EX-99.1 2 a08-5984_1ex99d1.htm EX-99.1

 

Exhibit 99.1

 

Conference call March 3 at 10:00 a.m. Chicago time. Access the live call on the Conference Calls page of www.teldta.com or www.uscellular.com.

 

Contact:

Mark A. Steinkrauss, Vice President, Corporate Relations

 

(312) 592-5384 mark.steinkrauss@teldta.com

 

 

 

Julie D. Mathews, Manager, Investor Relations

 

(312) 592-5341 julie.mathews@teldta.com

 

FOR RELEASE: IMMEDIATE

 

U.S. CELLULAR REPORTS 4Q AND FULL-YEAR 2007 RESULTS

Data revenues increase 69 percent for the year to $368 million

 

Note: Comparisons are year over year unless otherwise noted.

 

4Q 2007 Highlights

·         15.2 percent increase in service revenues, to $957.9 million

 

·         64.9 percent increase in data revenues, to $107.9 million (11 percent of service revenues)

 

·         ARPU (average revenue per unit) reached $52.46 (9 percent increase)

 

·         22 percent increase in cash flows from operating activities, to $245.7 million

 

Full-Year 2007 Highlights

·         14.5 percent increase in service revenues, to $3,679.2 million

 

·         69.1 percent increase in data revenues, to $367.6 million

 

·         ARPU grew to $51.13 (8 percent increase)

 

·         23.1 percent increase in cash flows from operating activities, to $863.1 million

 

·         Decrease in retail postpay churn to 1.4 percent from 1.6 percent

 

·         To offset dilution and seek to increase value to shareholders, U.S. Cellular repurchased 1,006,000 shares in 2007 at a total cost of $83.3 million

 

CHICAGO — Feb 29, 2008 — United States Cellular Corporation [AMEX:USM] reported service revenues of $957.9 million for the fourth quarter of 2007, up 15.2 percent from $831.7 million in the comparable period one year ago. The company recorded operating income of $63.3 million, down 0.6 percent from $63.6 million in the fourth quarter of 2006. Net income and diluted earnings per share were $29.2 million and $0.33, respectively, compared to net income and diluted earnings per share of $54.1 million and $0.61, respectively, for the comparable period one year ago.

 


 

U.S. Cellular acquired 70,000 net retail postpay customers in the quarter. Prepay customers declined by 6,000 and net reseller customers declined by 9,000. Excluding acquisitions, U.S. Cellular acquired 351,000 retail postpay customers in 2007. Prepay and net reseller customers declined by 18,000 and 32,000, respectively.

 

Sprint Nextel exchange provides more usable spectrum

In the fourth quarter, U.S. Cellular agreed to deliver personal communication service (PCS) spectrum in eight licenses covering portions of one state to Sprint Nextel in exchange for more strategically useful spectrum in eight licenses covering portions of four states. The exchange will not include any cash, customers, network assets, or other assets. U.S. Cellular recorded a $20.8 million pre-tax loss on the exchange. The transaction is expected to close in the first half of 2008.

 

Customer focus delivers excellent financial and operating results

“Our customer satisfaction strategy helped us achieve some important milestones in 2007,” said John E. Rooney, U.S. Cellular president and CEO. “Data revenues pushed past $100 million in the fourth quarter and $368 million for the year, which contributed to a significant increase in ARPU. Our focus on a high-quality call experience also drove double-digit increases in service revenues and cash flows from operating activities. Retail net additions were strong in 2007, though we saw some softness in the fourth quarter, mainly in December.

 

“Customers continued to respond well this year to our national, wide area, and family plans,” said Rooney. “There was also high demand for our BlackBerry® and MOTO Q™ smart phone offerings and our expanding suite of easyedgeSM data services, such as My Contacts Backup, Tone Room, and Your Navigator™. And, our customer focus and high network quality were backed up by several independent surveys in 2007. We topped the J.D. Power and Associates call quality rankings in the North Central region for the fourth consecutive time, which speaks to the value of investing the majority of our capital spending for 2007 in network enhancements. And, PC Magazine readers voted us the top contract/postpay wireless provider in 2007. I believe our associates’ commitment to customer service is at the heart of these results.

 

2008 OUTLOOK

Focus on postpay customer, increasing market penetration

“We’ll continue our focus on the postpay, high-lifetime value customer in 2008,” said Rooney. “As part of our commitment to strategic growth, we’re maintaining our drive to increase penetration, revenue, and profitability, and improve distribution, in our existing markets. We’ll also continue to evaluate EVDO and Long-Term Evolution technologies with regard to how well they help us meet the needs of our target customers.”

