- ------------ Cash and cash equivalents at end of period $55,206 $4,366 $69,298 ============ ============= ============ Supplemental disclosure of non-cash financing and investing activities: Capital infusion in business combination $-- $333,416 $-- Stock issued in business combination -- -- 330,848 Warrants assumed in business combination -- -- 2,568 Fair value of assets acquired in business combination -- 888,920 879,084 Fair value of liabilities assumed in business combination -- (449,552) (441,518) Conversion of preferred stock -- -- 85,328 Non-cash fixed asset additions 127 -- 127 Asset retirement obligations capitalized 292 28 321 Change in accounts payable for purchases of property and equipment (973) 4,827 3,855 Computation of Adjusted EBITDA and Reconciliation of Non-GAAP Liquidity Measures (Unaudited) (In thousands) Alamosa Alamosa Holdings, (Delaware), AirGate PCS, Inc. Inc. Inc. --------------------------------------- For the For the For the three three three months months months ended June ended June ended June 30, 30, 30, 2005 2005 2005 ------------ ------------- ------------ Net income (loss) $(4) $15,977 $(6,346) Income tax expense (benefit) (4,193) 5,493 (3,966) Net interest expense 23,722 18,735 5,023 Depreciation and amortization 55,905 28,107 27,798 Non-cash compensation 716 (47) 550 Loss on debt extinguishment 482 482 - (Gain) loss on derivative instruments 14,925 - - (Gain) loss on disposal of property and equipment 131 131 - ------------ ------------- ------------ Adjusted EBITDA 91,684 68,878 23,059 Provision for bad debts 3,454 2,090 1,364 Non-cash accretion of asset retirement obligation 74 60 14 Non-cash interest items 5,825 6,826 (1,001) Cash income tax (expense) benefit 3,973 (5,493) - Net interest expense (23,722) (18,735) (5,023) Working capital changes (16,605) 8,070 (17,754) ------------ ------------- ------------ Cash flows from operating activities $64,683 $61,696 $659 ============ ============= ============ Computation of Average Revenue per User (ARPU) Computation of Cash Cost per User (CCPU) (Unaudited) Alamosa Alamosa Holdings, (Delaware), AirGate PCS, Inc. Inc. Inc. --------------------------------------- For the For the For the three three three months months months ended June ended June ended June 30, 30, 30, 2005 2005 2005 ------------ ------------- ------------ Subscriber revenues (000s) $237,692 $163,871 $73,821 Roaming and wholesale revenue (000s) 89,967 66,289 24,776 ------------ ------------- ------------ Service revenue (000s) $327,659 $230,160 $98,597 ============ ============= ============ Average subscribers (000s) 1,424 994 430 ============ ============= ============ ARPU $56 $55 $57 ============ ============= ============ ARPU with roaming $77 $77 $76 ============ ============= ============ Cost of service and operations (000s) $162,596 $110,615 $53,079 Less roaming expense (000s) (57,058) (37,852) (20,304) General and administrative expenses (000s) 9,135 3,509 5,373 Merger related expenses (000s) -- -- -- Upgrade costs in selling and marketing expenses (000s) 10,400 7,610 2,790 ------------ ------------- ------------ $125,073 $83,882 $40,938 ============ ============= ============ Average subscribers(000s) 1,424 994 430 ============ ============= ============ CCPU $29 $28 $32 ============ ============= ============ CCPU with roaming $43 $41 $47 ============ ============= ============ Computation of Cost per Gross Addition (CPGA) (Unaudited) Alamosa Alamosa AirGate PCS, Holdings, (Delaware), Inc. Inc. Inc. --------------------------------------- For the For the For the three three three months months months ended June ended June ended June 30, 30, 30, 2005 2005 2005 ------------ ------------- ------------ Selling and marketing expenses (000s) $46,011 $33,618 $12,393 Less upgrade costs in selling and marketing costs(000s) (10,400) (7,610) (2,790) Cost of products sold(000s) 29,953 22,255 7,698 Product sales revenues(000s) (11,720) (8,715) (3,005) ------------ ------------- ------------ $53,844 $39,548 $14,296 ============ ============= ============ Activations (000s) 151 109 42 ============ ============= ============ CPGA $357 $363 $340 ============ ============= ============ *T Unaudited Pro Forma Statements of Operations and Operating Metrics The unaudited pro forma statements of operations and operating metrics for the quarters ended March 31, 2004, June 30, 2004, September 30, 2004, December 31, 2004 and March 31, 2005 present the effects of the acquisition of AirGate PCS, Inc. by Alamosa Holdings, Inc. using the purchase method of accounting assuming the transaction had been completed as of the beginning of the respective periods. The pro forma statements were prepared using historical unaudited quarterly financial statements of AirGate and Alamosa. Adjustments to the historical statements of operations include (i) the elimination of intercompany travel revenue and expense, (ii) amortization of intangible assets recorded in connection with the acquisition, (iii) decrease in depreciation of property and equipment based on the fair value of AirGate property and equipment recorded in connection with the transaction, (iv) reduction in interest expense based on the fair value of AirGate debt recorded in connection with the transaction, and (v) the tax effect of all pro forma adjustments using the historical effective tax rate. The unaudited pro forma condensed consolidated financial information is for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Alamosa Holdings would have been had the transaction occurred on the dates assumed, nor is it necessarily indicative of future consolidated results of operations or financial position. The unaudited pro forma condensed consolidated financial information does not include the realization of any cost savings from operating efficiencies, synergies or other restructurings resulting from the transaction. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of Alamosa Holdings, Inc. and AirGate PCS, Inc. -0- *T Alamosa Holdings, Inc. Pro Forma Statements of Operations Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 (000s) Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma ---------- ---------- ---------- ---------- ---------- Revenues: Service Revenues $186,402 $198,606 $209,245 $218,945 $224,660 Travel and Roaming 55,835 68,186 80,514 81,621 78,590 ---------- ---------- ---------- ---------- ---------- Total Service Revenues 242,237 266,792 289,759 300,566 303,250 Product Sales 11,673 11,667 12,208 12,415 12,826 ---------- ---------- ---------- ---------- ---------- Total Revenue 253,910 278,459 301,967 312,981 316,076 ---------- ---------- ---------- ---------- ---------- Costs and expenses: Cost of service & operations 124,815 133,418 134,543 154,602 145,276 Cost of products sold 26,985 23,049 28,916 29,995 35,107 Selling and marketing 42,909 42,729 54,018 53,334 54,570 General and Administrative 12,054 10,676 10,485 10,498 12,103 Depreciation and amortization 52,476 50,738 51,241 55,175 55,168 (Gain) loss on disposal of property and equipment 303 2,602 227 941 (4) Non cash compensation 26 25 30 802 771 ---------- ---------- ---------- ---------- ---------- Total costs and expenses 259,568 263,237 279,460 305,347 302,991 ---------- ---------- ---------- ---------- ---------- Income (Loss) from operations (5,658) 15,222 22,507 7,634 13,085 Loss on debt exchange (13,101) - - (2,991) - Change in fair value of derivatives 12,672 (11,926) 1,200 (2,251) 849 Interest and other income 333 409 599 1,253 1,446 Interest expense (25,815) (23,325) (24,751) (26,213) (25,468) ---------- ---------- ---------- ---------- ---------- Loss before income tax (31,569) (19,620) (445) (22,568) (10,088) Income Tax Benefit/ (Expense) (818) (450) - 1,038 6,181 ---------- ---------- ---------- ---------- ---------- Net loss $(32,387) $(20,070) $(445) $(21,530) $(3,907) ========== ========== ========== ========== ========== Alamosa Holdings, Inc. Pro Forma Operating Metrics Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 (000s) Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma ---------- ---------- ---------- ---------- ---------- Subscriber revenues $186,402 $198,606 $209,245 $218,945 $224,660 Roaming and wholesale revenues 55,835 68,186 80,514 81,621 78,590 ---------- ---------- ---------- ---------- ---------- Total Service Revenues $242,237 $266,792 $289,759 $300,566 $303,250 ========== ========== ========== ========== ========== Average subscribers 1,123 1,177 1,229 1,288 1,355 ========== ========== ========== ========== ========== ARPU $55 $56 $57 $57 $55 ========== ========== ========== ========== ========== ARPU with roaming $72 $76 $79 $78 $75 ========== ========== ========== ========== ========== Cost of service and operations $124,815 $133,418 $134,543 $154,602 $145,276 Less roaming expenses (36,853) (41,602) (48,359) (50,638) (48,728) General and administrative expenses 12,054 10,676 10,485 10,498 12,103 Upgrade costs in selling and marketing 8,003 6,433 11,544 11,043 10,225 ---------- ---------- ---------- ---------- ---------- $108,019 $108,925 $108,213 $125,505 $118,876 ========== ========== ========== ========== ========== Average subscribers 1,123 1,177 1,229 1,288 1,355 ========== ========== ========== ========== ========== CCPU $32 $31 $29 $32 $29 ========== ========== ========== ========== ========== CCPU with roaming $43 $43 $42 $46 $41 ========== ========== ========== ========== ========== Selling and marketing expenses $42,909 $42,729 $54,018 $53,334 $54,570 Less upgrade costs (8,003) (6,433) (11,544) (11,043) (10,225) Cost of products sold 26,985 23,049 28,916 29,995 35,107 Product sales revenue (11,673) (11,667) (12,208) (12,415) (12,826) ---------- ---------- ---------- ---------- ---------- $50,218 $47,678 $59,182 $59,871 $66,626 ========== ========== ========== ========== ========== Activations 146 134 166 171 186 ========== ========== ========== ========== ========== CPGA $344 $356 $357 $350 $358 ========== ========== ========== ========== ========== Alamosa Holdings, Inc. Pro Forma Computation of Adjusted EBITDA Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma ---------- ---------- ---------- ---------- --------- (000's) Net loss $(32,387) $(20,070) $(445) $(21,530) $(3,907) Income tax expense (benefit) 818 450 - (1,038) (6,181) Net interest expense 25,482 22,916 24,152 24,960 24,022 Depreciation and amortization 52,476 50,738 51,241 55,175 55,168 Non-cash compensation 26 25 30 802 771 Loss on debt exchange 13,101 - - 2,991 - (Gain) loss on derivative instrument (12,672) 11,926 (1,200) 2,251 (849) (Gain) loss on disposal of equipment 303 2,602 227 941 (4) ---------- ---------- ---------- ---------- --------- Adjusted EBITDA $47,147 $68,587 $74,005 $64,552 $69,020 ========== ========== ========== ========== ========= *T