Published on FierceWireless (http://www.fiercewireless.com)

MetroPCS Reports Third Quarter 2009 Results

By pgoldstein
Created Nov 5 2009 - 10:15am

Third Quarter 2009 Highlights Include:

DALLAS--(BUSINESS WIRE)--Nov. 5, 2009-- MetroPCS Communications, Inc. (NYSE:PCS), the nation's leading provider of unlimited, flat-rate wireless communications service, today announced financial and operational results for the quarter ended September 30, 2009. MetroPCS reported quarterly growth in consolidated Adjusted EBITDA of 35% over the third quarter 2008 and finished the third quarter with over 6.3 million subscribers.

"This quarter we focused on managing costs; we delivered solid financial results and positioned the company for future growth. On a consolidated basis, we reported the highest consolidated quarterly Adjusted EBITDA in company history. In a seasonally slow quarter, we reported net additions that were below our expectations, due primarily to elevated churn and a deceleration in gross additions. We believe this was the result of continued U.S. macro-economic weakness, an increasingly competitive environment, and upward adjustments we made to the price of certain handsets," said Roger D. Linquist, Chairman, President and Chief Executive Officer of MetroPCS.

"During the quarter, we continued to buildout and expand our network and increase distribution in the Northeast Markets. We recorded approximately 121 thousand net subscriber additions for the Northeast Markets during the third quarter. After enhancing our rate plans in August, we recently introduced additional marketing initiatives intended to address the evolving competitive marketplace.

"In September we announced our selection of our vendors for an initial launch of 4G LTE services and handsets for our anticipated launch of services in the second half of 2010, and also recently expanded the coverage area where our customers can receive MetroPCS Unlimited NationwideSM service," Linquist concluded.

Key Consolidated Financial and Operating Metrics
(in millions, except percentages, per share, per subscriber and subscriber amounts)


 
 
 

Three Months Ended
Three Months Ended
Nine Months Ended
Nine Months Ended

September 30, 2009
September 30, 2008
September 30, 2009
September 30, 2008
Service revenues $ 812

$ 611

$ 2,306

$ 1,771
Total revenues $ 896

$ 687

$ 2,551

$ 2,028
Income from operations $ 158

$ 121

$ 405

$ 368
Net income $ 74

$ 45

$ 144

$ 135
Diluted net income per common share $ 0.21

$ 0.13

$ 0.40

$ 0.38
Consolidated Adjusted EBITDA(1) $ 272

$ 201

$ 705

$ 589

Consolidated Adjusted EBITDA as a percentage of service revenues
33.5 %

32.9 %

30.6 %

33.2 %







 
ARPU(1) $ 41.08

$ 40.73

$ 40.68

$ 41.73
CPGA(1) $ 153.94

$ 128.21

$ 148.27

$ 130.78
CPU(1) $ 17.27

$ 18.18

$ 16.93

$ 18.41
Churn-Average Monthly Rate
5.8 %

4.8 %

5.5 %

4.5 %







 
Consolidated Subscribers






End of Period
6,322,269


4,847,314


6,322,269


4,847,314
Net Additions
66,157


249,265


955,436


884,528
Penetration of Covered POPs(2)
7.1 %

7.9 %

7.1 %

7.9 %
 

(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 increased approximately 28 million from 9/30/08 to 9/30/09.

Quarterly Consolidated Results

Effective January 1, 2009, the Company implemented a change to the composition of its reportable segments under SFAS No. 131 "Disclosure About Segments of an Enterprise and Related Information," (Accounting Standards Codification 280 "Segment Reporting"). Under this change, the Company now aggregates its thirteen operating segments as follows: the Core Markets include the Atlanta, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, Orlando/Jacksonville, Sacramento, San Francisco, and Tampa/Sarasota metropolitan areas and the Northeast Markets include the Boston, New York and Philadelphia metropolitan areas. On June 9, 2009, the Company filed a current report on Form 8-K which reflects the retrospective adjustment of the historical quarterly performance measures presented below.

