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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from______________________to_________________________
Commission File Number 1-9712
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UNITED STATES CELLULAR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 62-1147325
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8410 West Bryn Mawr, Suite 700, Chicago, Illinois 60631
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (773) 399-8900
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1997
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Common Shares, $1 par value 53,227,678 Shares
Series A Common Shares, $1 par value 33,005,877 Shares
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UNITED STATES CELLULAR CORPORATION
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3RD QUARTER REPORT ON FORM 10-Q
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INDEX
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Page(s)
No. ------
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Part I. Financial Information
Management's Discussion and Analysis of
Results of Operations and Financial Condition 3-13
Consolidated Statements of Operations -
Three Months and Nine Months Ended
September 30, 1997 and 1996 14
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 15
Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 16-17
Notes to Consolidated Financial Statements 18-21
Part II. Other Information 22
Signatures 23
2
PART I. FINANCIAL INFORMATION
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UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
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AND FINANCIAL CONDITION
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RESULTS OF OPERATIONS
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Nine Months Ended 9/30/97 Compared to Nine Months Ended 9/30/96
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United States Cellular Corporation (the "Company" - AMEX symbol: USM) owns,
operates and invests in cellular markets throughout the United States. USM owned
either majority or minority cellular interests in 202 markets at September 30,
1997, representing 25,083,000 population equivalents ("pops"). USM included the
operations of 132 majority-owned and managed cellular markets, representing 20.5
million pops, in consolidated operations ("consolidated markets") as of
September 30, 1997. Noncontrolling interests in 60 markets, representing 4.6
million pops, were accounted for using the equity method and were included in
investment income at that date. All other interests, representing less than
100,000 pops in the aggregate, were accounted for using the cost method.
Following is a table of summarized operating data for USM's consolidated
operations.
Nine Months Ended
or at September 30,
------------------------
1997 1996
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Total market population (in thousands) (1) 21,844 21,483
Customers 1,357,000 940,000
Market penetration 6.21% 4.38%
Markets in operation 132 130
Cell sites in service 1,556 1,270
Average monthly revenue per customer $ 56.58 $ 64.96(2)
Churn rate per month 1.9% 1.9%
Marketing cost per net customer addition $ 561 $ 531(2)
(1) Calculated using the respective Donnelley Marketing Service estimates for
each year.
(2) Recomputed to show the effect of change in current year presentation of
certain revenues and expenses.
The Company's operating income for the first nine months of 1997, which includes
100% of the revenues and expenses of its consolidated markets plus its corporate
office operations, primarily reflects improvement in the Company's overall
operations compared to the first nine months of 1996. This improvement resulted
from growth in its customer base and revenues coupled with increasing economies
of scale. Operating revenues, driven by increases in customers served, rose
$140.8 million, or 29%. Operating expenses rose $105.2 million, or 25%.
Operating cash flow (operating income before minority share plus depreciation
and amortization expense) increased $51.0 million, or 33%.
Beginning on January 1, 1997, the Company changed its income statement
presentation of certain credits given to customers on their monthly bills.
Customer incentive programs which result in either new or current customers
receiving free or reduced-price airtime or access are now reported as a
reduction of local retail revenue. Prior to January 1, 1997, the Company
reported the foregone revenues resulting from these incentive programs as
marketing and selling expense (for new customers) and general and administrative
expense (for current customers). Amounts in the currently
3
affected revenue and expense categories have been reclassified for previous
years, including the 1996 information provided throughout this Form 10-Q.
Operating income and net income are not affected by this change.
Investment and other income decreased $102.4 million, or 59%, to $72.6 million,
due primarily to the decrease of $119.3 million in gains on the sales of
cellular interests. Interest expense increased $2.8 million, or 16%, in 1997.
Income tax expense decreased $39.0 million to $66.1 million, as improved
operating results were more than offset by decreased gains on the sales of
cellular interests.
Net income totaled $86.4 million in 1997, a decrease of $32.2 million, or 27%,
from 1996. In both years, net income included gains on sales of cellular
interests. A summary of the after-tax effects of these gains on net income and
earnings per share is shown below.
Nine Months Ended
September 30,
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1997 1996
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(Dollars in thousands,
except per share amounts)
Net income before after-tax effects of gains $ 79,263 $ 52,140
Add: After-tax effects of gains 7,119 66,442
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Net income as reported $ 86,382 $118,582
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Earnings per share before after-tax effects of gains $ .92 $ .61
Add: After-tax effects of gains .08 .77
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Earnings per share as reported $ 1.00 $ 1.38
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Operating Revenues
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Operating revenues totaled $634.1 million in 1997, up $140.8 million, or 29%,
over 1996. As explained previously, operating revenues for 1996 have been
reclassified to conform to current period presentation of customer incentive
program credits.
Service revenues primarily consist of: (i) charges for access, airtime and
value-added services provided to the Company's local retail customers who use
the local systems operated by the Company ("local retail"); (ii) charges to
customers of other systems who use the Company's cellular systems when roaming
("inbound roaming"); and (iii) charges for long-distance calls made on the
Company's systems. Service revenues totaled $618.2 million in 1997, up $137.7
million, or 29%, over 1996. The increase was primarily due to the growing number
of local retail customers and the growth in inbound roaming revenue. The
reclassification of customer credits reduced service revenues by $38.2
million, or 6%, in 1997 and $16.9 million, or 3%, in 1996.
Average monthly service revenue per customer declined 13% to $56.58 in 1997 from
$64.96 in 1996. The 13% decrease in average monthly service revenue per customer
resulted from a decrease in average revenue per minute of use from both local
retail customers and inbound roamers. Also contributing was slower growth in
inbound roaming minutes of use than in the Company's customer base. The
reclassification of customer credits reduced average monthly service
revenue per customer by $3.50, or 6%, in 1997 and $2.29, or 3%, in 1996.
