MetroPCS Communications, Inc. : MetroPCS Reports Third Quarter 2011 Results
11/01/2011| 05:05am US/Eastern
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Third Quarter 2011 Highlights Include:
Quarterly net subscriber additions of 69 thousand, resulting in a
16% increase in total subscribers over the prior twelve month period
Quarterly ARPU of $40.80, an increase of $1.11 over third quarter
of 2010 and $0.31 increase over the second quarter 2011
Quarterly consolidated total revenues of $1.2 billion, an increase
of 18% over the third quarter of 2010
Adjusted EBITDA of $327 million, an increase of 4% over the third
quarter of 2010
Quarterly net income of $69 million and EPS of $0.19
MetroPCS Communications, Inc. (NYSE: PCS), the nation's leading provider
of no annual contract, unlimited, flat-rate wireless communications
service, today announced financial and operational results for the
quarter ended September 30, 2011. MetroPCS reported growth in quarterly
Adjusted EBITDA of 4% over the third quarter 2010 and finished the third
quarter 2011 with over 9.1 million subscribers.
Roger D. Linquist, Chairman and Chief Executive Officer of MetroPCS,
said, "We reported solid results during a seasonally slow period and
during challenging economic times. Subscriber growth of 69 thousand was
driven primarily by our strong sales of Android Smartphones. Throughout
the remainder of 2011 and in 2012 we plan to further enhance our Android
Smartphone offerings which allow access to compelling applications and
products including our recently introduced Rhapsody music service.
Financially, we reported Adjusted EBITDA of $327 million, up 4% from
last year's third quarter. We believe continued economic pressures on
our subscribers, as well as normal seasonality, among other things,
contributed to an increase in churn to 4.5% this quarter. We expect that
our strategy and the strategic investments we continue to make in our
network are strengthening our business, will drive profitable growth and
will build long-term value for our shareholders.
"Nine months into 2011, we have added nearly 1 million net subscribers,
and generated nearly $1 billion in Adjusted EBITDA, up 13% from the same
period last year. No annual contract mobile broadband wireless service
is one of the fastest growing sectors within wireless and we believe we
are well positioned to benefit from this ongoing industry shift. The
uptake by our customers of Android phones has been dramatic. Since
introducing our first Android Smartphone in December of 2010, as of
September 30, 2011, approximately 30% of our base is now using a
Smartphone and approximately 46% of all sales are Android Smartphones.
Looking towards the second half of 2012, we believe additional new
Android Smartphones will be introduced with lower cost and more
functionality, and we believe we can continue to drive profitable growth
by migrating our customers onto our 4G LTE network," Linquist concluded.
Key Consolidated Financial and Operating
Metrics
(in millions, except percentages, per share, per subscriber and
subscriber amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2011
2010
Change
2011
2010
Change
Service revenues
$
1,131
$
942
20%
$
3,295
$
2,718
21%
Total revenues
$
1,205
$
1,021
18%
$
3,609
$
3,004
20%
Income from operations
$
177
$
208
(15%)
$
532
$
512
4%
Net income
$
69
$
77
(10%)
$
210
$
180
17%
Diluted net income per common share
$
0.19
$
0.22
$
(0.03)
$
0.57
$
0.50
$
0.07
Adjusted EBITDA(1)
$
327
$
315
4%
$
970
$
861
13%
Adjusted EBITDA as a
percentage of service revenues
28.9%
33.4%
(450bps)
29.4%
31.7%
(230bps)
ARPU(1)
$
40.80
$
39.69
$
1.11
$
40.57
$
39.78
$
0.79
CPGA(1)
$
193.95
$
160.54
$
33.41
$
175.30
$
155.80
$
19.50
CPU(1)
$
19.52
$
18.47
$
1.05
$
19.41
$
18.38
$
1.03
Churn-Average Monthly Rate
4.5%
3.8%
70bps
3.9%
3.6%
30bps
Consolidated Subscribers
End of Period
9,149,249
7,857,384
16%
9,149,249
7,857,384
16%
Net Additions
69,384
223,249
(69%)
994,139
1,217,860
(18%)
Penetration of Covered POPs(2)
9.1%
8.1%
100bps
9.1%
8.1%
100bps
(1)
For a reconciliation of non-GAAP financial measures, please
refer to the section entitled "Definition of Terms and
Reconciliation of non-GAAP Financial Measures" included at the end
of this release.
