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2008-08-07 07:04:00
Service and data revenues up 9 percent and 45 percent in the quarter
Note: Comparisons are year over year unless otherwise noted.
2Q 2008 Highlights
- 9.0 percent increase in service revenues, to $987.4 million.
- 44.7 percent increase in data revenues, to $123.7 million, representing
12.5 percent of service revenues.
- 5.7 percent increase in ARPU (average monthly service revenue per unit),
to $53.27.
- Retail postpay churn remained flat at 1.4 percent; postpay customers
comprised 95 percent of retail customers.
- 7.4 percent increase in cell sites in service, to 6,596.
- Repurchased 150,000 common shares for $8.3 million, to offset dilution
from employee benefit plans.
CHICAGO, Aug. 7 /EMWNews/ -- 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
service 6,596 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
quarter 845,564 834,213 828,169 814,948 788,535
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 65,428 7,812 11.9%
Total Operating
Revenues 1,060,592 971,646 88,946 9.2%
Operating Expenses
System operations
(excluding
Depreciation,
amortization and
accretion reported
below) 196,652 176,409 20,243 11.5%
Cost of equipment
sold 172,194 148,241 23,953 16.2%
Selling, general
and administrative 422,367 374,668 47,699 12.7%
Depreciation,
amortization and
accretion 145,258 146,024 (766) (0.5)%
Loss on asset
disposals, net 6,219 2,832 3,387 N/M
Total Operating
Expenses 942,690 848,174 94,516 11.1%
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
income 1,429 2,653 (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 expense 44,016 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 $182,645 10.3%
Equipment sales 149,002 139,519 9,483 6.8%
Total Operating
Revenues 2,098,448 1,906,320 192,128 10.1%
Operating Expenses
System operations
(excluding
Depreciation,
amortization and
accretion reported
below) 387,668 343,693 43,975 12.8%
Cost of equipment
sold 346,231 298,985 47,246 15.8%
Selling, general
and administrative 830,001 733,534 96,467 13.2%
Depreciation,
amortization and
accretion 287,788 291,976 (4,188) (1.4)%
Loss on asset
disposals, net 9,892 6,137 3,755 61.2%
Total Operating
Expenses 1,861,580 1,674,325 187,255 11.2%
Operating Income 236,868 231,995 4,873 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 3,334 5,203 (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 expense 91,556 135,388 (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 securities 16,508 16,352
Accounts receivable from customers and other 442,415 435,497
Inventory 120,817 100,990
Prepaid expenses 51,923 41,588
Other current assets 42,448 34,793
775,266 833,753
Investments
Licenses 1,792,728 1,482,446
Goodwill 493,918 491,316
Customer lists 12,451 15,375
Investments in unconsolidated entities 157,162 157,693
Notes and interest receivable--long-term 4,359 4,422
2,460,618 2,151,252
Property, Plant and Equipment
In service and under construction 5,612,054 5,409,115
Less accumulated depreciation 3,045,114 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
Trade 256,196 252,272
Customer deposits and deferred revenues 153,860 143,445
Accrued taxes 42,969 43,105
Accrued compensation 36,680 59,224
Other current liabilities 97,220 97,678
645,615 604,243
Long-Term Debt 1,007,054 1,002,293
Deferred Liabilities and Credits 799,597 765,786
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 earnings 1,949,812 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 287,788 291,976
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 886 890
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)
426,832 440,437
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 divestitures 6,838 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 payable 100,000 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
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