APCS Alamosa Holdings (MM)

Highlights: -- Revenue increased 16 percent over third quarter 2004 pro-forma revenue to a record $349.4 million -- Net income attributable to common stockholders was $1.8 million or $0.01 per common share, after $2.8 million of expenses associated with Sprint negotiations and litigation -- Adjusted EBITDA increased to $94.2 million, including $2.8 million of expenses associated with Sprint negotiations and litigation -- As previously announced: -- Subscribers increased approximately 33,000 to 1.48 million -- Average monthly customer churn was 2.5 percent -- Completed the 3,000th cell site in its territory. Alamosa Holdings, Inc. (Nasdaq/NM: APCS), a PCS Affiliate of Sprint Nextel (NYSE: S) today reported financial and operational results for the third quarter ended September 30, 2005, including customer results for net subscriber additions, total direct subscribers and average monthly customer churn previously reported on October 13, 2005. The Company also provided an update on the status of its discussions with Sprint Nextel and its financial and operating guidance for the remainder of 2005. The Company reported record revenue for the third quarter of $349.4 million comprised of: $239.5 million in subscriber revenues, $98.2 million in travel revenues (including wholesale and resale) and $11.7 million in product sales revenues. Total revenue grew 3 percent from the second quarter of 2005 and 16 percent from the third quarter of 2004, on a pro-forma basis. Adjusted EBITDA was $94.2 million for the third quarter compared to Adjusted EBITDA of $91.7 million in the second quarter of 2005 and pro-forma $74 million in the third quarter of 2004. During the third quarter, the Company incurred expenses of approximately $2.8 million in legal, advisory and other expenses associated with its dispute with Sprint Nextel and the lawsuit filed by Alamosa subsidiary, AirGate PCS Inc., on August 8, 2005. Income from operations for the quarter increased to a record $36.7 million, a sequential increase of 5% and a 63 percent increase compared to the third quarter of 2004, on a pro-forma basis. The Company reported third quarter net income of $1.8 million or $0.01 per common share after preferred stock dividends. As previously announced, net subscriber additions totaled 33,000 during the third quarter compared to 52,000 net additions in the second quarter of 2005 and 61,000 net additions in the same quarter one year ago on a pro-forma basis. The Company ended the third quarter with 1.480 million subscribers, a 2 percent increase over the second quarter of 2005 and a 17 percent increase one year ago, on a pro-forma basis. The Company also reported average monthly customer churn of 2.5 percent for the third quarter, compared to 2.1 percent in the second quarter of 2005 and 2.5 percent one year ago, on a pro-forma basis. Additionally, the Company spent approximately $35 million on fixed asset additions including the launch of 117 new sites, 37 of which were in the former AirGate properties, in the third quarter increasing the covered population to 19.9 million. "Alamosa delivered another record quarter for revenues, income from operations, and Adjusted EBITDA, along with solid subscriber growth in a challenging quarter," said David E. Sharbutt, Chairman and Chief Executive Officer of Alamosa Holdings, Inc. "The mid-quarter merger of Sprint and Nextel impacted our subscriber growth as those companies were focused on the merger and the subsequent repositioning of the new brand and messaging subsequent to the merger. We did not allow the anticipated merger to affect our focus on continuing to grow our company, as evidenced by our operating results and the continued expansion of our distribution system and wireless network." Mr. Sharbutt concluded by stating, "We remain focused on executing our business plan to continue our rapid growth and on resolving our dispute with Sprint." As previously announced on August 8th, 2005, Alamosa through its wholly-owned subsidiary, AirGate PCS, Inc., filed a complaint against Sprint Corporation, certain of its affiliates and Nextel Communications, Inc. in the Delaware Court of Chancery alleging, among other things, that following the completion of the pending merger between Sprint and Nextel, Sprint would breach the exclusivity covenants contained in the agreements governing its relationship with AirGate and that Nextel unlawfully interfered with AirGate's exclusive rights under such agreements. 