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| LEAP > SEC Filings for LEAP > Form 8-K on 9-Nov-2009 | All Recent SEC Filings |
9-Nov-2009
Other Events
Other Financial Data
(Unaudited; in millions, except for ratios)
Nine Months Ended
September 30,
2008 2009
Adjusted OIBDA(1) $ 322.9 $ 356.1
Adjusted OIBDA margin(2) 26 % 22 %
Existing business adjusted OIBDA(1) $ 436.3 $ 530.9
Existing business adjusted OIBDA margin(2) 36 % 41 %
Ratio of earnings to fixed charges(3) - -
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(1) Adjusted OIBDA is
defined as
operating income
(loss) before
depreciation and
amortization,
adjusted to exclude
the effects of:
gain/loss on
sale/disposal of
assets; impairment
of assets; and
share-based
compensation
expense (benefit).
Existing business
adjusted OIBDA
further adjusts
adjusted OIBDA to
exclude total
revenues
attributable to our
business operations
in markets launched
after December 31,
2007 and our
Cricket Broadband
service offering
that were included
in total revenues,
and to add back
operating expenses
attributable to
such activities
that were included
in total operating
expenses (other
than depreciation
and amortization
and share-based
compensation
expense, which have
already been added
back to adjusted
OIBDA). Generally,
for purposes of
calculating these
measures,
corporate-level and
regional-level
overhead expenses
are allocated to
our markets based
on gross customer
additions and
weighted-average
customers by
market.
Adjusted OIBDA and
existing business
adjusted OIBDA are
non-GAAP financial
measures. Adjusted
OIBDA and existing
business adjusted
OIBDA should not be
construed as
alternatives to
operating income or
net income as
determined in
accordance with
GAAP, as
alternatives to
cash flows from
operating
activities as
determined in
accordance with
GAAP or as measures
of liquidity.
In a
capital-intensive
industry such as
wireless
telecommunications,
management believes
that adjusted OIBDA
and existing
business adjusted
OIBDA, as well as
the associated
percentage margin
calculations, are
meaningful measures
of our operating
performance. We use
adjusted OIBDA and
existing business
adjusted OIBDA as
supplemental
performance
measures because
management believes
they facilitate
comparisons of our
operating
performance from
period to period
and comparisons of
our operating
performance to that
of other companies
by backing out
potential
differences caused
by the age and book
depreciation of
fixed assets
(affecting relative
depreciation
expenses) as well
as the items
described above for
which additional
adjustments were
made. While
depreciation and
amortization are
considered
operating costs
under GAAP, these
expenses primarily
represent the
non-cash current
period allocation
of costs associated
with long-lived
assets acquired or
constructed in
prior periods.
Because adjusted
OIBDA and existing
business adjusted
OIBDA facilitate
internal
comparisons of our
historical
operating
performance,
management also
uses these metrics
for business
planning purposes
and to measure our
performance
relative to that of
our competitors. In
addition, we
believe that
adjusted OIBDA,
existing business
adjusted OIBDA, and
similar measures
are widely used by
investors,
financial analysts
and credit rating
agencies as
measures of our
financial
performance over
time and to compare
our financial
performance with
that of other
companies in our
industry.
Adjusted
OIBDA and
existing
business
adjusted
OIBDA have
limitations
as
analytical
tools, and
should not
be
considered
in isolation
or as
substitutes
for analysis
of our
results as
reported
under GAAP.
Some of
these
limitations
include:
• they do not reflect capital expenditures;
• although they do not include depreciation and amortization, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted OIBDA and existing business adjusted OIBDA do not reflect cash requirements for such replacements;
• they do not reflect costs associated with share-based awards exchanged for employee services;
• they do not reflect the interest expense necessary to service interest or principal payments on current future indebtedness;
• they do not reflect expenses incurred for the payment of income taxes and other taxes; and
• other companies, including companies in our industry, may calculate these measures differently than we do, limiting their usefulness as comparative measures.
