iPCS,Inc. Reports Third Quarter Results

http://www.businesswire.com/news/home/20091103006768/en

Company Reports Adjusted EBITDA
SCHAUMBURG, Ill.--(Business Wire)--
iPCS, Inc. (NASDAQ: IPCS), a PCS Affiliate of Sprint Nextel Corporation, today
reported financial and operational results for its third quarter ended September
30, 2009.

Third Quarter Highlights:

* Total revenues of $141.4 million compared to $132.1 million in the prior year
quarter ended September 30, 2008.
* Net Income of $2.7 million, or $0.16 per diluted share, compared to a net loss
of $7.5 million, or $0.44 per diluted share, in the prior year quarter.
* Adjusted EBITDA of $23.6 million compared to $14.7 million in the prior year
quarter. Included in Adjusted EBITDA for the current year third quarter is
approximately $3.0 million in Sprint-related litigation expenses. Included in
Adjusted EBITDA for the prior year quarter is approximately $5.3 million in
Sprint-related litigation expenses.
* Capital expenditures of $10.9 million compared to $11.4 million for the prior
year quarter.
* Subscriber activity for the quarter as follows:

* Gross additions of approximately 68,300 compared to 72,200 for the prior year
quarter.
* Net additions of approximately 9,900 compared to 20,400 for the prior year
quarter.
* Monthly churn, net of 30 day deactivations, of approximately 2.4%, compared to
2.3% for the prior year quarter.
* Ending subscribers of approximately 720,100 compared to 674,400 for the prior
year quarter.

Merger Agreement with Sprint Nextel

As previously disclosed, on October 18, 2009, the Company, Sprint Nextel
Corporation, a Kansas corporation ("Sprint Nextel"), and Ireland Acquisition
Corporation, a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of Sprint Nextel, entered into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which, among other things, on October 28, 2009
the Purchaser commenced a tender offer (the "Offer") to acquire all of the
Company`s outstanding shares of common stock, par value $0.01 per share (the
"Shares"), at a price of $24.00 per share in cash, subject to required
withholding taxes and without interest. The Merger Agreement also provides that
following the consummation of the Offer, the Purchaser will be merged with and
into the Company (the "Merger") with the Company surviving the merger as a
wholly owned subsidiary of Parent.

In light of the proposed transaction with Sprint Nextel described above, the
Company is withdrawing its full year 2009 operating and financial guidance and
will not be hosting an earnings conference call for its third quarter results.

NOTICE TO INVESTORS

The tender offer described in this release commenced on October 28, 2009. The
description contained in this release is not an offer to buy or the solicitation
of an offer to sell securities. Upon the commencement of the tender offer,
Sprint Nextel filed a tender offer statement on Schedule TO with the Securities
and Exchange Commission (the "SEC"), and iPCS filed a
solicitation/recommendation statement on Schedule 14D-9 with respect to the
planned tender offer. The tender offer statement (including an offer to
purchase, a related letter of transmittal and other tender offer documents) and
the solicitation/recommendation statement contain important information that
should be read carefully before making any decision to tender securities in the
tender offer. Those materials are being made available to iPCS's stockholders.
In addition, all of those materials (and all other tender offer documents filed
with the SEC) are available at no charge on the SEC`s website at www.sec.gov.

About iPCS, Inc.

iPCS, through its operating subsidiaries, is a Sprint PCS Affiliate of Sprint
Nextel Corporation with the exclusive right to sell wireless mobility
communications network products and services under the Sprint brand in 81
markets including markets in Illinois, Michigan, Pennsylvania, Indiana, Iowa,
Ohio and Tennessee. The territory includes key markets such as Grand Rapids
(MI), Fort Wayne (IN), the Tri-Cities region of Tennessee (Johnson City,
Kingsport and Bristol), Scranton (PA), Saginaw-Bay City (MI), Central Illinois
(Peoria, Springfield, Decatur, and Champaign) and the Quad Cities region of
Illinois and Iowa (Bettendorf and Davenport, IA, and Moline and Rock Island,
IL). As of September 30, 2009, iPCS's licensed territory had a total population
of approximately 15.1 million residents, of which its wireless network covered
approximately 12.7 million residents, and iPCS had approximately 720,100
subscribers. iPCS is headquartered in Schaumburg, Illinois. For more
information, please visit iPCS's website at www.ipcswirelessinc.com.

