Data revenues increase 69 percent for the year to $368 million
CHICAGO, Feb 29 /PRNewswire-FirstCall/ -- United States Cellular Corporation (AMEX:USM) reported service revenues of $957.9 million for the fourth quarter of 2007, up 15.2 percent from $831.7 million in the comparable period one year ago. The company recorded operating income of $63.3 million, down 0.6 percent from $63.6 million in the fourth quarter of 2006. Net income and diluted earnings per share were $29.2 million and $0.33, respectively, compared to net income and diluted earnings per share of $54.1 million and $0.61, respectively, for the comparable period one year ago.
U.S. Cellular acquired 70,000 net retail postpay customers in the quarter. Prepay customers declined by 6,000 and net reseller customers declined by 9,000. Excluding acquisitions, U.S. Cellular acquired 351,000 retail postpay customers in 2007. Prepay and net reseller customers declined by 18,000 and 32,000, respectively.
Sprint Nextel exchange provides more usable spectrum In the fourth quarter, U.S. Cellular agreed to deliver personal communication service (PCS) spectrum in eight licenses covering portions of one state to Sprint Nextel in exchange for more strategically useful spectrum in eight licenses covering portions of four states. The exchange will not include any cash, customers, network assets, or other assets. U.S. Cellular recorded a $20.8 million pre-tax loss on the exchange. The transaction is expected to close in the first half of 2008.
Customer focus delivers excellent financial and operating results "Our customer satisfaction strategy helped us achieve some important milestones in 2007," said John E. Rooney, U.S. Cellular president and CEO. "Data revenues pushed past $100 million in the fourth quarter and $368 million for the year, which contributed to a significant increase in ARPU. Our focus on a high-quality call experience also drove double-digit increases in service revenues and cash flows from operating activities. Retail net additions were strong in 2007, though we saw some softness in the fourth quarter, mainly in December.
"Customers continued to respond well this year to our national, wide area, and family plans," said Rooney. "There was also high demand for our BlackBerry(R) and MOTO Q(TM) smart phone offerings and our expanding suite of easyedge(SM) data services, such as My Contacts Backup, Tone Room, and Your Navigator(TM). And, our customer focus and high network quality were backed up by several independent surveys in 2007. We topped the J.D. Power and Associates call quality rankings in the North Central region for the fourth consecutive time, which speaks to the value of investing the majority of our capital spending for 2007 in network enhancements. And, PC Magazine readers voted us the top contract/postpay wireless provider in 2007. I believe our associates' commitment to customer service is at the heart of these results.
2008 OUTLOOK
Focus on postpay customer, increasing market penetration
"We'll continue our focus on the postpay, high-lifetime value customer in 2008," said Rooney. "As part of our commitment to strategic growth, we're maintaining our drive to increase penetration, revenue, and profitability, and improve distribution, in our existing markets. We'll also continue to evaluate EVDO and Long-Term Evolution technologies with regard to how well they help us meet the needs of our target customers." Guidance Guidance for the year ending Dec. 31, 2008 is as follows. There can be no assurance that final results will not differ materially from this guidance.
U.S. Cellular 2008 guidance as of Feb. 29, 2008 is as follows:
Net Retail Customer Additions 250,000 - 325,000
Service Revenues $3.9 - $4.0 billion
Operating Income $460 - $535 million
Depreciation, Amortization & Accretion * Approx. $615 million
Capital Expenditures $590 - $640 million
* Includes losses on disposals of assets This guidance represents the views of management as of Feb. 29, 2008 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.
U.S. Cellular and TDS remediate two material weaknesses; make progress on third U.S. Cellular and its parent, TDS, have reduced their material weaknesses related to personnel and accounting knowledge and fixed assets to the level of deficiency and significant deficiency, respectively. The companies have made progress toward remediating the third material weakness related to income tax accounting. The companies' efforts in these areas are summarized below: -- Personnel and accounting knowledge: U.S. Cellular and its parent, TDS,
conducted a multi-year program to increase technical accounting
expertise at the corporate and business unit levels, improve review and
documentation procedures, and automate more aspects of their accounting
and financial reporting. The companies developed many new accounting
policies and procedures, added personnel in key areas, and developed an
ongoing training program for accounting personnel. -- Fixed assets: U.S. Cellular conducted a detailed physical inventory and
valuation review of its property, plant, and equipment; and enhanced
its controls over the recording of transfers and disposals of such
assets. There was a resulting non-cash charge of $14.6 million included
in loss on asset disposals/exchanges for the fourth quarter. -- Income tax accounting: U.S. Cellular and its parent, TDS, created and
staffed a new tax accounting group (including adding a director of
accounting) that implemented new tax provisioning software to enhance
internal controls related to income taxes at the corporate and business
unit levels. As part of this implementation, the companies also
instituted several new controls to help ensure the accuracy of
accounting for income taxes.