Although average monthly local minutes of use per retail customer decreased less
than 1% to 105 in 1997 from 106 in 1996, the Company's increasing use of
incentive programs that encourage weekend
4
and off-peak usage, in order to stimulate overall usage, resulted in a larger
decrease in average local retail revenue per minute of use during the year. Also
contributing to the decline in average local retail revenue per minute of use
are increased amounts of credits given to new and current customers as
incentives to become or remain the Company's customers.
The Company believes that its customer base is growing faster than that of the
industry as a whole, which has a dilutive effect on inbound roaming revenue per
customer. Inbound roaming minutes of use have been growing at a slower rate than
the Company's customer base (28% compared to 44%). Also, the Company's average
inbound roaming revenue per minute of use decreased during 1997, in line with
the ongoing trend toward reduced per minute prices for roaming negotiated
between the Company and other cellular operators.
Local retail revenue increased $107.6 million, or 36%, in 1997. Growth in the
Company's customer base was the primary reason for the increase in local
revenue. The number of customers increased 44% to 1,357,000 at September 30,
1997 from 940,000 at September 30, 1996. The Company added 284,000
net new customers in the first nine months of 1997 compared to
232,000 in 1996. While the percentage increase in customer additions
is expected to be lower in the future, management anticipates that
the Company will continue to increase its customer base over the
next few years. The reclassification of customer credits reduced local
retail revenue by $38.2 million, or 9%, in 1997 and $16.9 million, or 5%, in
1996.
Average monthly local retail revenue per customer declined to $37.30 in 1997
from $40.54 in 1996. Monthly local retail minutes of use per customer decreased
less than 1% to 105 in 1997. While average minutes of use per customer remained
relatively the same, average revenue per minute of use decreased as a result of
the incentive programs stated previously. Average local retail revenue per
minute totaled $.36 in 1997 compared to $.38 in 1996. The decrease in average
monthly local retail revenue per customer is part of an
industry-wide trend. It reflects the Company's and the industry's continued
penetration of the consumer market, which tends to include fewer peak
business hour-usage customers and the effects of increasing competition in the
industry. The reclassification of customer credits reduced average
monthly local retail revenue per customer by $3.50, or 9%, in 1997 and $2.29,
or 5%, in 1996.
Inbound roaming revenue increased $23.9 million, or 17%, in 1997. This increase
was attributable to the 28% increase in the number of minutes used by customers
from other wireless systems when roaming in the Company's service areas. Also
contributing were the increased number of cell sites within the Company's
service areas. These effects were offset somewhat by the decrease in average
revenue per minute due to the downward trend in negotiated rates. Average
inbound roaming revenue per minute totaled $.86 in 1997 and $.93 in 1996.
Monthly inbound roaming revenue per Company customer averaged $14.97 in 1997 and
$18.88 in 1996. This decrease is related to both the decrease in roaming revenue
per minute and the faster increase in the Company's customer base as compared to
the growth in inbound roaming minutes of use.
Long-distance revenue increased $6.5 million, or 17%, in 1997 as the volume of
long-distance calls billed by the Company increased. Monthly long-distance
revenue per customer averaged $4.19 in 1997 and $5.31 in 1996. The decrease in
monthly long-distance revenue per customer is primarily due to the dilution of
the portion of long-distance revenue that comes from inbound roaming customers.
In a manner similar to inbound roaming revenue, this revenue is not growing as
fast as the Company's customer base.
Equipment sales revenues increased $3.1 million, or 24%, in 1997. Equipment
sales reflect the sale of 393,000 and 288,000 cellular telephone units in 1997
and 1996, respectively, plus installation and
5
accessories revenue. The average revenue per unit was $40 in 1997 compared to
$44 in 1996. The average revenue per unit decline partially reflects the
Company's decision to reduce sales prices on cellular telephones to stimulate
growth in the number of customers, to maintain its market position and to meet
competitive prices as well as to pass through reduced manufacturers' prices to
customers. Also, the Company uses promotions which are based on increased
equipment discounting. The success of these promotions has led to both an
increase in units sold and a decrease in average equipment sales revenue per
unit.
Operating Expenses
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Operating expenses totaled $523.6 million in 1997, up $105.2 million, or 25%,
over 1996. As explained previously, operating expenses for 1996 have been
reclassified to conform to current period presentation of customer incentive
program credits. The reclassification of customer credits reduced operating
expenses by $38.2 million, or 7%, in 1997 and $16.9 million, or 4%, in 1996.
System operations expenses increased $29.8 million, or 37%, in 1997 as a result
of increases in customer usage expenses and costs associated with serving the
Company's increased number of customers, which include the costs of roaming
fraud, and the growing number of cell sites within the Company's systems. In
total, system operations costs are expected to continue to increase as the
number of customers using and the number of cell sites within the Company's
systems grows.
Customer usage expenses represent charges from other telecommunications service
providers for the Company's customers' use of their facilities as well as for
the Company's inbound roaming traffic on these facilities. Also included are
costs related to local interconnection to the landline network, toll charges and
expenses incurred by the Company when its customers use systems other than their
local systems ("outbound roaming"). These expenses are offset somewhat by
amounts the Company bills to its customers for outbound roaming. Customer usage
expenses increased $22.1 million, or 46%, in 1997. The increase in 1997 is
primarily due to the increase in net outbound roaming expense, which has
resulted from the Company offering its customers increasingly larger service
footprints in which their calls are billed at local rates. In certain cases
these service areas include other operators' service areas. The Company pays
roaming rates to the other carriers for calls its customers make in these areas,
while charging those customers a local rate which is usually lower than the
roaming rate. Also contributing to the increase in 1997 were costs related to
the increase in minutes used on the Company's systems, partially offset by the
reduction in costs related to fraudulent use of the Company's customers'
cellular telephone numbers. The Company continues to implement procedures in
its markets to combat this fraud, which is primarily related to roaming usage.
Customer usage expenses represented 11% of service revenues in 1997 and 10% in
1996. The percentage increase in 1997 is primarily due to the increase in net
outbound roaming expense.
