-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RByTO3OcbfUy2kRynuGoxpipDcn4NW9Gs+2Wq9+97aeecsCDkre5FBMenuF5ommj DomEqRPU0BRYniOzETpnsQ== 0000891020-04-000199.txt : 20040212 0000891020-04-000199.hdr.sgml : 20040212 20040212162559 ACCESSION NUMBER: 0000891020-04-000199 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040212 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20040212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN WIRELESS CORP CENTRAL INDEX KEY: 0000930738 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 911638901 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28160 FILM NUMBER: 04592008 BUSINESS ADDRESS: STREET 1: 3650 131 ST AVENUE SE STREET 2: SUITE 400 CITY: BELLEVUE STATE: WA ZIP: 98006 BUSINESS PHONE: 4255868700 MAIL ADDRESS: STREET 1: 3650 131ST AVE. S.E STREET 2: SUITE 400 CITY: BELLEVUE STATE: WA ZIP: 98006 8-K 1 v96480e8vk.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): February 12, 2004 WESTERN WIRELESS CORPORATION - ------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Washington 000-28160 91-1638901 - ------------------------------------------------------------------------------ (State or other jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 3650 131st Avenue S.E. Bellevue, Washington 98006 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (425) 586-8700 ---------------------------- - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changes Since Last Report) ITEM 7. Exhibits 99.1 Press release dated February 12, 2004. ITEM 9. Regulation FD Disclosure On February 12, 2004, Western Wireless issued a press release, a copy of which is attached as Exhibit 99.1 hereto, announcing, among other things, its financial results for the fourth quarter and full year 2003. The information required to be disclosed pursuant to "Item 12. Results of Operations and Financial Condition" is being furnished under "Item 9. Regulation FD Disclosure" in accordance with the Securities and Exchange Commission's Final Rule Release No. 33-8216. Such information, including the exhibit attached hereto under "Item 7. Financial Statements and Exhibits" shall not be deemed "filed" for purposes of Section 18 of the Securities Act of 1934. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WESTERN WIRELESS CORPORATION ---------------------------- (Registrant) Date: February 12, 2004 By: /s/ Jeffrey A. Christianson -------------------------------- Jeffrey A. Christianson Senior Vice President and General Counsel EX-99.1 3 v96480exv99w1.txt EXHIBIT 99.1 Exhibit 99.1 FOR RELEASE 1:00 PM PDT FEBRUARY 12, 2004 [WESTERN WIRELESS LOGO] WESTERN WIRELESS CORPORATION 3650 131ST AVE. SE Bellevue, WA 98075 (425) 586-8700 WESTERN WIRELESS ANNOUNCES FOURTH QUARTER AND FULL YEAR 2003 FINANCIAL RESULTS BELLEVUE, WASH. (February 12, 2003) -- Western Wireless Corporation (NASDAQ: WWCA), a leading provider of wireless communications services to rural America, announced today its operating results for the quarter and year ended December 31, 2003. "Western Wireless just completed a very exciting year," said John W. Stanton, Chairman and Chief Executive Officer of Western Wireless Corporation. "We added over a half-million customers on a consolidated basis, achieved excellent growth in both revenue and Adjusted EBITDA, and punctuated the year by reporting consolidated Net Income for the fourth quarter. In our domestic business we made excellent progress operationally, which allowed us to generate financial results in line with our targets for the year. We continued to strengthen our strategic position by entering into long-term roaming agreements with the three largest GSM operators, and took advantage of resurgent capital markets to further solidify our balance sheet." Stanton continued, "Our consolidated international operations continue to demonstrate outstanding progress. Internationally, we added more customers in the fourth quarter than any quarter in our history, and added over 450,000 customers for the year. We effectively managed our dramatic growth, allowing us to report $24.5 million in international Adjusted EBITDA for the year, our first year of positive consolidated Adjusted EBITDA for our international operations." 