Exhibit 99.1
Contact: Kenneth R. Meyers, Executive Vice President, Finance, U.S. Cellular
(773) 399-8900 kmeyers@uscellular.com
Mark A. Steinkrauss, Vice President, Corporate Relations, TDS
(312) 592-5384 mark.steinkrauss@teldta.com
FOR RELEASE: IMMEDIATE
U.S. CELLULAR REPORTS FOURTH QUARTER 2005 RESULTS;
UPDATES 2006 GUIDANCE
CHICAGO — July 28, 2006 - United States Cellular Corporation [AMEX:USM] reported service revenues of $738.7 million for the fourth quarter of 2005, up 11 percent from $663 million, as restated, for the comparable period one year ago. The company recorded operating income of $71.6 million during the quarter, up 86 percent compared to $38.4 million for the fourth quarter of 2004, as restated. Net income and basic earnings per share were $42.5 million and $0.49, respectively, compared to net income and basic earnings per share of $38.1 million and $0.44, respectively, as restated, for the comparable period one year ago.
On Dec. 19, 2005, U.S. Cellular completed an exchange of wireless assets with ALLTEL Communications, Inc. Under the agreement, U.S. Cellular received 146,000 total customers in Kansas and Nebraska while ALLTEL received 92,000 total customers in Idaho and $58.1 million in cash, including a preliminary working capital adjustment. In addition to customers, both companies received 850 MHz spectrum, cell sites, retail stores and agents. U.S. Cellular recorded a fourth quarter 2005 pre-tax gain of $44.7 million on the exchange.
In the fourth quarter of 2004, U.S. Cellular recorded a “Gain on sales of assets,” included in operating income, of $10.1 million related to the sale of two operating markets to ALLTEL.
Fourth Quarter Highlights
• Total U.S. Cellular customers increased 11 percent year over year to 5,482,000 customers while retail customers increased 10 percent to 4,927,000.
• U.S. Cellular recorded a postpay churn rate of 1.6 percent in the fourth quarter. For the full year 2005, U.S. Cellular’s postpay churn rate was 1.5 percent. 2005 marks the tenth consecutive year that U.S. Cellular’s postpay churn rate has remained below 2 percent.
U.S. Cellular filed its Annual Report (Form 10-K) for the year ended December 31, 2005, with the Securities and Exchange Commission earlier today.
On Nov. 10, 2005, U.S. Cellular announced that it would restate financial results for several prior periods. U.S. Cellular completed and filed its restatement on April 26, 2006. The time spent completing the restatement caused the company to be late with its other SEC filings.
U.S. Cellular has not filed its Form 10-Q for the quarter ended March 31, 2006 on a timely basis. As a result, U.S. Cellular is not in compliance with American Stock Exchange (AMEX) listing standards. U.S. Cellular has been granted an extension until Nov. 14, 2006 to regain compliance with AMEX listing standards resulting from delayed filings with the SEC and delayed distribution of its 2005 annual report to shareholders.
In addition, U.S. Cellular has received extended waivers from its lenders under credit agreements and from counterparties under certain forward contracts provided that that it files its Forms 10-K for the year ended Dec. 31, 2005 by Aug. 31, 2006, its Forms 10-Q for the quarter ended March 31, 2006 within 30 days of filing the 2005 Form 10-K, and its Forms 10-Q for the quarter ended June 30, 2006 within 45 days of filing the first quarter Form 10-Q. U.S. Cellular expects to file its Forms 10-Q for the quarter ended Sept. 30, 2006 on or before the extended due date of Nov. 14, 2006.
Certain financial and statistical information will be posted to the U.S. Cellular Web site, together with reconciliations to generally accepted accounting principles (GAAP) of certain non-GAAP disclosures. Investors may access this additional information on the Investor Relations- Financial Information – Guidance & Reconciliations page of the U.S. Cellular Web site.
U.S. Cellular updated its 2006 guidance as of July 28, 2006 and it is as follows. There can be no assurance that final results will not differ materially from this guidance.