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. "Discussions with Sprint to date have failed to lead to a mutually satisfactory agreement," stated Mr. Sharbutt. BUSINESS OUTLOOK The following business outlook is being updated for the remainder of 2005 and 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 impact of the merger between Sprint and Nextel and general economic conditions, among other things (See "Forward Looking Statements" below): -0- *T AirGate Alamosa From AirGate Pro-Forma Feb. 16 Pro-Forma Combined Alamosa 2005 Combined Year Year ------- ------- -------- ----------- --------- Adjusted EBITDA $267 $73 $340 $80 $347 million million million million million Fixed Asset Additions $90 $50 $140 million million million Net Subscriber Additions 170,000 35,000 205,000 51,000 221,000 Average Monthly Churn 2.2%-2.3% 2.6%-2.7% 2.3%-2.4% 2.6%-2.7% 2.3%-2.4% SUMMARY OF THIRD 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. (consolidated)(a)(consolidated)(a)(consolidated)(a) Q3 2005 Q2 2005 Q3 '04(Pro-Forma) --------------- --------------- ----------------- Service Revenue (millions) $ 337.8 $ 327.7 $ 289.8 Adjusted EBITDA (millions) $ 94.2 $ 91.7 $ 74.0 Net Income (Loss) (millions) $ 1.8 $ -- $ -- --------------- --------------- ----------------- Total Direct Subscribers 1,480,000 1,447,000 1,260,000 Net Additions (including purchased subscribers) 33,000 52,000 61,000 Wholesale/Resale Subscribers 302,000 282,000 154,000 --------------- --------------- ----------------- ARPU (without roaming & wholesale) $ 55 $ 56 $ 57 ARPU (including roaming & wholesale) $ 77 $ 77 $ 79 CCPU (without roaming) $ 29 $ 29 $ 29 CCPU (including roaming) $ 43 $ 43 $ 42 CPGA $ 366 $ 357 $ 357 --------------- --------------- ----------------- Alamosa Alamosa AirGate, Other Selected Holdings, Inc. (Delaware) PCS, Inc. Operating Metrics (consolidated)(a) (stand alone) (stand alone) (Q3 2005) --------------- ------------- ------------- Cash & ST investments at period-end (millions) $ 189.3 $ 125.8 $ 52.9 Fixed Asset Additions during period (millions)$ 35.0 $ 19.3 $ 15.7 --------------- ------------- ------------- Licensed POPs (millions) 23.2 15.8 7.4 Covered POPs (millions) 19.9 13.5 6.4 Churn (net of 30-day returns) 2.5% 2.1% 2.9% Penetration - Covered POPs 7.4% 7.7% 6.8% --------------- ------------- ------------- Total Voice System Minutes of Use (MOUs) (millions) 4,689 3,204 1,485 Average Voice MOUs Per User (without roaming) 766 725 863 Average Voice MOUs Per User (including roaming) 959 911 1,071 Inbound Roaming Minutes (millions) 1,051 719 332 Inbound Wholesale & Resale Minutes (millions) 275 246 29 Outbound Roaming Minutes (millions) 849 577 272 --------------- ------------- ------------- *T THIRD QUARTER EARNINGS RELEASE & CONFERENCE CALL Alamosa has scheduled a conference call, which will be broadcast live over the Internet, on Tuesday, November 8, 2005 at 9:00 a.m. ET. Investors and analysts may access the call live via phone by dialing 913-312-1303 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 Tuesday, November 15, 2005, and may be accessed by calling 719-457-0820 and using the passcode 8442996. 