2003 HIGHLIGHTS - - Domestic Adjusted EBITDA reached $104.8 million for the fourth quarter and $420.2 million for the year, increases of 8% and 14%, respectively, from the prior year periods (see attached schedule of Adjustments to Reconcile Net Income (Loss) to Adjusted EBITDA). - - Domestic free cash flow for the year was $246.1 million, an increase of 19% over 2002 (see attached schedule of Adjustments to Reconcile Net Cash Provided By (Used In) Operating Activities to Free Cash Flow). - - Domestic net subscriber additions for the quarter were 24,800. - - Western Wireless International achieved the second consecutive quarter of positive Adjusted EBITDA at $12.1 million for the fourth quarter, and the first full year of positive Adjusted EBITDA of $24.5 million. - - Net customer additions for Western Wireless International for the quarter were 174,500. - - Completed the sale of 12 million Class A shares during the fourth quarter, raising net proceeds of $227.3 million. Including asset sales, Western Wireless raised over $1 billion in capital during 2003. - - Western Wireless launched additional GSM roaming services during the fourth quarter and now serves the country's three largest GSM operators. Western Wireless reported consolidated total revenue of $413.6 million for the fourth quarter, a 36% increase over the fourth quarter of 2002. Consolidated net income for the quarter was $2.1 million or $0.02 per basic and diluted share. This compares to a net loss of $22.9 million, or $0.29 per basic and diluted share, for the fourth quarter of 2002. Consolidated Adjusted EBITDA increased to $116.9 million for the quarter, a 59% increase from the same quarter last year. DOMESTIC RESULTS Domestic results are highlighted by continued growth in revenue and Adjusted EBITDA and overall financial results that match Western Wireless' targets for the year. Subscriber revenue increased nearly 18% over the fourth quarter of 2002, to $182.9 million. Beginning with the third quarter of 2003, Western Wireless includes in subscriber revenue amounts collected from its customers for federal and state universal service fund assessments. The subsequent remittances to the universal service fund are recorded in general and administrative costs. The USF collections increased subscriber revenue by $6.2 million in the fourth quarter. Subscriber revenue per average subscriber for the quarter was $48.08, an increase of 10% over the fourth quarter of 2002. This amount includes $1.63 for the USF collections. Roamer revenue for the quarter was $53.4 million, a decline of less than 4% from the fourth quarter last year. Adjusted EBITDA for the fourth quarter was $104.8 million, an increase of 8% over last year. Net income and Adjusted EBITDA are not affected by the USF collections and remittances. Consistent gross subscriber additions and lower churn resulted in strong net subscriber additions during the quarter of 24,800. Churn during the fourth quarter averaged 2.1% per month. Western Wireless completed its acquisition of the Minnesota 10 Rural Service Area ("MN 10") and the Minneapolis/St. Paul Metro A-2 cellular licenses, as well as the Mankato-Fairmont and Rochester-Austin-Albert Lea Basic Trading Area (BTA) PCS licenses in December, which added 19,500 subscribers. Total subscribers at December 31, 2003 were 1,290,400. The average monthly cost of serving a subscriber (cost of service plus general and administrative expenses) was $23.37 per subscriber for the fourth quarter, an increase of 13% from the fourth quarter of 2002. However, this amount includes $1.63 attributable to the USF remittances. Cost per gross subscriber addition (or CPGA, determined by dividing the sum of sales and marketing costs and cost of equipment sales, reduced by equipment sales, by the number of gross subscriber additions for the quarter) was $418 for the quarter. Western Wireless includes digital handset subsidies incurred in retaining existing subscribers in its subscriber acquisition costs. Retention costs for the quarter included in CPGA were $60. Capital expenditures for the quarter were $72.1 million. For the year, capital expenditures totaled $174.1 million. At the end of the year, over 65% of the population in Western Wireless' service area had access to CDMA digital services. In addition, Western Wireless has completed its GSM/GPRS overlay on about 186 sites, or about 30% of its