Exhibit 99.1
Contact: |
| Mark A. Steinkrauss, Vice President, Corporate Relations |
|
| (312) 592-5384 mark.steinkrauss@teldta.com |
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|
|
|
| Julie D. Mathews, Manager, Investor Relations |
|
| (312) 592-5341 julie.mathews@teldta.com |
U.S. CELLULAR REPORTS THIRD QUARTER 2006 RESULTS
Completes restatement of prior period results; reports year-end 2006 net adds
CHICAGO – Feb. 23, 2007 - United States Cellular Corporation [AMEX:USM] reported service revenues of $821.8 million for the third quarter of 2006, up 13 percent from $729 million, as restated, for the comparable period one year ago. The company recorded operating income of $77.3 million during the quarter, up 22 percent compared to $63.3 million, as restated, for the third quarter of 2005. Net income and diluted earnings per share were $35.9 million and $0.41, respectively, compared to net income and diluted earnings per share of $23.7 million and $0.27, respectively, as restated, for the comparable period one year ago.
U.S. Cellular also completed the restatement of prior period results announced on Nov. 6, 2006, which included each of the years ended Dec. 31, 2002 – 2005, quarterly information for 2004 and 2005, and the first and second quarters of 2006. The restatement was required primarily to correct the accounting for prepaid forward contracts under Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. The company will file its Form 10-K/A for 2005, its Forms 10-Q/A for the first and second quarters of 2006, and its Form 10-Q for the third quarter of 2006, with the Securities and Exchange Commission later today.
· The total number customers increased 8 percent year over year to 5,729,000. The number of retail customers increased 8 percent to 5,127,000.
· Average monthly revenue per unit (ARPU) increased 4 percent to $47.93.
· Data revenues increased 74 percent to $56.7 million.
· The company recorded a postpay churn rate of 1.6 percent.
· An investment in the Los Angeles Standard Metropolitan Statistical Area Limited Partnership contributed $16 million to equity in earnings of unconsolidated entities.
· At an Extraordinary General Meeting held on July 25, 2006, Vodafone approved a share consolidation in which 8 American Depository Receipts (“ADRs”) were consolidated into 7 ADRs and a return of capital (“Special Distribution”). U.S. Cellular received approximately $28.6 million from the Special Distribution and recorded it as a return of capital.
· The company recorded a loss in fair value adjustment of derivative instruments of $21.3 million related to accounting for prepaid forward contracts.
“Thanks to our intense focus on customer satisfaction, U.S. Cellular had a strong third quarter financially,” said John E. Rooney, U.S. Cellular’s president and chief executive officer. “We increased
service revenues, drove a dramatic increase in data revenues and improved profitability. Also contributing to these results are recently launched calling plans designed to better meet the needs of our customers.
“Postpay customers are a cornerstone of U.S. Cellular’s customer satisfaction strategy,” continued Rooney. “They generate higher lifetime revenue than prepaid or wholesale customers. Postpay customers also provide a steady and predictable revenue stream for more than five years on average, and benefit the most from and put a significant value on U.S. Cellular’s promise of customer satisfaction. This strategy resulted in postpay net customer additions of 40,000 in the third quarter. Retail net customer additions, which includes both postpay and prepaid customer adds, were 28,000 in the third quarter due to a decline in the number of prepaid customers.
“Network quality is key to ensuring outstanding customer service. For the twelve months ended Sept. 30, the company put in place 577 new cell sites, an increase of 11 percent. At the same time, our customer base grew 8 percent and minutes of use grew 13 percent. It is the company’s focus on improved profitability that has controlled network costs, limiting system operations expense growth to only 3.6 percent, year over year,” he concluded.
|
| 12/31/06 |
| 12/31/05 |
|
Postpay customer additions |
| 283,000 |
| 291,000 |
|
Prepaid customer additions |
| 14,000 |
| 120,000 |
|
Total net retail customer additions * |
| 297,000 |
| 411,000 |
|
Wholesale customer additions |
| 13,000 |
| 66,000 |
|
Total customer additions |
| 310,000 |
| 477,000 |
|
* U.S. Cellular issues guidance on net retail customer additions.
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 section of the U.S. Cellular web site.