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 Sprint PCS Affiliate of Sprint Nextel (NYSE: S), 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 mobile communications network services under the Sprint Nextel brand name throughout its designated territory located in Texas, New Mexico, Oklahoma, Arizona, Colorado, Utah, Wisconsin, Minnesota, Missouri, Washington, Oregon, Arkansas, Kansas, Illinois, California, and subsequent to year end in Georgia, South Carolina, North Carolina and Tennessee which includes licensed population of 23.2 million residents. FORWARD LOOKING STATEMENTS Statements contained in this news release that are forward-looking statements, such as statements containing terms such as can, may, will, expect, plan, and similar terms, 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 Nextel; shifts in populations or network focus; changes or advances in technology; changes in Sprint Nextel'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. 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) September 30, 2005 December 31, 2004 ------------------ ----------------- ASSETS Current assets: Cash and cash equivalents $ 102,248 $ 129,917 Short term investments 87,073 50,418 Customer accounts receivable, net 72,857 44,687 Receivable from Sprint 34,777 24,809 Interest receivable 202 216 Inventory 13,333 9,136 Prepaid expenses and other assets 18,259 13,170 Deferred customer acquisition costs 5,282 6,337 Deferred tax asset 15,941 4,230 ------------------ ----------------- Total current assets 349,972 282,920 Property and equipment, net 546,553 441,808 Debt issuance costs, net 8,334 9,086 Early redemption option on preferred stock -- 21,387 Goodwill 245,410 -- Intangible assets, net 767,923 416,716 Other noncurrent assets 5,668 4,188 ------------------ ----------------- Total assets $ 1,923,860 $ 1,176,105 ================== ================= LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 17,110 $ 24,692 Accrued expenses 61,417 43,916 Payable to Sprint 34,394 35,852 Interest payable 19,493 21,076 Deferred revenue 32,981 22,549 Current installments of capital leases 106 110 ------------------ ----------------- Total current liabilities 165,501 148,195 ------------------ ----------------- Long term liabilities: Capital lease obligations 671 749 Other noncurrent liabilities 11,631 5,835 Deferred tax liability 49,587 16,362 Senior notes 1,094,475 739,141 ------------------ ----------------- Total long term liabilities 1,156,364 762,087 ------------------ ----------------- Total liabilities 1,321,865 910,282 ------------------ ----------------- Commitments and contingencies -- -- Mandatorily redeemable convertible preferred stock: Series B preferred stock, $.01 par value; 750,000 shares authorized; 220,301 and 478,987 shares issued and outstanding, respectively 66,666 161,148 Series C preferred stock, $.01 par value; 500,000 shares authorized; no shares issued -- -- ------------------ ----------------- Total mandatorily redeemable convertible preferred stock 66,666 161,148 ------------------ ----------------- 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; 163,389,291 and 114,895,245 shares issued and outstanding, respectively 1,634 1,149 Additional paid-in capital 1,289,563 860,425 Accumulated deficit (754,213) (756,834) Unearned compensation (1,655) (65) ------------------ ----------------- Total stockholders' equity 535,329 104,675 ------------------ ----------------- Total liabilities and stockholders' equity $ 1,923,860 $ 1,176,105 ================== ================= ALAMOSA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (dollars in thousands, except per share amounts) For the three months ended September 30, ------------------------------ 2005 2004 ------------ ------------- Revenues: Subscriber revenues $ 239,474 $ 143,623 Roaming and wholesale revenues 98,284 59,106 ------------- ------------- Service revenues 337,758 202,729 Product sales 11,667 8,637 ------------- ------------- Total revenue 349,425 211,366 ------------- ------------- Costs and expenses: Cost of service and operations 170,652 99,250 Cost of products sold 28,763 20,265 Selling and marketing 46,982 40,090 General and administrative expenses 8,826 5,861 Merger related expenses -- -- Depreciation and amortization 55,995 25,886 Loss on disposal of property and equipment 406 172 Non-cash compensation 1,101 30 ------------- ------------- Total costs and expenses 312,725 191,554 ------------- ------------- Income from operations 36,700 19,812 Loss on debt extinguishment -- -- Gain (loss) on derivative instruments 571 1,200 Interest and other income 1,737 362 Interest expense (26,088) (19,206) ------------- ------------- Income (loss) before income taxes 12,920 2,168 Income tax expense (10,053) -- ------------- ------------- Net income (loss) 2,867 2,168 Preferred stock dividend (1,041) (2,282) Preferred stock conversion premium -- (160) ------------- ------------- Net income (loss) attributable to common stockholders $ 1,826 $ (274) ============= ============= Net income (loss) per common share: Basic $ 0.01 $ (0.00) ============= ============= Diluted $ 0.01 $ (0.00) ============= ============= Weighted average common shares outstanding: Basic 162,434,441 112,845,429 ============= ============= Diluted 165,344,812 112,845,429 ============= ============= For the three months ended September 30, ------------------------------- 2005 2004 ------------ ------------- Revenues: Subscriber revenues $ 667,146 $ 401,938 Roaming and wholesale revenues 256,428 153,964 -------------- ------------- Service revenues 923,574 555,902 Product sales 33,002 25,483 -------------- ------------- Total revenue 956,576 581,385 -------------- ------------- Costs and expenses: Cost of service and operations 455,523 276,528 Cost of products sold 87,295 56,427 Selling and marketing 138,270 102,922 General and administrative expenses 27,141 17,284 Merger related expenses 1,280 -- Depreciation and amortization 152,554 78,793 Loss on disposal of property and equipment 513 3,082 Non-cash compensation 2,588 81 -------------- ------------- Total costs and expenses 865,164 535,117 -------------- ------------- Income from operations 91,412 46,268 Loss on debt extinguishment (482) (13,101) Gain (loss) on derivative instruments (13,505) 1,946 Interest and other income 4,410 751 Interest expense (73,737) (56,393) -------------- ------------- Income (loss) before income taxes 8,098 (20,529) Income tax expense (5,477) (557) -------------- ------------- Net income (loss) 2,621 (21,086) Preferred stock dividend (4,041) (8,078) Preferred stock conversion premium (5,506) (6,600) -------------- ------------- Net income (loss) attributable to common stockholders $ (6,926) $ (35,764) =============== ============= Net income (loss) per common share: Basic $ (0.05) $ (0.35) =============== ============== Diluted $ (0.05) $ (0.35) =============== ============== Weighted average common shares outstanding: Basic 149,609,302 103,441,770 =============== ============= Diluted 149,609,302 103,441,770 =============== ============= ALAMOSA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands) For the nine months ended September 30, 2005 2004 --------- --------- Cash flows from operating activities: Net income (loss) $ 2,621 $ (21,086) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Non-cash compensation 2,588 81 Non-cash interest expense on derivative instruments -- 6 Non-cash accretion of asset retirement obligations 222 139 Non-cash (gain) loss on derivative instruments 13,505 (1,946) Provision for bad debts 10,054 7,603 Depreciation and amortization of property and equipment 75,183 54,269 Amortization of intangible assets 77,371 24,524 Amortization of financing costs included in interest expense 681 718 Amortization of debt premium (2,039) -- Loss on debt extinguishment 482 13,101 Deferred income taxes 4,033 -- Interest accreted on discount notes 15,371 18,351 Loss on disposal of property and equipment 513 3,082 Merger related expenses 1,280 -- (Increase) decrease in: Receivables (7,398) (20,318) Inventory 134 531 Prepaid expenses and other assets 524 1,816 Increase (decrease) in: Accounts payable and accrued expenses (46,037) 7,571 --------- -------- Net cash provided by operating activities 149,088 88,442 --------- --------- Cash flows from investing activities: Proceeds from sale of assets 303 569 Purchases of property and equipment (112,453) (63,765) Purchase of intangible asset -- (453) Acquisition of business, net of cash paid (70,790) -- Merger related expenses (436) -- Change in restricted cash -- 1 