Service and data revenues up 9 percent and 45 percent in the quarter Note: Comparisons are year over year unless otherwise noted.
CHICAGO, Aug. 7 /PRNewswire-FirstCall/ -- United States Cellular
Corporation (Amex: USM) reported service revenues of $987.4 million for the
second quarter of 2008, a 9.0 percent increase from $906.2 million in the
comparable period one year ago. The company recorded operating income of
$117.9 million, down from $123.5 million in the second quarter of 2007. Net
income and diluted earnings per share were $72.6 million and $0.83,
respectively, for the second quarter of 2008, compared to $147.6 million and
$1.67, respectively, in the comparable period one year ago.*
* In the second quarter of 2007, the company recorded a $131.7 million
pre-tax gain on the settlement of the Vodafone Group Plc variable
prepaid forward contracts and sale of remaining Vodafone ADRs, and also
a $17.8 million pre-tax loss on fair value adjustments to the variable
prepaid forward contracts prior to the settlement.
"Our continued, solid growth in service and data revenues demonstrates
that we're delivering the services and products customers want," said John E.
Rooney, U.S. Cellular(R) president and CEO. "These revenue increases have
driven a substantial increase in ARPU, with more than 50 percent of our
customers using at least one data service. And our low, 1.4 percent churn
rate is proof that our customers believe in U.S. Cellular and in the
communications experience we provide, even as they may be tightening their
budgets in response to the economic slowdown.
"Sales of our BlackBerry(R) and Windows(TM) smartphones continue to
surpass our expectations, and smartphone customers typically generate
considerably higher ARPU than other customers. We consider this a meaningful
growth area for U.S. Cellular. To help ensure that our smart phone customers
receive a high-quality service experience, U.S. Cellular is expanding its EVDO
coverage in select service areas, with the goal of reaching approximately
30 percent of our covered population in 2008, and we plan to continue the
expansion in 2009. We also continue to strengthen our overall network with new
cell towers in key areas.
"While net retail customer additions for the quarter were disappointing,
we're taking significant steps to further differentiate our customer
satisfaction-based business model in a tough competitive environment. With
U.S. Cellular's new Believe in Something Better(SM) branding campaign launched
in June, we're showing that we recognize that wireless plays an important role
in our customers' lives that goes well beyond just completing calls. Along
with the campaign, we have invested in new store environments, and we continue
to invest in associate training, so that our associates can deliver the ideal
customer experience. We're investing in our business and in our customers for
the long term."
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 Aug. 7, 2008 is as follows:
Net Retail Customer Additions 175,000 - 225,000
Service Revenues $3.9 - 4.0 billion**
Operating Income $385 - 435 million
Depreciation, Amortization
& Accretion*** Approx. $615 million**
Capital Expenditures $525 - 575 million
** Unchanged from guidance issued on May 7, 2008
*** Includes losses on exchanges and disposals of assets
The foregoing guidance represents the views of management as of Aug. 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 Aug. 7, 2008 at 10:00 a.m.
Chicago time.
-- Access the live call online at
http://www.videonewswire.com/event.asp?id=50620 or on the Conference
Calls page of http://www.uscellular.com.
-- Access the call by phone at 800/723-6498 (US/Canada) and use conference
ID 6948709.
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(R)
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 nearly 6.2 million customers in 26 states. The Chicago-based company
employed 8,400 full-time equivalent associates as of June 30, 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 revenue and 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.
As previously announced, U.S. Cellular(R) will hold a teleconference on
Aug. 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.