Core Markets Segment Results
(in millions, except percentages and subscriber amounts)


 
 
 

Three Months Ended
Three Months Ended
Nine Months Ended
Nine Months Ended

September 30, 2009
September 30, 2008
September 30, 2009
September 30, 2008
Service revenues $ 740

$ 608

$ 2,162

$ 1,768
Total revenues $ 809

$ 682

$ 2,373

$ 2,023
Income from operations $ 238

$ 165

$ 648

$ 464
Adjusted EBITDA $ 316

$ 236

$ 878

$ 661
Adjusted EBITDA as a percentage of service revenues
42.7 %

38.9 %

40.6 %

37.4 %







 
Subscribers






End of Period
5,655,785


4,802,692


5,655,785


4,802,692
Net Additions
(54,441 )

204,643


393,103


839,906
Penetration of Covered POPs
8.9 %

8.4 %

8.9 %

8.4 %

Core Markets Quarterly Results

Northeast Markets Segment Results
(in millions, except percentages and subscriber amounts)


 
 
 

Three Months Ended
Three Months Ended
Nine Months Ended
Nine Months Ended

September 30, 2009
September 30, 2008
September 30, 2009
September 30, 2008
Service revenues $ 72

$ 3

$ 144

$ 3
Total revenues $ 87

$ 5

$ 178

$ 5
Loss from operations $ (71 )
$ (40 )
$ (238 )
$ (82 )
Adjusted EBITDA (Deficit) $ (44 )
$ (35 )
$ (173 )
$ (72 )







 
Subscribers






End of Period
666,484


44,622


666,484


44,622
Net Additions
120,598


44,622


562,333


44,622
Penetration of Covered POPs
2.6 %

1.1 %

2.6 %

1.1 %

Northeast Markets Quarterly Results

Due to, among other things, MetroPCS' view that the U.S. economy will continue to experience weakness through at least the end of the year and increased competition in the wireless market, MetroPCS, as described below, will be affirming in part and revising in part its Annual Guidance for 2009 originally provided by the Company on November 5, 2008. Except as provided below, MetroPCS does not provide or reaffirm any operational or financial guidance for fiscal year 2009. In addition, due to the uncertainty in the economic and competitive environment and pending the development of MetroPCS' current and planned marketing and sales initiatives, MetroPCS at this time is not providing financial guidance for fiscal year 2010.

Operational and Financial Guidance for 2009

For the year ending December 31, 2009, MetroPCS today reaffirms the following guidance the Company originally provided on November 5, 2008.

MetroPCS currently expects to incur capital expenditures in the range of $0.7 billion to $0.9 billion on a consolidated basis for the year ending December 31, 2009. MetroPCS currently expects to reach unlevered free cash flow positive on a consolidated basis in late 2009.

Updated Operational and Financial Guidance for 2009

MetroPCS currently expects net subscriber additions in the range of 1.0 million to 1.2 million on a consolidated basis for the year ending December 31, 2009.

The Company currently expects Consolidated Adjusted EBITDA to be in the range of $850 million to $950 million for the year ending December 31, 2009.

MetroPCS Conference Call Information

MetroPCS Communications, Inc. will host a conference call to discuss its Third Quarter 2009 Earnings Results at 9:00 a.m. (ET) on Thursday, November 5, 2009.

Date:   Thursday, November 5, 2009
Time:
9:00 a.m. (ET)
Call-in Numbers:
Toll free: 888-464-7607
International:
706-634-9318
Participant Passcode:
31919942

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 5, 2009.

A replay of the conference call will be available for one week starting shortly after the call concludes and can be accessed by dialing 800-642-1687 (toll free) or 706-645-9291 (International). The passcode required to listen to the replay is 31919942.

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.

About MetroPCS Communications, Inc.