Change in short-term investments 7,969 (50,342) --------- --------- Net cash used in investing activities (175,407) (113,990) --------- --------- 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 -- (8,206) Preferred stock dividends (4,849) (8,349) Preferred stock conversion premium -- (276) Stock options exercised 10,058 1,441 Shares issued to employee stock purchase plan 1,165 978 Proceeds from restricted stock sales 2 -- Payments on capital leases (82) (415) --------- --------- Net cash provided by (used in) financing activities (1,350) 35,173 --------- --------- Net increase (decrease) in cash and cash equivalents (27,669) 9,625 Cash and cash equivalents at beginning of period 129,917 99,644 --------- --------- Cash and cash equivalents at end of period $ 102,248 $ 109,269 ========= ========= 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 879,457 -- Fair value of liabilities assumed in business combination (441,796) -- Conversion of preferred stock 87,031 67,219 Preferred stock issued in debt exchange -- 51 Non-cash fixed asset additions 1,277 -- Asset retirement obligations capitalized 437 143 Capitalized lease obligations incurred -- 67 Change in accounts payable for purchases of property and equipment (9,233) (9,532) BALANCE SHEETS AS OF SEPTEMBER 30, 2005 (dollars in thousands) Alamosa AirGate Alamosa (Delaware), PCS, Holdings, ASSETS Inc. Inc. Inc. Current Assets: ---------- -------- ---------- Cash and cash equivalents $ 74,263 $ 17,372 $ 102,248 Short-term investments 51,553 35,520 87,073 Customer accounts receivable, net 50,863 21,994 72,857 Receivable from Sprint 29,711 5,066 34,777 Interest receivable 202 -- 202 Intercompany receivable 19,521 -- -- Inventory 10,150 3,183 13,333 Prepaid expenses and other assets 10,844 7,366 18,259 Deferred customer acquisition costs 4,865 417 5,282 Deferred tax asset 4,230 11,711 15,941 ---------- -------- ---------- Total current assets 256,202 102,629 349,972 Property and equipment, net 445,127 101,426 546,553 Debt issuance costs, net 8,334 -- 8,334 Goodwill -- 255,628 245,410 Intangible assets, net 397,497 370,426 767,923 Other noncurrent assets 4,040 1,628 5,668 ---------- -------- ---------- Total assets $1,111,200 $831,737 $1,923,860 ========== ======== ========== LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 13,604 $ 3,506 $ 17,110 Accrued expenses 44,991 15,331 61,417 Payable to Sprint 20,784 13,610 34,394 Interest payable 13,086 6,407 19,493 Intercompany payable -- 2,984 -- Deferred revenue 24,429 8,552 32,981 Current installments of capital leases 106 -- 106 ---------- -------- ---------- Total current liabilities 117,000 50,390 165,501 Capital lease obligations 671 -- 671 Other noncurrent liabilities 8,519 1,358 11,631 Deferred tax liability 28,877 27,700 49,587 Senior notes 748,123 346,352 1,094,475 ---------- -------- ---------- Total liabilities 903,190 425,800 1,321,865 ---------- -------- ---------- Mandatorily redeemable convertible preferred stock -- -- 66,666 ---------- -------- ---------- Stockholders' Equity: Preferred stock -- -- -- Common stock -- -- 1,634 Additional paid-in capital 932,059 424,560 1,289,563 Accumulated deficit (722,593) (18,623) (754,213) Unearned compensation (1,456) -- (1,655) ---------- -------- ---------- Total stockholders' equity 208,010 405,937 535,329 ---------- -------- ---------- Total liabilities and stockholders' equity $1,111,200 $831,737 $1,923,860 ========== ======== ========== STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 (dollars in thousands) Alamosa AirGate Alamosa (Delaware), PCS, Holdings, Inc. Inc. Inc. Revenues: -------- -------- -------- Subscriber revenues $166,850 $ 72,624 $239,474 Roaming and wholesale revenues 71,761 27,729 98,284 -------- -------- -------- Service revenues 238,611 100,353 337,758 Product sales 8,329 3,338 11,667 -------- -------- -------- Total revenue 246,940 103,691 349,425 -------- -------- -------- Costs and expenses: Cost of service and operations 116,293 55,565 170,652 Cost of products sold 20,690 8,073 28,763 Selling and marketing 33,245 