CHICAGO, Oct. 20 /PRNewswire-FirstCall/ -- United States Cellular
Corporation (Amex: USM) reported service revenues of $692 million for the
third quarter of 2004, up 10 percent from $628.4 million in the comparable
period a year ago, as restated. The company recorded operating income of $42
million during the quarter compared to $95.6 million in the third quarter of
2003, as restated. Net income and basic earnings per share were $21.3 million
and $0.25, respectively, compared to net income and basic earnings per share
of $51.6 million and $0.60, respectively, in the comparable period one year
ago, as restated.
Operating income declined 56% from the comparable period a year ago, due
principally to costs associated with adding 144,000 new customers, the costs
of launching three new markets, the costs of heavily subsidizing consumer
handsets, and an increase in depreciation expense.
Third quarter 2004 operating results do not include any results from
operations of the Florida, Georgia and south Texas markets that were either
traded or sold to AT&T Wireless. The Florida, Georgia and south Texas markets
contributed $24 million of service revenues in the third quarter of 2003.
Third Quarter Highlights
-- Customers totaled 4,828,000, a 13 percent increase from 4,268,000
customers one year earlier.
-- Net customer activations from distribution channels totaled 144,000
during the quarter, compared to 66,000 activations for the same quarter
of 2003.
-- For the quarter, the company recorded postpay churn of 1.6 percent,
which is favorable to industry averages.
-- Average monthly retail service revenue per customer increased to $41.51
compared to $40.68 in the same period a year ago.
President's Comments
"We're pleased to report another quarter of strong operating results,"
said John E. Rooney, president and chief executive officer. "We added 144,000
customers during the quarter, our third consecutive quarter of strong net add
performance, which brings net customer additions for the first nine months of
the year to 477,000, ahead of our business plan.
"Our company-wide focus on customer satisfaction is the key driver to our
low churn rates and resulting strong net customer additions. Customers can
easily access our products and services through our 2,300 distribution
outlets, making it easier for the customer to do business with us. And we
provide our customers with an exceptional network of more than 4,700 cell
sites, ensuring excellent call quality.
"During the quarter we made further progress on our strategy of
strengthening our competitive footprint and upgrading our network. We
launched service in Oklahoma City, Okla., Lincoln, Neb. and Portland, Maine,
all markets which are contiguous to our existing operations. We completed
deployment of CDMA 1X technology in our Northwest markets, leaving only the
mid-Atlantic markets for conversion. We are well on track to complete the
mid-Atlantic conversion before year end, bringing our three-year network
upgrade initiative to a successful close. With the completion of the upgrade
we will be able to offer our popular easyedge(SM) suite of data services to
customers in these remaining markets. easyedge has been very successful and
contributed to the increase in retail service revenue per unit in the quarter.
"The costs associated with our strong customer growth as well as the
considerable cost to launch the new markets affected our marketing cost per
gross customer unit addition (CPGA) for the quarter. Also impacting CPGA is
the industry's continued practice of heavily subsidizing handset costs, as the
cost of handsets has increased due to additional features such as color or
camera functions."
U.S. Cellular Corporation, the nation's eighth largest wireless service
carrier, provides wireless service to 4.8 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: changes in circumstances or events that may affect the ability of the
company to start up the operations of the licensed areas involved in the AT&T
Wireless transaction completed in August 2003; the ability of the company to
successfully manage and grow the operations of the Chicago MTA and newly
launched markets; changes in the overall economy; changes in competition in
the markets in which the company operates; advances in telecommunications
technology; the impact of wireless local number portability; changes in the
telecommunications regulatory environment; changes in the value of
investments, including variable prepaid forward contracts; changes in the
capital markets that could adversely impact the availability, cost and terms
of financing; an adverse change in the ratings afforded our debt securities by
nationally accredited ratings organizations; 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 Securities and Exchange Commission, which are incorporated by
reference herein.
As previously announced, TDS and U.S. Cellular will hold a joint
teleconference Oct. 20, 2004 at 10:00 a.m. Chicago time. Interested parties
may listen to the call live over the Internet by accessing
http://www.vcall.com/CEPage.asp?ID=89406, or the conference call page of the
Investor Relations section at www.uscellular.com, or by calling 888/245-6674,
pass code 1398163. The conference call will also be archived on the
conference call section of the U.S. Cellular web site at www.uscellular.com.