Maintenance, utility and cell site expenses increased $7.7 million, or 24%, in
1997, primarily reflecting a 23% increase in the number of cell sites in the
Company's systems to 1,556 in 1997 from 1,270 in 1996.
Marketing and selling expenses increased $33.3 million, or 38%, in 1997.
Marketing and selling expenses primarily consist of salaries, commissions and
expenses of field sales and retail personnel and offices; agent expenses; local
advertising and public relations expenses. The increase was primarily due to a
32% rise in the number of gross customer activations (excluding acquisitions and
divestitures), to 494,000 in 1997 from 373,000 in 1996. Cost per gross customer
activation, including losses on equipment sales, decreased to $322 in 1997 from
$331 in 1996. The reclassification of customer credits reduced cost per
gross addition by $62, or 16%, in 1997 and $37, or 10%, in 1996; in total, the
reclassification reduced marketing and selling expenses by $30.3 million, or
20%, in 1997 and $13.9 million, or 14%, in 1996.
6
Cost of equipment sold increased $5.8 million, or 12%, in 1997. The increase
reflects the growth in unit sales related to the rise in gross customer
activations made through the Company's direct and retail distribution channels,
offset somewhat by falling manufacturer prices per unit. The average cost to the
Company of a telephone unit sold, including accessories and installation, was
$141 in 1997 compared to $172 in 1996.
General and administrative expenses increased $20.9 million, or 17%, in 1997.
These expenses include the costs of operating the Company's local business
offices and its corporate expenses. The increase includes the effects of
increases in expenses required to serve the growing customer base in existing
markets and an expansion of both local administrative office and corporate
staff, necessitated by growth in the Company's business. The Company is using an
ongoing clustering strategy to combine local operations wherever feasible in
order to gain operational efficiencies and reduce its administrative expenses.
The reclassification of customer credits reduced general and administrative
expenses by $7.9 million, or 5%, in 1997 and $3.1 million, or 2%, in 1996.
Operating cash flow increased $51.0 million, or 33%, to $205.2 million in 1997.
The improvement was primarily due to substantial growth in customers and service
revenues and the effects of improved operational efficiencies on cash operating
expenses. Operating cash flow margins were 33.2% in 1997 and 32.1% in 1996.
Depreciation expense increased $15.0 million, or 28%, in 1997. The increase
reflects rising average fixed asset balances, which increased 29% in 1997.
Increased fixed asset balances primarily result from the increase in cell sites
built to improve coverage and capacity in the Company's markets.
Operating Income before Minority Share
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Operating income before minority share totaled $110.5 million in 1997, an
increase of $35.6 million, or 47%, over 1996. The operating income margin (as a
percent of service revenues) was 17.9% in 1997 and 15.6% in 1996. The
improvement in operating income and operating income margin reflects increased
revenues resulting from growth in the number of customers served by the
Company's systems and the effect of improved operational efficiencies on total
operating expenses.
The Company expects service revenues to continue to grow during the remainder of
1997 and in 1998; however, management anticipates that average monthly revenue
per customer will continue to decrease as local retail and inbound roaming
revenue per minute of use decline. Additionally, the Company expects expenses to
increase during the remainder of 1997 and in 1998 as it incurs costs associated
with both customer growth and cell sites added.
Management believes there exists a seasonality in both service revenues, which
tend to increase more slowly in the first and fourth quarters, and operating
expenses, which tend to be higher in the fourth quarter due to increased
marketing activities and customer growth, which may cause operating income to
vary from quarter to quarter. Additionally, competitors licensed to provide
personal communications services ("PCS") have initiated service in certain of
the Company's markets over the past fifteen months. The Company expects PCS
operators to complete initial deployment of PCS across all of the Company's
markets by the end of 1998. The Company's management is monitoring these and
other wireless communications providers' strategies to determine what effect
this additional competition will have on the Company's future strategies and
results. While the effects of additional wireless competition have slowed
customer growth in certain of the Company's markets, the overall effect on the
Company's operations to date has not been material.
7
Investment and Other Income
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Investment and other income totaled $72.6 million in 1997, a decrease of $102.4
million, or 59%, from 1996. Gain on sale of cellular interests totaled $13.4
million in 1997, reflecting gains recorded on the sales of the Company's
majority interest in one market partition and minority interests in two other
markets. Gain on sale of cellular interests totaled $132.8 million in 1996,
reflecting gains recorded on the sales of the Company's majority interests in
eight markets and minority interests in two other markets, on cash received in
an exchange of markets with another cellular operator and on cash received from
the settlement of two separate legal matters.
Investment income was $60.5 million in 1997 compared to $36.4 million in 1996, a
66% increase. Investment income primarily represents the Company's share of net
income from the markets managed by others that are accounted for by the equity
method. Although investment income increased significantly in the nine months of
1997, future investment income may be negatively impacted by the completion of
the exchange transaction with BellSouth Corporation ("BellSouth").
See "Financial Resources and Liquidity - Acquisitions and Divestitures"
for further discussion of this transaction.
Interest and Income Taxes
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Total interest expense increased $2.8 million, or 16%, in 1997. Interest expense
in 1997 is primarily related to Liquid Yield Option Notes ("LYONs") ($11.4
million); borrowings under vendor financing agreements ($4.5 million);
borrowings under the Revolving Credit Agreement with Telephone and Data Systems,
Inc. ("TDS"), the Company's parent organization ($1.9 million); and the
Company's 7.25% notes (the "Notes") issued during the third quarter of 1997
($1.8 million). Interest expense in 1996 is primarily related to LYONs
($10.7 million) and borrowings under vendor financing agreements ($6.1 million).
In August 1997, the Company sold $250 million principal amount of 7.25% Notes
under a shelf registration statement, priced to yield 7.33% to maturity. The
Notes are unsecured and become due on August 15, 2007. Interest on the Notes is
payable semi-annually on February 15 and August 15 of each year, commencing
February 15, 1998. The Notes will be redeemable, in whole or in part, at the
option of the Company at any time on or after August 15, 2004.