Net Retail Customer Additions |
| 370,000 – 400,000 |
Service Revenues |
| Approx. $3.2 billion |
Operating Income |
| $250 – 300 million |
Depreciation, Amortization & Accretion |
| $585 million |
Capital Expenditures |
| $580 - $610 million |
As of Dec. 31, 2005, U.S. Cellular Corporation, the nation's sixth-largest wireless service carrier, provided wireless service to 5.5 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 operations of the Chicago MTA and 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 investments, including variable prepaid forward contracts; an adverse change in the ratings afforded our debt securities by accredited ratings organizations; 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 rates 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: www.uscellular.com.
###
2
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
Quarter Ended |
| 12/31/2005 |
| 9/30/2005 |
| 6/30/2005 |
| 3/31/2005 |
| 12/31/2004 |
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Consolidated Markets: |
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| |||||
Total population (000s) (1) |
| 45,244 |
| 44,690 |
| 44,690 |
| 44,576 |
| 44,391 |
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All customers - |
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Customer units |
| 5,482,000 |
| 5,303,000 |
| 5,227,000 |
| 5,127,000 |
| 4,945,000 |
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Gross customer unit activations |
| 419,000 |
| 355,000 |
| 340,000 |
| 426,000 |
| 408,000 |
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Net customer unit activations |
| 125,000 |
| 76,000 |
| 94,000 |
| 182,000 |
| 150,000 |
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Market penetration (1) |
| 12.12 | % | 11.87 | % | 11.70 | % | 11.50 | % | 11.14 | % | |||||
Retail customers - |
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Customer units |
| 4,927,000 |
| 4,765,000 |
| 4,688,000 |
| 4,601,000 |
| 4,478,000 |
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Gross customer unit activations |
| 392,000 |
| 346,000 |
| 317,000 |
| 365,000 |
| 358,000 |
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Net customer unit activations |
| 130,000 |
| 77,000 |
| 81,000 |
| 123,000 |
| 105,000 |
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Cell sites in service |
| 5,428 |
| 5,149 |
| 5,034 |
| 4,899 |
| 4,856 |
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Average monthly revenue per unit (2) |
| $ | 45.94 |
| $ | 46.19 |
| $ | 44.52 |
| $ | 44.46 |
| $ | 45.41 |
|
Retail service revenue per unit (2) |
| $ | 40.19 |
| $ | 40.25 |
| $ | 39.40 |
| $ | 39.20 |
| $ | 39.93 |
|
Inbound roaming revenue per unit (2) |
| $ | 2.31 |
| $ | 2.70 |
| $ | 2.27 |
| $ | 1.98 |
| $ | 2.38 |
|
Long-distance/other revenue per unit (2) |
| $ | 3.44 |
| $ | 3.24 |
| $ | 2.85 |
| $ | 3.28 |
| $ | 3.10 |
|
Minutes of use (MOU) (3) |
| 648 |
| 639 |
| 627 |
| 584 |
| 568 |
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Postpay churn rate per month (4) |
| 1.6 | % | 1.5 | % | 1.4 | % | 1.5 | % | 1.6 | % | |||||
Marketing cost per gross customer unit addition (5) |
| $ | 498 |
| $ | 491 |
| $ | 461 |
| $ | 396 |
| $ | 440 |
|
Construction Expenditures (000s) |
| $ | 201,700 |
| $ | 128,300 |
| $ | 143,800 |
| $ | 112,800 |
| $ | 261,500 |
|
(1) Market penetration is calculated using 2004 Claritas population estimates for all periods of 2005 and 2003 Claritas estimates for all periods of 2004. “Total population” represents the total population of each of U.S. Cellular’s consolidated markets, regardless of whether the market has begun marketing operations. The 12/31/05, 9/30/05 and 6/30/05 total population counts include the population of the market acquired from Cingular Wireless in April 2005. The total population counts on and after 12/31/04 exclude the population of the two markets sold to ALLTEL in November 2004. The population of markets in which U.S. Cellular has deferred the transfer of licenses from AT&T Wireless (now Cingular Wireless) are not included in the total population counts for any period, nor are the population counts of markets for which Carroll Wireless, L.P., a consolidated U.S. Cellular subsidiary, was the winning bidder in the Federal Communications Commission’s Auction 58 that concluded in February 2005. The total population counts for 12/31/05 exclude the population of the two markets divested to ALLTEL in December 2005, and include the population of the 15 markets acquired in the same transaction.