Prior to the commencement of the call, certain financial and statistical
information discussed during the conference call comments will be posted to
the conference call page of the Investor Relations section of the U.S.
Cellular web site, together with reconciliations to generally accepted
accounting principles (GAAP) of any non-GAAP information to be disclosed.
USM's Internet Home Page: www.uscellular.com
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
Quarter Ended 9/30/04 6/30/04 3/31/04
Consolidated Markets:
Total population (000s) (a) 45,581 45,581 45,581
Customer units 4,828,000 4,684,000 4,547,000
Gross customer unit activations 387,000 365,000 397,000
Net customer unit activations 144,000 137,000 196,000
Market penetration (a) 10.59% 10.28% 9.98%
Cell sites in service 4,713 4,420 4,122
Average monthly revenue per unit (b) $48.49 $47.79 $46.16
Retail service revenue per unit (b) $41.51 $41.58 $40.26
Inbound roaming revenue per unit (b) $3.39 $3.21 $3.17
Long-distance/other revenue per
unit (b) $3.59 $3.00 $2.73
Minutes of use (MOU) (c) 553 542 491
Postpay churn rate per month (d) 1.6% 1.5% 1.3%
Marketing cost per gross
customer unit addition (e) $410 $392 $371
Capital Expenditures ($000s) $131,648 $162,579 $100,535
(a) Market penetration is calculated using 2003 Claritas population
estimates for 9/30/04, 6/30/04 and 3/31/04 and 2002 Claritas estimates
for 2003. "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 9/30/04, 6/30/04 and
3/31/04 total population counts include the population of the market
added to consolidated operations as of 1/1/04, but exclude the
population of the six markets sold to AT&T Wireless in February 2004.
The 12/31/03 and 9/30/03 total population counts exclude the
population of the 10 markets transferred to AT&T Wireless in August
2003 and include the population of markets acquired from AT&T Wireless
in that transaction. The population of markets in which U.S. Cellular
has deferred the transfer of licenses from AT&T Wireless are not
included in the total population counts for any period.
(b) 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 $691,964 $662,658 $619,382
Components:
Retail service revenue during
quarter $592,411 $576,541 $540,228
Inbound roaming revenue during
quarter $48,402 $44,516 $42,499
Long-distance/other revenue
during quarter $51,151 $41,601 $36,655
Divided by average customers
during quarter (000s) 4,757 4,622 4,473
Divided by three months in each
quarter 3 3 3
Average monthly revenue per unit $48.49 $47.79 $46.16
Retail service revenue per unit $41.51 $41.58 $40.26
Inbound roaming revenue per unit $3.39 $3.21 $3.17
Long-distance/other revenue per
unit $3.59 $3.00 $2.73
(c) Average monthly local minutes of use per customer (without roaming).
(d) 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.
(e) Due to changes in accounting for agent rebates and net customer
retention expenses, for all periods shown this measurement is no
longer 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
http://www.uscellular.com .
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
Quarter Ended 12/31/03 9/30/03
Consolidated Markets:
Total population (000s) (a) 46,267 45,817
Customer units 4,409,000 4,268,000
Gross customer unit activations 368,000 294,000
Net customer unit activations 141,000 66,000
Market penetration (a) 9.53% 9.32%
Cell sites in service 4,184 4,082
Average monthly revenue per unit (b) $47.80 $49.05
Retail service revenue per unit (b) $40.64 $40.68
Inbound roaming revenue per unit (b) $3.90 $4.65
Long-distance/other revenue per unit (b) $3.26 $3.72
Minutes of use (MOU) (c) 462 435
Postpay churn rate per month (d) 1.4% 1.6%
Marketing cost per gross
customer unit addition (e) $384 $405
Capital Expenditures ($000s) $193,413 $135,111
(a) Market penetration is calculated using 2003 Claritas population
estimates for 9/30/04, 6/30/04 and 3/31/04 and 2002 Claritas estimates
for 2003. "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 9/30/04, 6/30/04 and
3/31/04 total population counts include the population of the market
added to consolidated operations as of 1/1/04, but exclude the
population of the six markets sold to AT&T Wireless in February 2004.