The LYONs are zero coupon convertible debentures which accrete interest at 6%
annually, but do not require current cash payments of interest. All accreted
interest is added to the outstanding principal balance on June 15 and December
15 of each year. All borrowings under the vendor financing agreements were
repaid in August 1997 with a portion of the proceeds from the Notes offering.
Borrowings under the Revolving Credit Agreement with TDS were outstanding from
April 1997 through August 1997, at which time all outstanding amounts were
repaid with a portion of the proceeds from the Notes offering.
Income tax expense was $66.1 million in 1997 and $105.2 million in 1996. In
1997, $6.3 million of income tax expense related to the gains on sales of
cellular interests compared to $66.4 million in 1996. The effective tax rates
were 43% in 1997 and 47% in 1996. The decrease in 1997's effective tax rate is
primarily due to the decrease in gains on sales of cellular interests from 1996;
taxes on these gains are generally higher than taxes on income from operations.
In both 1997 and 1996, state income taxes and gains on sales of cellular
interests increased the effective rate above the statutory federal income tax
rate.
8
The Company is included in a consolidated federal income tax return with other
members of the TDS consolidated group. For financial reporting purposes, the
Company computes federal income taxes as if it were filing a separate return as
its own affiliated group and was not included in the TDS group. TDS and the
Company are parties to a Tax Allocation Agreement under which the Company is
able to carry forward any losses and credits and use them to offset any current
or future income tax liabilities to TDS.
Net Income
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Net income totaled $86.4 million in 1997 compared to $118.6 million in 1996.
Earnings per share was $1.00 in 1997 and $1.38 in 1996. Net income and earnings
per share in both years included gains on the sales of cellular interests. See
Page 4 for a summary of the after-tax effects of gains on net income and
earnings per share.
Three Months Ended 9/30/97 Compared to Three Months Ended 9/30/96
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Operating revenues totaled $232.0 million in the third quarter of 1997, up $51.7
million, or 29%, over 1996. Average monthly service revenue per customer
decreased 12% to $57.56 in the third quarter of 1997 compared to $65.15 in the
same period of 1996 for reasons generally the same as the first nine months of
1997. The reclassification of customer credits reduced service revenues by
$13.7 million, or 6%, in 1997 and $7.4 million, or 4%, in 1996.
Revenues from local customers' usage of the Company's systems increased $39.0
million, or 36%, in 1997 primarily due to the increased number of customers
served. Average monthly local retail minutes of use per customer totaled 105 in
the third quarter of 1997 compared to 112 in 1996. Also, as the number of
customers and amount of revenue earned continued to grow, average revenue per
minute of use continued to decline. As a result, average monthly local retail
revenue per customer declined 7% to $37.48 in the third quarter of 1997 compared
to $40.11 in 1996.
Inbound roaming revenue increased $8.7 million, or 17%, in 1997 due to the
increased number of other wireless operators' customers using the Company's
systems and the growth in the number of cell sites within those systems. Monthly
inbound roaming revenue per customer averaged $15.52 in 1997 compared to $19.35
in 1996.
Long-distance revenue increased $2.8 million, or 19%, in 1997 as the volume of
long-distance calls billed by the Company increased. Monthly long-distance
revenue per customer averaged $4.47 in 1997 and $5.45 in 1996.
Equipment sales revenue reflects sales of 142,000 cellular telephones in 1997
compared to 111,000 in 1996. The average revenue per unit sold was $40 in 1997
and $39 in 1996.
Operating expenses totaled $187.0 million in the third quarter of 1997, up $39.9
million, or 27%, over 1996. The reclassification of customer credits
reduced operating expenses by $13.7 million, or 7%, in 1997 and $7.4 million, or
5%, in 1996.
System operations expenses increased $12.9 million, or 47%, in 1997 as a result
of increased customer usage expenses and costs associated with maintaining 23%
more cell sites than in 1996. Customer usage expenses were $26.6 million in 1997
compared to $16.4 million in 1996. Maintenance, utility and cell site expenses
were $13.7 million in 1997 compared to $10.9 million in 1996.
9
Marketing and selling expenses increased $11.3 million, or 36%, in 1997. The
increase was primarily due to a 30% increase in the number of gross customer
activations (excluding acquisitions and divestitures) to 173,000 in 1997 from
133,000 in 1996. Cost per gross customer activation was $328 in 1997 and $341 in
1996. The reclassification of customer credits reduced marketing and
selling expenses by $10.9 million, or 20%, in 1997 and $6.1 million, or 16%, in
1996.
Cost of equipment sold increased $1.5 million, or 8%, in 1997. The increase
reflects a rise in the number of cellular telephones sold in 1997, partially
offset by a decrease in average cost per telephone sold.
General and administrative expenses increased $8.6 million, or 20%, in 1997,
primarily related to the increase in customers served. The reclassification of
customer credits reduced general and administrative expenses by $2.8
million, or 5%, in 1997 and $1.3 million, or 3%, in 1996.
Operating cash flow increased $17.4 million, or 29%, to $78.0 million in 1997,
and operating cash flow margins totaled 34.5% in 1997 and 34.4% in 1996.
Depreciation expense increased $5.9 million, or 32%, in 1997, reflecting a 31%
increase in average fixed asset balances.
Operating income before minority share totaled $44.9 million in 1997 compared to
$33.1 million in 1996, a 36% increase. The operating income margin improved to
19.9% in 1997 from 18.8% in 1996. The improvement in operating income and
operating income margin was primarily the result of increased revenues and
improved operational efficiencies.
Investment income increased $10.0 million, or 71%, in 1997 due to improved
results in markets managed by others accounted for by the equity method. Gain on
sale of cellular and other investments totaled $5.2 million in 1997 and $7.8
million in 1996. Total interest expense increased $2.4 million, or 41%, in 1997.