(2)
Number of covered POPs covered by MetroPCS Communications, Inc.
network increased approximately 3.6 million from 9/30/10 to
9/30/11 to 100 million.
Quarterly Consolidated Results
Consolidated service revenues of $1.1 billion for the third quarter of
2011, an increase of $189 million, or 20%, when compared to the prior
year's third quarter.
Income from operations decreased $31 million, or 15%, for the third
quarter of 2011 when compared to the prior year's third quarter.
Net income for the quarter decreased $8 million, or 10%, for the third
quarter of 2011 when compared to the prior year's third quarter.
Adjusted EBITDA of $327 million increased by $12 million for the third
quarter of 2011, or 4%, when compared to the prior year's third
quarter.
Average revenue per user (ARPU) of $40.80 for the third quarter of
2011 represents an increase of $1.11 when compared to the third
quarter of 2010 and an increase of $0.31 when compared to the second
quarter of 2011. The increase in ARPU was primarily attributable to
continued demand for our Wireless for All and 4G LTE service
plans.
The Company's cost per gross addition (CPGA) of $193.95 for the third
quarter of 2011 represents an increase of $33.41 when compared to the
prior year's third quarter. The increase was primarily driven by
increased promotional activities.
Cost per user (CPU) increased to $19.52 in the third quarter of 2011,
or 6%, when compared to the third quarter of 2010. The increase in CPU
is primarily driven by the increase in retention expense on existing
customers, costs associated with our 4G LTE network upgrade and
roaming expenses associated with Metro USA, offset by the continued
scaling of our business.
Churn increased 70 basis points from 3.8% to 4.5%, when compared to
the third quarter of 2010. The increase in churn was primarily driven
by an increase in gross additions, adjusted for false churn, in the
first half of 2011 over the first half of 2010, and we believe
continued economic pressures on our subscribers as well as increased
data demands on our CDMA network driven by Android penetration.
Financial Guidance for 2011
For the year ending December 31, 2011, MetroPCS today reaffirms guidance
the Company originally provided on August 2, 2011 that MetroPCS expects
to incur capital expenditures in the range of $0.9 billion to $1.0
billion on a consolidated basis for the full year ending December 31,
2011.
MetroPCS Conference Call Information
MetroPCS Communications, Inc. will host a conference call to discuss its
Third Quarter 2011 Earnings Results at 9:00 a.m. Eastern Time (ET) on
Tuesday, November 1, 2011.
Date:
Tuesday, November 1, 2011
Time:
9:00 a.m. ET
Call-in Numbers:
Toll free: 800-432-9830
International:
719-234-7318
Participant Passcode:
6138241
Please plan on accessing the conference call ten minutes prior to the
scheduled start time.
The conference call will be broadcast live via the Company's Investor
Relations website at investor.metropcs.com.
A replay of the webcast will be available on the website beginning at
approximately 12:30 p.m. ET on November 1, 2011.
A replay of the conference call will be available for one week starting
shortly after the call concludes and can be accessed by dialing
888-203-1112 (toll free) or 719-457-0820 (international). The passcode
required to listen to the replay is 6138241.
To automatically receive MetroPCS financial news by e-mail, please visit
the Investor Relations portion of the MetroPCS website, investor.metropcs.com,
and subscribe to E-mail Alerts.
All registered marks, including but not limited to, Wireless for All,
are registered service marks of MetroPCS Wireless, Inc. All rights
reserved. All other company and product names mentioned may be
trademarks or registered marks of the respective companies with which
they are associated.
About MetroPCS Communications, Inc.
Dallas-based MetroPCS Communications, Inc. (NYSE: PCS) is a provider of
no annual contract, unlimited wireless communications service for a
flat-rate. MetroPCS is the fifth largest facilities-based wireless
carrier in the United States based on number of subscribers served. With
Metro USA(SM), MetroPCS customers can use their service in areas
throughout the United States covering a population of over 280 million
people. As of September 30, 2011, MetroPCS had over 9.1 million
subscribers. For more information please visit www.metropcs.com.