planned GSM/GPRS coverage, and is now providing GSM roaming services. Over three-quarters of Western Wireless' subscribers now use digital services and over 80% of network minutes are digital. Western Wireless completed an offering of 12 million Class A shares in November 2003. The net proceeds from the offering were $227.3 million. Most of the proceeds, $175 million, have been used to reduce amounts outstanding under the domestic revolving credit facility, allowing Western Wireless to reduce total debt while maintaining the additional liquidity that the offering represents. Included in Western Wireless' domestic results for the fourth quarter is a gain from the adjustment of interest rate hedges to fair market value, in the amount of $12 million (recorded under other income (expense) as Other, net). INTERNATIONAL RESULTS Total revenue for Western Wireless International's ("WWI") six consolidated businesses was $165.2 million for the quarter, an increase of 97% over the fourth quarter of 2002. For the year, total revenue was $531.1 million, up 75% from $302.9 million in 2002. WWI's Austrian subsidiary, tele.ring, contributed $115.4 million to revenue of the consolidated international operations in the fourth quarter, compared to $53.6 million for the fourth quarter of 2002, an increase of 115%. Total revenue in tele.ring for the year was $369.2 million, up from $192.8 million in 2002. Adjusted EBITDA for the consolidated international operations for the quarter was $12.1 million, compared to an Adjusted EBITDA loss of $23.4 million for the fourth quarter of 2002. tele.ring's contribution to Adjusted EBITDA of the consolidated international operations was $10.2 million for the fourth quarter. This compares to an Adjusted EBITDA loss for tele.ring in the fourth quarter of 2002 of $17.5 million. Adjusted EBITDA for tele.ring for the year was $29.3 million, up from an Adjusted EBITDA loss of $23.5 million in 2002. Net post-paid and pre-paid customer additions for the international consolidated businesses totaled 174,500 for the quarter. Total customers at December 31, 2003 for the six consolidated businesses were 1,194,200. During the fourth quarter tele.ring added 116,600 mobile customers. tele.ring finished the quarter with 634,200 mobile customers, of which 78% were post-paid subscribers. WWI's Irish business, Meteor Mobile, added 24,600 customers during the quarter and ended the quarter with 180,600 customers. Virtually all of Meteor's customers are pre-paid. WWI also had 159,300 fixed line customers, primarily in its tele.ring operations in Austria. CONFERENCE CALL On February 12, 2004 at 1:30 p.m. PDT, Western Wireless will host a conference call to discuss fourth quarter and full year financial results. The dial-up number for the call is 888/323-9686. The access code is the phrase "Western Wireless". A separate dial-up replay number will be available beginning at 3:30 p.m. PDT on February 12, 2004 until midnight PDT on Thursday, February 19, 2004. The replay number is 888/473-0149 and the access code is 4703. Investors can also access the live conference call and the conference call replay, as well as view this press release, through the investor relations link on the Western Wireless website at www.wwireless.com. ABOUT WESTERN WIRELESS CORPORATION Western Wireless Corporation, located in Bellevue, Washington, serves over 1.2 million subscribers in 19 western states under the Cellular One(R) and Western Wireless(R) brand names. Through its subsidiaries and operating joint ventures, Western Wireless is licensed to offer service in eight foreign countries. This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements regarding the Company's plans, intentions and expectations. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made. Such statements are inherently subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those expected or implied by the forward-looking statements. These factors include general economic and business conditions nationally, internationally and in the regions and countries in which we operate; demographic changes; technology changes; increased competition; changes in business strategy or development plans; our high leverage and our ability to access capital markets; our ability to attract and retain qualified personnel; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; our ability and the cost of acquiring additional spectrum licenses; and product liability and other claims asserted against us. A more extensive discussion of the risk factors that could impact these areas and the Company's overall business and financial performance can be found in the Company's public offering prospectuses and its reports filed with the Securities and Exchange Commission. Given these factors, investors and analysts should not place undue reliance on forward-looking statements. FOR FURTHER INFORMATION CONTACT: Investment Community: Media: Steve Winslow John Snyder Western Wireless Corporation Snyder Investor Relations (800) 261-5960 (206) 262-0291 steve.winslow@wwireless.com jsnyder@snyderir.com WESTERN WIRELESS CORPORATION Consolidating Statements of Operations (Dollars in thousands, except per share data) (Unaudited)
THREE MONTHS ENDED DECEMBER 31, 2003 THREE MONTHS ENDED DECEMBER 31, 2002 -------------------------------------------- ------------------------------------------ DOMESTIC INTERNATIONAL CONSOLIDATED DOMESTIC INTERNATIONAL CONSOLIDATED ------------ ------------ ------------ ------------ ------------ ------------ Revenues: Subscriber revenues $ 182,945 $ 132,966 $ 315,911 $ 155,496 $ 56,643 $ 212,139 Roamer revenues 53,407 9,991 63,398 55,527 7,554 63,081 Fixed line revenues 13,236 13,236 14,495 14,495 Equipment sales 11,648 5,511 17,159 10,727 3,401 14,128 Other revenues 411 3,478 3,889 (390) 1,575 1,185 ------------ ------------ ------------ ------------ ------------ ------------ Total revenues 248,411 165,182 413,593 221,360 83,668 305,028 ------------ ------------ ------------ ------------ ------------ ------------ Operating expenses: Cost of service (exclusive of depreciation and accretion included below) 43,275 70,396 113,671 39,312 50,178 89,490 Cost of equipment sales 22,939 26,727 49,666 21,659 14,461 36,120 General and administrative 45,631 22,237 67,868 34,298 18,321 52,619 Sales and marketing 31,770 33,759 65,529 29,005 24,073 53,078 Depreciation, amortization and accretion 42,183 21,794 63,977 48,030 14,008 62,038 Asset dispositions 15,000 15,000 Stock based compensation, net 2,182 8,763 10,945 1,328 1,328 ------------ ------------ ------------ ------------ ------------ ------------ Total operating expenses 187,980 183,676 371,656 188,632 121,041 309,673 ------------ ------------ ------------ ------------ ------------ ------------ Other income (expense): Interest and financing expense, net (24,518) (14,912) (39,430) (26,319) (13,519) (39,838) Equity in net income (loss) of unconsolidated affiliates, net of tax (30) 1,231 1,201 (170) (16) (186) Other, net 10,750 669 11,419 2,396 1,270 3,666 ------------ ------------ ------------ ------------ ------------ ------------ Total other expense (13,798) (13,012) (26,810) (24,093) (12,265) (36,358) ------------ ------------ ------------ ------------ ------------ ------------ Minority interests in net loss of consolidated subsidiaries 521 521 1,111 1,111 ------------ ------------ ------------ ------------ Income (loss) from continuing operations before provision for income taxes 46,633 (30,985) 15,648 8,635 (48,527) (39,892) Provision for income taxes (10,941) (2,623) (13,564) (6,586) (686) (7,272) ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) from continuing operations before cumulative change in accounting principle 35,692 (33,608) 2,084 2,049 (49,213) (47,164) ------------ ------------ ------------ Discontinued operations: Income from discontinued operations 328 328 Gain (loss) on sale of discontinued operations (721) 24,624 23,903 ------------ ------------ ------------ Total discontinued operations (721) 24,952 24,231 ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 35,692 $ (33,608) $ 2,084 $ 1,328 $ (24,261) $ (22,933) ============ ============ ============ ============ ============ ============ Basic income (loss) per share: Continuing operations $ 0.02 $ (0.60) Discontinued operations 0.31 ------------ ------------ Basic income (loss) per share $ 0.02 $ (0.29) ============ ============ Diluted income (loss) per share: Continuing operations $ 0.02 $ (0.60) Discontinued operations 0.31 ------------ ------------ Diluted income (loss) per share $ 0.02 $ (0.29) ============ ============ Weighted average shares outstanding: Basic 87,129,000 78,969,000 ============ ============ Diluted 89,242,000 78,969,000 ============ ============ Adjusted EBITDA (1) $ 104,796 $ 12,063 $ 116,859 $ 97,086 $ (23,365) $ 73,721 ============ ============ ============ ============ ============ ============