 

Guidance

Guidance for the year ending Dec. 31, 2008 is as follows. There can be no assurance that final results will not differ materially from this guidance.

 

U.S. Cellular 2008 guidance as of Feb. 29, 2008 is as follows:

 

 

 

Net Retail Customer Additions

 

250,000 - 325,000

 

Service Revenues

 

$3.9 - $4.0 billion

 

Operating Income

 

$460 - $535 million

 

Depreciation, Amortization & Accretion*

 

Approx. $615 million

 

Capital Expenditures

 

$590 - $640 million

 

* Includes losses on disposals of assets

 

This guidance represents the views of management as of Feb. 29, 2008 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.

 

2


 

U.S. Cellular and TDS remediate two material weaknesses; make progress on third

U.S. Cellular and its parent, TDS, have reduced their material weaknesses related to personnel and accounting knowledge and fixed assets to the level of deficiency and significant deficiency, respectively.  The companies have made progress toward remediating the third material weakness related to income tax accounting.  The companies’ efforts in these areas are summarized below:

 

·      Personnel and accounting knowledge: U.S. Cellular and its parent, TDS, conducted a multi-year program to increase technical accounting expertise at the corporate and business unit levels, improve review and documentation procedures, and automate more aspects of their accounting and financial reporting. The companies developed many new accounting policies and procedures, added personnel in key areas, and developed an ongoing training program for accounting personnel.

·      Fixed assets: U.S. Cellular conducted a detailed physical inventory and valuation review of its property, plant, and equipment; and enhanced its controls over the recording of transfers and disposals of such assets. There was a resulting non-cash charge of $14.6 million included in loss on asset disposals/exchanges for the fourth quarter.

·      Income tax accounting: U.S. Cellular and its parent, TDS, created and staffed a new tax accounting group (including adding a director of accounting) that implemented new tax provisioning software to enhance internal controls related to income taxes at the corporate and business unit levels. As part of this implementation, the companies also instituted several new controls to help ensure the accuracy of accounting for income taxes.

 

Item 9A (Controls and Procedures) of U.S. Cellular’s SEC Form 10-K contains an expanded discussion of these remediation efforts.

 

Conference Call Information

U.S. Cellular will hold a conference call on March 3, 2008 at 10:00 a.m. Chicago time.

·      Access the live call online at http://www.videonewswire.com/event.asp?id=46101 or on the Conference Calls page of www.uscellular.com

·      Access the call by phone at 800/706-9695 (US/Canada) and use conference ID #37621356

 

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of www.uscellular.com, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. The call will be archived on the Conference Calls page of www.uscellular.com.

 

About U.S. Cellular

U.S. Cellular Corporation, the nation’s sixth-largest full-service wireless carrier, provides a comprehensive range of wireless products and services, superior customer support, and a high-quality network to more than 6.1 million customers in 26 states. The Chicago-based company employed 8,400 associates as of year end.

 

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of the company to successfully manage and grow the operations of more recently launched markets; changes in the overall economy, competition, the state and federal telecommunications regulatory environment, and the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited

 

3


 

ratings organizations; industry consolidation; likely participation in FCC spectrum auctions; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to restatements and possible future restatements; ability to remediate material weaknesses; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming terms, the availability of devices and the mix of products and services offered by the company. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.

 

For more information about U.S. Cellular, visit: www.uscellular.com.

 

###

 

4

 


 

UNITED STATES CELLULAR CORPORATION

SUMMARY OPERATING DATA

 

 

Quarter Ended

 

12/31/2007

 

9/30/2007

 

6/30/2007

 

3/31/2007

 

12/31/2006

 

Total Population:

 

 

 

 

 

 

 

 

 

 

 

Consolidated markets (1)

 

82,371,000

 

81,841,000

 

81,581,000

 

56,048,000

 

55,543,000

 

Consolidated operating markets (1)

 

44,955,000

 

44,955,000

 

44,955,000

 

44,416,000

 

44,043,000

 

All customers:

 

 

 

 

 

 

 

 

 

 

 

Customer units

 

6,122,000

 

6,067,000

 

6,010,000

 

5,973,000

 

5,815,000

 

Gross customer unit additions

 

437,000

 

447,000

 

418,000

 

459,000

 

389,000

 

Net customer unit additions

 

55,000

 

57,000

 

37,000

 

152,000

 

86,000

 

Market penetration at end of period:

