CHICAGO, Nov. 6 /PRNewswire-FirstCall/ -- United States Cellular Corporation (AMEX:USM) reported service revenues of $954.5 million for the third quarter of 2007, up 16.1 percent from $821.8 million for the comparable period one year ago. The company recorded operating income of $100.9 million, up 30.5 percent from $77.3 million for the third quarter of 2006. Net income and diluted earnings per share were $63.6 million and $0.72, respectively, compared to net income and diluted earnings per share of $35.9 million and $0.41, respectively, for the comparable period one year ago.
Third Quarter Highlights
-- The total number of customers increased 5.9 percent year over year to
6,067,000. The number of retail customers increased 7.3 percent to
5,500,000. -- Average monthly revenue per unit (ARPU) increased 10.0 percent to
$52.71. -- Data revenues grew 66.0 percent to $96.8 million, 10.1 percent of
service revenues. -- Operating income grew 30.5 percent to $100.9 million. -- Cash flows from operating activities were $181.3 million for the
quarter and $617.4 million for the first nine months. "This quarter we had strong service revenues growth of 16 percent, as well as a 31 percent increase in operating income," said John E. Rooney, president and chief executive officer. "In addition, cash flows from operating activities were $181.3 million. There were a number of factors contributing to our success this quarter. For one, data revenues continue to be a strong revenue growth driver for U.S. Cellular, growing 66 percent this quarter to $97 million. Data revenues now account for more than 10 percent of service revenues and helped average revenue per unit, or ARPU, increase by 10 percent, to $52.71. In addition, the popularity of our national and wide area calling plans helped to increase ARPU as more than half of our customer base has shifted to these high-value plans. We expect these trends to continue.
"We also continue to see results from our customer satisfaction strategy and high-quality network," continued Rooney. "We recently received our fourth consecutive award from J.D. Power and Associates for call quality in the North Central region. The award highlights both our associates' efforts to provide the best customer service and our commitment to ensuring a high-quality call experience. Our retail postpay churn rate of 1.6 percent, down from 1.7 percent in the third quarter of 2006, reflects this commitment." Net Customer Additions The company acquired 73,000 net retail postpay customers in the quarter. Postpay customers are the cornerstone of U.S. Cellular's customer acquisition and satisfaction strategy and comprise 95 percent of the retail customer base. The number of prepay customers declined 21,000. The company also acquired 5,000 net reseller customers.
Share Repurchases On April 4, 2007, U.S. Cellular entered into an agreement with an investment banking firm to purchase 670,000 of its common shares through an accelerated share repurchase ("ASR") for approximately $49 million. On July 10, 2007, U.S. Cellular entered into an additional agreement with the same firm to purchase 168,000 of its common shares through an ASR for approximately $16 million.
In addition, on Oct. 25, 2007, U.S. Cellular entered into a third agreement with the same firm to purchase 168,000 of its common shares through an ASR for approximately $16 million.
Guidance Guidance for the year ending Dec. 31, 2007 is as follows. There can be no assurance that final results will not differ materially from this guidance.
U.S. Cellular 2007 guidance as of Nov. 6, 2007 is as follows:
Net Retail Customer Additions 375,000 - 425,000
Service Revenues $3.6 - $3.7 billion
Operating Income $410 - $460 million
Depreciation, Amortization & Accretion Approx. $600 million
Capital Expenditures Approx. $600 million
Conference Call Information
As previously announced, U.S. Cellular will hold a teleconference Nov. 6, 2007, at 10:00 a.m. Chicago time. Interested parties may listen to the call live via the Internet by accessing http://www.videonewswire.com/event.asp?id=43702 or visiting the Conference Calls page of http://www.uscc.com/. To connect by phone, call 800/706-9695 (US/Canada) and use conference ID #22669548. The call will be archived on the Conference Calls page of http://www.uscc.com/.
Prior to the start of the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Call page of http://www.uscc.com/, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed.
About U.S. Cellular As of Sept. 30, 2007, U.S. Cellular Corporation, the nation's sixth-largest wireless service carrier, employed 8,200 associates and provided wireless service to 6.1 million customers in 26 states. The Chicago-based company operates on a customer satisfaction strategy, meeting customer needs by providing a comprehensive range of wireless products and services, superior customer support, and a high-quality network.