Item 9A (Controls and Procedures) of U.S. Cellular's SEC Form 10-K contains an expanded discussion of these remediation efforts.
Conference Call Information U.S. Cellular will hold a conference call on March 3, 2008 at 10:00 a.m. Chicago time.
-- Access the live call online at
http://www.videonewswire.com/event.asp?id=46101 or on the Conference
Calls page of http://www.uscellular.com/
-- Access the call by phone at 800/706-9695 (US/Canada) and use conference
ID #37621356 Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of http://www.uscellular.com/, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. The call will be archived on the Conference Calls page of http://www.uscellular.com/.
About U.S. Cellular U.S. Cellular Corporation, the nation's sixth-largest full-service wireless carrier, provides a comprehensive range of wireless products and services, superior customer support, and a high-quality network to more than 6.1 million customers in 26 states. The Chicago-based company employed 8,400 associates as of year end.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of the company to successfully manage and grow the operations of more recently launched markets; changes in the overall economy, competition, the state and federal telecommunications regulatory environment, and the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited ratings organizations; industry consolidation; likely participation in FCC spectrum auctions; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to restatements and possible future restatements; ability to remediate material weaknesses; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming terms, the availability of devices and the mix of products and services offered by the company. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.
For more information about U.S. Cellular, visit: http://www.uscellular.com/.
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA Quarter Ended 12/31/2007 9/30/2007 6/30/2007 3/31/2007 12/31/2006
Total Population:
Consolidated
markets (1) 82,371,000 81,841,000 81,581,000 56,048,000 55,543,000
Consolidated
operating
markets (1) 44,955,000 44,955,000 44,955,000 44,416,000 44,043,000
All customers:
Customer units 6,122,000 6,067,000 6,010,000 5,973,000 5,815,000
Gross customer
unit additions 437,000 447,000 418,000 459,000 389,000
Net customer
unit additions 55,000 57,000 37,000 152,000 86,000
Market penetration
at end of period:
Consolidated
markets (2) 7.4% 7.4% 7.4% 10.7% 10.5%
Consolidated
operating
markets (2) 13.6% 13.5% 13.4% 13.4% 13.2%
Retail customers:
Customer units 5,564,000 5,500,000 5,448,000 5,377,000 5,225,000
Gross customer
unit additions 367,000 374,000 347,000 397,000 375,000
Net customer
unit additions 64,000 52,000 71,000 146,000 98,000 Cell sites in service 6,383 6,255 6,140 6,004 5,925
Average monthly
revenue per unit (3) $52.46 $52.71 $50.42 $48.69 $48.15
Retail service
revenue per
unit (3) $45.36 $45.00 $43.87 $42.69 $42.21
Inbound roaming
revenue per unit(3) $3.09 $3.36 $2.68 $2.33 $2.34
Long-distance/
other revenue
per unit (3) $4.01 $4.35 $3.87 $3.67 $3.60
Minutes of use
(MOU) (4) 906 887 858 783 749
Retail postpay
churn rate
per month (5) 1.5% 1.6% 1.4% 1.3% 1.5%
Construction
Expenditures(000s) $188,100 $130,600 $137,100 $109,700 $158,400 (1) "Total population of consolidated markets" and "Total population of
consolidated operating markets" are used only for the purposes of
calculating market penetration of consolidated operating markets,
which is calculated by dividing customers by the total market
population (without duplication of population in overlapping markets). Effective with this report, U.S. Cellular is expanding its reporting
of total population to include the population of its consolidated
operating markets - i.e., markets in which U.S. Cellular provides
wireless service to customers - in order to reflect its market
penetration more accurately. Historically, total population has been
reported only for total consolidated markets, regardless of whether
U.S. Cellular was providing wireless services in those markets.