Definitions of Operating and Non-GAAP Financial Measures

iPCS provides readers financial measures calculated using generally accepted
accounting principles ("GAAP") and other measures which are derived from GAAP
("Non-GAAP Financial Measures"). These financial measures reflect conventions or
standard measures of liquidity, profitability or performance commonly used by
the investment community in the telecommunications industry for comparability
purposes. These financial measures are a supplement to GAAP financial measures
and should not be considered as an alternative to, or more meaningful than, GAAP
financial measures.

The Non-GAAP Financial Measures and non-financial terms used in this release
include the following:

* Gross subscriber additions for the period represent the number of new
activations during the period (excluding transfers into our territory).
* Net subscriber additions for the period represented is calculated as the gross
subscriber additions in the period less the number of subscribers deactivated
plus the net subscribers transferred in or out of our markets during the period.

* Churn is a measure of the average monthly rate at which subscribers based in
our territory deactivate service on a voluntary or involuntary (credit-related)
basis. We calculate average monthly churn based on the number of subscribers
deactivated during the period (net of those who deactivate within 30 days of
activation and excluding transfers out of our territory) as a percentage of our
average monthly subscriber based during the period divided by the number of
months during the period.
* Adjusted EBITDA represents earnings before interest, taxes, depreciation and
amortization as adjusted for gain or loss on the disposal of property and
equipment, stock-based compensation expense and debt extinguishment costs.
Adjusted EBITDA is a measure used by the investment community in the
telecommunications industry for comparability and is not intended to represent
the results of our operations in accordance with GAAP.
* ARPU, or average revenue per user, is a measure of the average monthly service
revenue earned from subscribers based in our territory. This measure is
calculated by dividing subscriber revenue or subscriber revenue plus roaming
revenue in our consolidated statement of operations by the number of our average
monthly subscribers during the period divided by the number of months in the
period.
* CCPU, or cash cost per user, is a measure of the monthly costs to operate our
business on a per subscriber basis consisting of costs of service and
operations, and general and administrative expenses in our consolidated
statement of operations, plus handset subsidies on equipment sold to existing
subscribers, less stock-based compensation expense. These costs are divided by
the number of our average monthly subscribers during the period divided by the
number of months in the period.
* CPGA, or cost per gross addition, is a measure of the average cost we incur to
add a new subscriber in our territory. These costs include handset subsidies on
new subscriber activations, commissions, rebates and other selling and marketing
costs. We calculate CPGA by dividing (a) the sum of cost of products sold less
product sales revenue associated with transactions with new subscribers, and
selling and marketing expense, net of stock-based compensation expense, during
the measurement period, by (b) the total number of subscribers activated in our
territory during the period.
* Licensed Population represents the number of residents in the markets in our
territory for which we have an exclusive right to provide wireless mobility
communications services under the Sprint brand name. The number of residents
located in our territory does not represent the number of wireless subscribers
that we serve or expect to serve in our territory.
* Covered Population represents the number of residents covered by our portion
of the wireless network of Sprint. The number of residents covered by our
network does not represent the number of wireless subscribers that we serve or
expect to serve in our territory.
* Free Cash Flowis defined as the net increase (decrease) in cash and cash
equivalents less the change in debt (including payment in kind, or "PIK"
interest), proceeds from the exercise of common stock options or the issuance or
repurchase of common stock and other financing activities, net. This non-GAAP
measure should be used in addition to, but not as a substitute for, the analysis
provided in the statement of cash flows. We believe that Free Cash Flow provides
useful information to investors, analysts and our management about the cash
generated by our core operations after interest and dividends and our ability to
fund or refinance scheduled debt maturities and other financing activities,
including discretionary refinancing and retirement of debt, the repurchase of
common stock and purchase or sale of investments.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995

