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Clearwire Reports Fourth Quarter And Full Year 2012 Results

Stocks in this article: CLWR

Fourth quarter 2012 reported net loss from continuing operations attributable to Clearwire was $(195.0) million, or $(0.28) per basic share compared to $(236.0) million, or $(0.81) per basic share, respectively in the prior year period. Including the effects of discontinued operations, fourth quarter 2012 reported net loss attributable to Clearwire was $(187.2) million, or $(0.27) per basic share, compared to $(236.8) million or $(0.81), respectively in the prior year period.

CLEARWIRE CORPORATION
SUMMARY FINANCIAL AND OPERATING DATA FROM CONTINUING OPERATIONS
(In thousands)
(Unaudited)
         
  Three months ended
  December 31, 2012 September 30, 2012 June 30, 2012 December 31, 2011
         
REVENUES:        
Retail revenue  $ 194,451  $ 197,215  $ 199,156  $ 197,640
Wholesale revenue  116,590  116,498  117,560  164,082
Other revenue  200  169  216  148
Total revenues  311,241  313,882  316,932  361,870
OPERATING EXPENSES:        
Cost of goods and services and network costs (exclusive of items shown separately below)  208,322  211,540  224,426  293,999
Selling, general and administrative expense  138,489  139,365  137,693  128,502
Depreciation and amortization  194,873  210,781  184,566  169,962
Spectrum lease expense  83,387  82,513  81,190  79,556
Loss from abandonment of network and other assets  (1,099)  2,588  317  123,000
Total operating expenses  623,972  646,787  628,192  795,019
OPERATING LOSS  (312,731)  (332,905)  (311,260)  (433,149)
         
LESS NON-CASH ITEMS:        
Non-cash expenses  70,041  67,310  77,893  156,308
Non-cash write-downs  1,805  16,551  14,369  129,358
Depreciation and amortization  194,873  210,781  184,566  169,962
Total non-cash items  266,719  294,642  276,828  455,628
Adjusted EBITDA  $ (46,012)  $ (38,263)  $ (34,432)  $ 22,479
Adjusted EBITDA margin (15)% (12)% (11)% 6 %
         
KEY OPERATING METRICS (k for '000's, MM for '000,000's)      
Total net subscriber additions  (906)k   (468)k   (41)k   873k 
Wholesale  (915)k   (489)k   (34)k   904k 
Retail  9k   21k   (8)k   (31)k 
Total subscribers  9,581k   10,488k   10,957k   10,414k 
Wholesale (1)  8,220k   9,136k   9,625k   9,122k 
Retail  1,361k   1,353k   1,333k   1,292k 
Retail ARPU $44.10 $45.06 $46.12 $46.69
Churn        
Wholesale 7.3 % 5.4 % 3.6 % 2.9 %
Retail 5.0 % 5.1 % 4.4 % 3.9 %
Retail CPGA $155 $191 $226 $259
Capital expenditures  $102MM   $34MM   $24MM   $23MM 
Domestic 4G covered POPS  135MM   133MM   134MM   132MM 
Cash, cash equivalents and investments  $869MM   $1,184MM   $1,210MM   $1,108MM 
         
(1) Includes non-launched markets. Based on the terms of the November 2011 Amended MVNO Agreement between Clearwire and Sprint, which provides for unlimited WiMAX service to Sprint retail customers in exchange for fixed payments in 2012 and 2013, fluctuations in the wholesale subscriber base will not necessarily correlate to wholesale revenue.
 