Dallas-based MetroPCS Communications, Inc. (NYSE:PCS) is a provider of unlimited wireless communications service for a flat-rate with no signed contract. MetroPCS is the fifth largest facilities-based carrier in the United States and has access to licenses covering a population of approximately 143 million people in the largest metropolitan areas in the United States, including New York City, Los Angeles, San Francisco, Dallas, Philadelphia, Atlanta, Jacksonville, Detroit, Boston, Miami, Las Vegas, Orlando, Tampa and Sacramento. As of September 30, 2009, MetroPCS had over 6.3 million subscribers. For more information please visit www.metropcs.com [1].

Forward-Looking Statements

This news 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 news release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including 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," "will," "forecast," and other similar expressions.

These forward-looking statements or projections are based on reasonable assumptions at the time they are made, including our current expectations, plans and assumptions that have been made 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. Forward-looking statements or projections 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 and projections. Factors that may materially affect such forward-looking statements and projections include:

• the highly competitive nature of our industry;

• current and planned marketing and sales initiatives;

• the rapid technological changes in our industry;

• the current economic slow down or recession continuing in the United States;

• the state of the capital markets and the United States economy;

• our exposure to counterparty risk in our financial agreements;

• our ability to maintain adequate customer care and manage our churn rate;

• our ability to achieve planned growth rates;

• our ability to manage our rapid growth, train additional personnel and improve our financial and disclosure controls and procedures;

• our ability to secure the necessary spectrum and network infrastructure equipment;

• our ability to maintain and upgrade our networks and business systems;

• our ability to adequately enforce or protect our intellectual property rights and defend against suits filed by others;

• governmental regulation of our services, and the costs of compliance and our failure to comply with such regulations;

• our capital structure, including our indebtedness amounts;

• changes in consumer preferences or demand for our products;

• our inability to attract and retain key members of management;

• the performance of our suppliers and other third parties on whom we rely; and

• other factors described or referenced from time to time in our filings with the Securities and Exchange Commission.

The forward-looking statements and projections speak only as to the date made, are based on current expectations, and are subject to 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 and projections, which are based on current 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 or projection to reflect events after the date of this release, except as required by law. The results for the third quarter of 2009 may not be reflective of results for 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,

2009
December 31,

2008
CURRENT ASSETS:


Cash and cash equivalents $ 955,578

$ 697,948
Short-term investments
224,928


3
Inventories, net
88,124


155,955
Accounts receivable (net of allowance for uncollectible accounts of $1,883 and $4,106 at September 30, 2009 and December 31, 2008, respectively)
47,780


34,666
Prepaid charges
88,792


56,347
Deferred charges
38,595


49,716
Deferred tax assets
1,832


1,832
Other current assets   23,642  
  47,417  
Total current assets
1,469,271


1,043,884



 
Property and equipment, net
3,097,625


2,847,751
Restricted cash and investments
13,437


4,575
Long-term investments
3,846


5,986
FCC licenses
2,451,544


2,406,596
Microwave relocation costs
19,282


16,478
Other assets   107,884  
  96,878  
Total assets $ 7,162,889  
$ 6,422,148  



 
CURRENT LIABILITIES:


Accounts payable and accrued expenses $ 483,436

$ 568,432
Current maturities of long-term debt
18,174


17,009
Deferred revenue
164,313


151,779
Other current liabilities   5,371  
  5,136  
Total current liabilities
671,294


742,356



 
Long-term debt, net
3,590,688


3,057,983
Deferred tax liabilities
481,732


389,509
Deferred rents
74,443


56,425
Redeemable ownership interest
7,457


6,290
Other long-term liabilities   103,644  
  135,262  
Total liabilities
4,929,258


4,387,825



 
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, 2009 and December 31, 2008
-


-
Common Stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 352,254,300 and 350,918,272 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively
35


35
Additional paid-in capital
1,622,483


1,578,972
Retained earnings
631,568


487,849
Accumulated other comprehensive loss   (20,455 )
  (32,533 )
Total stockholders' equity   2,233,631  
  2,034,323  
Total liabilities and stockholders' equity $ 7,162,889  
$ 6,422,148  
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,