(2) Calculated by dividing the number of wireless customers at the end of
the period by the total population of consolidated markets and
consolidated operating markets, respectively, as estimated by
Claritas.
(3) Per unit revenue measurements are derived from service revenues as
reported in Financial Highlights for each respective quarter as
follows: Service Revenues
per Financial
Highlights $957,896 $954,540 $906,218 $860,583 $831,663
Components:
Retail service
revenue during
quarter $828,169 $814,948 $788,535 $754,515 $729,072
Inbound roaming
revenue during
quarter $56,358 $60,843 $48,084 $41,268 $40,354
Long-distance/
other revenue
during quarter $73,369 $78,749 $69,599 $64,800 $62,237 Divided by average
customers during
quarter (000s) 6,086 6,036 5,991 5,892 5,757
Divided by three
months in each quarter 3 3 3 3 3 Average monthly
revenue per unit $52.46 $52.71 $50.42 $48.69 $48.15
Retail service
revenue per unit $45.36 $45.00 $43.87 $42.69 $42.21
Inbound roaming
revenue per unit $3.09 $3.36 $2.68 $2.33 $2.34
Long-distance/
other revenue per
unit $4.01 $4.35 $3.87 $3.67 $3.60 (4) Average monthly local minutes of use per customer (without roaming).
(5) Retail postpay churn rate per month is calculated by dividing the
total monthly retail postpay customer disconnects during the quarter
by the average retail postpay customer base for the quarter.
UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Three Months Ended December 31,
(Unaudited, dollars and shares in thousands, except per share amounts) Increase
(Decrease)
2007 2006 Amount Percent
Operating Revenues
Service $957,896 $831,663 $126,233 15.2%
Equipment sales 66,214 70,456 (4,242) (6.0%)
Total Operating Revenues 1,024,110 902,119 121,991 13.5%
Operating Expenses
System operations (excluding
depreciation shown below) 187,903 170,703 17,200 10.1%
Cost of equipment sold 169,869 151,414 18,455 12.2%
Selling, general and
administrative 413,836 370,696 43,140 11.6%
Depreciation, amortization and
accretion 142,279 138,246 4,033 2.9%
Loss on asset
disposals/exchanges 46,958 7,415 39,543 N/M
Total Operating Expenses 960,845 838,474 122,371 14.6% Operating Income 63,265 63,645 (380) (0.6%) Investment and Other Income
(Expense)
Equity in earnings of
unconsolidated entities 20,173 28,196 (8,023) (28.5%)
Interest and dividend income 4,461 5,541 (1,080) (19.5%)
Interest expense (20,045) (23,485) 3,440 14.6%
Fair value adjustment of
derivative instruments --- (45,630) 45,630 N/M
Gain on investments 6,301 70,427 (64,126) (91.1%)
Other, net (395) 18 (413) N/M
10,495 35,067 (24,572) (70.1%)
Income Before Income Taxes and
Minority Interest 73,760 98,712 (24,952) (25.3%)
Income tax expense 40,169 42,701 (2,532) (5.9%)
Income Before Minority Interest 33,591 56,011 (22,420) (40.0%)
Minority share of income (4,384) (1,906) (2,478) N/M
Net Income $29,207 $54,105 $(24,898) (46.0%) Basic Weighted Average Common
Shares Outstanding 87,691 87,645 46 0.1%
Basic Earnings Per Share $0.33 $0.62 $(0.29) (46.8%) Diluted Weighted Average Common
Shares Outstanding 88,309 88,368 (59) (0.1%)
Diluted Earnings Per Share $0.33 $0.61 $(0.28) (45.9%) N/M - Percentage change not meaningful UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Year Ended December 31,
(Unaudited, dollars and shares in thousands, except per share amounts) Increase
(Decrease)
2007 2006 Amount Percent
Operating Revenues
Service $3,679,237 $3,214,410 $464,827 14.5%
Equipment sales 267,027 258,745 8,282 3.2%
Total Operating Revenues 3,946,264 3,473,155 473,109 13.6%
Operating Expenses
System operations (excluding
depreciation shown below) 717,075 639,683 77,392 12.1%