CLEARWIRE CORPORATION
SUMMARY FINANCIAL AND OPERATING DATA FROM CONTINUING OPERATIONS
(In thousands)
(Unaudited)
  Year Ended
  December 31, 2012 December 31, 2011
     
REVENUES:    
Retail revenue  $ 795,632  $ 758,254
Wholesale revenue  468,469  493,661
Other revenue  593  1,551
Total revenues  1,264,694  1,253,466
OPERATING EXPENSES:    
Cost of goods and services and network costs (exclusive of items shown separately below)  908,078  1,249,966
Selling, general and administrative expense  558,202  698,067
Depreciation and amortization  768,193  687,636
Spectrum lease expense  326,798  308,693
Loss from abandonment of network and other assets  82,206  700,341
Total operating expenses  2,643,477  3,644,703
OPERATING LOSS  (1,378,783)  (2,391,237)
     
LESS NON-CASH ITEMS:    
Non-cash expenses  281,908  423,260
Non-cash write-downs  171,781  966,441
Depreciation and amortization  768,193  687,636
Total non-cash items  1,221,882  2,077,337
Adjusted EBITDA  $ (156,901)  $ (313,900)
Adjusted EBITDA margin (12)% (25)%
     
KEY OPERATING METRICS (k for '000's, MM for '000,000's)  
Total net subscriber additions  (830)k  6,069k
Wholesale  (901)k  5,876k
Retail  71k  193k
Total subscribers  9,581k  10,414k
Wholesale (1)  8,220k  9,122k
Retail  1,361k  1,292k
Retail ARPU $45.51 $47.04
Churn    
Wholesale 4.8 % 1.9 %
Retail 4.6 % 3.8 %
Retail CPGA $201 $292
Capital expenditures  $182MM  $226MM
Domestic 4G covered POPS  135MM  132MM
Cash, cash equivalents and investments  $869MM  $1,108MM
     
(1) Includes non-launched markets. Based on the terms of the November 2011 Amended MVNO Agreement between Clearwire and Sprint, which provides for unlimited WiMAX service to Sprint retail customers in exchange for fixed payments in 2012 and 2013, fluctuations in the wholesale subscriber base will not necessarily correlate to wholesale revenue.

Management Webcast Clearwire executives will host a conference call and simultaneous webcast to discuss the company's fourth quarter and full year 2012 financial results at 4:30 p.m. Eastern Time today. A live broadcast of the conference call will be available online on the company's investor relations website located at http://investors.clearwire.com . Interested parties can access the conference call by dialing 1-877-392-9886, or from outside the U.S. by dialing 1-707-287-9329, at least five minutes prior to the start time. A replay of the call will be available beginning at approximately 7:30 p.m. Eastern Time on February 12, through Thursday, February 19, by calling 1-855-859-2056, or from outside the U.S. by dialing 1-404-537-3406. The passcode for the replay is 90062075.

About Clearwire Clearwire Corporation (Nasdaq:CLWR), through its operating subsidiaries, is a leading provider of 4G wireless broadband services offering services in areas of the U.S. where more than 130 million people live. The company holds the deepest portfolio of wireless spectrum available for data services in the U.S. Clearwire serves retail customers through its own CLEAR ® brand as well as through wholesale relationships with some of the leading companies in the retail, technology and telecommunications industries, including Sprint and NetZero. The company is constructing a next-generation 4G LTE Advanced-ready network to address the capacity needs of the market, and is also working closely with the Global TDD-LTE Initiative to further the TDD-LTE ecosystem. Clearwire is headquartered in Bellevue, Wash. Additional information is available at http://www.clearwire.com .

The Clearwire Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8493

Forward-Looking Statements

This release, and other written and oral statements made by Clearwire from time to time, contain forward-looking statements which are based on management's current expectations and beliefs, as well as on a number of assumptions concerning future events made with information that is currently available. Forward-looking statements may include, without limitation, management's expectations regarding future financial and operating performance and financial condition; proposed transactions; network development and market launch plans; strategic plans and objectives; industry conditions; the strength of the balance sheet; and liquidity and financing needs. The words "will," "would," "may," "should," "estimate," "project," "forecast," "intend," "expect," "believe," "target," "designed," "plan" and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside of Clearwire's control, which could cause actual results to differ materially and adversely from such statements. Some factors that could cause actual results to differ are:

  • Our proposed merger with Sprint is subject to certain regulatory conditions that may not be satisfied on a timely basis, or at all, and is also conditioned on the consummation of the Sprint-Softbank transaction. If the merger with Sprint fails because it is not adopted by our shareholders, then under certain circumstances Sprint may gain significant control over us by increasing its majority stake in us pursuant to the terms of an agreement with other shareholders. Additionally, failure to complete the proposed merger could negatively impact our business and the market price of our Class A Common Stock, and substantial doubt may arise regarding our ability to continue as a going concern.
  • We have a history of operating losses and we expect to continue to realize significant net losses for the foreseeable future.
  • Our business has become increasingly dependent on our wholesale partners, and Sprint in particular. Additionally, our current business plans depend on our ability to attract new wholesale partners with substantial requirements for additional data capacity, which is subject to a number of risks and uncertainties. If we do not receive the amount of revenues we expect from existing wholesale partners or if we are unable to enter into new agreements with additional wholesale partners for significant new wholesale commitments in a timely manner, our business prospects, results of operations and financial condition could be adversely affected, or we could be forced to consider all available alternatives, including financial restructuring.
  • Sprint owns a majority of our common shares, is our largest shareholder, and may have, or may develop in the future, interests that may diverge from other stockholders.
  • If the proposed merger with Sprint fails to close for any reason, we believe that we will require substantial additional capital to fund our business beyond the next twelve months and to further develop our network; such capital may not be available on acceptable terms or at all.  If the merger fails to close and the funding under our Note Purchase Agreement with Sprint was no longer available, we would have to significantly curtail our LTE network build plan to conserve cash and meet our obligations during 2013. Additionally, if the proposed merger with Sprint fails to close and we are unable to obtain sufficient additional capital, or we fail to generate sufficient revenue from our businesses to meet our ongoing obligations beyond the next twelve months, our business prospects, financial condition and results of operations will likely be materially and adversely affected, and we will be forced to consider all available alternatives, including financial restructuring.
  • We are in the early stages of deploying LTE on our wireless broadband network, alongside mobile WiMAX, to remain competitive and to generate sufficient revenues for our business; we will incur significant costs to deploy such technology. Additionally, LTE technology, or other alternative technologies that we may consider, may not perform as we expect on our network and deploying such technologies would result in additional risks to the company, including uncertainty regarding our ability to successfully add a new technology to our current network and to operate dual technology networks without disruptions to customer service, as well as our ability to generate new wholesale customers for the new network.
  • We currently depend on our commercial partners to develop and deliver the equipment for our legacy and mobile WiMAX networks, and are dependent on commercial partners to deliver equipment and devices for our planned LTE network as well.
  • Many of our competitors for our retail business are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services.
  • Our substantial indebtedness and restrictive debt covenants could limit our financing options and liquidity position and may limit our ability to grow our business. Further, unless we are able to secure the required shareholder approvals to increase the number of authorized shares under our Certificate of Incorporation, we may not have enough authorized, but unissued shares available to raise sufficient additional capital through an equity financing.
  • Future sales of large blocks of our common stock may adversely impact our stock price.

For a more detailed description of the factors that could cause such a difference, please refer to Clearwire's filings with the Securities and Exchange Commission, including the information under the heading "Risk Factors" in our Annual Report on Form 10-K filed on February 16, 2012, and subsequent SEC filings. Clearwire assumes no obligation to update or supplement such forward-looking statements.

CLEARWIRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
     
  December 31, 2012 December 31, 2011
ASSETS    
Current assets:    
Cash and cash equivalents  $ 193,445  $ 891,929
Short-term investments  675,112  215,655
Restricted cash  1,653  1,000
Accounts receivable, net of allowance of $3,145 and $5,542  22,769  83,660
Inventory  10,940  23,832
Prepaids and other assets  83,769  71,083
Total current assets  987,688  1,287,159
Property, plant and equipment, net  2,259,004  3,014,277
Restricted cash  3,709  7,619
Spectrum licenses, net  4,249,621  4,298,254
Other intangible assets, net  24,660  40,850
Other assets  141,107  157,797
Assets of discontinued operations  —  36,696
Total assets  $ 7,665,789  $ 8,842,652
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable and accrued expenses  $ 177,855  $ 157,172
Other current liabilities  227,610  122,756
Total current liabilities  405,465  279,928
Long-term debt, net  4,271,357  4,019,605
Deferred tax liabilities, net  143,992  152,182
Other long-term liabilities  963,353  719,703
Liabilities of discontinued operations  —  25,196
Total liabilities  5,784,167  5,196,614
Commitments and contingencies     
Stockholders' equity:    
Class A common stock, par value $0.0001, 2,000,000 shares authorized; 691,315 and 452,215 shares outstanding  69  45
Class B common stock, par value $0.0001, 1,400,000 shares authorized; 773,733 and 839,703 shares outstanding  77  83
Additional paid-in capital  3,158,244  2,714,634
Accumulated other comprehensive (loss) income  (6)  2,793
Accumulated deficit  (2,346,393)  (1,617,826)
Total Clearwire Corporation stockholders' equity  811,991  1,099,729
Non-controlling interests  1,069,631  2,546,309
Total stockholders' equity  1,881,622  3,646,038
Total liabilities and stockholders' equity  $ 7,665,789  $ 8,842,652
 
 
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  Three Months Ended December 31,
  2012  2011
     
Revenues  $ 311,241  $ 361,870
Operating expenses:    
Cost of goods and services and network costs (exclusive of items shown separately below)  208,322  293,999
Selling, general and administrative expense  138,489  128,502
Depreciation and amortization  194,873  169,962
Spectrum lease expense  83,387  79,556
Loss from abandonment of network and other assets  (1,099)  123,000
Total operating expenses  623,972  795,019
Operating loss  (312,731)  (433,149)
Other income (expense):    
Interest income  543  272
Interest expense  (139,077)  (128,859)
Loss on derivative instruments  (3,539)  (2,919)
Other income (expense), net  1,261  (285)
Total other expense, net  (140,812)  (131,791)
Loss from continuing operations before income taxes  (453,543)  (564,940)
Income tax benefit (provision)  22,261  (78,406)
Net loss from continuing operations  (431,282)  (643,346)
Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries  236,297  407,348
Net loss from continuing operations attributable to Clearwire Corporation  (194,985)  (235,998)
Net loss from discontinued operations attributable to Clearwire Corporation, net of tax   7,831  (851)
Net loss attributable to Clearwire Corporation  $ (187,154)  $ (236,849)
     
Net loss from continuing operations attributable to Clearwire Corporation per Class A common share:
Basic  $ (0.28)  $ (0.81)
Diluted  $ (0.30)  $ (0.81)
     
Net loss attributable to Clearwire Corporation per Class A common share:  
Basic  $ (0.27)  $ (0.81)
Diluted  $ (0.29)  $ (0.81)
     
Weighted average Class A common shares outstanding:    
Basic  689,688  291,634
Diluted  1,464,987  291,634
 
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
     
  Year Ended December 31,
  2012  2011
     
Revenues  $ 1,264,694  $ 1,253,466
Operating expenses:    
Cost of goods and services and network costs (exclusive of items shown separately below)  908,078  1,249,966
Selling, general and administrative expense  558,202  698,067
Depreciation and amortization  768,193  687,636
Spectrum lease expense  326,798  308,693
Loss from abandonment of network and other assets  82,206  700,341
Total operating expenses  2,643,477  3,644,703
Operating loss  (1,378,783)  (2,391,237)
Other income (expense):    
Interest income  1,895  2,335
Interest expense  (553,459)  (505,992)
Gain on derivative instruments  1,356  145,308
Other income (expense), net  (12,153)  681
Total other expense, net  (562,361)  (357,668)
Loss from continuing operations before income taxes  (1,941,144)  (2,748,905)
Income tax benefit (provision)  197,399  (106,828)
Net loss from continuing operations  (1,743,745)  (2,855,733)
Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries  1,182,183  2,158,831
Net loss from continuing operations attributable to Clearwire Corporation  (561,562)  (696,902)
Net loss from discontinued operations attributable to Clearwire Corporation, net of tax   (167,005)  (20,431)
Net loss attributable to Clearwire Corporation  $ (728,567)  $ (717,333)
     