2009   2008
2009   2008
REVENUES:






Service revenues $ 812,340

$ 610,691

$ 2,305,888

$ 1,771,222
Equipment revenues   83,253  
  76,030  
  244,646  
  256,660  
Total revenues
895,593


686,721


2,550,534


2,027,882







 
OPERATING EXPENSES:






Cost of service (excluding depreciation and amortization expense of $88,232, $58,484, $240,803 and $160,202, shown separately below)
298,288


219,423


812,596


614,036
Cost of equipment
199,092


160,538


651,511


520,783
Selling, general and administrative expenses (excluding depreciation and amortization expense of $10,745, $9,147, $31,294 and $25,617, shown separately below)
138,460


116,654


417,191


334,448
Depreciation and amortization
98,977


67,631


272,097


185,819
Loss (gain) on disposal of assets   2,569  
  1,822  
  (8,328 )
  4,471  
Total operating expenses   737,386  
  566,068  
  2,145,067  
  1,659,557  







 
Income from operations
158,207


120,653


405,467


368,325







 
OTHER EXPENSE (INCOME):






Interest expense
70,391


42,950


199,358


136,032
Accretion of put option in majority-owned subsidiary
395


317


1,168


937
Interest and other income
(853 )

(5,164 )

(1,881 )

(20,418 )
Impairment loss on investment securities   374  
  2,956  
  1,827  
  20,037  
Total other expense
70,307


41,059


200,472


136,588







 
Income before provision for income taxes
87,900


79,594


204,995


231,737







 
Provision for income taxes   (14,350 )
  (34,714 )
  (61,276 )
  (96,873 )







 
Net income $ 73,550  
$ 44,880  
$ 143,719  
$ 134,864  







 
Other comprehensive income:






Unrealized gains on available-for-sale securities, net of tax
776


-


665


798
Unrealized losses on cash flow hedging derivatives, net of tax
(8,570 )

(3,202 )

(12,197 )

(7,863 )
Reclassification adjustment for losses on cash flow hedging derivatives included in net income, net of tax   8,792  
  3,570  
  23,610  
  8,271  







 
Comprehensive income $ 74,548  
$ 45,248  
$ 155,797  
$ 136,070  







 
Net income per common share:






Basic $ 0.21  
$ 0.13  
$ 0.41  
$ 0.39  
Diluted $ 0.21  
$ 0.13  
$ 0.40  
$ 0.38  
Weighted average shares:






Basic   352,182,656  
  349,983,692  
  351,732,660  
  349,069,936  
Diluted   355,359,436  
  355,883,935  
  356,511,560  
  355,573,339  
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

 

 

 For the nine months ended

September 30,

2009   2008
CASH FLOWS FROM OPERATING ACTIVITIES:


Net income $ 143,719

$ 134,864
Adjustments to reconcile net income to net cash provided by operating activities:


Depreciation and amortization
272,097


185,819
Provision for uncollectible accounts receivable
191


14
Deferred rent expense
17,765


14,268
Cost of abandoned cell sites
6,148


3,603
Stock-based compensation expense
35,767


30,254
Non-cash interest expense
8,176


1,875
(Gain) loss on disposal of assets
(8,328 )

4,471
Gain on sale of investments
(272 )

-
Impairment loss on investment securities
1,827


20,037
Accretion of asset retirement obligations
3,716


2,244
Accretion of put option in majority-owned subsidiary
1,168


937
Deferred income taxes
85,070


93,484
Changes in assets and liabilities:


Inventories
67,831


26,644
Accounts receivable, net
(13,305 )

(7,511 )
Prepaid charges
(22,123 )

(17,854 )
Deferred charges
11,121


(3,702 )
Other assets
9,565


(298 )
Accounts payable and accrued expenses
171,442


21,381
Deferred revenue
12,438


16,069
Other liabilities   (24,599 )
  1,308  
Net cash provided by operating activities
779,414