Interest expense in 1997 is primarily related to LYONs ($3.9 million),
borrowings under vendor financing agreements ($1.0 million), borrowings under
the Revolving Credit Agreement with TDS ($935,000) and the Notes ($1.8 million).
Interest expense in 1996 is primarily related to LYONs ($3.6 million) and
borrowings under vendor financing agreements ($2.0 million). Income tax expense
totaled $26.7 million in 1997 and $23.2 million in 1996. In 1997, $1.0 million
of income tax expense related to gains on sales of cellular interests compared
to $5.6 million in 1996.
Net income totaled $36.2 million in 1997 compared to $26.1 million in 1996. Both
net income and earnings per share in 1997 reflect improved operating results and
investment income, partially offset by increased interest expense and a
reduction in gains on the sales of cellular interests. A summary of the
after-tax effect of these gains on net income and earnings per share is shown
below.
Three Months Ended
September 30,
-------------------------
1997 1996
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(Dollars in thousands,
except per share amounts)
Net income before after-tax effects of gains $ 32,014 $ 23,899
Add: After-tax effects of gains 4,208 2,241
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Net income as reported $ 36,222 $ 26,140
========== =========
Earnings per share before after-tax
effects of gains $ .37 $ .28
Add: After-tax effects of gains .05 .02
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Earnings per share as reported $ .42 $ .30
========== =========
10
FINANCIAL RESOURCES AND LIQUIDITY
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The Company operates a capital and marketing-intensive business. In recent
years, the Company has generated operating cash flow and received cash proceeds
from divestitures to fund most of its construction costs and substantially all
of its operating expenses. The Company anticipates further substantial increases
in cellular units in service, revenues and cell sites as it continues its growth
strategy. Operating cash flow may fluctuate from quarter to quarter depending on
the seasonality of each of these growth factors.
Cash flows from operating activities provided $183.6 million in 1997 and $126.3
million in 1996. Operating cash flow provided $205.2 million in 1997 and $154.2
million in 1996. Cash flows from other operating activities (investment and
other income, interest expense, changes in working capital and changes in other
assets and liabilities) required cash investments totaling $21.6 million in 1997
and $27.9 million in 1996.
Cash flows from financing activities provided $140.8 million in 1997 and
required $6.3 million in 1996. In August 1997, the Notes offering provided
$247.0 million of cash. A portion of the proceeds from the Notes offering was
used to repay all outstanding borrowings under the Revolving Credit Agreement
with TDS and under vendor financing agreements, aggregating $160.5 million.
Repayments of borrowings under the vendor financing agreements earlier in 1997
totaled $13.7 million. In 1996, issuances of USM Common Shares, primarily to
TDS, provided $9.8 million while repayments of debt under the vendor financing
agreements required $15.8 million.
Cash flows from investing activities required $218.3 million in 1997 and $93.1
million in 1996. The Company received net cash proceeds totaling $32.9 million
in 1997 and $193.6 million in 1996 related to the sales and exchanges of
cellular interests. Cash distributions from cellular entities in which the
Company has an interest provided $40.0 million in 1997 and $14.9 million in
1996. Cash required for property, plant and equipment and system development
expenditures totaled $248.0 million in 1997, financed primarily with internally
generated cash and the proceeds of the Notes offering, and $172.9 million in
1996, financed primarily with internally generated funds and proceeds from the
sales of cellular interests. These expenditures primarily represent the
construction of 234 and 184 cell sites, respectively, plus other plant additions
and costs related to the development of the Company's office systems.
Acquisitions required $39.2 million in 1997 and $112.1 million in 1996.
Anticipated capital requirements for 1997 primarily reflect the Company's
construction and system expansion program. The Company's construction and system
expansion budget for 1997 is approximately $300 million, primarily for new cell
sites to expand and enhance the Company's coverage in its service areas and for
the enhancement of the Company's office systems.
Acquisitions and Divestitures
- -----------------------------
The Company assesses its cellular holdings on an ongoing basis in order to
maximize the benefits derived from clustering its markets. As the Company's
clusters have grown, the Company's focus has shifted toward exchanges and
divestitures of managed and investment interests. Over the past few years, the
Company has completed exchanges of controlling interests in its less strategic
markets for controlling interests in markets which better complement its
clusters. The Company has also completed outright sales of other less strategic
markets. The proceeds from these sales have been used to further the Company's
growth.
In the first nine months of 1997, the Company purchased a majority interest in
one market and several minority interests, representing 327,000 pops. The total
consideration paid in these transactions was $48.7 million in cash.
11
In the first nine months of 1996, the Company purchased a majority interest in
one market and several minority interests, representing 971,000 pops, and
received a majority interest in another market through an exchange with another
cellular operator. The total consideration paid for these purchases, primarily
in the form of USM Common Shares issued to TDS to reimburse TDS for the value of
TDS Common Shares issued to third parties, was $153.9 million.
In the first nine months of 1997, the Company sold a majority interest in one
market partition and minority interests in two other markets, representing
183,000 pops. The Company received consideration consisting of cash and
receivables totaling $34.5 million from these sales. The two minority interests
involved interests the Company had previously acquired from TDS pursuant to an
agreement between the two companies signed in June 1996. In the aggregate, the
Company recorded a substantial book gain on the divestitures of the interests
acquired from TDS.
In the first nine months of 1996, the Company sold majority interests in eight
markets and one market partition, plus minority interests in two other markets,
representing 1.1 million pops, and divested a controlling interest in another
market through an exchange with another cellular operator. The Company received
consideration, consisting of cash and receivables, totaling $187.8 million both
from these sales and from the exchange. The Company also settled two separate
legal matters during the first nine months of 1996, receiving $30.3 million from
those transactions. In total, sales, exchanges and litigation settlements
provided the Company with cash and receivables totaling $218.1 million in the
first nine months of 1996.