Forward-Looking Statements
This release includes "forward-looking statements" for the purpose of
the "safe harbor" provisions within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended, and rule 3(b)-6
under the Securities Exchange Act of 1934, as amended. Any statements
made in this release that are not statements of historical fact,
including statements about our beliefs, opinions, projections, and
expectations, are forward-looking statements and should be evaluated as
such. Forward-looking statements include information concerning our
planned additions to our handset line-up, service offerings, and timing
of availability of handsets, the demand for Android Smartphones and
related products and features, the profitability of our strategy or
growth, our positioning with regard to market growth and competitive
challenges, our guidance on our strategy and investments and the capital
expenditures for 2011, our views on the causes of increased churn, the
importance of non-GAAP measures in evaluating company performance and
liquidity, investors use of non-GAAP measures, and possible or assumed
future results of operations, expectations regarding the returns on our
strategy and investments, and statements that may relate to our plans,
objectives, strategies, goals, future events, future revenues or
performance, capital expenditures, financing needs, and other
information that is not historical information. These forward-looking
statements often include words such as "anticipate," "expect,"
"suggests," "plan," "believe," "intend," "estimates," "targets,"
"views," "projects," "should," "would," "could," "may," "become,"
"will," "forecast," and other similar expressions.
These forward-looking statements are based on reasonable assumptions at
the time they are made, including our current expectations, plans,
beliefs, opinions and assumptions in light of our experience in the
industry, as well as our perceptions of historical trends, current
conditions, expected future developments and other factors we believe
are appropriate under the circumstances and at such times.
Forward-looking statements are not guarantees of future performance or
results. Actual financial results, performance or results of operations
may differ materially from those expressed in the forward-looking
statements. Factors that may materially affect such forward-looking
statements include, but are not limited to:
the highly competitive nature of our industry and changes in the
competitive landscape;
the current economic environment in the United States; disruptions to
the credit and financial markets in the United States; the impact of a
failure to increase the United States debt ceiling and possible credit
downgrade of the United States credit rating; and contractions or
limited growth on consumer spending as a result of the uncertainty in
the United States economy;
our ability to manage our rapid growth, achieve planned growth, manage
churn rates, and maintain our cost structure;
our and our competitors' current and planned promotions, marketing and
sales initiatives and our ability to respond and support them;
our ability to negotiate and maintain acceptable agreements with our
suppliers and vendors, including roaming arrangements;
the seasonality of our business and any failure to have strong
customer growth in the first and fourth quarters;
increases or changes in taxes and regulatory fees;
the rapid technological changes in our industry, our ability to adapt
and respond to such technological changes, our ability to deploy new
technologies, such as long term evolution, or 4G LTE, in our networks
to expand capacity in our existing networks, and successfully offer
new services using such new technology;
our ability to meet the demands and expectations of our customers,
secure the products, services, applications, content and network
infrastructure equipment we need, or which our customers or potential
customers demand, and to maintain adequate customer care;
our ability to secure spectrum, or secure it at acceptable prices,
when we need it;
our ability to manage our networks to deliver the services our
customers expect and to maintain and increase capacity of our networks
and business systems to satisfy the demands of our customers;
our ability to adequately enforce or protect our intellectual property
rights and defend against suits filed by others;
our capital structure, including our indebtedness amounts and the
limitations imposed by the covenants in our indebtedness and maintain
our financial and disclosure controls and procedures;
our inability to attract and retain key members of management and
train personnel;
our reliance on third parties to provide distribution, products,
software and services that are integral to our business and the
ability of our suppliers to perform, develop and timely provide us
with technological developments, products and services we need to
remain competitive;
possible disruptions or intrusions of our billing, operational
support, and customer care systems and networks which may limit our
ability to provide service or cause disclosure of our subscriber's
information;
governmental regulation affecting our services and changes in
government regulation, and the costs of compliance and our failure to
comply with such regulations; and
other factors described or referenced from time to time in our annual
report on Form 10-K, for the year ended December 31, 2010 and our
quarterly reports on Form 10-Q, for the quarters ended March 31, 2011,
and June 30, 2011 as well as subsequent quarterly reports on Form
10-Q, or current reports on Form 8-K, all of which are on file with
the SEC and may be obtained free of charge through the SEC's website http://www.sec.gov,
from the Company's website at www.metropcs.com
under the investor relations tab, or from the Company by contacting
the Investor Relations department.
The forward-looking statements speak only as to the date made, are based
on current assumptions and expectations, and are subject to the factors
above, among others, and involve risks, uncertainties and assumptions,
many of which are beyond our ability to control or ability to predict.