(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 |
| $ | 738,682 |
| $ | 729,504 |
| $ | 691,746 |
| $ | 671,639 |
| $ | 662,955 |
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Components: |
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Retail service revenue during quarter |
| $ | 646,178 |
| $ | 635,610 |
| $ | 612,159 |
| $ | 592,167 |
| $ | 582,950 |
|
Inbound roaming revenue during quarter |
| $ | 37,184 |
| $ | 42,654 |
| $ | 35,313 |
| $ | 29,875 |
| $ | 34,812 |
|
Long-distance/other revenue during quarter |
| $ | 55,320 |
| $ | 51,240 |
| $ | 44,274 |
| $ | 49,597 |
| $ | 45,193 |
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Divided by average customers during quarter (000s) |
| 5,360 |
| 5,264 |
| 5,179 |
| 5,035 |
| 4,866 |
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Divided by three months in each quarter |
| 3 |
| 3 |
| 3 |
| 3 |
| 3 |
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Average monthly revenue per unit |
| $ | 45.94 |
| $ | 46.19 |
| $ | 44.52 |
| $ | 44.46 |
| $ | 45.41 |
|
Retail service revenue per unit |
| $ | 40.19 |
| $ | 40.25 |
| $ | 39.40 |
| $ | 39.20 |
| $ | 39.93 |
|
Inbound roaming revenue per unit |
| $ | 2.31 |
| $ | 2.70 |
| $ | 2.27 |
| $ | 1.98 |
| $ | 2.38 |
|
Long-distance/other revenue per unit |
| $ | 3.44 |
| $ | 3.24 |
| $ | 2.85 |
| $ | 3.28 |
| $ | 3.10 |
|
(3) Average monthly local minutes of use per customer (without roaming).
(4) Postpay churn rate per month is calculated by dividing the average monthly postpay customer disconnects during the quarter by the average postpay customer base for the quarter.
(5) This measurement is not calculable using information from the financial statements as reported. The details of this calculation and a reconciliation to line items reported in Financial Highlights for each respective quarter are shown on U.S. Cellular’s web site, along with additional information related to U.S. Cellular’s fourth quarter results, at www.uscellular.com.
3
UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Three Months Ended December 31,
(Unaudited, dollars in thousands, except per share amounts)
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| 2004 |
| Increase (Decrease) |
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| 2005 |
| (As Restated) |
| Amount |
| Percent |
| |||
Operating Revenues |
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Service |
| $ | 738,682 |
| $ | 662,955 |
| $ | 75,727 |
| 11.4 | % |
Equipment sales |
| 48,663 |
| 46,188 |
| 2,475 |
| 5.4 | % | |||
Total Operating Revenues |
| 787,345 |
| 709,143 |
| 78,202 |
| 11.0 | % | |||
Operating Expenses |
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System operations (excluding depreciation shown below) |
| 157,549 |
| 126,643 |
| 30,906 |
| 24.4 | % | |||
Cost of equipment sold |
| 137,057 |
| 129,451 |
| 7,606 |
| 5.9 | % | |||
Selling, general and administrative |
| 337,558 |
| 290,243 |
| 47,315 |
| 16.3 | % | |||
Depreciation, amortization and accretion |
| 128,212 |
| 134,453 |
| (6,241 | ) | (4.6 | %) | |||
(Gain) on sales of assets |
| (44,660 | ) | (10,081 | ) | (34,579 | ) | N/M |
| |||
Total Operating Expenses |
| 715,716 |
| 670,709 |
| 45,007 |
| 6.7 | % | |||
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Operating Income |
| 71,629 |
| 38,434 |
| 33,195 |
| 86.4 | % | |||
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Investment and Other Income (Expense) |
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Investment income |
| 18,424 |
| 15,675 |
| 2,749 |
| 17.5 | % | |||
Interest and dividend income |
| 4,684 |
| 7,608 |