(1) See "Adjustments To Reconcile Net Income (Loss) To Adjusted EBITDA" WESTERN WIRELESS CORPORATION Consolidating Statements of Operations (Dollars in thousands, except per share data) (Unaudited)
TWELVE MONTHS ENDED DECEMBER 31, 2003 TWELVE MONTHS ENDED DECEMBER 31, 2002 ------------------------------------------ ------------------------------------------ DOMESTIC INTERNATIONAL CONSOLIDATED DOMESTIC INTERNATIONAL CONSOLIDATED ----------- ------------- ------------ ------------ ------------- ------------ Revenues: Subscriber revenues $ 706,307 $ 401,228 $ 1,107,535 $ 609,406 $ 201,280 $ 810,686 Roamer revenues 217,397 45,634 263,031 228,878 29,057 257,935 Fixed line revenues 56,613 56,613 55,751 55,751 Equipment sales 43,905 15,704 59,609 41,937 11,695 53,632 Other revenues 2,628 11,908 14,536 3,483 5,123 8,606 ------------ ------------ ------------ ------------ ------------ ------------ Total revenues 970,237 531,087 1,501,324 883,704 302,906 1,186,610 ------------ ------------ ------------ ------------ ------------ ------------ Operating expenses: Cost of service (exclusive of depreciation and accretion included below) 170,499 252,154 422,653 176,584 184,107 360,691 Cost of equipment sales 88,178 72,801 160,979 79,162 39,487 118,649 General and administrative 173,587 83,272 256,859 144,666 72,182 216,848 Sales and marketing 117,729 98,364 216,093 115,678 65,874 181,552 Depreciation, amortization and accretion 200,438 71,851 272,289 194,003 46,484 240,487 Asset dispositions 7,640 7,640 21,304 21,304 Stock based compensation, net 2,182 8,763 10,945 1,328 (5,450) (4,122) ------------ ------------ ------------ ------------ ------------ ------------ Total operating expenses 760,253 587,205 1,347,458 732,725 402,684 1,135,409 ------------ ------------ ------------ ------------ ------------ ------------ Other income (expense): Interest and financing expense, net (99,351) (59,218) (158,569) (110,080) (46,611) (156,691) Equity in net income (loss) of unconsolidated affiliates, net of tax (400) 3,150 2,750 (678) 4,897 4,219 Gain (loss) on sale of Croatian joint venture (1,574) 42,093 40,519 Loss on extinquishment of debt (16,910) (4,310) (21,220) Other, net 16,147 (1,306) 14,841 993 (180) 813 ------------ ------------ ------------ ------------ ------------ ------------ Total other expense (102,088) (19,591) (121,679) (109,765) (41,894) (151,659) ------------ ------------ ------------ ------------ ------------ ------------ Minority interests in net loss of consolidated subsidiaries 4,717 4,717 8,408 8,408 ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) from continuing operations before provision for income taxes and cumulative change in accounting principle 107,896 (70,992) 36,904 41,214 (133,264) (92,050) Provision for income taxes (30,290) (4,721) (35,011) (120,687) (2,583) (123,270) ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) from continuing operations before cumulative change in accounting principle 77,606 (75,713) 1,893 (79,473) (135,847) (215,320) ------------ ------------ ------------ Discontinued operations: Income from discontinued operations 5,736 5,736 Gain (loss) on sale of discontinued operations (721) 24,624 23,903 ------------ ------------ ------------ Total discontinued operations (721) 30,360 29,639 Cumulative change in accounting principle (1,189) (1,042) (2,231) ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 76,417 $ (76,755) $ (338) $ (80,194) $ (105,487) $ (185,681) ============ ============ ============ ============ ============ ============ Basic income (loss) per share: Continuing operations before cumulative change in accounting principle $ 0.02 $ (2.73) Discontinued operations 0.38 Cumulative change in accounting principle (0.02) ------------ ------------ Basic income (loss) per share $ 0.00 $ (2.35) ============ ============ Diluted income (loss) per share: Continuing operations before cumulative change in accounting principle $ 0.02 $ (2.73) Discontinued operations 0.38 Cumulative change in accounting principle (0.02) ------------ ------------ Diluted income (loss) per share $ 0.00 $ (2.35) ============ ============ Weighted average shares outstanding: Basic 81,248,000 78,955,000 ============ ============ Diluted 81,248,000 78,955,000 ============ ============ Adjusted EBITDA (1) $ 420,244 $ 24,496 $ 444,740 $ 367,614 $ (58,744) $ 308,870 ============ ============ ============ ============ ============ ============
