Service and data revenues up 12 percent and 49 percent in the quarter
CHICAGO, May 7 /PRNewswire-FirstCall/ -- United States Cellular Corporation (AMEX:USM) reported service revenues of $962.1 million for the first quarter of 2008, an 11.8 percent increase from $860.6 million in the comparable period one year ago. The company recorded operating income of $119 million, an increase of 9.6 percent from $108.5 million in the first quarter of 2007. Net income and diluted earnings per share were $70.6 million and $0.80, respectively, compared to $74.4 million and $0.84, respectively, in the comparable period one year ago.* * In the first quarter of 2007, the company recorded a $12.5 million
pre-tax gain on fair value adjustment of derivative instruments related
to the derivative component of the Vodafone Group Plc variable prepaid
forward contracts. Continued growth in data revenues drives service revenues and ARPU
"U.S. Cellular experienced strong growth in data revenues this quarter," said John E. Rooney, U.S. Cellular president and CEO, "driven in part by new smartphones like the BlackBerry(R) Pearl(TM) and their related data plans, and by customers' increased use of messaging services. The 49 percent increase in data revenues helped to drive up both service revenues and ARPU. The growth in service revenues was partly offset by growth in operating expenses, however, resulting in lower margins. We also had solid net retail customer additions in the quarter, and maintained a low, 1.4-percent retail postpay churn rate.
"We continue to focus on providing a consistently high-quality wireless experience," added Rooney, "in terms of network strength and reliability and exceptional customer service. We received our fifth consecutive J.D. Power and Associates award for call quality this quarter, and our associates are committed to exceeding our customers' expectations for service and satisfaction." Strengthened footprint with new spectrum U.S. Cellular participated in Auction 73, the Federal Communications Commission (FCC) auction of spectrum in the 700 MHz band, through its interest in King Street Wireless L.P. King Street Wireless was the provisional winning bidder for 152 licenses for an aggregate bid of $300.5 million, net of its designated entity discount, which was recorded in licenses on U.S. Cellular's balance sheet as of March 31, 2008. The FCC has not yet awarded any of the licenses to winning bidders. The licenses expected to be awarded to King Street Wireless cover areas that overlap or are proximate or contiguous to areas covered by licenses that U.S. Cellular currently owns, operates, and/or consolidates in its financial statements.
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 May 7, 2008 is as follows: Net Retail Customer Additions 200,000 - 275,000
Service Revenues $3.9 - 4.0 billion**
Operating Income $435 - 510 million
Depreciation, Amortization & Accretion Approx. $615 million**
Capital Expenditures $565 - 615 million ** Unchanged from guidance issued on Feb. 29, 2008
The foregoing guidance represents the views of management as of May 7, 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.
Conference call information U.S. Cellular will hold a conference call on May 7, 2008 at 10:00 a.m. Chicago time.
-- Access the live call online at
http://www.videonewswire.com/event.asp?id=48272 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 45884257. Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Call 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 United States Cellular Corporation, the nation's sixth-largest, full-service wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to more than 6.2 million customers in 26 states. The Chicago-based company employed 8,700 associates as of March 31, 2008. For more information about U.S. Cellular, visit http://www.uscellular.com/.
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; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to restatements and possible future restatements; ability to remediate the material weakness; 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.
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA Quarter Ended 3/31/2008 12/31/2007 9/30/2007 6/30/2007 3/31/2007
Total
Population:
Consolidated
markets (1) 82,846,000 82,371,000 81,841,000 81,581,000 56,048,000
Consolidated
operating
markets (1) 45,262,000 44,955,000 44,955,000 44,955,000 44,416,000
All customers:
Customer
units (2) 6,201,000 6,122,000 6,067,000 6,010,000 5,973,000
Gross customer
unit additions 409,000 437,000 447,000 418,000 459,000
Net customer
unit additions 80,000 55,000 57,000 37,000 152,000
Market penetration
at end of period:
Consolidated
markets (3) 7.5% 7.4% 7.4% 7.4% 10.7%
Consolidated
operating
markets (3) 13.7% 13.6% 13.5% 13.4% 13.4%
Retail customers:
Customer
units (2) 5,640,000 5,564,000 5,500,000 5,448,000 5,377,000
Gross customer
unit additions 360,000 367,000 374,000 347,000 397,000
Net customer
unit additions 85,000 64,000 52,000 71,000 146,000 Cell sites in
service 6,452 6,383 6,255 6,140 6,004
Average monthly
revenue per
unit (4) $52.06 $52.46 $52.71 $50.42 $48.69
Retail service
revenue per
unit (4) $45.14 $45.36 $45.00 $43.87 $42.69
Inbound roaming
revenue per
unit (4) $2.93 $3.09 $3.36 $2.68 $2.33
Long-distance/
other revenue
per unit (4) $3.99 $4.01 $4.35 $3.87 $3.67
Minutes of use
(MOU) (5) 948 906 887 858 783
Retail postpay
churn rate
per month (6) 1.4% 1.5% 1.6% 1.4% 1.3%
Construction
Expenditures
(000s) $111,700 $188,100 $130,600 $137,100 $109,700 (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 markets and
consolidated operating markets, respectively, which is calculated by
dividing customers by the total market population (without
duplication of population in overlapping markets).