 

 

 

 

 

 

 

 

 

 

 

Consolidated markets (2)

 

7.4

%

7.4

%

7.4

%

10.7

%

10.5

%

Consolidated operating markets (2)

 

13.6

%

13.5

%

13.4

%

13.4

%

13.2

%

Retail customers:

 

 

 

 

 

 

 

 

 

 

 

Customer units

 

5,564,000

 

5,500,000

 

5,448,000

 

5,377,000

 

5,225,000

 

Gross customer unit additions

 

367,000

 

374,000

 

347,000

 

397,000

 

375,000

 

Net customer unit additions

 

64,000

 

52,000

 

71,000

 

146,000

 

98,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Cell sites in service

 

6,383

 

6,255

 

6,140

 

6,004

 

5,925

 

Average monthly revenue per unit (3)

 

$

52.46

 

$

52.71

 

$

50.42

 

$

48.69

 

$

48.15

 

Retail service revenue per unit (3)

 

$

45.36

 

$

45.00

 

$

43.87

 

$

42.69

 

$

42.21

 

Inbound roaming revenue per unit (3)

 

$

3.09

 

$

3.36

 

$

2.68

 

$

2.33

 

$

2.34

 

Long-distance/other revenue per unit (3)

 

$

4.01

 

$

4.35

 

$

3.87

 

$

3.67

 

$

3.60

 

Minutes of use (MOU) (4)

 

906

 

887

 

858

 

783

 

749

 

Retail postpay churn rate per month (5)

 

1.5

%

1.6

%

1.4

%

1.3

%

1.5

%

Construction Expenditures (000s)

 

$

188,100

 

$

130,600

 

$

137,100

 

$

109,700

 

$

158,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

“Total population of consolidated markets” and “Total population of consolidated operating markets” are used only for the purposes of calculating market penetration of consolidated operating markets, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets). Effective with this report, U.S. Cellular is expanding its reporting of total population to include the population of its consolidated operating markets - i.e., markets in which U.S. Cellular provides wireless service to customers - in order to reflect its market penetration more accurately. Historically, total population has been reported only for total consolidated markets, regardless of whether U.S. Cellular was providing wireless services in those markets.

 

 

 

(2)

 

Calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.

 

 

 

(3)

 

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

 

$

957,896

 

$

954,540

 

$

906,218

 

$

860,583

 

$

831,663

 

Components:

 

 

 

 

 

 

 

 

 

 

 

Retail service revenue during quarter

 

$

828,169

 

$

814,948

 

$

788,535

 

$

754,515

 

$

729,072

 

Inbound roaming revenue during quarter

 

$

56,358

 

$

60,843

 

$

48,084

 

$

41,268

 

$

40,354

 

Long-distance/other revenue during quarter

 

$

73,369

 

$

78,749

 

$

69,599

 

$

64,800

 

$

62,237

 

 

 

 

 

 

 

 

 

 

 

 

 

Divided by average customers during quarter (000s)

 

6,086

 

6,036

 

5,991

 

5,892

 

5,757

 

Divided by three months in each quarter

 

3

 

3

 

3

 

3

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Average monthly revenue per unit

 

$

52.46

 

$

52.71

 

$

50.42

 

$

48.69

 

$

48.15

 

Retail service revenue per unit

 

$

45.36

 

$

45.00

 

$

43.87

 

$

42.69

 

$

42.21

 

Inbound roaming revenue per unit

 

$

3.09

 

$

3.36

 

$

2.68

 

$

2.33

 

$

2.34

 

Long-distance/other revenue per unit

 

$

4.01

 

$

4.35

 

$

3.87

 

$

3.67

 

$

3.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4)

 

Average monthly local minutes of use per customer (without roaming).

 

 

 

(5)

 

Retail postpay churn rate per month is calculated by dividing the total monthly retail post pay customer disconnects during the quarter by the average retail post pay customer base for the quarter.