You should not place undue reliance on these forward-looking statements,
which are based on current assumptions and expectations and speak only
as of the date of this release. MetroPCS Communications, Inc. is not
obligated to, and does not undertake a duty to, update any
forward-looking statement to reflect events after the date of this
release, except as required by law. The results for the third quarter of
2011 may not be reflective of results for the year or any subsequent
period. MetroPCS does not plan to update nor reaffirm guidance except
through formal public disclosure pursuant to Regulation FD.
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(Unaudited)
September 30, 2011
December 31, 2010
CURRENT ASSETS:
Cash and cash equivalents
$
1,840,761
$
796,531
Short-term investments
299,981
374,862
Inventories
147,002
161,049
Accounts receivable (net of allowance for uncollectible accounts of
$611 and $2,494 at September 30, 2011 and December 31, 2010,
respectively)
65,048
58,056
Prepaid expenses
66,763
50,477
Deferred charges
81,178
83,485
Deferred tax assets
6,290
6,290
Other current assets
42,795
63,135
Total current assets
2,549,818
1,593,885
Property and equipment, net
4,009,265
3,659,445
Restricted cash and investments
2,576
2,876
Long-term investments
6,319
16,700
FCC licenses
2,538,600
2,522,241
Other assets
173,023
123,433
Total assets
$
9,279,601
$
7,918,580
CURRENT LIABILITIES:
Accounts payable and accrued expenses
$
476,324
$
521,788
Current maturities of long-term debt
32,860
21,996
Deferred revenue
243,696
224,471
Other current liabilities
26,458
34,165
Total current liabilities
779,338
802,420
Long-term debt, net
4,710,992
3,757,287
Deferred tax liabilities
756,362
643,058
Deferred rents
114,766
101,411
Other long-term liabilities
92,673
72,828
Total liabilities
6,454,131
5,377,004
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.0001 per share, 100,000,000 shares
authorized; no shares of preferred stock issued and outstanding at
September 30, 2011 and December 31, 2010
--
--
Common stock, par value $0.0001 per share, 1,000,000,000 shares
authorized, 362,219,229 and 355,318,666 shares issued and
outstanding at September 30, 2011 and December 31, 2010, respectively
36
36
Additional paid-in capital
1,776,506
1,686,761
Retained earnings
1,068,148
858,108
Accumulated other comprehensive loss
(12,947
)
(1,415
)
Less treasury stock, at cost, 537,395 and 237,818 treasury shares at
September 30, 2011 and December 31, 2010, respectively
(6,273
)
(1,914
)
Total stockholders' equity
2,825,470
2,541,576
Total liabilities and stockholders' equity
$
9,279,601
$
7,918,580
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive
Income
(in thousands, except share and per share information)
(Unaudited)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2011
2010
2011
2010
REVENUES:
Service revenues
$
1,131,054
$
942,251
$
3,294,563
$
2,717,671
Equipment revenues
74,334
78,538
314,654
286,156
Total revenues
1,205,388
1,020,789
3,609,217
3,003,827
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense of
$120,362, $99,706, $347,645 and $290,532 shown separately below)
382,033
313,688
1,089,480
906,508
Cost of equipment
343,473
256,265
1,095,269
805,357
Selling, general and administrative expenses (excluding depreciation
and amortization expense of $18,947, $14,098, $54,883 and $40,374
shown separately below)
162,459
147,431
486,786
465,940
Depreciation and amortization
139,309
113,804
402,528
330,906
Loss (gain) on disposal of assets
1,283
(18,333
)
2,731
(16,461
)
Total operating expenses
1,028,557
812,855
3,076,794
2,492,250
Income from operations
176,831
207,934
532,423
511,577
OTHER EXPENSE (INCOME):
Interest expense
69,511
65,726
193,051
198,710
Interest income
(531
)
(497
)
(1,557
)
(1,353
)
Other (income) expense, net
(93
)
462
(534
)
1,396
Loss on extinguishment of debt
--
15,590
9,536
15,590
Total other expense
68,887
81,281
200,496
214,343
Income before provision for income taxes
107,944
126,653
331,927
297,234
Provision for income taxes
(38,618
)
(49,366
)
(121,887
)
(117,370
)
Net income
$
69,326
$
77,287
$
210,040
$
179,864
Other comprehensive income (loss):
Unrealized gains on available-for-sale securities, net of tax of
$25, $89, $127 and $167, respectively
40
137
204
261
Unrealized losses on cash flow hedging derivatives, net of tax
benefit of $5,790, $2,237, $13,713 and $8,674, respectively
(9,286
)
(3,355
)
(22,060
)
(13,573
)
Reclassification adjustment for gains on available-for-sale
securities included in net income, net of tax of $47, $49, $169 and