The 12/31/03 and 9/30/03 total population counts exclude the
population of the 10 markets transferred to AT&T Wireless in August
2003 and include the population of markets acquired from AT&T Wireless
in that transaction. The population of markets in which U.S. Cellular
has deferred the transfer of licenses from AT&T Wireless are not
included in the total population counts for any period.
(b) 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 $620,639 $628,440
Components:
Retail service revenue during
quarter $527,626 $521,247
Inbound roaming revenue during
quarter $50,653 $59,638
Long-distance/other revenue
during quarter $42,360 $47,555
Divided by average customers
during quarter (000s) 4,328 4,271
Divided by three months in each
quarter 3 3
Average monthly revenue per unit $47.80 $49.05
Retail service revenue per unit $40.64 $40.68
Inbound roaming revenue per unit $3.90 $4.65
Long-distance/other revenue per
unit $3.26 $3.72
(c) Average monthly local minutes of use per customer (without roaming).
(d) 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.
(e) Due to changes in accounting for agent rebates and net customer
retention expenses, for all periods shown this measurement is no
longer 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
http://www.uscellular.com .
UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Three Months Ended September 30
(Unaudited, dollars in thousands, except per share amounts)
2003 Increase (Decrease)
2004 Restated Amount Percent
Operating Revenues
Service Revenues $691,964 $628,440 $63,524 10.1%
Equipment Sales 56,249 36,536 19,713 54.0%
748,213 664,976 83,237 12.5%
Operating Expenses
System Operations 154,126 153,724 402 0.3%
Cost of Equipment Sold 126,659 76,926 49,733 64.7%
Selling, General and
Administrative 298,011 236,573 61,438 26.0%
Depreciation 115,377 90,171 25,206 28.0%
Amortization and Accretion 12,031 13,463 (1,432) (10.6%)
Loss (Gain) on Assets Held for
Sale - (1,442) 1,442 N/M
706,204 569,415 136,789 24.0%
Operating Income 42,009 95,561 (53,552) (56.0%)
Investment Income 19,265 11,301 7,964 70.5%
Interest (Expense) (23,671) (15,615) (8,056) (51.6%)
Other Income (Expense) (2,697) 1,019 (3,716) N/M
Income Before Income Taxes and
Minority Interest 34,906 92,266 (57,360) (62.2%)
Income Tax Expense 11,646 36,047 (24,401) (67.7%)
Income Before Minority Interest 23,260 56,219 (32,959) (58.6%)
Minority Share of Income (1,951) (4,605) 2,654 57.6%
Net Income $21,309 $51,614 $(30,305) (58.7%)
Weighted Average Common and Series
A Common Shares (000s) (Basic) 86,278 86,142 136
Earnings Per Common and Series A
Common Share ("EPS") (Basic) $0.25 $0.60 $(0.35) (58.3%)
Earnings Per Common and Series A
Common Share ("EPS") (Diluted) $0.25 $0.59 $(0.34) (57.6%)
N/M - Percent change not meaningful
UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
Nine Months Ended September 30
(Unaudited, dollars in thousands, except per share amounts)
Increase
2003 (Decrease)
2004 Restated Amount Percent
Operating Revenues
Service Revenues $1,974,004 $1,803,150 $170,854 9.5%
Equipment Sales 144,084 111,537 32,547 29.2%
2,118,088 1,914,687 203,401 10.6%
Operating Expenses
System Operations 436,536 438,721 (2,185) (0.5%)
Cost of Equipment Sold 356,729 245,149 111,580 45.5%
Selling, General and
Administrative 825,836 745,020 80,816 10.8%
Depreciation 327,131 272,534 54,597 20.0%
Amortization and Accretion 36,420 45,371 (8,951) (19.7%)
Loss on impairment of
intangible assets - 49,595 (49,595) N/M
Loss (Gain) on Assets Held for
Sale (725) 23,619 (24,344) N/M