As of Sept. 30, 2006, U.S. Cellular Corporation, the nation's sixth-largest wireless service carrier, employed 8,000 people and provided wireless service to 5.7 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 assets; changes in the value of investments,
2
including variable prepaid forward contracts; 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 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.
###
3
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
Quarter Ended |
| 9/30/2006 |
| 6/30/2006 |
| 3/31/2006 |
| 12/31/2005 |
| 9/30/2005 |
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Consolidated Markets: |
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|
|
| |||||
Total population (000s) (1) |
| 55,543 |
| 55,543 |
| 55,164 |
| 45,244 |
| 44,690 |
| |||||
All customers - |
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|
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|
|
|
|
| |||||
Customer units |
| 5,729,000 |
| 5,704,000 |
| 5,633,000 |
| 5,482,000 |
| 5,303,000 |
| |||||
Gross customer unit activations |
| 365,000 |
| 347,000 |
| 434,000 |
| 419,000 |
| 355,000 |
| |||||
Net customer unit activations |
| 25,000 |
| 48,000 |
| 151,000 |
| 125,000 |
| 76,000 |
| |||||
Market penetration (1) |
| 10.31 | % | 10.27 | % | 10.21 | % | 12.12 | % | 11.87 | % | |||||
Retail customers - |
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|
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|
|
|
|
|
|
|
| |||||
Customer units |
| 5,127,000 |
| 5,099,000 |
| 5,029,000 |
| 4,927,000 |
| 4,765,000 |
| |||||
Gross customer unit activations |
| 353,000 |
| 331,000 |
| 380,000 |
| 392,000 |
| 346,000 |
| |||||
Net customer unit activations |
| 28,000 |
| 49,000 |
| 122,000 |
| 130,000 |
| 77,000 |
| |||||
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|
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|
|
|
|
|
|
|
| |||||
Cell sites in service |
| 5,726 |
| 5,583 |
| 5,438 |
| 5,428 |
| 5,149 |
| |||||
Average monthly revenue per unit (2) |
| $ | 47.93 |
| $ | 46.54 |
| $ | 46.17 |
| $ | 45.88 |
| $ | 46.16 |
|
Retail service revenue per unit (2) |
| $ | 41.65 |
| $ | 40.84 |
| $ | 40.70 |
| $ | 40.13 |
| $ | 40.22 |
|
Inbound roaming revenue per unit (2) |
| $ | 2.55 |
| $ | 2.28 |
| $ | 2.12 |
| $ | 2.31 |
| $ | 2.70 |
|
Long-distance/other revenue per unit (2) |
| $ | 3.73 |
| $ | 3.42 |
| $ | 3.35 |
| $ | 3.44 |
| $ | 3.24 |
|
Minutes of use (MOU) (3) |
| 725 |
| 719 |
| 658 |
| 648 |
| 639 |
| |||||
Postpay churn rate per month (4) |
| 1.6 | % | 1.5 | % | 1.5 | % | 1.6 | % | 1.5 | % | |||||
Marketing cost per gross |
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|
|
|
| |||||
customer unit addition (5) |
| $ | 496 |
| $ | 503 |
| $ | 412 |
| $ | 501 |
| $ | 491 |
|
Construction Expenditures (000s) |
| $ | 152,800 |
| $ | 151,400 |
| $ | 117,200 |
| $ | 197,400 |
| $ | 125,600 |
|
| ||||||||||||||||
(1) Market penetration is calculated using 2005 Claritas population estimates for all periods of 2006 and 2004 Claritas estimates for all periods of 2005. “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 9/30/06, 6/30/06 and 3/31/06 total population count includes the markets acquired in January 2006 by Carroll Wireless, L.P., a consolidated U.S. Cellular subsidiary, representing the licensed areas for which Carroll Wireless L.P. was the winning bidder in the Federal Communications Commission’s Auction 58 that concluded in February 2005. The 9/30/06, 6/30/06, 3/31/06 and 12/31/05 total population counts include the population of the 15 markets acquired from ALLTEL in December 2005, and exclude the population of the two markets transferred to ALLTEL in the same transaction. 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. | ||||||||||||||||