 

 

5


 

UNITED STATES CELLULAR CORPORATION

FINANCIAL HIGHLIGHTS

Three Months Ended December 31,

(Unaudited, dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

Increase (Decrease)

 

 

 

2007

 

2006

 

Amount

 

Percent

 

Operating Revenues

 

 

 

 

 

 

 

 

 

Service

 

$

957,896

 

$

831,663

 

$

126,233

 

15.2

%

Equipment sales

 

66,214

 

70,456

 

(4,242

)

(6.0

)%

Total Operating Revenues

 

1,024,110

 

902,119

 

121,991

 

13.5

%

Operating Expenses

 

 

 

 

 

 

 

 

 

System operations (excluding depreciation shown below)

 

187,903

 

170,703

 

17,200

 

10.1

%

Cost of equipment sold

 

169,869

 

151,414

 

18,455

 

12.2

%

Selling, general and administrative

 

413,836

 

370,696

 

43,140

 

11.6

%

Depreciation, amortization and accretion

 

142,279

 

138,246

 

4,033

 

2.9

%

Loss on asset disposals/exchanges

 

46,958

 

7,415

 

39,543

 

N/M

 

Total Operating Expenses

 

960,845

 

838,474

 

122,371

 

14.6

%

 

 

 

 

 

 

 

 

 

 

Operating Income

 

63,265

 

63,645

 

(380

)

(0.6

)%

 

 

 

 

 

 

 

 

 

 

Investment and Other Income (Expense)

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

20,173

 

28,196

 

(8,023

)

(28.5

)%

Interest and dividend income

 

4,461

 

5,541

 

(1,080

)

(19.5

)%

Interest expense

 

(20,045

)

(23,485

)

3,440

 

14.6

%

Fair value adjustment of derivative instruments

 

—

 

(45,630

)

45,630

 

N/M

 

Gain on investments

 

6,301

 

70,427

 

(64,126

)

(91.1

)%

Other, net

 

(395

)

18

 

(413

)

N/M

 

 

 

10,495

 

35,067

 

(24,572

)

(70.1

)%

Income Before Income Taxes and Minority Interest

 

73,760

 

98,712

 

(24,952

)

(25.3

)%

Income tax expense

 

40,169

 

42,701

 

(2,532

)

(5.9

)%

Income Before Minority Interest

 

33,591

 

56,011

 

(22,420

)

(40.0

)%

Minority share of income

 

(4,384

)

(1,906

)

(2,478

)

N/M

 

Net Income

 

$

29,207

 

$

54,105

 

$

(24,898

)

(46.0

)%

 

 

 

 

 

 

 

 

 

 

Basic Weighted Average Common Shares Outstanding

 

87,691

 

87,645

 

46

 

0.1

%

Basic Earnings Per Share

 

$

0.33

 

$

0.62

 

$

(0.29

)

(46.8

)%

 

 

 

 

 

 

 

 

 

 

Diluted Weighted Average Common Shares Outstanding

 

88,309

 

88,368

 

(59

)

(0.1

)%

Diluted Earnings Per Share

 

$

0.33

 

$

0.61

 

$

(0.28

)

(45.9

)%

 

N/M - Percentage change not meaningful

 

6


 

UNITED STATES CELLULAR CORPORATION

FINANCIAL HIGHLIGHTS

Year Ended December 31,

(Unaudited, dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

Increase (Decrease)

 

 

 

2007

 

2006

 

Amount

 

Percent

 

Operating Revenues

 

 

 

 

 

 

 

 

 

Service

 

$

3,679,237

 

$

3,214,410

 

$

464,827

 

14.5

%

Equipment sales

 

267,027

 

258,745

 

8,282

 

3.2

%

Total Operating Revenues

 

3,946,264

 

3,473,155

 

473,109

 

13.6

%

Operating Expenses

 

 

 

 

 

 

 

 

 

System operations (excluding depreciation shown below)

 

717,075

 

639,683

 

77,392

 

12.1

%

Cost of equipment sold

 

640,225

 

568,903

 

71,322

 

12.5

%

Selling, general and administrative

 

1,555,639

 

1,399,561

 

156,078

 

11.2

%

Depreciation, amortization and accretion

 

582,269

 

555,525

 

26,744

 

4.8

%

Loss on asset disposals/exchanges

 

54,857

 

19,587

 

35,270

 

N/M

 

Total Operating Expenses

 

3,550,065

 

3,183,259

 

366,806

 

11.5

%

 

 

 

 

 

 

 

 

 

 

Operating Income

 

396,199

 

289,896

 

106,303

 

36.7

%

 

 

 

 

 

 

 

 

 

 

Investment and Other Income (Expense)

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

90,033

 

93,119

 

(3,086

)

(3.3

)%

Interest and dividend income

 

13,059

 

16,537

 

(3,478

)

(21.0

)%

Interest expense

 

(84,679

)

(93,674

)

8,995

 

9.6

%

Fair value adjustment of derivative instruments

 

(5,388

)

(63,022

)

57,634

 

91.5

%

Gain on investments

 

137,987

 

70,427

 

67,560

 

