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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Ntelos Holdings Corp. (MM) | NASDAQ:NTLSD | NASDAQ | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 19.18 | 0 | 01:00:00 |
From Jun 2019 to Jun 2024
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:
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
“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.
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.
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:
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 $ 1,143,5571
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 $ 93,927NTELOS 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 TotalFor 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:
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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