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(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 |
| $ | 821,820 |
| $ | 791,705 |
| $ | 769,222 |
| $ | 737,790 |
| $ | 729,005 |
|
Components: |
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|
|
| |||||
Retail service revenue during quarter |
| $ | 714,270 |
| $ | 694,712 |
| $ | 678,110 |
| $ | 645,286 |
| $ | 635,111 |
|
Inbound roaming revenue during quarter |
| $ | 43,806 |
| $ | 38,745 |
| $ | 35,344 |
| $ | 37,184 |
| $ | 42,654 |
|
Long-distance/other revenue during quarter |
| $ | 63,744 |
| $ | 58,248 |
| $ | 55,768 |
| $ | 55,320 |
| $ | 51,240 |
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|
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| |||||
Divided by average customers during quarter (000s) |
| 5,716 |
| 5,670 |
| 5,554 |
| 5,360 |
| 5,264 |
| |||||
Divided by three months in each quarter |
| 3 |
| 3 |
| 3 |
| 3 |
| 3 |
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| |||||
Average monthly revenue per unit |
| $ | 47.93 |
| $ | 46.54 |
| $ | 46.17 |
| $ | 45.88 |
| $ | 46.16 |
|
Retail service revenue per unit |
| $ | 41.65 |
| $ | 40.84 |
| $ | 40.70 |
| $ | 40.13 |
| $ | 40.22 |
|
Inbound roaming revenue per unit |
| $ | 2.55 |
| $ | 2.28 |
| $ | 2.12 |
| $ | 2.31 |
| $ | 2.70 |
|
Long-distance/other revenue per unit |
| $ | 3.73 |
| $ | 3.42 |
| $ | 3.35 |
| $ | 3.44 |
| $ | 3.24 |
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(3) Average monthly local minutes of use per customer (without roaming). | ||||||||||||||||
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(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. | ||||||||||||||||
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(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 third quarter results, at www.uscellular.com. | ||||||||||||||||
4
UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Three Months Ended September 30,
(Unaudited, dollars in thousands, except per share amounts)
|
|
|
| 2005 |
| Increase (Decrease) |
| |||||
|
| 2006 |
| (as restated) |
| Amount |
| Percent |
| |||
Operating Revenues |
|
|
|
|
|
|
|
|
| |||
Service |
| $ | 821,820 |
| $ | 729,005 |
| $ | 92,815 |
| 12.7 | % |
Equipment sales |
| 66,703 |
| 66,095 |
| 608 |
| N/M |
| |||
Total Operating Revenues |
| 888,523 |
| 795,100 |
| 93,423 |
| 11.7 | % | |||
Operating Expenses |
|
|
|
|
|
|
|
|
| |||
System operations (excluding depreciation shown below) |
| 165,107 |
| 159,335 |
| 5,772 |
| 3.6 | % | |||
Cost of equipment sold |
| 140,757 |
| 130,823 |
| 9,934 |
| 7.6 | % | |||
Selling, general and administrative |
| 358,392 |
| 313,374 |
| 45,018 |
| 14.4 | % | |||
Depreciation, amortization and accretion |
| 146,940 |
| 128,238 |
| 18,702 |
| 14.6 | % | |||
Total Operating Expenses |
| 811,196 |
| 731,770 |
| 79,426 |
| 10.9 | % | |||
|
|
|
|
|
|
|
|
|
| |||
Operating Income |
| 77,327 |
| 63,330 |
| 13,997 |
| 22.1 | % | |||
|
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|
|
|
|
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|
|
| |||
Investment and Other Income (Expense) |
|
|
|
|
|
|
|
|
| |||
Equity in earnings of unconsolidated entities |
| 23,483 |
| 17,416 |
| 6,067 |
| 34.8 | % | |||
Interest and dividend income |
| 601 |