13,737 46,982 General and administrative expenses 4,064 4,566 8,826 Depreciation and amortization 29,387 26,608 55,995 Loss on disposal of property and equipment 286 120 406 Non-cash compensation 922 -- 1,101 --------- -------- -------- Income (loss) from operations 42,053 (4,978) 36,700 Gain on derivative instruments -- -- 571 Interest and other income 967 694 1,737 Interest expense (19,813) (6,275) (26,088) -------- -------- -------- Income (loss) before income taxes 23,207 (10,559) 12,920 Income tax (expense) benefit (5,288) 4,099 (10,053) -------- -------- -------- Net income (loss) $ 17,919 $ (6,460) $ 2,867 ======== ======== ======== STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (dollars in thousands) Alamosa AirGate Alamosa (Delaware), PCS, Holdings, Inc. Inc.(1) Inc. Revenues: -------- -------- -------- Subscriber revenues $485,752 $181,394 $667,146 Roaming and wholesale revenues 198,656 60,645 256,428 -------- -------- -------- Service revenues 684,408 242,039 923,574 Product sales 25,011 7,991 33,002 -------- -------- -------- Total revenue 709,419 250,030 956,576 -------- -------- -------- Costs and expenses: Cost of service and operations 328,391 130,005 455,523 Cost of products sold 67,096 20,199 87,295 Selling and marketing 103,383 34,887 138,270 General and administrative expenses 13,125 13,388 27,141 Merger related expenses 436 -- 1,280 Depreciation and amortization 83,843 68,711 152,554 Loss on disposal of property and equipment 393 120 513 Non-cash compensation 2,028 -- 2,588 --------- -------- -------- Income (loss) from operations 110,724 (17,280) 91,412 Loss on debt extinguishment (482) -- (482) Loss on derivative instruments -- -- (13,505) Interest and other income 2,566 1,719 4,410 Interest expense (58,965) (14,772) (73,737) -------- -------- -------- Income (loss) before income taxes 53,843 (30,333) 8,098 Income tax (expense) benefit (12,332) 11,710 (5,477) -------- --------- -------- Net income (loss) $ 41,511 $(18,623) $ 2,621 ======== ======== ======== (1) Includes AirGate PCS, Inc. activity from acquisition (February 15, 2005) through September 30, 2005. STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (dollars in thousands) Alamosa AirGate Alamosa (Delaware), PCS, Holdings, Inc. Inc.(1) Inc. -------- --------- --------- Cash flows from operating activities: Net income (loss) $ 41,511 $ (18,623) $ 2,621 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Non-cash compensation 2,028 -- 2,588 Non-cash accretion of asset retirement obligations 178 44 222 Non-cash loss on derivative instruments -- -- 13,505 Provision for bad debts 6,804 3,250 10,054 Depreciation and amortization of property and equipment 61,047 14,136 75,183 Amortization of intangible assets 22,797 54,574 77,371 Amortization of financing costs included in interest expense 681 -- 681 Amortization of debt premium -- (2,039) (2,039) Loss on debt extinguishment 482 -- 482 Interest accreted on discount notes 15,371 -- 15,371 Deferred income taxes 12,273 (11,710) 4,033 Loss on disposal of property and equipment 393 120 513 Merger related expenses 436 -- 1,280 (Increase) decrease in: Receivables from/payable to Parent (21,889) 2,986 -- Receivables (17,867) 10,469 (7,398) Inventory (1,014) 1,148 134 Prepaid expenses and other assets 2,285 (3,690) 524 Decrease in: Accounts payable and accrued expenses (18,814) (27,483) (46,037) -------- --------- --------- Net cash provided by operating activities 106,702 23,182 149,088 -------- --------- --------- Cash flows from investing activities: Proceeds from sale of assets 303 -- 303 Purchases of property and equipment (76,319) (36,134) (112,453) Acquisition of business, net of cash paid (865) 36,220 (70,790) Merger related expenses (436) -- (436) Change in short term investments (1,142) 9,104 7,969 -------- ---------- --------- Net cash provided by (used in) investing activities (78,459) 9,190 (175,407) -------- --------- --------- Cash flows from financing activities: Repayment of senior notes (6,800) -- (6,800) Merger related expenses -- -- (844) Preferred stock