Statements in this press release regarding iPCS's business which are not
historical facts are "forward-looking statements." Forward-looking statements
generally can be identified by the use of forward-looking terminology such as
"may," "will," "expect," "intend," "estimate," "anticipate," "believe" or
"continue" or the negative thereof or variations thereon or similar terminology.
Such statements are based upon the current beliefs and expectations of
management and are subject to significant risks and uncertainties. A variety of
factors could cause actual results to differ materially from those anticipated
in iPCS's forward-looking statements, including, but not limited to, the
following factors: (1) iPCS's dependence on its affiliation with Sprint; (2) the
final outcome of iPCS's litigation with Sprint concerning the scope of iPCS's
exclusivity under its affiliation agreements; (3) changes in Sprint's
affiliation strategy; (4) changes in Sprint's ability to devote as much of its
personnel and resources to the remaining Sprint Affiliates of Sprint Nextel; (5)
iPCS's reliance on Sprint's internal support systems and its related execution
of back office activities, including customer care, billing and back office
support; (6) changes in iPCS's customer default rates and/or in the level of bad
debt expense; (7) changes or advances in technology; (8) changes in Sprint's
national service plans, products and services or its fee structure with iPCS;
(9) adverse changes in the amounts of, and the relationship between, roaming
revenue iPCS receives and roaming expense iPCS pays; (10) iPCS's reliance on the
timeliness, accuracy and sufficiency of financial and other data and information
received from Sprint; (11) difficulties in network construction, expansion and
upgrades; (12) increased competition in iPCS's markets; (13) iPCS's dependence
on independent third parties for a sizable percentage of its sales; (14) the
depth and duration of the economic downturn in the United States and its effect
on our vendors, distribution partners and customers, (15) uncertainties as to
the timing of the Offer and the Merger; (16) uncertainties as to how many Shares
will be tendered into the Offer; (17) the risk that competing offers will be
made; (18) the possibility that various closing conditions for the transaction
may not be satisfied or waived, including that a governmental entity may
prohibit, delay or refuse to grant approval for the consummation of the
transaction and (19) the effects of disruption from the transaction making it
more difficult to maintain relationships with employees, licensees, other
business partners or governmental entities. For a detailed discussion of these
and other cautionary statements and factors that could cause actual results to
differ from iPCS's forward-looking statements, please refer to iPCS's filings
with the SEC, especially in the "risk factors" section of the Annual Report on
Form 10-K for the fiscal year ended December 31, 2008, our Form10-Q for the
quarter ended March 31, 2009, June 30, 2009 and our Form 10-Q for the quarter
ended September 30, 2009 to be filed shortly.Investors and analysts should not
place undue reliance on forward-looking statements. The forward-looking
statements in this document speak only as of the date of the document and iPCS
assumes no obligation to update the forward-looking statements or to update the
reasons why actual results could differ from those contained in the
forward-looking statements

iPCS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share and per share amounts)

September 30, December 31,
2009 2008

Assets
Current Assets:
Cash and cash equivalents $ 77,092 $ 55,940
Accounts receivable, net 44,922 37,859
Receivable from Sprint 29,168 25,623
Inventories, net 6,346 5,465
Assets held for sale - 389
Prepaid expenses 7,653 7,223
Other current assets 34 63
Total current assets 165,215 132,562
Property and equipment, net 159,726 162,014
Financing costs, net 5,387 6,419
Deferred customer activation costs 2,935 3,816
Intangible assets, net 83,720 90,602
Goodwill 141,783 141,783
Other assets 432 416
Total assets $ 559,198 $ 537,612

Liabilities and Stockholders' Deficiency
Current Liabilities:
Accounts payable $ 5,044 $ 5,051
Accrued expenses 19,848 18,337
Payable to Sprint 49,709 41,067
Deferred revenue 14,793 13,410
Accrued interest 3,672 5,519
Current maturities of long-term debt and capital lease obligations 42 37
Total current liabilities 93,108 83,421
Deferred customer activation fee revenue 2,935 3,816
Interest rate swap 11,749 16,621
Other long-term liabilities 6,761 6,551
Long-term debt and capital lease obligations, excluding current maturities 477,667 475,401
Total liabilities 592,220 585,810