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 and projections, 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 newly launched markets; changes in competition in the markets in which the company operates; changes in the overall economy; changes due to industry consolidation; advances in telecommunications technology; changes in the telecommunications regulatory environment; changes in the value of assets; an adverse change in the ratings afforded our debt securities by accredited ratings organizations; risks and uncertainties relating to restatements and possible future restatements; pending and future litigation; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming terms and the mix of products and services offered in the company's markets. 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 9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006 Consolidated Markets:
Total population
(000s) (1) 81,841 81,581 56,048 55,543 55,543
All customers -
Customer units 6,067,000 6,010,000 5,973,000 5,815,000 5,729,000
Gross customer
unit activations 447,000 418,000 459,000 389,000 365,000
Net customer unit
activations 57,000 37,000 152,000 86,000 25,000
Market
penetration (1) 7.4% 7.4% 10.7% 10.5% 10.3%
Retail customers -
Customer units 5,500,000 5,448,000 5,377,000 5,225,000 5,127,000
Gross customer
unit activations 374,000 347,000 397,000 375,000 353,000
Net customer unit
activations 52,000 71,000 146,000 98,000 28,000 Cell sites in service 6,255 6,140 6,004 5,925 5,726
Average monthly revenue
per unit (2) $52.71 $50.42 $48.69 $48.15 $47.93
Retail service revenue
per unit (2) $45.00 $43.87 $42.69 $42.21 $41.75
Inbound roaming
revenue per unit (2) $3.36 $2.68 $2.33 $2.34 $2.55
Long-distance/other
revenue per unit (2) $4.35 $3.87 $3.67 $3.60 $3.63
Minutes of use (MOU) (3) 887 858 783 749 725
Retail postpay churn
rate per month (4) 1.6% 1.4% 1.3% 1.5% 1.7%
Construction
Expenditures (000s) $130,600 $137,100 $109,700 $158,400 $152,800 (1) Market penetration is calculated using 2006 Claritas population
estimates for all periods of 2007 and 2005 Claritas estimates for all
periods of 2006. "Total population" represents the total population of
each of U.S. Cellular's consolidated markets, regardless of whether
the market has begun marketing operations (without duplication of
population in overlapping markets). The population of markets in which
U.S. Cellular has deferred the transfer of licenses from AT&T Wireless
Services, Inc. are not included in the total population counts for any
period.
(2) 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 $954,540 $906,218 $860,583 $831,663 $821,820
Components:
Retail service
revenue during
quarter $814,948 $788,535 $754,515 $729,072 $715,896
Inbound roaming
revenue during
quarter $60,843 $48,084 $41,268 $40,354 $43,806
Long-distance/
other revenue
during quarter $78,749 $69,599 $64,800 $62,237 $62,118 Divided by average
customers during
quarter (000s) 6,036 5,991 5,892 5,757 5,716
Divided by three
months in each
quarter 3 3 3 3 3 Average monthly
revenue per unit $52.71 $50.42 $48.69 $48.15 $47.93
Retail service
revenue per unit $45.00 $43.87 $42.69 $42.21 $41.75
Inbound roaming
revenue per unit $3.36 $2.68 $2.33 $2.34 $2.55
Long-distance/
other revenue
per unit $4.35 $3.87 $3.67 $3.60 $3.63 (3) Average monthly local minutes of use per customer (without roaming).
(4) Retail postpay churn rate per month is calculated by dividing the
total monthly customer disconnects during the quarter by the average
customer base for the quarter.
UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Three Months Ended September 30,
(Unaudited, dollars in thousands, except per share amounts) Increase (Decrease)
2007 2006 Amount Percent
Operating Revenues
Service $954,540 $821,820 $132,720 16.1%
Equipment sales 61,294 66,703 (5,409) (8.1%)
Total Operating Revenues 1,015,834 888,523 127,311 14.3%
Operating Expenses
System operations (excluding
depreciation shown below) 185,479 165,107 20,372 12.3%
Cost of equipment sold 164,662 140,757 23,905 17.0%
Selling, general and
administrative 414,978 358,392 56,586 15.8%
Depreciation, amortization
and accretion 149,776 146,940 2,836 1.9%
Total Operating Expenses 914,895 811,196 103,699 12.8% Operating Income 100,939 77,327 23,612 30.5% Investment and Other
Income (Expense)
Equity in earnings of
unconsolidated entities 23,782 23,483 299 1.3%
Interest and dividend income 3,395 601 2,794 N/M