527,907



 
CASH FLOWS FROM INVESTING ACTIVITIES:


Purchases of property and equipment
(636,522 )

(660,771 )
Change in prepaid purchases of property and equipment
(10,211 )

10,526
Proceeds from sale of property and equipment
4,836


502
Purchase of investments
(374,227 )

-
Proceeds from sale of investments
150,000


37
Change in restricted cash and investments
(13,112 )

-
Purchases of and deposits for FCC licenses
(15,517 )

(314,567 )
Proceeds from exchange of FCC licenses
949


-
Cash used in business acquisitions
-


(25,163 )
Microwave relocation costs   (1,050 )
  (1,798 )
Net cash used in investing activities
(894,854 )

(991,234 )



 
CASH FLOWS FROM FINANCING ACTIVITIES:


Change in book overdraft
(100,368 )

15,809
Proceeds from 9¼% Senior Notes
492,250


-
Debt issuance costs
(11,925 )

-
Repayment of debt
(12,000 )

(12,000 )
Payments on capital lease obligations
(2,680 )

-
Proceeds from exercise of stock options   7,793  
  9,702  
Net cash provided by financing activities   373,070  
  13,511  



 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
257,630


(449,816 )
CASH AND CASH EQUIVALENTS, beginning of period   697,948  
  1,470,208  
CASH AND CASH EQUIVALENTS, end of period $ 955,578  
$ 1,020,392  

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, and cost per user, or CPU, 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. Effective December 31, 2008, we revised our definition of ARPU to include activation revenues. Activation revenues are related to the reactivation of accounts that have previously disconnected and we believe that these revenues are more appropriate presented as a component of ARPU rather than a reduction to CPGA. Prior year measures have been restated to reflect this revision. The following tables reconcile non-GAAP financial measures with the Company's financial statements presented in accordance with GAAP.

ARPU - The Company utilizes ARPU to evaluate 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 three and nine months ended September 30, 2009 includes approximately $12.5 million and $37.2 million, respectively, 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 the 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,

2009   2008
2009   2008

(in thousands, except average number

of customers and ARPU)
Calculation of Average Revenue Per User (ARPU):






Service revenues $ 812,340

$ 610,691

$ 2,305,888

$ 1,771,222
Add:






Impact to service revenues of promotional activity
12,481


-


37,209


-
Less:






Pass through charges   (48,030 )
  (31,445 )
  (125,314 )
  (88,582 )
Net service revenues $ 776,791  
$ 579,246  
$ 2,217,783  
$ 1,682,640  
Divided by: Average number of customers   6,303,075  
  4,741,043  
  6,058,007  
  4,480,606  
ARPU $ 41.08  
$ 40.73  
$ 40.68  
$ 41.73  

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 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 PCS providers. Equipment revenues related to new customers adjusted for 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 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,

2009   2008

2009

   2008

(in thousands, except gross customer

additions and CPGA)
Calculation of Cost Per Gross Addition (CPGA):






Selling expenses $ 72,968

$ 58,916

$ 222,146

$ 158,743
Less: Equipment revenues
(83,253 )

(76,030 )

(244,646 )

(256,660 )
Add: Impact to service revenues of promotional activity
12,481


-


37,209


-
Add: Equipment revenue not associated with new customers
38,742


33,295


121,786


116,711
Add: Cost of equipment
199,092


160,538


651,511


520,783
Less: Equipment costs not associated with new customers   (62,041 )
  (56,891 )
  (198,523 )
  (188,096 )
Gross addition expenses $ 177,989  
$ 119,828  
$ 589,483  
$ 351,481  
Divided by: Gross customer additions   1,156,242  
  934,607  
  3,975,625  
  2,687,513  
CPGA $ 153.94  
$ 128.21  
$ 148.27  
$ 130.78  