At September 30, 1997, the Company had entered into an agreement to acquire a
majority interest in one market, representing 202,000 pops, for consideration
totaling $32.5 million. The consideration paid to the sellers will be
approximately 759,000 TDS Common Shares; USM will reimburse TDS for the value of
these shares by issuing approximately 996,000 shares to TDS when the transaction
is completed. The Company also has an agreement pending to divest a majority
interest in the wireline licensee in one market, representing 174,000 pops, for
$20.0 million in cash. Pursuant to a waiver received from the Federal
Communications Commission, the Company owned both wireline and nonwireline
licensees in this market as of the completion of the transaction with BellSouth,
described below, and will continue to do so until the divestiture of the
wireline license is completed. These acquisition and divestiture transactions
are both expected to be completed by year-end.
In October 1997, the Company completed the exchange with BellSouth it had
announced earlier in 1997. Pursuant to the exchange, the Company received
majority interests in 12 markets adjacent to its Iowa and Wisconsin/Illinois
clusters. In exchange, the Company divested its majority interests in 10 markets
and minority interests in nine markets and paid a net amount of $87 million in
cash ($103 million paid in October less $16 million received in September).
Certain aspects of this transaction are taxable; the amount of these taxes will
be determined by year-end and will be paid in the first quarter of 1998. No book
gain or loss will be recorded on the transaction which is being treated
as a like-kind exchange. The Company received majority interests
representing approximately 4.0 million pops in the transaction, and
divested majority interests representing 2.0 million pops and minority interests
representing approximately 1.1 million pops.
The Company expects that this transaction will have a net positive effect on its
operating cash flow after the transition of operators is complete, which is
expected to occur in the next 12 to 18 months. As it includes the divestiture of
significant investment interests in exchange for majority interests, the
transaction may also significantly reduce investment income in the future.
12
Liquidity
- ---------
The Company anticipates that the aggregate resources required for the remainder
of 1997 will include approximately $52 million for capital spending and
approximately $103 million to complete the transaction with BellSouth. The
Company is generating substantial cash from its operations and anticipates
financing its capital spending for the remainder of 1997 primarily with
internally generated cash and its financing facilities. The Company had $121
million of cash and cash equivalents at September 30, 1997 and expects to
receive approximately $20 million from pending divestitures during the remainder
of 1997.
Additionally, in August 1997 the Company established a $500 million revolving
credit facility with a group of banks. This seven-year facility replaces the
Company's Revolving Credit Agreement with TDS. No borrowings have been made
under the new credit facility to date.
The Company filed a shelf registration statement in July 1997 covering $400
million of debt securities, and in August 1997 sold $250 million of Notes under
such shelf registration statement. The remaining $150 million is available for
future borrowings.
Management believes that the Company's operating cash flows and sources of
external financing, including the revolving credit facility and shelf
registration mentioned previously, provide substantial financial flexibility for
the Company to meet both its short and long-term needs. The Company also
currently has access to public and private capital markets to help meet its
long-term financing needs. The Company anticipates issuing debt and equity
securities only when capital requirements (including acquisitions), financial
market conditions and other factors warrant.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT
This Management's Discussion and Analysis of Results of Operations and Financial
Condition and other sections of this Quarterly Report on Form 10-Q contain
"forward-looking" statements as defined in the Private Securities Litigation
Reform Act of 1995, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking statements.
These statements contain potential risks and uncertainties; therefore, actual
results may differ materially. The Company undertakes no obligation to update
publicly any forward-looking statements whether as a result of new information,
future events or otherwise.
Important factors that may affect these projections or expectations include, but
are not limited to: changes in the overall economy; changes in competition in
markets in which the Company operates; advances in telecommunications
technology; changes in the telecommunications regulatory environment;
pending and future litigation; availability of future financing;
start-up of PCS operations; and unanticipated changes in growth in
cellular customers, penetration rates, churn rates and the mix of products and
services offered in the Company's markets. Readers should evaluate any
statements in light of these important factors.
13
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Unaudited
---------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(Dollars in thousands,
except per share amounts)
OPERATING REVENUES
Service $ 226,230 $ 175,894 $ 618,209 $ 480,541
Equipment sales 5,729 4,325 15,913 12,790
--------- --------- --------- ---------
Total Operating Revenues 231,959 180,219 634,122 493,331
--------- --------- --------- ---------
OPERATING EXPENSES
System operations 40,268 27,339 109,545 79,728
Marketing and selling 42,729 31,384 119,728 86,455
Cost of equipment sold 19,716 18,241 55,473 49,631
General and administrative 51,285 42,696 144,224 123,364
Depreciation 24,504 18,631 68,735 53,691
Amortization of intangibles 8,545 8,834 25,906 25,525
--------- --------- --------- ---------
Total Operating Expenses 187,047 147,125 523,611 418,394
--------- --------- --------- ---------
OPERATING INCOME BEFORE
MINORITY SHARE 44,912 33,094 110,511 74,937
Minority share of operating income (3,023) (3,195) (10,271) (8,616)
--------- --------- --------- ---------
OPERATING INCOME 41,889 29,899 100,240 66,321
--------- --------- --------- ---------
INVESTMENT AND OTHER INCOME
Investment income 24,114 14,073 60,537 36,401
Amortization of licenses
related to investments (535) (280) (1,603) (854)
Interest income 1,629 3,374 3,212 7,644
Other income (expense), net (1,250) 198 (3,032) (1,069)
Gain on sale of cellular and
other investments 5,208 7,797 13,445 132,793
--------- --------- --------- ---------
Total Investment and Other Income 29,166 25,162 72,559 174,915
--------- --------- --------- ---------
INCOME BEFORE INTEREST
AND INCOME TAXES 71,055 55,061 172,799 241,236
Interest expense - affiliate 934 -- 1,948 --