Interest expense (19,625) (23,974) 4,349 18.1%
Fair value adjustment of
derivative instruments -- (21,285) 21,285 N/M
Other, net 179 (225) 404 N/M
7,731 (21,400) 29,131 N/M
Income Before Income Taxes and
Minority Interest 108,670 55,927 52,743 94.3%
Income tax expense 41,154 15,510 25,644 N/M
Income Before Minority Interest 67,516 40,417 27,099 67.0%
Minority share of income (3,961) (4,542) 581 12.8%
Net Income $63,555 $35,875 $27,680 77.2% Basic Weighted Average Common
Shares Outstanding (000s) 87,757 87,281 476 0.5%
Basic Earnings Per Share $0.72 $0.41 $0.31 75.6% Diluted Weighted Average Common
Shares Outstanding (000s) 88,589 88,092 497 0.6%
Diluted Earnings Per Share $0.72 $0.41 $0.31 75.6% N/M - Percentage change not meaningful UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Nine Months Ended September 30,
(Unaudited, dollars in thousands, except per share amounts) Increase (Decrease)
2007 2006 Amount Percent
Operating Revenues
Service $2,721,341 $2,382,747 $338,594 14.2%
Equipment sales 200,813 188,289 12,524 6.7%
Total Operating Revenues 2,922,154 2,571,036 351,118 13.7%
Operating Expenses
System operations (excluding
depreciation shown below) 529,172 468,980 60,192 12.8%
Cost of equipment sold 470,356 417,489 52,867 12.7%
Selling, general and
administrative 1,141,803 1,028,865 112,938 11.0%
Depreciation, amortization
and accretion 447,889 429,451 18,438 4.3%
Total Operating Expenses 2,589,220 2,344,785 244,435 10.4% Operating Income 332,934 226,251 106,683 47.2% Investment and Other
Income (Expense)
Equity in earnings of
unconsolidated entities 69,860 64,923 4,937 7.6%
Interest and dividend income 8,598 10,996 (2,398) (21.8%)
Interest expense (64,634) (70,189) 5,555 7.9%
Fair value adjustment of
derivative instruments (5,388) (17,392) 12,004 69.0%
Gain on sale of investments 131,686 -- 131,686 N/M
Other, net (315) (163) (152) (93.3%)
139,807 (11,825) 151,632 N/M
Income Before Income Taxes
and Minority Interest 472,741 214,426 258,315 N/M
Income tax expense 176,542 77,903 98,639 N/M
Income Before Minority Interest 296,199 136,523 159,676 N/M
Minority share of income (10,672) (11,138) 466 4.2%
Net Income $285,527 $125,385 $160,142 N/M Basic Weighted Average Common
Shares Outstanding (000s) 87,743 87,258 485 0.6%
Basic Earnings Per Share $3.25 $1.44 $1.81 N/M Diluted Weighted Average Common
Shares Outstanding (000s) 88,680 88,071 609 0.7%
Diluted Earnings Per Share $3.22 $1.42 $1.80 N/M N/M - Percentage change not meaningful UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands) ASSETS
September 30, December 31,
2007 2006
Current Assets
Cash and cash equivalents $182,020 $32,912
Marketable equity securities 16,133 249,039
Accounts receivable from customers and other 429,684 407,438
Inventory 113,078 117,189
Prepaid expenses 46,634 34,955
Other current assets 13,557 13,385
801,106 854,918 Investments
Licenses 1,500,092 1,494,327
Goodwill 491,316 485,452
Customer lists 17,442 26,196
Marketable equity securities -- 4,873
Investments in unconsolidated entities 176,557 150,325
Notes and interest receivable--long-term 4,452 4,541
2,189,859 2,165,714 Property, Plant and Equipment
In service and under construction 5,414,358 5,120,994
Less accumulated depreciation 2,844,527 2,492,146
2,569,831 2,628,848 Other Assets and Deferred Charges 28,658 31,136 Total Assets $5,589,454 $5,680,616
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31,
2007 2006
Current Liabilities
Prepaid forward contracts $-- $159,856
Derivative liability -- 88,840
Notes payable -- 35,000
Accounts payable
Affiliated 9,175 13,568
Trade 244,176 241,303
Customer deposits and deferred revenues 143,923 123,344
Accrued taxes 46,641 26,913
Accrued compensation 50,801 47,842
Net deferred income tax liability -- 26,326
Other current liabilities 103,338 93,718
598,054 856,710 Long-term debt 1,002,180 1,001,839 Deferred Liabilities and Credits 759,600 792,088 Minority Interest 41,898 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 1,319,038 1,290,829
Treasury Shares (28,601) (14,462)
Accumulated other comprehensive income 10,009 80,382
Retained earnings 1,799,224 1,548,478
3,187,722 2,993,279 Total Liabilities and Shareholders' Equity $5,589,454 $5,680,616
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 of United States Cellular Corporation Web site: http://www.uscc.com/ http://www.uscellular.com/
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