CPU - CPU is cost of service and general and administrative costs (excluding applicable non-cash stock-based compensation expense included in cost of service and general and administrative expense) plus net loss on equipment transactions unrelated to initial customer acquisition exclusive of pass through charges, divided by the sum of the average monthly number of customers during such period. CPU does not include any depreciation and amortization expense. Management uses 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. We believe investors use CPU primarily as a tool to track changes in our non-selling cash costs over time and to compare our non-selling cash costs to those of other wireless providers. 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,

2009   2008
2009   2008

(in thousands, except average number

of customers and CPU)
Calculation of Cost Per User (CPU):






Cost of service $ 298,288

$ 219,423

$ 812,596

$ 614,036
Add: General and administrative expense
65,492


57,738


195,045


175,705
Add: Net loss on equipment transactions unrelated to initial customer acquisition
23,299


23,596


76,737


71,385
Less: Stock-based compensation expense included in cost of service and general and administrative expense
(12,426 )

(10,782 )

(35,767 )

(30,254 )
Less: Pass through charges   (48,030 )
  (31,445 )
  (125,314 )
  (88,582 )
Total costs used in the calculation of CPU $ 326,623  
$ 258,530  
$ 923,297  
$ 742,290  
Divided by: Average number of customers   6,303,075  
  4,741,043  
  6,058,007  
  4,480,606  
CPU $ 17.27  
$ 18.18  
$ 16.93  
$ 18.41  

The Company's senior secured credit facility calculates consolidated Adjusted EBITDA as: consolidated net income plus depreciation and amortization; gain (loss) on disposal of assets; non-cash expenses; gain (loss) on extinguishment of debt; provision for income taxes; interest expense; and certain expenses of MetroPCS minus interest and other income and non-cash items increasing consolidated net income. The Company considers Adjusted EBITDA, as defined above, to be an important indicator to investors because it provides information related to the Company's ability to provide cash flows to meet future debt service, capital expenditures and working capital requirements and fund future growth. The Company presents Adjusted EBITDA because covenants in its senior secured credit facility contain ratios based on this measure. If the Company's Adjusted EBITDA were to decline below certain levels, covenants in the Company's senior secured credit facility that are based on Adjusted EBITDA, including the maximum senior secured leverage ratio covenant, may be violated and could cause, among other things, an inability to incur further indebtedness and in certain circumstances a default or mandatory prepayment under the Company's senior secured credit facility. The Company's maximum senior secured leverage ratio is required to be less than 4.5 to 1.0 based on Adjusted EBITDA plus the impact of certain new markets. The lenders under the senior secured credit facility use the senior secured leverage ratio to measure the Company's ability to meet its obligations on its senior secured debt by comparing the total amount of such debt to its Adjusted EBITDA, which the Company's lenders use to estimate its cash flow from operations. The senior secured leverage ratio is calculated as the ratio of senior secured indebtedness to Adjusted EBITDA, as defined by the senior secured credit facility. Adjusted EBITDA is not a measure calculated in accordance with GAAP, and should not be considered a substitute for, operating income (loss), net income (loss), or any other measure of financial performance reported in accordance with GAAP. In addition, Adjusted EBITDA should not be construed as an alternative to, or more meaningful than cash flows from operating activities, as determined in accordance with GAAP.

The following table shows the calculation of our consolidated Adjusted EBITDA, as defined in the Company's senior secured credit facility, for the three and nine months ended September 30, 2009 and 2008.


 Three Months

Ended September 30,

   Nine Months

Ended September 30,

2009   2008
2009   2008

(in thousands)
Calculation of Consolidated Adjusted EBITDA:






Net income $ 73,550

$ 44,880

$ 143,719

$ 134,864
Adjustments:






Depreciation and amortization
98,977


67,631


272,097


185,819
Loss (gain) on disposal of assets
2,569


1,822


(8,328 )

4,471
Stock-based compensation expense (1)
12,426


10,782


35,767


30,254
Interest expense
70,391


42,950


199,358


136,032
Accretion of put option in majority-owned subsidiary (1)
395


317


1,168


937
Interest and other income
(853 )

(5,164 )

(1,881 )

(20,418 )
Impairment loss on investment securities
374


2,956


1,827


20,037
Provision for income taxes   14,350  
  34,714  
  61,276  
  96,873  
Consolidated Adjusted EBITDA $ 272,179  
$ 200,888  
$ 705,003  
$ 588,869  
________________________________
(1) Represents a non-cash expense, as defined by our senior secured credit facility.