Management
understands
these
limitations and
considers
adjusted OIBDA
and existing
business
adjusted OIBDA
as financial
performance
measures that
supplement but
do not replace
the information
provided to
management by
our GAAP
results.
(2) Adjusted OIBDA margin is calculated by dividing adjusted OIBDA by service revenues. Existing business adjusted OIBDA margin is calculated by dividing existing business adjusted OIBDA by existing business service revenues. The term "existing business" refers to our and our consolidated joint ventures' business operations in markets in service on December 31, 2007, excluding any effects of our Cricket Broadband service. See "Reconciliation of Non-GAAP Financial Measures" below.
(3) For purposes of
calculating the
ratio of
earnings to
fixed charges,
earnings
represent
income
(loss) before
income taxes,
cumulative
effect of
change in
accounting
principle,
accretion of
redeemable
noncontrolling
interests, net
of tax, and
equity in net
(income) loss
of investee
plus fixed
charges and
amortization of
capitalized
interest, less
interest
capitalized.
"Fixed charges"
consist of
interest
expense,
whether
expensed or
capitalized,
and the
interest
portion of
rental expense
inherent in our
operating
leases. The
portion of
total rental
expense that
represents the
interest factor
is estimated to
be 33%. Our
earnings were
inadequate to
cover fixed
charges for the
nine months
ended
September 30,
2008 and 2009
by
$94.0 million
and
$160.9 million,
respectively.
See
"Calculation of
Ratio of
Earnings to
Fixed Charges"
below.
Reconciliation of Non-GAAP Financial Measures
We utilize certain financial measures, as described above, that are not
calculated based on GAAP. Certain of these financial measures are considered
"non-GAAP" financial measures within the meaning of Item 10 of Regulation S-K
promulgated by the SEC.
Adjusted OIBDA - The following table reconciles adjusted OIBDA and existing
business adjusted OIBDA to operating income (loss), which we consider to be the
most directly comparable GAAP financial measure to adjusted OIBDA and existing
business adjusted OIBDA (unaudited; in thousands):
Nine Months Ended
September 30,
2008 2009
Operating income $ 42,897 $ 26,634
Plus depreciation and amortization 254,839 297,230
OIBDA $ 297,736 $ 323,864
Less gain on sale or disposal of assets (559 ) (1,436 )
Plus impairment of assets 177 639
Plus share-based compensation expense 25,502 33,069
Adjusted OIBDA $ 322,856 $ 356,136
Plus net operating expense attributable to markets launched
after December 31, 2007 and the Cricket Broadband service
included in total operating expenses 113,468 174,763
Existing business adjusted OIBDA $ 436,324 $ 530,899
Adjusted OIBDA and existing business adjusted OIBDA margin:
Service revenues $ 1,250,595 $ 1,596,858
Adjusted OIBDA margin 26 % 22 %
Existing business service revenues $ 1,213,799 $ 1,304,113
Existing business adjusted OIBDA margin 36 % 41 %
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Calculation of Ratio of Earnings to Fixed Charges
(Unaudited; in thousands, except for ratios)
Nine Months Ended
September 30,
2008 2009
Computation of earnings:
Income (loss) before income taxes, cumulative effect of
change in accounting principle, accretion of redeemable
noncontrolling interests, net of tax, and equity in net
(income) loss of investee $ (58,002 ) $ (147,528 )
Fixed charges 190,539 227,069
Capitalized interest, net of amounts amortized (36,032 ) (13,386 )
Total earnings $ 96,505 $ 66,155
Computation of fixed charges:
Interest costs, including amounts capitalized $ 147,710 $ 170,486
Estimated interest expense portion of rent expense(1) 42,829 56,583
Total fixed charges $ 190,539 $ 227,069
Ratio of earnings to fixed charges - -
Deficiency of earnings to fixed charges $ (94,034 ) $ (160,914 )
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(1) One third of rent expense is deemed to be a reasonable approximation of the interest factor.
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