Cost of equipment sold 640,225 568,903 71,322 12.5%
Selling, general and
administrative 1,555,639 1,399,561 156,078 11.2%
Depreciation, amortization and
accretion 582,269 555,525 26,744 4.8%
Loss on asset
disposals/exchanges 54,857 19,587 35,270 N/M
Total Operating Expenses 3,550,065 3,183,259 366,806 11.5% Operating Income 396,199 289,896 106,303 36.7% Investment and Other Income
(Expense)
Equity in earnings of
unconsolidated entities 90,033 93,119 (3,086) (3.3%)
Interest and dividend income 13,059 16,537 (3,478) (21.0%)
Interest expense (84,679) (93,674) 8,995 9.6%
Fair value adjustment of
derivative instruments (5,388) (63,022) 57,634 91.5%
Gain on investments 137,987 70,427 67,560 95.9%
Other, net (710) (145) (565) N/M
150,302 23,242 127,060 N/M
Income Before Income Taxes and
Minority Interest 546,501 313,138 233,363 74.5%
Income tax expense 216,711 120,604 96,107 79.7%
Income Before Minority Interest 329,790 192,534 137,256 71.3%
Minority share of income (15,056) (13,044) (2,012) (15.4%)
Net Income $314,734 $179,490 $135,244 75.3% Basic Weighted Average Common
Shares Outstanding 87,730 87,346 384 0.4%
Basic Earnings Per Share $3.59 $2.05 $1.54 75.1% Diluted Weighted Average Common
Shares Outstanding 88,481 88,109 372 0.4%
Diluted Earnings Per Share $3.56 $2.04 $1.52 74.5% N/M - Percentage change not meaningful UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands) ASSETS December 31, December 31,
2007 2006
Current Assets
Cash and cash equivalents $204,533 $32,912
Marketable equity securities 16,352 249,039
Accounts receivable from customers and other 435,497 407,438
Inventory 100,990 117,189
Prepaid expenses 41,588 34,955
Other current assets 34,793 13,385
833,753 854,918 Investments
Licenses 1,482,446 1,494,327
Goodwill 491,316 485,452
Customer lists 15,375 26,196
Marketable equity securities --- 4,873
Investments in unconsolidated entities 157,693 150,325
Notes and interest receivable--long-term 4,422 4,541
2,151,252 2,165,714 Property, Plant and Equipment
In service and under construction 5,409,115 5,120,994
Less accumulated depreciation 2,814,019 2,492,146
2,595,096 2,628,848 Other Assets and Deferred Charges 31,773 31,136 Total Assets $5,611,874 $5,680,616
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, December 31,
2007 2006
Current Liabilities
Prepaid forward contracts $--- $159,856
Derivative liability --- 88,840
Notes payable --- 35,000
Accounts payable
Affiliated 8,519 13,568
Trade 252,272 241,303
Customer deposits and deferred revenues 143,445 123,344
Accrued taxes 43,105 26,913
Accrued compensation 59,224 47,842
Net deferred income tax liability --- 26,326
Other current liabilities 97,678 93,718
604,243 856,710
Long-term Debt 1,002,293 1,001,839
Deferred Liabilities and Credits 765,786 792,088
Minority Interest 43,396 36,700
Common Shareholders' Equity
Common Shares, par value $1 per share 55,046 55,046
Series A Common Shares, par value
$1 per share 33,006 33,006
Additional paid-in capital 1,316,042 1,290,829
Treasury Shares (41,094) (14,462)
Accumulated other comprehensive income 10,134 80,382
Retained earnings 1,823,022 1,548,478
3,196,156 2,993,279 Total Liabilities and Shareholders' Equity $5,611,874 $5,680,616
Conference call March 3 at 10:00 a.m. Chicago time. Access the live call on the Conference Calls page of http://www.teldta.com/ or http://www.uscellular.com/. DATASOURCE: U.S. Cellular CONTACT: Mark A. Steinkrauss, Vice President, Corporate Relations, +1-312-592-5384, , or Julie D. Mathews, Manager, Investor Relations, +1-312-592-5341, , for U.S.
Cellular Web site: http://www.teldta.com/ http://www.uscellular.com/
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