In addition, for further information, the following table reconciles consolidated Adjusted EBITDA, as defined in our senior secured credit facility, to cash flows from operating activities for the three and nine months ended September 30, 2009 and 2008.


 Three Months

Ended September 30,

   Nine Months

Ended September 30,

2009   2008
2009   2008

(in thousands)
Reconciliation of Net Cash Provided by Operating Activities to Consolidated Adjusted EBITDA:






Net cash provided by operating activities $ 313,421

$ 196,489

$ 779,414

$ 527,907
Adjustments:






Interest expense
70,391


42,950


199,358


136,032
Non-cash interest expense
(3,019 )

(671 )

(8,176 )

(1,875 )
Interest and other income
(853 )

(5,164 )

(1,881 )

(20,418 )
(Provision for) recovery of uncollectible accounts receivable
(80 )

107


(191 )

(14 )
Deferred rent expense
(5,876 )

(1,302 )

(17,765 )

(14,268 )
Cost of abandoned cell sites
(1,541 )

(1,280 )

(6,148 )

(3,603 )
Gain on sale of investments
241


-


272


-
Accretion of asset retirement obligations
(1,320 )

(996 )

(3,716 )

(2,244 )
Provision for income taxes
14,350


34,714


61,276


96,873
Deferred income taxes
(40,072 )

(33,690 )

(85,070 )

(93,484 )
Changes in working capital   (73,463 )
  (30,269 )
  (212,370 )
  (36,037 )
Consolidated Adjusted EBITDA $ 272,179  
$ 200,888  
$ 705,003  
$ 588,869  

The following table reconciles segment Adjusted EBITDA for the three and nine months ended September 30, 2009 and 2008 to consolidated income before provision for income taxes.


 Three Months

Ended September 30,

   Nine Months

Ended September 30,

2009   2008
2009   2008

(in thousands)
Segment Adjusted EBITDA (Deficit):






Core Markets Adjusted EBITDA $ 315,810

$ 236,328

$ 878,227

$ 660,882
Northeast Markets Adjusted EBITDA Deficit   (43,631 )
  (35,440 )
  (173,224 )
  (72,013 )
Total
272,179


200,888


705,003


588,869
Depreciation and amortization
(98,977 )

(67,631 )

(272,097 )

(185,819 )
(Loss) gain on disposal of assets
(2,569 )

(1,822 )

8,328


(4,471 )
Stock-based compensation expense
(12,426 )

(10,782 )

(35,767 )

(30,254 )
Interest expense
(70,391 )

(42,950 )

(199,358 )

(136,032 )
Accretion of put option in majority-owned subsidiary
(395 )

(317 )

(1,168 )

(937 )
Interest and other income
853


5,164


1,881


20,418
Impairment loss on investment securities   (374 )
  (2,956 )
  (1,827 )
  (20,037 )
Consolidated income before provision for income taxes $ 87,900  
$ 79,594  
$ 204,995  
$ 231,737  

 

Source: MetroPCS Communications, Inc.

MetroPCS Communications, Inc.
Investor Relations Contacts:
Keith Terreri, Vice President - Finance & Treasurer, 214-570-4641
or
Jim Mathias, Director - Investor Relations, 214-570-4641
investor_relations@metropcs.com [2]

Source URL: http://www.fiercewireless.com/press-releases/metropcs-reports-third-quarter-2009-results

Links:
[1] http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.metropcs.com&esheet=6092437&lan=en_US&anchor=www.metropcs.com&index=1&md5=f614c72d38314e303695d4cfec6ba562
[2] mailto:investor_relations@metropcs.com