95.9

%

Other, net

 

(710

)

(145

)

(565

)

N/M

 

 

 

150,302

 

23,242

 

127,060

 

N/M

 

Income Before Income Taxes and Minority Interest

 

546,501

 

313,138

 

233,363

 

74.5

%

Income tax expense

 

216,711

 

120,604

 

96,107

 

79.7

%

Income Before Minority Interest

 

329,790

 

192,534

 

137,256

 

71.3

%

Minority share of income

 

(15,056

)

(13,044

)

(2,012

)

(15.4

)%

Net Income

 

$

314,734

 

$

179,490

 

$

135,244

 

75.3

%

 

 

 

 

 

 

 

 

 

 

Basic Weighted Average Common Shares Outstanding

 

87,730

 

87,346

 

384

 

0.4

%

Basic Earnings Per Share

 

$

3.59

 

$

2.05

 

$

1.54

 

75.1

%

 

 

 

 

 

 

 

 

 

 

Diluted Weighted Average Common Shares Outstanding

 

88,481

 

88,109

 

372

 

0.4

%

Diluted Earnings Per Share

 

$

3.56

 

$

2.04

 

$

1.52

 

74.5

%

 

N/M - Percentage change not meaningful

 

7


 

UNITED STATES CELLULAR CORPORATION

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Unaudited, dollars in thousands)

 

 

ASSETS

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

December 31,

 

December 31,

 

 

 

2007

 

2006

 

 

 

2007

 

2006

 

Current Assets

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Cash and cash equivalents

 

$

204,533

 

$

32,912

 

Prepaid forward contracts

 

$

—

 

$

159,856

 

Marketable equity securities

 

16,352

 

249,039

 

Derivative liability

 

—

 

88,840

 

Accounts receivable from customers and other

 

435,497

 

407,438

 

Notes payable

 

—

 

35,000

 

Inventory

 

100,990

 

117,189

 

Accounts payable

 

 

 

 

 

Prepaid expenses

 

41,588

 

34,955

 

Affiliated

 

8,519

 

13,568

 

Other current assets

 

34,793

 

13,385

 

Trade

 

252,272

 

241,303

 

 

 

833,753

 

854,918

 

Customer deposits and deferred revenues

 

143,445

 

123,344

 

 

 

 

 

 

 

Accrued taxes

 

43,105

 

26,913

 

 

 

 

 

 

 

Accrued compensation

 

59,224

 

47,842

 

 

 

 

 

 

 

Net deferred income tax liability

 

—

 

26,326

 

 

 

 

 

 

 

Other current liabilities

 

97,678

 

93,718

 

Investments

 

 

 

 

 

 

 

604,243

 

856,710

 

Licenses

 

1,482,446

 

1,494,327

 

 

 

 

 

 

 

Goodwill

 

491,316

 

485,452

 

 

 

 

 

 

 

Customer lists

 

15,375

 

26,196

 

Long-term Debt

 

1,002,293

 

1,001,839

 

Marketable equity securities

 

—

 

4,873

 

 

 

 

 

 

 

Investments in unconsolidated entities

 

157,693

 

150,325

 

 

 

 

 

 

 

Notes and interest receivable—long-term

 

4,422

 

4,541

 

Deferred Liabilities and Credits

 

765,786

 

792,088

 

 

 

2,151,252

 

2,165,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority Interest

 

43,396

 

36,700

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, Plant and Equipment

 

 

 

 

 

 

 

 

 

 

 

In service and under construction

 

5,409,115

 

5,120,994

 

Common Shareholders’ Equity

 

 

 

Less accumulated depreciation

 

2,814,019

 

2,492,146

 

Common Shares, par value $1 per share

 

55,046

 

55,046

 

 

 

2,595,096

 

2,628,848

 

Series A Common Shares, par value $1 per share

 

33,006

 

33,006

 

 

 

 

 

 

 

Additional paid-in capital

 

1,316,042

 

1,290,829

 

 

 

 

 

 

 

Treasury Shares

 

(41,094

)

(14,462

)

 

 

 

 

 

 

Accumulated other comprehensive income

 

10,134

 

80,382

 

Other Assets and Deferred Charges

 

31,773

 

31,136

 

Retained earnings

 

1,823,022

 

1,548,478

 

 

 

 

 

 

 

 

 

3,196,156

 

2,993,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

5,611,874

 

$

5,680,616

 

Total Liabilities and Shareholders’ Equity

 

$

5,611,874

 

$

5,680,616

 

 

8