| 384 |
| 217 |
| 56.5 | % | |||
Interest (expense) |
| (23,974 | ) | (21,122 | ) | (2,852 | ) | (13.5 | %) | |||
Fair value adjustment of derivative instruments |
| (21,285 | ) | (14,241 | ) | (7,044 | ) | (49.5 | %) | |||
Other (expense) |
| (225 | ) | (691 | ) | 466 |
| 67.4 | % | |||
|
| (21,400 | ) | (18,254 | ) | (3,146 | ) | (17.2 | %) | |||
Income Before Income Taxes and Minority Interest |
| 55,927 |
| 45,076 |
| 10,851 |
| 24.1 | % | |||
Income tax expense |
| 15,510 |
| 17,966 |
| (2,456 | ) | (13.7 | %) | |||
Income Before Minority Interest |
| 40,417 |
| 27,110 |
| 13,307 |
| 49.1 | % | |||
Minority share of income |
| (4,542 | ) | (3,438 | ) | (1,104 | ) | (32.1 | %) | |||
Net Income |
| $ | 35,875 |
| $ | 23,672 |
| $ | 12,203 |
| 51.6 | % |
|
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|
| |||
Basic Weighted Average Common Shares Outstanding (000s) |
| 87,281 |
| 86,904 |
| 377 |
| N/M |
| |||
Basic Earnings Per Share |
| $ | 0.41 |
| $ | 0.27 |
| $ | 0.14 |
| 51.9 | % |
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| |||
Diluted Weighted Average Common Shares Outstanding (000s) |
| 88,092 |
| 87,661 |
| 431 |
| N/M |
| |||
Diluted Earnings Per Share |
| $ | 0.41 |
| $ | 0.27 |
| $ | 0.14 |
| 51.9 | % |
N/M - Percentage change not meaningful
5
UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Nine Months Ended September 30,
(Unaudited, dollars in thousands, except per share amounts)
|
|
| 2005 |
| Increase (Decrease) |
| ||||||||
| 2006 |
| (as restated) |
| Amount |
| Percent |
| ||||||
Operating Revenues |
|
|
|
|
|
|
| |||||||
Service | $ | 2,382,747 |
| $ | 2,089,232 |
| $ 293,515 |
| 14.0 | % | ||||
Equipment sales | 188,289 |
| 156,294 |
| 31,995 |
| 20.5 | % | ||||||
Total Operating Revenues | 2,571,036 |
| 2,245,526 |
| 325,510 |
| 14.5 |
| ||||||
Operating Expenses |
|
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|
|
|
|
|
| ||||||
System operations (excluding depreciation shown below) | 468,980 |
| 446,278 |
| 22,702 |
| 5.1 | % | ||||||
Cost of equipment sold | 417,489 |
| 374,882 |
| 42,607 |
| 11.4 | % | ||||||
Selling, general and administrative | 1,028,865 |
| 877,116 |
| 151,749 |
| 17.3 | % | ||||||
Depreciation, amortization and accretion | 429,451 |
| 382,244 |
| 47,207 |
| 12.3 | % | ||||||
Total Operating Expenses | 2,344,785 |
| 2,080,520 |
| 264,265 |
| 12.7 | % | ||||||
|
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|
|
|
|
|
|
| ||||||
Operating Income | 226,251 |
| 165,006 |
| 61,245 |
| 37.1 | % | ||||||
|
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|
|
|
|
| ||||||
Investment and Other Income (Expense) |
|
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|
|
|
|
|
| ||||||
Equity in earnings of unconsolidated entities | 64,923 |
| 49,231 |
| 15,692 |
| 31.9 | % | ||||||
Interest and dividend income | 10,996 |
| 6,884 |
| 4,112 |
| 59.7 | % | ||||||
Interest (expense) | (70,189 | ) | (63,304 | ) | (6,885 | ) | (10.9 | %) | ||||||
Fair value adjustment of derivative instruments | (17,392 | ) | 9,938 |
| (27,330 | ) | N/M |
| ||||||
Gain (loss) on investments | — |
| 551 |
| (551 | ) | N/M |
| ||||||
Other income | (163 | ) | (536 | ) | 373 |
| 69.6 | % | ||||||
| (11,825 | ) | 2,764 |
| (14,589 | ) | N/M |
| ||||||
Income Before Income Taxes and Minority Interest | 214,426 |
| 167,770 |
| 46,656 |
| 27.8 | % | ||||||
Income tax expense | 77,903 |
| 65,955 |
| 11,948 |
| 18.1 | % | ||||||
Income Before Minority Interest Minority share of income | 136,523 (11,138 | ) | 101,815 (8,034 | ) | 34,708 (3,104 | ) | 34.1 (38.6 | %%) | ||||||