(2) All customer units and Retail customer units as of March 31, 2008
include one time adjustments, resulting from a review of U.S. Cellular's customer reporting procedures.
(3) 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.
(4) 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 $962,094 $957,896 $954,540 $906,218 $860,583
Components:
Retail service
revenue
during
quarter $834,213 $828,169 $814,948 $788,535 $754,515
Inbound
roaming
revenue
during
quarter $54,089 $56,358 $60,843 $48,084 $41,268
Long-distance/
other revenue
during
quarter $73,792 $73,369 $78,749 $69,599 $64,800 Divided by
average
customers
during quarter
(000s) 6,160 6,086 6,036 5,991 5,892
Divided by three
months in each
quarter 3 3 3 3 3 Average monthly
revenue per
unit $52.06 $52.46 $52.71 $50.42 $48.69
Retail service
revenue per
unit $45.14 $45.36 $45.00 $43.87 $42.69
Inbound roaming
revenue per
unit $2.93 $3.09 $3.36 $2.68 $2.33
Long-distance/
other revenue
per unit $3.99 $4.01 $4.35 $3.87 $3.67 (5) Average monthly local minutes of use per customer (without roaming).
(6) 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
CONSOLIDATED STATEMENTS OF OPERATIONS HIGHLIGHTS
Three Months Ended March 31,
(Unaudited, dollars and shares in thousands, except per share amounts) Increase
(Decrease)
2008 2007 Amount Percent
Operating Revenues
Service $962,094 $860,583 $101,511 11.8%
Equipment sales 75,762 74,091 1,671 2.3%
Total Operating Revenues 1,037,856 934,674 103,182 11.0%
Operating Expenses
System operations (excluding
Depreciation, amortization and
accretion shown separately
below) 191,016 167,284 23,732 14.2%
Cost of equipment sold 174,037 150,744 23,293 15.5%
Selling, general and
administrative 407,634 358,866 48,768 13.6%
Depreciation, amortization and
accretion 142,530 145,952 (3,422) (2.3%)
Loss on asset disposals, net 3,673 3,305 368 11.1%
Total Operating Expenses 918,890 826,151 92,739 11.2% Operating Income 118,966 108,523 10,443 9.6% Investment and Other Income (Expense)
Equity in earnings of
unconsolidated entities 21,235 23,098 (1,863) (8.1%)
Interest and dividend income 1,905 2,550 (645) (25.3%)
Interest expense (20,115) (23,684) 3,569 15.1%
Fair value adjustment of
derivative instruments --- 12,461 (12,461) N/M
Other, net 118 (585) 703 N/M
3,143 13,840 (10,697) (77.3%)
Income Before Income Taxes and
Minority Interest 122,109 122,363 (254) (0.2%)
Income tax expense 47,540 43,888 3,652 8.3%
Income Before Minority Interest 74,569 78,475 (3,906) (5.0%)
Minority share of income, net
of tax (4,012) (4,074) 62 1.5%
Net Income $70,557 $74,401 $(3,844) (5.2%) Basic Weighted Average Common
Shares Outstanding 87,571 87,882 (311) (0.4%)
Basic Earnings Per Share $0.81 $0.85 $(0.04) (4.7%) Diluted Weighted Average Common
Shares Outstanding 88,064 88,688 (624) (0.7%)
Diluted Earnings Per Share $0.80 $0.84 $(0.04) (4.8%) N/M -- Percentage change not meaningful UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands) ASSETS March 31, December 31,
2008 2007
Current Assets
Cash and cash equivalents $216,475 $204,533
Marketable equity securities 16,404 16,352
Accounts receivable from customers
and other 415,178 435,497
Inventory 114,687 100,990
Prepaid expenses 56,619 41,588
Other current assets 36,157 34,793
855,520 833,753 Investments
Licenses 1,788,548 1,482,446
Goodwill 492,286 491,316
Customer lists 14,333 15,375
Investments in unconsolidated entities 172,586 157,693
Notes and interest receivable --
long-term 4,391 4,422
2,472,144 2,151,252 Property, Plant and Equipment