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
Quarter Ended 6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007
Total
Population:
Consolidated
markets (1) 82,875,000 82,846,000 82,371,000 81,841,000 81,581,000
Consolidated
operating
markets (1) 45,493,000 45,262,000 44,955,000 44,955,000 44,955,000
All customers:
Customer
units (2)6,194,000 6,175,000 6,102,000 6,058,000 6,010,000
Gross
customer unit
additions 365,000 409,000 436,000 447,000 418,000
Net customer
unit
additions 16,000 74,000 44,000 48,000 37,000
Market
penetration at
end of period:
Consolidated
markets (3)7.5%7.5%7.4%7.4%7.4%
Consolidated
operating
markets (3) 13.6% 13.6% 13.6% 13.5% 13.4%
Retail customers:
Customer
units (2)5,677,000 5,640,000 5,564,000 5,500,000 5,448,000
Gross
customer unit
additions 318,000 360,000 367,000 374,000 347,000
Net customer
unit additions 34,000 85,000 64,000 52,000 71,000
Cell sites in
service6,596 6,452 6,383 6,255 6,140
Average monthly
revenue per
unit (4) $ 53.27 $ 52.24 $ 52.57 $ 52.73 $ 50.42
Retail service
revenue per
unit (4) $ 45.62 $ 45.30 $ 45.45 $ 45.02 $ 43.87
Inbound roaming
revenue per
unit (4)$ 3.40 $ 2.94 $ 3.09 $ 3.36 $ 2.68
Long-distance /
other revenue
per unit (4)$ 4.25 $ 4.00 $ 4.03 $ 4.35 $ 3.87
Minutes of use
(MOU) (5) 1,012 951 908 888 858
Retail postpay
churn rate per
month (6)1.4%1.4%1.5%1.6%1.4%
Construction
Expenditures
(000s) $ 137,800 $ 111,700 $ 188,100 $ 130,600 $ 137,100
(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 June 30, 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 $ 987,352 $ 962,094 $ 957,896 $ 954,540 $ 906,218
Components:
Retail service
revenue during
quarter845,564834,213828,169814,948788,535
Inbound roaming
revenue during
quarter 63,033 54,089 56,358 60,843 48,084
Long-distance/other
revenue during
quarter 78,755 73,792 73,369 78,749 69,599
Divided by average
customers during
quarter (000s) 6,178 6,139 6,074 6,034 5,991
Divided by three
months in each
quarter 3 3 3 3 3
Average monthly
revenue per unit $ 53.27$ 52.24$ 52.57$ 52.73$ 50.42
Retail service
revenue per unit $ 45.62$ 45.30$ 45.45$ 45.02$ 43.87
Inbound roaming
revenue per unit$ 3.40 $ 2.94 $ 3.09 $ 3.36 $ 2.68
Long-distance/other
revenue per unit$ 4.25 $ 4.00 $ 4.03 $ 4.35 $ 3.87
(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 June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Increase
(Decrease)
2008 2007 Amount Percent
Operating Revenues
Service $987,352$ 906,218 $ 81,134 9.0%
Equipment sales 73,240 65,4287,81211.9%
Total Operating
Revenues1,060,592 971,646 88,946 9.2%
Operating Expenses
System operations
(excluding
Depreciation,
amortization and
accretion reported
below) 196,652 176,409 20,24311.5%
Cost of equipment
sold172,194 148,241 23,95316.2%
Selling, general
and administrative 422,367 374,668 47,69912.7%
Depreciation,
amortization and
accretion 145,258 146,024 (766) (0.5)%
Loss on asset
disposals, net6,2192,8323,387 N/M
Total Operating
Expenses 942,690 848,174 94,51611.1%
Operating Income 117,902 123,472 (5,570) (4.5)%
Investment and Other
Income (Expense)
Equity in earnings
of unconsolidated
entities 22,807 22,980 (173) (0.8)%
Interest and dividend
income1,4292,653 (1,224) (46.1)%
Fair value adjustment
of derivative
instruments --- (17,849) 17,849 N/M
Gain on sales of
investments --- 131,686 (131,686) N/M
Interest expense (20,774) (21,325) 551 2.6%
Other, net 600 91 509 N/M
4,062 118,236 (114,174) (96.6)%
Income Before Income
Taxes and Minority
Interest 121,964 241,708 (119,744) (49.5)%
Income tax expense44,016 91,500 (47,484) (51.9)%
Income Before Minority
Interest 77,948 150,208 (72,260) (48.1)%
Minority share of
income, net of tax (5,346) (2,637) (2,709) N/M
Net Income$ 72,602$ 147,571$ (74,969) (50.8)%
Basic Weighted Average
Common Shares
Outstanding 87,571 87,590 (19) (0.0)%
Basic Earnings Per
Share
$ 0.83 $ 1.68 $ (0.85) (50.6)%
Diluted Weighted Average
Common Shares
Outstanding 87,872 88,410 (538) (0.6)%
Diluted Earnings Per
Share $ 0.83 $ 1.67 $ (0.84) (50.3)%
N/M - Percentage change not meaningful
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS HIGHLIGHTS
Six Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Increase
(Decrease)
2008 2007 Amount Percent
Operating Revenues
Service $1,949,446 $1,766,801 $182,64510.3%
Equipment sales 149,002 139,5199,483 6.8%
Total Operating
Revenues2,098,4481,906,320 192,12810.1%
Operating Expenses
System operations
(excluding
Depreciation,
amortization and
accretion reported
below) 387,668 343,693 43,97512.8%
Cost of equipment
sold346,231 298,985 47,24615.8%
Selling, general
and administrative 830,001 733,534 96,46713.2%
Depreciation,
amortization and
accretion 287,788 291,976 (4,188) (1.4)%
Loss on asset
disposals, net9,8926,1373,75561.2%
Total Operating
Expenses1,861,5801,674,325 187,25511.2%