dividends -- -- (4,849) Stock options exercised -- -- 10,058 Shares issued to employee stock purchase plan -- -- 1,165 Proceeds from sale of restricted stock -- -- 2 Capital distribution to Parent (74,230) (15,000) -- Payments on capital leases (82) -- (82) -------- ---------- --------- Net cash used in financing activities (81,112) (15,000) (1,350) -------- --------- --------- Net increase (decrease) in cash and cash equivalents (52,869) 17,372 (27,669) Cash and cash equivalents at beginning of period 127,132 -- 129,917 -------- --------- --------- Cash and cash equivalents at end of period $ 74,263 $ 17,372 $ 102,248 ======== ========= ========= 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 -- 879,074 879,457 Fair value of liabilities assumed in business combination -- (449,829) (441,796) Conversion of preferred stock -- -- 87,031 Non-cash fixed asset additions 1,277 -- 1,277 Asset retirement obligations capitalized 376 60 437 Change in accounts payable for purchases of property and equipment (11,636) 2,403 (9,233) (1) Includes AirGate PCS, Inc. activity from acquisition (February 15, 2005) through September 30, 2005. Computation of Adjusted EBITDA and Reconciliation of Non-GAAP Liquidity Measures (Unaudited) (dollars in thousands) Alamosa AirGate Alamosa (Delaware), PCS, Holdings, Inc. Inc. Inc. ------------------------------------ For the For the For the three months three months three months ended ended ended Sept. 30, Sept. 30, Sept. 30, 2005 2005 2005 ------------------------------------ Net income (loss) $ 2,867 $ 17,919 $(6,460) Income tax expense (benefit) 10,053 5,288 (4,099) Net interest expense 24,351 18,846 5,581 Depreciation and amortization 55,995 29,387 26,608 Non-cash compensation 1,101 922 -- Gain on derivative instruments (571) -- -- Loss on disposal of property and equipment 406 286 120 -------- -------- ------- Adjusted EBITDA 94,202 72,648 21,750 Provision for bad debts 4,881 2,941 1,940 Non-cash accretion of asset retirement obligation 78 63 15 Non-cash interest items 1,830 2,427 (597) Current income tax (expense) benefit (5,800) 6,985 -- Net interest expense (24,351) (18,846) (5,581) Working capital changes 4,251 (16,773) 9,615 -------- -------- ------- Cash flows from operating activities $ 75,091 $ 49,445 $27,142 ======== ======== ======= Computation of Average Revenue per User (ARPU) Computation of Cash Cost per User (CCPU) Computation of Cost per Gross Addition (CPGA) (Unaudited) Alamosa AirGate Alamosa (Delaware), PCS, Holdings, Inc. Inc. Inc. ------------------------------------ For the For the For the three months three months three months ended ended ended Sept. 30, Sept. 30, Sept. 30, 2005 2005 2005 ------------------------------------ Subscriber revenues (000s) $239,474 $166,850 $ 72,624 Roaming and wholesale revenue (000s) 98,284 71,761 27,729 -------- -------- -------- Service revenue (000s) $337,758 $238,611 $100,353 ======== ======== ======== Average subscribers (000s) 1,464 1,030 434 ======== ======== ======== ARPU $ 55 $ 54 $ 56 ======== ======== ======== ARPU with roaming $ 77 $ 77 $ 77 ======== ======== ======== Cost of service and operations (000s) $170,652 $116,293 $ 55,565 Less Sprint roaming expense (000s) (60,493) (40,542) (21,156) General and administrative expenses (000s) 8,826 4,064 4,566 Upgrade costs in selling and marketing expenses (000s) 8,084 5,749 2,335 -------- -------- -------- $127,069 $ 85,564 $ 41,310 ======== ======== ======== Average subscribers (000s) 1,464 1,030 434 ======== ======== ======== CCPU $ 29 $ 28 $ 32 ======== ======== ======== CCPU with roaming $ 43 $ 41 $ 48 ======== ======== ======== Selling and marketing expenses (000s) $ 46,982 $ 33,245 $ 13,737 Less upgrade costs in selling and marketing costs (000s) (8,084) (5,749) (2,335) Cost of products sold (000s) 28,763 20,690 8,073 Product sales revenues (000s) (11,667) (8,329) (3,338) -------- -------- -------- $ 55,994 $ 39,857 $ 16,137 ======== ======== ======== Activations (000s) 153 107 46 ======== ======== ======== CPGA $ 366 $ 372 $ 351 ======== ======== ======== *T