Interest expense - other 7,180 5,741 18,347 17,496
--------- --------- --------- ---------
Total Interest Expense 8,114 5,741 20,295 17,496
========= ========= ========= =========
INCOME BEFORE INCOME TAXES 62,941 49,320 152,504 223,740
Income tax expense 26,719 23,180 66,122 105,158
--------- --------- --------- ---------
NET INCOME $ 36,222 $ 26,140 $ 86,382 $ 118,582
========= ========= ========= =========
WEIGHTED AVERAGE COMMON
AND SERIES A COMMON
SHARES (000s) 86,260 86,158 86,228 86,002
PRIMARY EARNINGS PER COMMON
AND SERIES A COMMON SHARE $ .42 $ .30 $ 1.00 $ 1.38
========= ========= ========= =========
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
14
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Unaudited
---------
Nine Months Ended
September 30,
----------------------
1997 1996
---------- ----------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 86,382 $ 118,582
Add (Deduct) adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 94,641 79,216
Investment income (60,537) (36,401)
Gain on sale of cellular and other investments (13,445) (132,793)
Minority share of operating income 10,271 8,616
Other noncash expense 18,123 15,371
Change in accounts receivable (21,510) (17,080)
Change in accounts payable 16,008 (9,365)
Change in accrued interest 1,971 113
Change in accrued taxes 25,384 47,206
Change in deferred taxes 21,053 42,604
Change in unearned revenue 3,646 3,577
Change in other assets and liabilities 1,649 6,668
---------- ---------
183,636 126,314
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in 7.25% notes 246,985 --
Vendor financing borrowings -- 3,922
Repayment of vendor financing (103,802) (15,752)
Borrowings from Revolving Credit Agreement - TDS 70,444 --
Repayment of Revolving Credit Agreement - TDS (70,444) --
Common Shares issued 1,971 9,784
Capital (distributions) to minority partners (4,310) (4,302)
---------- ---------
140,844 (6,348)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (219,311) (156,387)
System development costs (28,646) (16,528)
Investments in and advances to investment entities (497) (16,709)
Distributions from investment entities 40,029 14,922
Proceeds from sale of cellular and other investments 32,866 193,625
Acquisitions, excluding cash acquired (39,169) (112,071)
Other investments (1,896) --
Change in temporary cash and marketable
non-equity securities (1,675) --
---------- ---------
(218,299) (93,148)
---------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 106,181 26,818
CASH AND CASH EQUIVALENTS-
Beginning of period 14,377 38,404
---------- ---------
End of period $ 120,558 $ 65,222
========== =========
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
15
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
(Unaudited)
September 30, December 31,
1997 1996
--------------- ------------
(Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents
General funds $ 15,464 $ 802
Affiliated cash equivalents 105,094 13,575
------------- ------------
120,558 14,377
Temporary cash investments 336 --
Accounts receivable
Customers, net of allowance 71,305 58,034
Roaming 37,469 29,742
Affiliates 126 607
Other 8,624 7,568
Inventory 8,648 11,893
Prepaid and other current assets 9,587 6,398
------------- ------------
256,653 128,619
------------- ------------
PROPERTY, PLANT AND EQUIPMENT
In service and under construction 1,044,988 846,005
Less accumulated depreciation 252,709 195,251
------------- ------------
792,279 650,754
------------- ------------
INVESTMENTS
Licenses, net of accumulated amortization 1,052,490 1,044,141
Cellular entities 208,772 186,791
Notes and interest receivable 13,828 14,943
Marketable non-equity securities 1,339 --
------------- ------------
1,276,429 1,245,875
------------- ------------
DEFERRED CHARGES
System development costs,
net of accumulated amortization 67,694 44,319
Other, net of accumulated amortization 19,150 16,332
------------- ------------
86,844 60,651
------------- ------------
Total Assets $ 2,412,205 $ 2,085,899
============= ============
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
16
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
(Unaudited)
September 30, December 31,
1997 1996
------------- -------------
(Dollars in thousands)
CURRENT LIABILITIES
Current portion of long-term debt $ -- $ 23,065
Notes payable 1,375 1,375
Accounts payable
Affiliates 2,466 2,729
Other 83,379 66,638
Accrued taxes 44,384 18,781
Accrued interest 2,175 204
Customer deposits and deferred revenues 20,057 16,410
Other current liabilities 15,282 17,252
------------- -------------
169,118 146,454
------------- -------------
LONG-TERM DEBT
6% zero coupon convertible debentures 261,465 250,107
7.25% notes 250,000 --
Vendor financing, excluding current
portion -- 80,589
------------- -------------
511,465 330,696
------------- -------------
DEFERRED LIABILITIES AND CREDITS
Net deferred income tax liability 99,765 78,833
Other 5,534 2,444
------------- -------------
105,299 81,277
------------- -------------
MINORITY INTEREST 55,177 51,270
------------- -------------
COMMON SHAREHOLDERS' EQUITY
Common Shares, par value $1 per share 53,218 53,117
Series A Common Shares, par value $1
per share 33,006 33,006
Additional paid-in capital 1,253,527 1,245,066
Retained earnings 231,395 145,013
------------- -------------
1,571,146 1,476,202
------------- -------------
Total Liabilities and Shareholders' Equity $ 2,412,205 $ 2,085,899
============= =============
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
17
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K.
The accompanying unaudited consolidated financial statements contain the
following: all adjustments (consisting of only normal recurring items)
necessary to present fairly the financial position as of September 30,
1997 and December 31, 1996; the results of operations for the nine months
and three months ended September 30, 1997 and 1996; and cash flows for the
nine months ended September 30, 1997 and 1996. The results of operations
for the nine months ended September 30, 1997 and 1996, are not necessarily
indicative of the results to be expected for the full year.
2. Certain amounts reported in prior periods have been reclassified to
conform to the current period presentation which nets certain customer
promotional and retention expenses against service revenues.
3. Primary earnings per Common and Series A Common Share for the nine months
ended September 30, 1997 and 1996, was computed by dividing Net Income by
the weighted average number of Common Shares, Series A Common Shares and
dilutive common equivalent shares outstanding during the period. Dilutive
common stock equivalents at September 30, 1997 and 1996, consist primarily
of dilutive Common Shares issuable, Redeemable Preferred Stock and Common
Share options, and stock appreciation rights.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share" in March 1997
which will become effective in December 1997. Earnings per share would not
change significantly if SFAS No. 128 had been in effect as of January 1,
1996.