$132, respectively
(75
)
(74
)
(272
)
(207
)
Reclassification adjustment for losses on cash flow hedging
derivatives included in net income, net of tax benefit of $2,468,
$1,884, $6,587 and $9,320, respectively
3,956
2,780
10,596
14,584
Total other comprehensive (loss) income
(5,365
)
(512
)
(11,532
)
1,065
Comprehensive income
$
63,961
$
76,775
$
198,508
$
180,929
Net income per common share:
Basic
$
0.19
$
0.22
$
0.58
$
0.51
Diluted
$
0.19
$
0.22
$
0.57
$
0.50
Weighted average shares:
Basic
362,019,205
353,954,532
359,763,082
353,342,910
Diluted
364,865,226
356,423,216
363,717,798
355,593,779
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Nine Months Ended September 30,
2011
2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
210,040
$
179,864
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
402,528
330,906
Provision for uncollectible accounts receivable
382
38
Deferred rent expense
13,457
15,648
Cost of abandoned cell sites
650
1,450
Stock-based compensation expense
32,142
35,103
Non-cash interest expense
6,141
10,049
Loss (gain) on disposal of assets
2,731
(16,461
)
Loss on extinguishment of debt
9,536
15,590
Gain on sale of investments
(441
)
(340
)
Accretion of asset retirement obligations
4,198
2,772
Other non-cash expense
--
1,455
Deferred income taxes
119,290
114,105
Changes in assets and liabilities:
Inventories
14,047
21,199
Accounts receivable, net
(7,373
)
4,761
Prepaid expenses
(16,289
)
(11,885
)
Deferred charges
2,307
(4,263
)
Other assets
24,755
15,730
Accounts payable and accrued expenses
(90,087
)
(50,921
)
Deferred revenue
19,225
10,474
Other liabilities
6,421
4,117
Net cash provided by operating activities
753,660
679,391
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(699,625
)
(547,943
)
Change in prepaid purchases of property and equipment
(65,241
)
60,348
Proceeds from sale of property and equipment
845
7,643
Purchase of investments
(462,289
)
(1,174,773
)
Proceeds from maturity of investments
537,500
387,500
Change in restricted cash and investments
300
1,262
Acquisitions of FCC licenses and microwave clearing costs
(4,003
)
(3,686
)
Cash used in asset acquisitions
(7,495
)
--
Net cash used in investing activities
(700,008
)
(1,269,649
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft
14,081
(78,765
)
Proceeds from debt issuance, net of discount
1,497,500
992,770
Debt issuance costs
(15,351
)
(24,250
)
Repayment of debt
(17,945
)
(12,000
)
Retirement of long-term debt
(535,792
)
(327,529
)
Payments on capital lease obligations
(6,222
)
(2,923
)
Purchase of treasury stock
(4,359
)
(1,586
)
Proceeds from exercise of stock options
58,666
4,944
Net cash provided by financing activities
990,578
550,661
INCREASE (DECREASE) CASH AND CASH EQUIVALENTS
1,044,230
(39,597
)
CASH AND CASH EQUIVALENTS, beginning of period
796,531
929,381
CASH AND CASH EQUIVALENTS, end of period
$
1,840,761
$
889,784
Definition of Terms and Reconciliation of Non-GAAP
Financial Measures
The Company utilizes certain financial measures and key performance
indicators that are not calculated in accordance with GAAP to assess our
financial and operating performance. A non-GAAP financial measure is
defined as a numerical measure of a company's financial performance that
(i) excludes amounts, or is subject to adjustments that have the effect
of excluding amounts, that are included in the comparable measure
calculated and presented in accordance with GAAP in the statement of
income or statement of cash flows, or (ii) includes amounts, or is
subject to adjustments that have the effect of including amounts, that
are excluded from the comparable measure so calculated and presented.
Average revenue per user, or ARPU, cost per gross addition, or CPGA,
cost per user, or CPU, and Adjusted EBITDA are non-GAAP financial
measures utilized by the Company's management to judge the Company's
ability to meet its liquidity requirements and to evaluate its operating
performance. Management believes that these measures are important in
understanding the performance of the Company's operations from period to
period, and although every company in the wireless industry does not
define each of these measures in precisely the same way, management
believes that these measures (which are common in the wireless industry)
facilitate key liquidity and operating performance comparisons with
other companies in the wireless industry. The following tables reconcile
the Company's non-GAAP financial measures with the Company's financial
statements presented in accordance with GAAP.