Stockholders' Deficiency:
Preferred stock, par value $.01 per share; 25,000,000 shares authorized; none - -
issued
Common stock, par value $.01 per share; 75,000,000 shares authorized, 173 172
17,262,954 and 17,163,221 shares issued, respectively
Additional paid-in-capital 171,021 167,531
Accumulated deficiency (183,448 ) (199,280 )
Accumulated other comprehensive loss (11,749 ) (16,621 )
Treasury stock, at cost; 658,863 and 0 shares, respectively (9,019 ) -
Total stockholders' deficiency (33,022 ) (48,198 )
Total liabilities and stockholders' deficiency $ 559,198 $ 537,612

iPCS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except share data)

For the Three Months Ended For the Nine Months Ended

September 30, September 30, September 30, September 30,
2009 2008 2009 2008

Revenue:
Service revenue $ 108,480 $ 96,097 $ 319,600 $ 282,370
Roaming revenue 27,783 32,282 83,556 94,083
Equipment and other 5,141 3,678 14,571 10,633
Total revenue 141,404 132,057 417,727 387,086
Operating Expense:
Cost of service and roaming 74,038 74,520 217,838 213,167
Cost of equipment 18,497 15,905 50,029 40,442
Selling and marketing 17,542 18,091 51,528 52,394
General and administrative 8,948 10,028 25,565 25,108
Gain on Sprint settlement - - (4,273 ) -
Depreciation 8,986 10,592 29,233 33,809
Amortization of intangible assets 2,294 2,295 6,882 6,882
Loss on disposal of property and equipment, net 113 71 629 329
Total operating expense 130,418 131,502 377,431 372,131
Operating income 10,986 555 40,296 14,955
Interest income 47 316 211 1,420
Interest expense (8,065 ) (8,320 ) (24,096 ) (25,456 )
Other income, net 72 63 99 93
Income (loss) before provision for income tax 3,040 (7,386 ) 16,510 (8,988 )
Provision for income tax 358 108 678 758
Net income (loss) $ 2,682 $ (7,494 ) $ 15,832 $ (9,746 )

Income (loss) per share of common stock:
Basic $ 0.16 $ (0.44 ) $ 0.94 $ (0.57 )
Diluted $ 0.16 $ (0.44 ) $ 0.93 $ (0.57 )

Weighted average shares of common stock outstanding:
Basic 16,595,364 17,159,794 16,828,193 17,150,061
Diluted 16,917,497 17,159,794 16,994,820 17,150,061

iPCS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)

For the Nine Months Ended

September 30, 2009 September 30, 2008

Cash Flows from Operating Activities:
Net income (loss) $ 15,832 $ (9,746 )
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Loss on disposal of property and equipment 629 329
Depreciation and amortization 36,115 40,691
Non-cash interest expense 1,032 1,032
Payment-in-kind interest 3,600 -
Stock-based compensation expense 3,502 4,778
Provision for doubtful accounts 8,044 15,791
Changes in assets and liabilities:
Accounts receivable (15,105 ) (21,395 )
Receivable from Sprint (3,546 ) 9,885
Inventories, net (881 ) (3,476 )
Prepaid expenses, other current and long-term assets 464 206
Accounts payable, accrued expenses and other long-term liabilities (1,048 ) 5,753
Payable to Sprint 8,642 (815 )
Deferred revenue 502 1,081
Net cash flows provided by operating activities 57,782 44,114
Cash Flows from Investing Activities:
Purchases of property and equipment (27,910 ) (52,435 )
Proceeds from disposition of property and equipment 248 156
Net cash flows used in investing activities (27,662 ) (52,279 )
Cash Flows from Financing Activities:
Payments on capital lease obligations (27 ) (22 )
Proceeds from the exercise of stock options 5 582
Payment of special cash dividend (89 ) (109 )
Repurchase of common stock (8,857 ) (19 )
Net cash flows (used in) provided by financing activities (8,968 ) 432
Net increase (decrease) in cash and cash equivalents 21,152 (7,733 )
Cash and cash equivalents at beginning of period 55,940 77,599
Cash and cash equivalents at end of period $ 77,092 $ 69,866