18
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Assuming that acquisitions accounted for as purchases during the period
January 1, 1996, to September 30, 1997, had taken place on January 1,
1996, pro forma results of operations would have been as follows:
Nine Months Ended
September 30,
-------------------------
1997 1996
----------- -----------
(Dollars in thousands,
except per share amounts)
Service Revenues $ 618,209 $ 481,145
Equipment Sales 15,913 12,797
Interest Expense
(including cost to finance acquisitions) 21,346 20,132
Net Income 85,632 119,741
Earnings per Common and Series A Common Share $ .99 $ 1.39
5. Supplemental Cash Flow Information
The Company acquired certain cellular licenses and interests during the
first nine months of 1997 and 1996. In conjunction with these
acquisitions, the following assets were acquired, liabilities assumed and
Common Shares issued.
Nine Months Ended
September 30,
------------------------
1997 1996
---------- ----------
(Dollars in thousands)
Property, plant and equipment $ -- $ 7,069
Cellular licenses 37,258 88,006
Increase (Decrease) in equity-method
investment in cellular interests -- 13,971
Accounts receivable -- 1,332
Revolving Credit Agreement - TDS -- --
Accounts payable -- (1,106)
Other assets and liabilities,
excluding cash acquired 1,911 (463)
Common Shares issued and issuable -- 3,262
---------- ----------
Decrease in cash due to acquisitions $ 39,169 $ 112,071
========== ==========
19
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following summarizes certain noncash transactions and interest and income
taxes paid.
Nine Months Ended
September 30,
------------------------
1997 1996
---------- ----------
(Dollars in thousands)
Interest paid $ 6,431 $ 5,142
Income taxes paid 24,840 21,409
Non-cash interest expense 11,506 11,952
Common Shares issued by USM for conversion
of USM Preferred Stock and
TDS Preferred Shares $ -- $ 18,450
6. Debt Securities
The Company filed a shelf Registration Statement on Form S-3 in July
1997 for the sale of up to $400 million of unsecured debt. The Company
issued $250 million of 7.25% Notes due August 15, 2007 (the "Notes")
under the shelf registration in August 1997. The Company used a portion
of the net proceeds from the sale of the Notes of approximately $247.0
million to repay $70.4 million of variable-rate borrowings under the
Revolving Credit Agreement with USM's parent organization, Telephone and
Data Systems, Inc. (AMEX: TDS) as well as $90.1 million principal amount
of variable-rate borrowings under a vendor financing agreement. The
remaining net proceeds were used for general corporate purposes.
7. Contingencies
The Company owns a 5.5% interest in the Los Angeles SMSA Limited
Partnership (the "Partnership"). In November 1993, a class action
complaint was filed on behalf of cellular customers in Orange County
Superior Court naming, among others, the Partnership. These complaints
allege certain facts, including a similarity in the pricing structures
of the two defendant cellular carriers, which plaintiffs contend are
circumstantial evidence that the Partnership and Los Angeles Cellular
Telephone Company conspired to fix the prices of retail and wholesale
cellular radio services in the Los Angeles market. The complaint seeks
damages for the class "in a sum in excess of $100 million." The case was
settled in July 1997 before reaching trial. The Partnership agreed to
give subscribers $90 million worth of free service and discounted
merchandise to settle the complaint.
For further discussion of this contingency, see Note 14 of Notes to
Consolidated Financial Statements included in the Company's Report on
Form 10-K for the year ended December 31, 1996.
20
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Subsequent Events
In October 1997, the Company completed the exchange with BellSouth it
had announced earlier in 1997. Pursuant to the exchange, the Company
received majority interests in 12 markets adjacent to its Iowa and
Wisconsin/Illinois clusters. In exchange, the Company divested its
majority interests in 10 markets and minority interests in nine markets
and paid a net amount of $87 million in cash ($103 million paid in
October less $16 million received in September). Certain aspects of this
transaction are taxable; the amount of these taxes will be determined by
year-end and will be paid in the first quarter of 1998. No book gain or
loss will be recorded on the transaction.
21
PART II. OTHER INFORMATION
--------------------------
Item 5. Other Information
- --------------------------
On November 3, 1997, the Company announced the completion of an
exchange transaction with BellSouth Corporation, pursuant to agreements
entered into in February 1997. The new release issued to announce this
is attached as Exhibit 99.1.
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits:
Exhibit 3 - Restated By-laws.
Exhibit 4 - Revolving Credit Agreement, dated August 19, 1997, among
United States Cellular Corporation and BankBoston N.A. and Toronto
Dominion (Texas), Inc., as agents (except for exhibits and schedules
which will be supplied supplementally to the commission upon request).
Exhibit 11 - Computation of earnings per common share.
Exhibit 12 - Statement regarding computation of ratios.
Exhibit 27 - Financial Data Schedule.
Exhibit 99.1 - News release dated November 3, 1997.
(b) Reports on Form 8-K filed during the quarter ended September 30, 1997:
On September 5, 1997, the Company filed a Current Report on Form 8-K
for the purposes of filing certain documents as exhibits relating to
the August 26, 1997 sale of the Company's $250,000,000 principal amount
of 7.25% Notes due August 15, 2007.
No other reports on Form 8-K were filed during the quarter ended
September 30, 1997.
22
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATES CELLULAR CORPORATION
----------------------------------
(Registrant)
Date November 13, 1997 H. DONALD NELSON
----------------------- -----------------------------
H. Donald Nelson
President
(Chief Executive Officer)
Date November 13, 1997 KENNETH R. MEYERS
----------------------- -----------------------------
Kenneth R. Meyers
Senior Vice President-Finance
and Treasurer
(Chief Financial Officer)
Date November 13, 1997 PHILLIP A. LORENZINI
----------------------- ------------------------------
Phillip A. Lorenzini
Controller
(Principal Accounting Officer)
23