ARPU - The Company utilizes ARPU to evaluate its per-customer service
revenue realization and to assist in forecasting future service
revenues. ARPU is calculated exclusive of pass through charges that the
Company collects from its customers and remits to the appropriate
government agencies.
Average number of customers for any measurement period is determined by
dividing (a) the sum of the average monthly number of customers for the
measurement period by (b) the number of months in such period. Average
monthly number of customers for any month represents the sum of the
number of customers on the first day of the month and the last day of
the month divided by two. ARPU for the nine months ended September 30,
2010 includes approximately $0.8 million that would have been recognized
as service revenues but were classified as equipment revenues because
the consideration received from customers was less than the fair value
of promotionally priced handsets. The following table shows the
calculation of ARPU for the periods indicated.
Three Months Ended September 30,
Nine Months Ended September 30,
2011
2010
2011
2010
(in thousands, except average number of customers and ARPU)
Calculation of Average Revenue Per User (ARPU):
Service revenues
$
1,131,054
$
942,251
$
3,294,563
$
2,717,671
Add: Impact to service revenues of promotional activity
--
--
--
778
Less: Pass through charges
(19,785
)
(21,270
)
(61,795
)
(69,204
)
Net service revenues
$
1,111,269
$
920,981
$
3,232,768
$
2,649,245
Divided by: Average number of customers
9,079,982
7,734,525
8,853,141
7,398,960
ARPU
$
40.80
$
39.69
$
40.57
$
39.78
CPGA - The Company utilizes CPGA to assess the efficiency of its
distribution strategy, validate the initial capital invested in its
customers and determine the number of months to recover its customer
acquisition costs. This measure also allows management to compare the
Company's average acquisition costs per new customer to those of other
wireless broadband mobile providers. Equipment revenues related to new
customers, adjusted for the impact to service revenues of promotional
activity, are deducted from selling expenses in this calculation as they
represent amounts paid by customers at the time their service is
activated that reduce the Company's acquisition cost of those customers.
Additionally, equipment costs associated with existing customers, net of
related revenues, are excluded as this measure is intended to reflect
only the acquisition costs related to new customers. The following table
reconciles total costs used in the calculation of CPGA to selling
expenses, which the Company considers to be the most directly comparable
GAAP financial measure to CPGA.
Three Months Ended September 30,
Nine Months Ended September 30,
2011
2010
2011
2010
(in thousands, except gross customer additions and CPGA)
Calculation of Cost Per Gross Addition (CPGA):
Selling expenses
$
88,702
$
73,380
$
259,086
$
248,721
Less: Equipment revenues
(74,334
)
(78,538
)
(314,654
)
(286,156
)
Add: Impact to service revenues of promotional activity
--
--
--
778
Add: Equipment revenue not associated with new customers
58,026
54,201
192,615
171,905
Add: Cost of equipment
343,473
256,265
1,095,269
805,357
Less: Equipment costs not associated with new customers
(163,610
)
(128,016
)
(515,743
)
(376,137
)
Gross addition expenses
$
252,257
$
177,292
$
716,573
$
564,468
Divided by: Gross customer additions
1,300,611
1,104,350
4,087,582
3,623,113
CPGA
$
193.95
$
160.54
$
175.30
$
155.80
CPU - The Company utilizes CPU as a tool to evaluate the non-selling
cash expenses associated with ongoing business operations on a per
customer basis, to track changes in these non-selling cash costs over
time, and to help evaluate how changes in the Company's business
operations affect non-selling cash costs per customer. In addition, CPU
provides management with a useful measure to compare our non-selling
cash costs per customer with those of other wireless providers. The
Company believes investors use CPU primarily as a tool to track changes
in the Company's non-selling cash costs over time and to compare the
Company's non-selling cash costs to those of other wireless providers,
although other wireless carriers may calculate this measure differently.
The following table reconciles total costs used in the calculation of
CPU to cost of service, which we consider to be the most directly
comparable GAAP financial measure to CPU.