(1) See "Adjustments To Reconcile Net Income (Loss) To Adjusted EBITDA" WESTERN WIRELESS CORPORATION ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO ADJUSTED EBITDA (dollars in thousands)
THREE MONTHS ENDED DECEMBER 31, ------------------------------------------------------------------------------------- 2003 2002 ------------------------------------------ --------------------------------------- DOMESTIC INTERNATIONAL CONSOLIDATED DOMESTIC INTERNATIONAL CONSOLIDATED -------- ------------- ------------ -------- ------------- ------------ Net income (loss) $ 35,692 $ (33,608) $ 2,084 $ 1,328 $ (24,261) $ (22,933) Depreciation, amortization and accretion 42,183 21,794 63,977 48,030 14,008 62,038 Asset dispositions 15,000 15,000 Stock based compensation, net 2,182 8,763 10,945 1,328 1,328 Interest and financing expense, net 24,518 14,912 39,430 26,319 13,519 39,838 Equity in net (income) loss of unconsolidated affiliates, net of tax and other, net (10,720) (1,900) (12,620) (2,226) (1,254) (3,480) (Gain) loss on sale of joint venture Loss on extinguishment of debt Minority interests in net loss of consolidated subsidiaries (521) (521) (1,111) (1,111) Provision for income taxes 10,941 2,623 13,564 6,586 686 7,272 Discontinued operations 721 (24,952) (24,231) Cumulative change in accounting principle --------- --------- --------- --------- --------- --------- Adjusted EBITDA (1) $ 104,796 $ 12,063 $ 116,859 $ 97,086 $ (23,365) $ 73,721 ========= ========= ========= ========= ========= =========
TWELVE MONTHS ENDED DECEMBER 31, ------------------------------------------------------------------------------------- 2003 2002 ----------------------------------------- ---------------------------------------- DOMESTIC INTERNATIONAL CONSOLIDATED DOMESTIC INTERNATIONAL CONSOLIDATED -------- ------------- ------------ -------- ------------ ------------ Net income (loss) $ 76,417 $ (76,755) $ (338) $ (80,194) $(105,487) $(185,681) Depreciation, amortization and accretion 200,438 71,851 272,289 194,003 46,484 240,487 Asset dispositions 7,640 7,640 21,304 21,304 Stock based compensation, net 2,182 8,763 10,945 1,328 (5,450) (4,122) Interest and financing expense, net 99,351 59,218 158,569 110,080 46,611 156,691 Equity in net (income) loss of unconsolidated affiliates, net of tax and other, net (15,747) (1,844) (17,591) (315) (4,717) (5,032) (Gain) loss on sale of joint venture 1,574 (42,093) (40,519) Loss on extinguishment of debt 16,910 4,310 21,220 Minority interests in net loss of consolidated subsidiaries (4,717) (4,717) (8,408) (8,408) Provision for income taxes 30,290 4,721 35,011 120,687 2,583 123,270 Discontinued operations 721 (30,360) (29,639) Cumulative change in accounting principle 1,189 1,042 2,231 --------- --------- --------- --------- --------- --------- Adjusted EBITDA (1) $ 420,244 $ 24,496 $ 444,740 $ 367,614 $ (58,744) $ 308,870 ========= ========= ========= ========= ========= =========
(1) EBITDA is a non-GAAP financial measure generally defined as net income (loss) before interest, taxes, depreciation and amortization. We use the non-GAAP financial measure "Adjusted EBITDA" which further excludes the following items: (i) accretion; (ii) asset dispositions; (iii) stock based compensation, net; (iv) equity in net (income) loss of unconsolidated affiliates, net of tax and other, net; (v) (gain) loss on sale of joint venture; (vi) loss on extinguishment of debt; (vii) minority interests in net loss of consolidated subsidiaries; (vii) discontinued operations; and (ix) cumulative change in accounting principle. Each of these items is presented in our Consolidating Statements of Operations. Other companies in the wireless industry may define Adjusted EBITDA in a different manner or present other varying financial measures, and, accordingly, the Company's presentation may not be comparable to other similarly titled measures of other