1,981,927 1,820,009 161,918 8.9%
Operating Income 136,161 94,678 41,483 43.8%
Investment Income 51,913 37,163 14,750 39.7%
Interest (Expense) (64,937) (47,513) (17,424) (36.7%)
(Loss) on Investments (1,830) (3,500) 1,670 47.7%
Other Income 464 2,801 (2,337) (83.4%)
Income Before Income Taxes and
Minority Interest 121,771 83,629 38,142 45.6%
Income Tax Expense 46,401 37,725 8,676 23.0%
Income Before Minority Interest 75,370 45,904 29,466 64.2%
Minority Share of Income (6,845) (9,464) 2,619 27.7%
Income Before Cumulative Effect
of Accounting Change 68,525 36,440 32,085 88.0%
Cumulative effect of accounting
change, net of tax - (14,346) 14,346 N/M
Net Income $68,525 $22,094 $46,431 N/M
Weighted Average Common and
Series A Common Shares (000s)
(Basic) 86,211 86,132 79
Earnings Per Common and Series A
Common Share ("EPS") (Basic) $0.79 $0.26 $0.53 N/M
Basic EPS Before Cumulative
Effect of Accounting Change $0.79 $0.43 $0.36 83.7%
Basic EPS from Cumulative Effect
of Accounting Change $- $(0.17) $0.17 N/M
Earnings Per Common and Series A
Common Share ("EPS") (Diluted) $0.79 $0.26 $0.53 N/M
Diluted EPS Before Cumulative
Effect of Accounting Change $0.79 $0.43 $0.36 83.7%
Diluted EPS from Cumulative
Effect of Accounting Change $- $(0.17) $0.17 N/M
N/M - Percent change not meaningful
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
ASSETS
September 30, December 31,
2004 2003
Current Assets
Cash and cash equivalents
General funds $30,661 $9,822
Affiliated cash equivalents 56 26
30,717 9,848
Accounts receivable 323,697 286,980
Inventory 61,842 70,963
Prepaid expenses 26,241 22,396
Prepaid income taxes 7,883 2,407
Other current assets 30,463 31,511
480,843 424,105
Investments
Licenses 1,184,014 1,189,326
Goodwill 425,343 430,256
Customer list, net 27,417 24,448
License rights 42,037 42,037
Marketable equity securities 249,571 260,188
Investments in unconsolidated entities, net 171,727 170,569
Notes and interest receivable--long-term 5,252 6,476
2,105,361 2,123,300
Property, Plant and Equipment
In service and under construction 3,733,188 3,441,177
Less accumulated depreciation 1,503,688 1,267,293
2,229,500 2,173,884
Deferred Charges
System development costs, net 78,466 97,370
Other, net 33,081 26,565
111,547 123,935
Assets of Operations Held for Sale 51,923 100,523
Total Assets $4,979,174 $4,945,747
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31,
2004 2003
Current Liabilities
Current portion of long-term debt $3,000 $3,000
Current portion of long-term debt - affiliates - 105,000
Notes payable 55,000 -
Accounts payable
Affiliates 6,934 4,252
Trade 210,456 281,306
Customer deposits and deferred revenues 104,162 93,789
Accrued interest 15,408 11,416
Accrued taxes 84,262 25,477
Accrued compensation 46,503 39,257
Other current liabilities 23,763 18,399
549,488 581,896
Long-term Debt
6% zero coupon convertible debentures - 157,659
7.25% notes - 250,000
Variable prepaid forward contract 159,856 159,856
8.75% notes 130,000 130,000
6.7% notes 530,817 436,829
7.5% notes 330,000 -
Other 10,000 10,000
1,160,673 1,144,344
Deferred Liabilities and Credits 685,441 691,580
Minority Interest 38,736 60,097
Liabilities of Operations Held for Sale 2,283 2,427
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 1,302,775 1,308,963
Treasury Shares (100,686) (115,156)
Accumulated other comprehensive income 27,130 26,789
Retained earnings 1,225,282 1,156,755
2,542,553 2,465,403
Total Liabilities and Shareholders' Equity $4,979,174 $4,945,747
SOURCE United States Cellular Corporation