Three Months Ended September 30,
Nine Months Ended September 30,
2011
2010
2011
2010
(in thousands, except average number of customers and CPU)
Calculation of Cost Per User (CPU):
Cost of service
$
382,033
$
313,688
$
1,089,480
$
906,508
Add: General and administrative expense
73,757
74,051
227,700
217,219
Add: Net loss on equipment transactions unrelated to initial
customer acquisition
105,584
73,815
323,128
204,232
Less: Stock-based compensation expense included in cost of service
and general and administrative expense
(9,898
)
(11,770
)
(32,142
)
(35,103
)
Less: Pass through charges
(19,785
)
(21,270
)
(61,795
)
(69,204
)
Total costs used in the calculation of CPU
$
531,691
$
428,514
$
1,546,371
$
1,223,652
Divided by: Average number of customers
9,079,982
7,734,525
8,853,141
7,398,960
CPU
$
19.52
$
18.47
$
19.41
$
18.38
Adjusted EBITDA - The Company utilizes Adjusted EBITDA to monitor the
financial performance of its operations. This measurement, together with
GAAP measures such as revenue and income from operations, assists
management in its decision-making process related to the operations of
the company's business. Adjusted EBITDA has limitations as an analytical
tool and should not be considered in isolation or as a substitute for
income from operations, net income, or any other measure of financial
performance reported in accordance with GAAP. In addition, other
wireless carriers may calculate this measure differently.
The Company believes that analysts and investors use Adjusted EBITDA as
a supplemental measure to evaluate its overall operating performance and
that this metric facilitates the comparisons with other wireless
communications companies. The Company uses Adjusted EBITDA internally as
a metric to evaluate and compensate its personnel and management for
their performance, and as a benchmark to evaluate its operating
performance in comparison to its competitors. Management also uses
Adjusted EBITDA to measure, from period-to-period, the company's ability
to provide cash flows to meet future debt services, capital expenditures
and working capital requirements and fund future growth.
The following tables illustrate the calculation of Adjusted EBITDA and
reconcile Adjusted EBITDA to net income and cash flows from operating
activities, which we consider to be the most directly comparable GAAP
financial measures to Adjusted EBITDA.
Three Months Ended September 30,
Nine Months Ended September 30,
2011
2010
2011
2010
(in thousands)
Calculation of Adjusted EBITDA:
Net income
$
69,326
$
77,287
$
210,040
$
179,864
Adjustments:
Depreciation and amortization
139,309
113,804
402,528
330,906
Loss (gain) on disposal of assets
1,283
(18,333
)
2,731
(16,461
)
Stock-based compensation expense
9,898
11,770
32,142
35,103
Interest expense
69,511
65,726
193,051
198,710
Interest income
(531
)
(497
)
(1,557
)
(1,353
)
Other (income) expense, net
(93
)
462
(534
)
1,396
Loss on extinguishment of debt
--
15,590
9,536
15,590
Provision for income taxes
38,618
49,366
121,887
117,370
Adjusted EBITDA
$
327,321
$
315,175
$
969,824
$
861,125
Three Months Ended September 30,
Nine Months Ended September 30,
2011
2010
2011
2010
(in thousands)
Reconciliation of Net Cash Provided by Operating Activities to
Adjusted EBITDA:
Net cash provided by operating activities
$
271,560
$
341,940
$
753,660
$
679,391
Adjustments:
Interest expense
69,511
65,726
193,051
198,710
Non-cash interest expense
(2,125
)
(3,637
)
(6,141
)
(10,049
)
Interest income
(531
)
(497
)
(1,557
)
(1,353
)
Other (income) expense, net
(93
)
462
(534
)
1,396
Other non-cash expense
--
(492
)
--
(1,455
)
(Provision) Benefit for uncollectible accounts receivable
(121
)
19
(382
)
(38
)
Deferred rent expense
(5,626
)
(4,733
)
(13,457
)
(15,648
)
Cost of abandoned cell sites
(270
)
(547
)
(650
)
(1,450
)
Gain on sale and maturity of investments
122
123
441
340
Accretion of asset retirement obligations
(1,436
)
(1,487
)
(4,198
)
(2,772
)
Provision for income taxes
38,618
49,366
121,887
117,370
Deferred income taxes
(37,895
)
(48,405
)
(119,290
)
(114,105
)
Changes in working capital
(4,393
)
(82,663
)
46,994
10,788
Adjusted EBITDA
$
327,321
$
315,175
$
969,824
$
861,125
MetroPCS Communications, Inc. Keith Terreri, 214-570-4641 Vice
President - Finance & Treasurer or Jim Mathias,
214-570-4641 Director ? Investor Relations investor_relations@metropcs.com
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