Supplemental disclosure of cash flow information - cash paid for interest 21,254 24,978
(net of amount capitalized)
Supplemental disclosure for non-cash investing activities:
Accounts payable and accrued expenses incurred for the acquisition of property, $ 1,552 $ 12,070
equipment and construction in progress

iPCS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(UNAUDITED)
(In thousands)

Adjusted EBITDA For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008

Net income (loss) $ 2,682 $ (7,494 ) $ 15,832 $ (9,746 )
Net interest expense 8,018 8,004 23,885 24,036
Provision for income tax 358 108 678 758
Depreciation and amortization 11,280 12,887 36,115 40,691
Stock-based compensation expense 1,188 1,118 3,502 4,778
Loss on disposal of property and equipment, net 113 71 629 329
Adjusted EBITDA $ 23,639 $ 14,694 $ 80,641 $ 60,846

Free Cash Flow For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Net increase (decrease) in cash and cash equivalents $ 1,453 $ 4,312 $ 21,152 $ (7,733 )
Add back: Cash Flows from Financing Activities
Payments on capital lease obligations 10 7 27 22
Proceeds from the exercise of stock options (5 ) (186 ) (5 ) (582 )
Payment of special cash dividend 30 37 89 109
Repurchases of common stock 4,374 8 8,857 19
Free cash flow $ 5,862 $ 4,178 $ 30,120 $ (8,165 )

iPCS, INC. AND SUBSIDIARIES
Summary of Operating Statistics
(UNAUDITED)

For the Three Months Ended
September 30, June 30, 2009 September 30,
2009 2008

Subscribers
Gross Additions 68,300 55,300 72,200
Net Additions 9,900 10,100 20,400
Total Subscribers 720,100 710,200 674,400
Churn, net 2.4% 2.0% 2.3%

Average Revenue Per User, Monthly
Including Roaming $ 63 $ 64 $ 65
Without Roaming $ 50 $ 51 $ 48

Cash Cost Per User, Monthly
Including Roaming $ 41 $ 39 $ 44
Without Roaming $ 31 $ 29 $ 34

Cost Per Gross Addition $ 373 $ 429 $ 374

Licensed Population (Millions) 15.1 15.1 15.1
Covered Population (Millions) 12.7 12.6 12.4
Cell Sites 1,981 1,941 1,819

iPCS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(UNAUDITED)
(Dollars in thousands except per user and per gross addition amounts)

For the Three Months Ended
September 30, June 30, 2009 September 30,
2009 2008
ARPU
Service revenue $ 108,480 $ 107,139 $ 96,097
Roaming revenue 27,783 28,153 32,282
Total service and roaming revenue $ 136,263 $ 135,292 $ 128,379
Average subscribers 716,700 704,400 663,100

Average revenue per user including roaming, monthly $ 63 $ 64 $ 65
Average revenue per user without roaming, monthly $ 50 $ 51 $ 48

CCPU
Cost of service and roaming $ 74,038 $ 71,650 $ 74,520
plus: General and administrative 8,948 7,736 10,028
less: Stock-based compensation expense (1,047 ) (1,050 ) (988
less: Retail equipment upgrade revenue (1,575 ) (1,563 ) (676
plus: Retail equipment cost of upgrades 6,839 5,482 3,897
Total cash costs including roaming $ 87,203 $ 82,255 $ 86,781
less: Roaming expense (21,102 ) (20,409 ) (19,317
Total cash costs without roaming $ 66,101 $ 61,846 $ 67,464
Average subscribers 716,700 704,400 663,100

Cash cost per user, monthly $ 41 $ 39 $ 44
Cash cost per user without roaming, monthly $ 31 $ 29 $ 34

CPGA
Selling and marketing $ 17,542 $ 17,336 $ 18,091
less: Stock-based compensation expense (141 ) (144 ) (129
less: Equipment revenue, net of upgrade revenue (3,555 ) (3,293 ) (2,991
plus: Equipment costs, net of cost of upgrades 11,658 9,838 12,008
CPGA Costs $ 25,504 $ 23,737 $ 26,979
Gross additions 68,300 55,300 72,200

Cost per gross addition $ 373 $ 429 $ 374

Investor:
Financial Dynamics
Nathan Elwell, 312-553-6706

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