| (2,924 | ) | (38.4 | %) | |||
Interest (expense) |
| (21,563 | ) | (21,304 | ) | (259 | ) | (1.2 | %) | |||
Gain (loss) on investments |
| (5,400 | ) | 27,621 |
| (33,021 | ) | N/M |
| |||
Other (expense), net |
| 337 |
| 203 |
| 134 |
| 66.0 | % | |||
|
| (3,518 | ) | 29,803 |
| (33,321 | ) | (111.8 | %) | |||
Income Before Income Taxes and Minority Interest |
| 68,111 |
| 68,237 |
| (126 | ) | (0.2 | %) | |||
Income tax expense |
| 22,959 |
| 27,341 |
| (4,382 | ) | (16.0 | %) | |||
Income Before Minority Interest |
| 45,152 |
| 40,896 |
| 4,256 |
| 10.4 | % | |||
Minority share of income |
| (2,666 | ) | (2,807 | ) | 141 |
| 5.0 | % | |||
Net Income |
| $ | 42,486 |
| $ | 38,089 |
| $ | 4,397 |
| 11.5 | % |
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| |||
Basic Weighted Average Common Shares Outstanding (000s) |
| 87,073 |
| 86,344 |
| 729 |
| 0.8 | % | |||
Basic Earnings Per Share |
| $ | 0.49 |
| $ | 0.44 |
| 0.05 |
| 11.4 | % | |
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Diluted Weighted Average Common Shares Outstanding (000s) |
| 87,729 |
| 86,890 |
| 839 |
| 1.0 | % | |||
Diluted Earnings Per Share |
| $ | 0.48 |
| $ | 0.44 |
| $ | 0.04 |
| 9.1 | % |
4
UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Year Ended December 31,
(Unaudited, dollars in thousands, except per share amounts)
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| 2004 |
| Increase (Decrease) |
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| 2005 |
| (As Restated) |
| Amount |
| Percent |
| |||
Operating Revenues |
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Service |
| $ | 2,831,571 |
| $ | 2,616,946 |
| $ | 214,625 |
| 8.2 | % |
Equipment sales |
| 204,316 |
| 191,255 |
| 13,061 |
| 6.8 | % | |||
Total Operating Revenues |
| 3,035,887 |
| 2,808,201 |
| 227,686 |
| 8.1 | % | |||
Operating Expenses |
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System operations (excluding depreciation shown below) |
| 602,360 |
| 562,690 |
| 39,670 |
| 7.1 | % | |||
Cost of equipment sold |
| 511,939 |
| 486,605 |
| 25,334 |
| 5.2 | % | |||
Selling, general and administrative |
| 1,212,874 |
| 1,088,181 |
| 124,693 |
| 11.5 | % | |||
Depreciation, amortization and accretion |
| 509,072 |
| 498,202 |
| 10,870 |
| 2.2 | % | |||
(Gain) on sales of assets |
| (44,660 | ) | (10,806 | ) | (33,854 | ) | N/M |
| |||
Total Operating Expenses |
| 2,791,585 |
| 2,624,872 |
| 166,713 |
| 6.4 | % | |||
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Operating Income |
| 244,302 |
| 183,329 |
| 60,973 |
| 33.3 | % | |||
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Investment and Other Income (Expense) |
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Investment income |
| 68,433 |
| 63,758 |
| 4,675 |
| 7.3 | % | |||
Interest and dividend income |
| 11,440 |
| 10,764 |
| 676 |
| 6.3 | % | |||
Interest (expense) |
| (84,867 | ) | (86,241 | ) | 1,374 |
| 1.6 | % | |||
Gain (loss) on investments |
| (4,849 | ) | 25,791 |
| (30,640 | ) | (118.8 | %) | |||
Other (expense), net |
| (199 | ) | (2,576 | ) | 2,377 |
| 92.3 | % | |||
|
| (10,042 | ) | 11,496 |
| (21,538 | ) | (187.4 | %) | |||
Income Before Income Taxes and Minority Interest |
| 234,260 |
| 194,825 |
| 39,435 |
| 20.2 | % | |||
Income tax expense |
| 88,404 |
| 74,678 |
| 13,726 |
| 18.4 | % | |||
Income Before Minority Interest |
| 145,856 |
| 120,147 |
| 25,709 |
| 21.4 | % | |||
Minority share of income |
| (11,108 | ) | (10,631 | ) | (477 | ) | (4.5 | %) | |||
Net Income |
| $ | 134,748 |
| $ | 109,516 |
| $ | 25,232 |
| 23.0 | % |
|
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| |||