Net loss from continuing operations attributable to Clearwire Corporation per Class A common share:
Basic  $ (1.01)  $ (2.70)
Diluted  $ (1.27)  $ (2.99)
     
Net loss attributable to Clearwire Corporation per Class A common share:  
Basic  $ (1.31)  $ (2.78)
Diluted  $ (1.39)  $ (3.07)
     
Weighted average Class A common shares outstanding:    
Basic  554,015  257,967
Diluted  1,398,603  965,099
 
 
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  Year Ended December 31,
  2012 2011
Cash flows from operating activities:    
Net loss from continuing operations  $ (1,743,745)  $ (2,855,733)
Adjustments to reconcile net loss to net cash used in operating activities:    
Deferred income taxes  (199,199)  105,308
Non-cash gain on derivative instruments  (1,356)  (145,308)
Accretion of discount on debt  41,386  40,216
Depreciation and amortization  768,193  687,636
Amortization of spectrum leases  54,328  53,674
Non-cash rent expense  197,169  342,962
Loss on property, plant and equipment  171,780  966,441
Other operating activities  42,740  27,745
Changes in assets and liabilities:    
Inventory  11,200  15,697
Accounts receivable  50,401  (54,212)
Prepaids and other assets  326  22,447
Prepaid spectrum licenses  1,904  (4,360)
Deferred revenue  170,455  16,497
Accounts payable and other liabilities  (17,090)  (152,180)
Net cash used in operating activities of continuing operations  (451,508)  (933,170)
Net cash provided by (used in) operating activities of discontinued operations  (3,000)  2,381
Net cash used in operating activities  (454,508)  (930,789)
Cash flows from investing activities:    
Capital expenditures  (112,997)  (405,655)
Purchases of available-for-sale investments  (1,797,787)  (957,883)
Disposition of available-for-sale investments  1,339,078  1,255,176
Other investing activities  (655)  20,229
Net cash used in investing activities of continuing operations  (572,361)  (88,133)
Net cash provided by (used in) investing activities of discontinued operations  1,185  (3,886)
Net cash used in investing activities  (571,176)  (92,019)
Cash flows from financing activities:    
Principal payments on long-term debt  (26,985)  (29,957)
Proceeds from issuance of long-term debt  300,000  —
Debt financing fees  (6,205)  (1,159)
Equity investment by strategic investors  8  331,400
Proceeds from issuance of common stock  58,460  387,279
Net cash provided by financing activities of continuing operations  325,278  687,563
Net cash provided by financing activities of discontinued operations  —  —
Net cash provided by financing activities  325,278  687,563
Effect of foreign currency exchange rates on cash and cash equivalents  107  (4,573)
Net decrease in cash and cash equivalents  (700,299)  (339,818)
Cash and cash equivalents:    
Beginning of period  893,744  1,233,562
End of period  193,445  893,744
Less: cash and cash equivalents of discontinued operations at end of period  —  1,815
Cash and cash equivalents of continuing operations at end of period  $ 193,445  $ 891,929
     

Definitions of Terms and Reconciliations of Non-GAAP Financial Measures to Unaudited Condensed Consolidated Statements of Operations

The company utilizes certain non-GAAP financial measures which are widely used in the telecommunications industry and are not calculated based on accounting principles generally accepted in the United States of America (GAAP). Other companies may calculate these measures differently.

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