Operating Income 236,868 231,9954,873 2.1%
Investment and Other
Income (Expense)
Equity in earnings
of unconsolidated
entities 44,042 46,078 (2,036) (4.4)%
Interest and
dividend income 3,3345,203 (1,869) (35.9)%
Fair value
adjustment of
derivative
instruments --- (5,388) 5,388 N/M
Gain on sale of
investments --- 131,686 (131,686) N/M
Interest expense (40,889) (45,009) 4,120 9.2%
Other, net 718 (494) 1,212 N/M
7,205 132,076 (124,871) (94.5)%
Income Before Income
Taxes and Minority
Interest 244,073 364,071 (119,998) (33.0)%
Income tax expense91,556 135,388 (43,832) (32.4)%
Income Before Minority
Interest 152,517 228,683 (76,166) (33.3)%
Minority share of
income, net (9,358) (6,711) (2,647) (39.4)%
Net Income $ 143,159$ 221,972$ (78,813) (35.5)%
Basic Weighted Average
Common Shares
Outstanding 87,571 87,735 (164) (0.2)%
Basic Earnings Per
Share
$ 1.63 $ 2.53 $ (0.90) (35.6)%
Diluted Weighted
Average Common Shares
Outstanding 87,963 88,615 (652) (0.7)%
Diluted Earnings Per
Share $ 1.63 $ 2.50 $ (0.87) (34.8)%
N/M - Percentage change not meaningful
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
ASSETS
June 30, December 31,
2008 2007
Current Assets
Cash and cash equivalents$ 101,155 $ 204,533
Marketable equity securities16,508 16,352
Accounts receivable from customers and other 442,415435,497
Inventory 120,817100,990
Prepaid expenses51,923 41,588
Other current assets42,448 34,793
775,266833,753
Investments
Licenses 1,792,728 1,482,446
Goodwill 493,918491,316
Customer lists 12,451 15,375
Investments in unconsolidated entities 157,162157,693
Notes and interest receivable--long-term 4,359 4,422
2,460,618 2,151,252
Property, Plant and Equipment
In service and under construction5,612,054 5,409,115
Less accumulated depreciation3,045,114 2,814,019
2,566,940 2,595,096
Other Assets and Deferred Charges 29,728 31,773
Total Assets $ 5,832,552$ 5,611,874
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
2008 2007
Current Liabilities
Notes payable $ 50,000 $ ---
Accounts payable
Affiliated 8,690 8,519
Trade256,196252,272
Customer deposits and deferred revenues153,860143,445
Accrued taxes 42,969 43,105
Accrued compensation36,680 59,224
Other current liabilities 97,220 97,678
645,615604,243
Long-Term Debt 1,007,054 1,002,293
Deferred Liabilities and Credits 799,597765,786
Minority Interest 48,391 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 1,329,212 1,316,042
Treasury Shares(45,414) (41,094)
Accumulated other comprehensive income 10,233 10,134
Retained earnings1,949,812 1,823,022
3,331,895 3,196,156
Total Liabilities and Shareholders' Equity $ 5,832,552$ 5,611,874
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
(Unaudited, dollars in thousands)
2008 2007
Cash Flows from Operating Activities
Net income $ 143,159 $ 221,972
Add (deduct) adjustments to reconcile
net income to net
cash flows from operating activities:
Depreciation, amortization and accretion 287,788291,976
Bad debts expense 32,426 23,870
Stock-based compensation expense 6,481 8,177
Deferred income taxes, net 27,231 5,002
Equity in earnings of unconsolidated entities (44,042) (46,078)
Distributions from unconsolidated entities 45,569 43,169
Minority share of income 9,358 6,711
Unrealized fair value adjustment of
derivative instruments--- 5,388
Gain on sale of investments--- (131,686)
Loss on asset disposals, net 9,892 6,137
Noncash interest expense 886890
Excess tax benefit from stock awards (896)(9,679)
Other operating activities --- (5,000)
Changes in assets and liabilities from operations:
Change in accounts receivable (50,059) (30,103)
Change in inventory(19,816) (770)
Change in accounts payable - trade 2,838 (3,781)
Change in accounts payable - affiliate 171 (3,530)
Change in customer deposits and
deferred revenues 10,406 17,606
Change in accrued taxes 1,471 60,418
Change in accrued interest 455 (742)
Change in other assets and liabilities (36,486) (19,510)
426,832440,437
Cash Flows from Investing Activities
Additions to property, plant and equipment (249,500) (246,790)
Proceeds from sale of investments--- 4,301
Cash received from divestitures6,838 4,277
Cash paid for acquisitions (312,615) (18,283)
Other investing activities(1,215) (156)
(556,492) (256,651)
Cash Flows from Financing Activities
Issuance of notes payable100,000 25,000
Repayment of notes payable (50,000) (60,000)
Common shares reissued, net of tax payments (1,878) 9,223
Common shares repurchased(14,516) (49,057)
Excess tax benefit from exercise of stock awards 896 9,679
Capital distributions to minority partners(6,022)(5,461)
Other financing activities(2,198) ---
26,282(70,616)
Net Increase (Decrease) in Cash and Cash
Equivalents (103,378) 113,170
Cash and Cash Equivalents
Beginning of period 204,533 32,912
End of period $ 101,155 $ 146,082
SOURCE U.S. Cellular