In service and under construction 5,493,389 5,409,115
Less accumulated depreciation 2,925,051 2,814,019
2,568,338 2,595,096 Other Assets and Deferred Charges 30,072 31,773 Total Assets $5,926,074 $5,611,874 LIABILITIES AND SHAREHOLDERS' EQUITY March 31, December 31,
2008 2007
Current Liabilities
Accounts payable
Affiliated $8,402 $8,519
Trade 249,854 252,272
Customer deposits and deferred revenues 149,960 143,445
Accrued taxes 75,003 43,105
Accrued compensation 37,489 59,224
Other current liabilities 306,743 97,678
827,451 604,243 Long-Term Debt 1,006,395 1,002,293 Deferred Liabilities and Credits 785,830 765,786 Minority Interest 44,772 43,396 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 1,317,488 1,316,042
Treasury Shares (41,630) (41,094)
Accumulated other comprehensive income 10,167 10,134
Retained earnings 1,887,549 1,823,022
3,261,626 3,196,156
Total Liabilities and Shareholders' Equity $5,926,074 $5,611,874 UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
(Unaudited, dollars in thousands) 2008 2007
Cash Flows from Operating Activities
Net income $70,557 $74,401
Add (deduct) adjustments to reconcile net
income to net cash flows from operating
activities:
Depreciation, amortization and accretion 142,530 145,952
Bad debts expense 17,962 11,087
Stock-based compensation expense 1,773 3,022
Deferred income taxes, net 15,926 369
Equity in earnings of unconsolidated
entities (21,235) (23,098)
Distributions from unconsolidated
entities 6,933 2,226
Minority share of income 4,012 4,074
Unrealized fair value adjustment of
derivative instruments --- (12,461)
Loss on asset disposals, net 3,673 3,305
Noncash interest expense 443 445
Excess tax benefit from exercise of stock
awards (764) (1,114)
Changes in assets and liabilities from
operations:
Change in accounts receivable (8,615) 14,019
Change in inventory (13,697) 16,106
Change in accounts payable -- trade (2,418) (18,382)
Change in accounts payable -- affiliate (117) (2,676)
Change in customer deposits and deferred
revenues 6,515 11,639
Change in accrued taxes 32,949 47,155
Change in accrued interest 9,337 9,382
Change in other assets and liabilities (35,967) (30,385)
229,797 255,066
Cash Flows from Investing Activities
Additions to property, plant and equipment (111,690) (109,729)
Cash received from divestitures 6,838 279
Cash paid for acquisitions (102,000) (18,237)
Other investing activities 239 662
(206,613) (127,025)
Cash Flows from Financing Activities
Issuance of notes payable --- 25,000
Common shares repurchased (6,201) ---
Common shares reissued, net of tax payments (2,526) 5,558
Excess tax benefit from exercise of stock
awards 764 1,114
Distributions to minority partners (3,231) (2,769)
Other financing activities (48) ---
(11,242) 28,903 Net Increase in Cash and Cash Equivalents 11,942 156,944
Cash and Cash Equivalents
Beginning of period 204,533 32,912
End of period $216,475 $189,856 As previously announced, U.S. Cellular(R) will hold a teleconference May 7, 2008, at 10:00 a.m. Chicago time. Interested parties may listen to the call live via the Internet by accessing the Conference Calls page of http://www.teldta.com/ or http://www.uscc.com/. DATASOURCE: United States Cellular Corporation CONTACT: Mark A. Steinkrauss, Vice President, Corporate Relations, +1-312-592-5384, , or Julie D. Mathews, Manager, Investor Relations, +1-312-592-5341, , both for United States Cellular Corporation Web site: http://www.uscellular.com/ http://www.teldta.com/
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