Net Income | $ | 125,385 |
| $ | 93,781 |
| $ | 31,604 |
| 33.7 | % | |||
|
|
|
|
|
|
|
|
| ||||||
Basic Weighted Average Common Shares Outstanding (000s) | 87,258 |
| 86,674 |
| 584 |
| N/M |
| ||||||
Basic Earnings Per Share | $ | 1.44 |
| $ | 1.08 |
| $ | 0.36 |
| 33.3 | % | |||
|
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|
|
|
|
|
|
| ||||||
Diluted Weighted Average Common Shares Outstanding (000s) | 88,071 |
| 87,390 |
| 681 |
| N/M |
| ||||||
Diluted Earnings Per Share | $ | 1.42 |
| $ | 1.07 |
| $ | 0.35 |
| 32.7 | % | |||
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N/M - Percentage change not meaningful
6
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
|
|
|
| December 31, |
| ||
|
| September 30, |
| 2005 |
| ||
|
| 2006 |
| (as restated) |
| ||
ASSETS |
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| ||
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| ||
Current Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 38,910 |
| $ | 29,003 |
|
Marketable equity securities |
| 204,933 |
| — |
| ||
Accounts receivable from customers and other |
| 393,520 |
| 362,359 |
| ||
Inventory |
| 76,925 |
| 92,748 |
| ||
Prepaid expenses |
| 36,605 |
| 32,068 |
| ||
Deferred income tax asset |
| — |
| 8,218 |
| ||
Other current assets |
| 21,160 |
| 15,489 |
| ||
|
| 772,053 |
| 539,885 |
| ||
|
|
|
|
|
| ||
Investments |
|
|
|
|
| ||
Licenses |
| 1,447,569 |
| 1,362,263 |
| ||
Goodwill |
| 485,485 |
| 481,235 |
| ||
Customer lists |
| 32,048 |
| 47,649 |
| ||
Marketable equity securities |
| 3,572 |
| 225,387 |
| ||
Investments in unconsolidated entities |
| 197,817 |
| 172,093 |
| ||
Notes and interest receivable—long-term |
| 4,767 |
| 4,707 |
| ||
|
| 2,171,258 |
| 2,293,334 |
| ||
|
|
|
|
|
| ||
Property, Plant and Equipment |
|
|
|
|
| ||
In service and under construction |
| 4,981,963 |
| 4,615,234 |
| ||
Less accumulated depreciation |
| 2,382,414 |
| 2,062,205 |
| ||
|
| 2,599,549 |
| 2,553,029 |
| ||
|
|
|
|
|
| ||
Other Assets and Deferred Charges |
| 30,647 |
| 29,985 |
| ||
|
|
|
|
|
| ||
Total Assets |
| $ | 5,573,507 |
| $ | 5,416,233 |
|
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|
|
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|
| ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
| ||
Current portion of Long-term Debt |
| $ | 159,856 |
| $ | — |
|
Derivative Liability |
| 43,210 |
| — |
| ||
Notes payable |
| 150,000 |
| 135,000 |
| ||
Accounts payable |
|
|
|
|
| ||
Affiliates |
| 11,065 |
| 7,239 |
| ||
Trade |
| 248,805 |
| 301,058 |
| ||
Customer deposits and deferred revenues |
| 119,782 |
| 111,407 |
| ||
Accrued taxes |
| 42,324 |
| 36,748 |
| ||
Accrued compensation |
| 42,504 |
| 42,865 |
| ||
Deferred Taxes |
| 28,681 |
| — |
| ||
Other current liabilities |
| 47,822 |
| 28,404 |
| ||
|
| 894,049 |
| 662,721 |
| ||
|
|
|
|
|
| ||
Long-term Debt |
| 1,001,725 |
| 1,161,241 |
| ||
|
|
|
|
|
| ||
Deferred Liabilities and Credits |
| 755,788 |
| 809,362 |
| ||
|
|
|
|
|
| ||
Minority Interest |
| 38,741 |
| 41,871 |
| ||
|
|
|
|
|
| ||
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 |
| 1,289,802 |
| 1,286,964 |
| ||
Treasury Shares |
| (40,594 | ) | (47,088 | ) | ||
Accumulated other comprehensive income |
| 51,571 |
| 44,122 |
| ||
Retained earnings |
| 1,494,373 |
| 1,368,988 |
| ||
|
| 2,883,204 |
| 2,741,038 |
| ||
|
|
|
|
|
| ||
Total Liabilities and Shareholders’ Equity |
| $ | 5,573,507 |
| $ | 5,416,233 |
|
7