companies. The Company's caluclation of Adjusted EBITDA is also not directly comparable to EBIT (earnings before interest and taxes) or a EBITDA. The Company views Adjusted EBITDA as an operating performance measure and, as such, believes that the GAAP financial measure most directly comparable to Adjusted EBITDA is net income (loss). The Company has presented Adjusted EBITDA because this financial measure, in combination with other financial measures, is an integral part of the Company's internal reporting system utilized by management to assess and evaluate the performance of its business. Adjusted EBITDA is also considered a significant performance measure. It is used by management as a measurement of the Company's success in obtaining, retaining and servicing customers by reflecting the Company's ability to generate subscriber revenue while providing a high level of customer service in a cost effective manner. The components of Adjusted EBITDA include the key revenue and expense items for which the Company's operating managers are responsible and upon which the Company evaluates their performance. Adjusted EBITDA is consistent with certain financial measures used in the Company's Credit Facility and 9.250% Senior Notes due 2013. Such financial measures are key components of several negative covenants including, among others, the limitation on investments and acquisitions and the limitation on distributions and dividends. Adjusted EBITDA should not be construed as an alternative to net income (loss), as determined in accordance with GAAP, as an alternative to cash flows from operating activities, as determined in accordance with GAAP, or as a measure of liquidity. The Company believes Adjusted EBITDA is useful to investors as a means to evaluate the Company's operating performance prior to financing costs, deferred tax charges, non-cash depreciation and amortization expense and certain other non-cash charges. Although Adjusted EBITDA may be defined differently by other companies in the wireless industry. the Company believes that Adjusted EBITDA provides some commonality of measurement in analyzing operating performance of companies in the wireless industry. WESTERN WIRELESS CORPORATION ADJUSTMENTS TO RECONCILE NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES TO FREE CASH FLOW (dollars in thousands)
THREE MONTHS ENDED DECEMBER 31, -------------------------------------------------------------------------------------- 2003 2002 ----------------------------------------- ----------------------------------------- DOMESTIC INTERNATIONAL CONSOLIDATED DOMESTIC INTERNATIONAL CONSOLIDATED ---------- ------------- ------------ -------- ------------- ------------ Net cash provided by (used in) operating activities $ 71,726 $ 9,510 $ 81,236 $ 55,913 $ (27,098) $ 28,815 Purchase of property and equipment (72,105) (30,296) (102,401) (54,524) (25,446) (79,970) Interest and financing expense, net 24,518 14,912 39,430 26,319 13,519 39,838 Non-cash interest (2,723) (2,723) (2,736) (2,736) Interest allocation 10,803 (10,803) 9,742 (9,742) Changes in operating assets and liabilities (1,077) (4,533) (5,610) 5,030 1,914 6,944 Cash paid for taxes 2,623 2,623 686 686 Other, net (1,174) 3,077 1,903 82 92 174 --------- --------- --------- --------- --------- --------- Free cash flow (1) $ 32,691 $ (18,233) $ 14,458 $ 42,562 $ (48,811) $ (6,249) ========= ========= ========= ========= ========= ========= Net cash used in investing activities $(121,189) $ (54,026) ========= ========= Net cash provided by financing activities $ 53,272 $ 51,163 ========= =========
TWELVE MONTHS ENDED DECEMBER 31, -------------------------------------------------------------------------------------- 2003 2002 ----------------------------------------- ---------------------------------------- DOMESTIC INTERNATIONAL CONSOLIDATED DOMESTIC INTERNATIONAL CONSOLIDATED ---------- ------------- ------------ -------- ------------- ------------ Net cash provided by (used in) operating activities $ 293,582 $ 30,513 $ 324,095 $ 229,405 $ (83,545) $ 145,860 Purchase of property and equipment (174,147) (75,910) (250,057) (160,676) (139,752) (300,428) Interest and financing expense, net 99,351 59,218 158,569 110,080 46,611 156,691 Non-cash interest (10,633) (10,633) (7,407) (7,407) Interest allocation 42,183 (42,183) 36,248 (36,248) Changes in operating assets and liabilities (10,991) (16,228) (27,219) (2,306) 18,673 16,367 Cash paid for taxes 4,721 4,721 2,583 2,583 Other, net (3,881) (912) (4,793) (5,813) 589 (5,224) --------- --------- --------- --------- --------- --------- Free cash flow (1) $ 246,097 $ (51,414) $ 194,683 $ 206,938 $(198,496) $ 8,442 ========= ========= ========= ========= ========= ========= Net cash used in investing activities $(180,619) $(304,326) ========= ========= Net cash provided by (used in) financing activities $ (84,860) $ 171,726 ========= =========