Basic Weighted Average Common Shares Outstanding (000s) |
| 86,775 |
| 86,244 |
| 531 |
| 0.6 | % | |||
Basic Earnings Per Share |
| $ | 1.55 |
| $ | 1.27 |
| $ | 0.28 |
| 22.0 | % |
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| |||
Diluted Weighted Average Common Shares Outstanding (000s) |
| 87,464 |
| 86,736 |
| 728 |
| 0.8 | % | |||
Diluted Earnings Per Share |
| $ | 1.54 |
| $ | 1.26 |
| $ | 0.28 |
| 22.2 | % |
N/M - Percentage change not meaningful
5
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
|
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|
| December 31, 2004 |
| ||
|
| December 31, 2005 |
| (As Restated) |
| ||
Current Assets |
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|
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Cash and cash equivalents |
| $ | 29,003 |
| $ | 41,062 |
|
Accounts receivable from customers and other |
| 367,510 |
| 316,436 |
| ||
Inventory |
| 92,748 |
| 76,918 |
| ||
Prepaid expenses |
| 31,026 |
| 31,764 |
| ||
Deferred income tax asset |
| 8,218 |
| 73,216 |
| ||
Other current assets |
| 15,145 |
| 24,951 |
| ||
|
| 543,650 |
| 564,347 |
| ||
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Investments |
|
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Licenses |
| 1,362,263 |
| 1,228,801 |
| ||
Goodwill |
| 471,617 |
| 445,212 |
| ||
Customer lists |
| 49,318 |
| 24,915 |
| ||
Marketable equity securities |
| 225,387 |
| 282,829 |
| ||
Investments in unconsolidated entities |
| 170,337 |
| 155,519 |
| ||
Notes and interest receivable—long-term |
| 4,707 |
| 4,885 |
| ||
|
| 2,283,629 |
| 2,142,161 |
| ||
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Property, Plant and Equipment |
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In service and under construction |
| 4,653,292 |
| 4,133,471 |
| ||
Less accumulated depreciation |
| 2,076,528 |
| 1,692,751 |
| ||
|
| 2,576,764 |
| 2,440,720 |
| ||
|
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|
| ||
Other Assets and Deferred Charges |
| 29,985 |
| 32,807 |
| ||
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| ||
Total Assets |
| $ | 5,434,028 |
| $ | 5,180,035 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
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| December 31, 2004 |
| ||
|
| December 31, 2005 |
| (As Restated) |
| ||
Current Liabilities |
|
|
|
|
| ||
Notes payable |
| $ | 135,000 |
| $ | 30,000 |
|
Accounts payable |
|
|
|
|
| ||
Affiliates |
| 7,239 |
| 5,314 |
| ||
Trade |
| 298,397 |
| 259,167 |
| ||
Customer deposits and deferred revenues |
| 106,180 |
| 104,394 |
| ||
Accrued taxes |
| 38,627 |
| 80,512 |
| ||
Accrued compensation |
| 42,865 |
| 49,116 |
| ||
Other current liabilities |
| 25,952 |
| 20,829 |
| ||
|
| 654,260 |
| 549,332 |
| ||
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|
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| ||
Long-term Debt |
| 1,161,241 |
| 1,160,786 |
| ||
|
|
|
|
|
| ||
Deferred Liabilities and Credits |
| 821,345 |
| 840,268 |
| ||
|
|
|
|
|
| ||
Minority Interest |
| 46,442 |
| 40,052 |
| ||
|
|
|
|
|
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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 |
| 1,286,964 |
| 1,305,249 |
| ||
Treasury Shares |
| (47,088 | ) | (99,627 | ) | ||
Accumulated other comprehensive income |
| 24,944 |
| 32,803 |
| ||
Retained earnings |
| 1,397,868 |
| 1,263,120 |
| ||
|
| 2,750,740 |
| 2,589,597 |
| ||
|
|
|
|
|
| ||
Total Liabilities and Shareholders’ Equity |
| $ | 5,434,028 |
| $ | 5,180,035 |
|
NOTE: Certain December 31, 2004 amounts have been changed to conform to current period presentation.
6