(1) Free cash flow is a non-GAAP financial measure which the Company defines as net cash provided by (used in) operating activities; (i) less purchase of property and equipment and non-cash interest; (ii) adding back interest and financing expense, net; The Company views free cash flow as a liquidity measure and, as such, believes that the GAAP financial measure most directly comparable to free cash flow is net cash provided by (used in) operating activities. The Company has presented free cash flow because this financial measure, in combination with other financial measures, is an integral part of the Company's internal reporting system. The Company believes the ability of a company in the wireless industry to generate positive free cash flow has a positive impact on shareholder value. Free cash flow provides an important measurement of the cash generated by the Company after capital reinvestment in its business and is an indicator of the Company's ability to service its long-term debt and other corporate cash requirements. Free cash flow does not include expenditures for domestic taxes as the Company currently has significant accumulated net operating losses and does not believe it will pay cash domestic income taxes in the near future. Free cash flow should not be construed as an alternative to net income (loss), as determined in accordance with GAAP, or as an alternative to net cash provided by (used in) operating activities, as determined in accordance with GAAP. The Company believes free cash flow is useful to investors as a means to evaluate the cash-generating capabilities of the Company, as a recurring capital expenditures are required in the wireless industry to sustain its subscriber base and revenue growth. Further, the Company considers trends in free cash flow when making decisions regarding the allocation of financial resources. WESTERN WIRELESS CORPORATION SELECTED DOMESTIC OPERATING STATISTICS
AS OF AND FOR THE THREE MONTHS ENDED DECEMBER 31, ----------------------------------- 2003 2002 -------------- --------------- Licensed population(1) 11,130,000 10,582,000 Subscribers 1,290,400 1,197,800 Average monthly subscriber revenue(2) $ 48.08 $ 43.67 Average monthly service revenue(3) $ 62.23 $ 59.15 Average monthly cost of serving a subscriber:(4) - - per subscriber $ 23.37 $ 20.67 - - per minute of use $ 0.041 $ 0.044 Cost per gross subscriber addition(5) $ 418 $ 405 Churn 2.1% 2.2% Subscriber minutes of use 491 398 Capital expenditures (000's) $ 72,105 $ 54,524
(1) Population is estimated based upon 2003 Claritas, Inc. estimates and is adjusted by Western Wireless by applying Claritas's positive and negative growth factors. (2) Average monthly subscriber revenue is determined by dividing subscriber revenue for the period by average subscribers for the period (the sum of beginning subscribers and ending subscribers, divided by two), and dividing that result by the number of months in the period. (3) Average monthly service revenue is determined by dividing service revenues for the period by average subscribers for the period and dividing that result by the number of months in the period. Service revenues include subscriber, roamer and other revenues. (4) Average monthly cost of serving a subscriber is determined by dividing total service costs (cost of service plus general and administrative expense) by average subscribers for the period, and dividing that result by the number of months in the period. (5) Cost per gross subscriber addition is determined by dividing the sum of sales and marketing costs and cost of equipment sales, reduced by equipment sales, by the number of gross subscriber additions for the period. -----END PRIVACY-ENHANCED MESSAGE-----