U.S. Cellular Reports Fourth Quarter Results
Provides financial guidance for 2010
CHICAGO, Feb. 25 /PRNewswire-FirstCall/ --
Note: Comparisons are year over year unless otherwise noted.
4Q 2009 Highlights
- 354,000 retail gross additions; 39,000 retail net additions, of which 26,000 were postpay and 13,000 were prepaid.
- 1 percent increase in service revenues to $986 million, despite $17 million decrease in inbound roaming revenues.
- 34 percent increase in data revenues to $190 million, representing 19 percent of service revenues.
- Retail service ARPU (average revenue per unit) increased from $46.43 to $47.12.
- Retail postpay churn of 1.6 percent; postpay customers comprised 95 percent of retail customers.
- 6 percent increase in cell sites in service to 7,279.
- Repurchased 240,200 common shares for $9 million.
- Redeemed 8.75 percent senior notes; principal amount of $130 million.
- $14 million impairment on licenses; $387 million in the fourth quarter of 2008.
As previously announced, U.S. Cellular will hold a teleconference on Feb. 25, 2010, at 9:30 a.m. CST. Interested parties may listen to the call live via the Internet by accessing the Conference Calls page of www.teldta.com or www.uscellular.com.
United States Cellular Corporation (NYSE: USM) reported service revenues of $986.3 million for the fourth quarter of 2009, up 1 percent from $977.0 million in the comparable period one year ago. Net income attributable to U.S. Cellular was $12.4 million, or $0.14 per diluted share, impacted by a $14 million (pre-tax), or $0.10 diluted loss per share, charge for impairment on licenses. In the fourth quarter of 2008, net loss attributable to U.S. Cellular was $200.1 million, or $2.29 per diluted share, impacted by a $386.7 million (pre-tax), or $2.71 diluted loss per share, charge for impairment of licenses.
For the twelve months ended Dec. 31, 2009, U.S. Cellular reported service revenues of $3,927.9 million, compared to $3,940.3 million in 2008. Net income attributable to U.S. Cellular for 2009 was $216.0 million, or $2.48 per diluted share, impacted by a $14 million (pre-tax), or $0.10 diluted loss per share, charge for impairment on licenses. In 2008, net income attributable to U.S. Cellular was $33.0 million, or $0.38 per diluted share, impacted by a $386.7 million (pre-tax), or $2.69 diluted loss per share, charge for impairment of licenses.
"Though we continued to be challenged by general economic and competitive pressure, both gross and net customer additions improved from the third quarter," said John E. Rooney, U.S. Cellular president and CEO. "Service revenues increased 1 percent year over year, as the growing demand for data services continues to drive strong increases in data revenues that offset decreases in inbound roaming revenues.
"The aggressive rollout of our 3G network in 2009 -- now available to 75 percent of customers -- helped to ensure even faster and more reliable communications for the increasing number of consumers who choose from our improved portfolio of smart phones and other premium devices. As part of our commitment to providing excellent experiences for all of our customers, we introduced the industry's first Battery Swap program in 2009, as well as an Overage Protection program, and we will continue to look for ways to surpass our customers' expectations.
"We are moving aggressively to develop and integrate new billing and operational support systems, increase our understanding of key customer segments, and promote online sales and self-service. These initiatives and others will be implemented over the next several years, and we expect them to stimulate and support growth over the long term, while ultimately reducing operating costs."
Loss on impairment of intangible assets
In the fourth quarter, U.S. Cellular recorded an impairment loss of $14 million (pre-tax) on licenses as a result of its annual impairment assessment of licenses and goodwill. In the fourth quarter of 2008, U.S. Cellular recorded an impairment loss of $386.7 million (pre-tax), attributable to the deterioration in the credit and financial markets. The impairment charges had no impact on cash or cash flow.
Impact of Impairment Impact of Impairment
for the three months for the year ended
ended December 31, December 31,
(Dollars in millions,
except per share amounts) 2009 2008 2009 2008
------------------------- ---- ---- ---- ----
Net income attributable to
U.S. Cellular shareholders,
excluding licenses
impairments(1) $21.1 $36.2 $224.7 $269.3
----- ----- ------ ------
Loss on impairment of
intangible assets related
to licenses (14.0) (386.7) (14.0) (386.7)
Income tax benefit and
noncontrolling interest impact
of licenses impairments(1) 5.3 150.4 5.3 150.4
--- ----- --- -----
Impact of licenses impairments
on net income attributable
to U.S. Cellular shareholders(1) (8.7) (236.3) (8.7) (236.3)
---- ------ ---- ------
Net income attributable to
U.S. Cellular shareholders $12.4 $(200.1) $216.0 $33.0
===== ======= ====== =====
Diluted earnings per share
attributable to U.S. Cellular
shareholders, excluding
license impairments(1) $0.24 $0.42 $2.58 $3.07
Impact of license impairments
on diluted earnings (loss)
per share attributable to
U.S. Cellular shareholders(1) (0.10) (2.71) (0.10) (2.69)
----- ----- ----- -----
Diluted earnings (loss) per
share attributable to
U.S. Cellular shareholders $0.14 $(2.29) $2.48 $0.38
===== ====== ===== =====
(1) These amounts are non-GAAP financial measures. The purpose of
presenting these measures is to provide information on the
impact of losses on impairment related to licenses on results
of operations. Such impairments are discrete, significant
amounts that impact the comparability of the results of
operations, and U.S. Cellular believes it is useful to
disclose these impacts. The income tax and noncontrolling
interest impact is calculated by allocating the losses on
impairment to the respective consolidated subsidiaries, and
applying the income tax rate and noncontrolling interest
percentages applicable to these respective subsidiaries.
Guidance for year ending Dec. 31, 2010
This guidance represents the views of management as of Feb. 25, 2010, and should not be assumed to be accurate as of any other date. There can be no assurance that final results will not differ materially from this guidance. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.
Service Revenues $3,975 - $4,075 million
Operating Income $250 - $350 million
Depreciation, Amortization and Accretion(1) Approx. $600 million
Capital Expenditures Approx. $600 million
(1) Includes losses on disposal of assets
Conference call information
U.S. Cellular will hold a conference call on Feb. 25, 2010 at 9:30 a.m. CST.
- Access the live call online at http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=67422&eventID=2754661 or on the Conference Calls page of www.uscellular.com.
- Access the call by phone at 866-871-4351 (US/Canada) and use conference ID #57950705.
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®
United States Cellular Corporation, the nation's sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to more than 6.1 million customers in 26 states. The Chicago-based company had 8,900 full-time equivalent associates as of Dec. 31, 2009. For more information about U.S. Cellular, visit www.uscellular.com.
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 grow its 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 the company's debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to possible future restatements; 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 revenue and terms, the availability of handset 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.
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
Quarter Ended 12/31/2009 9/30/2009 6/30/2009 3/31/2009 12/31/2008
---------- --------- --------- --------- ----------
Total population
Consolidated
markets
(1)(2) 89,712,000 85,118,000 83,726,000 83,726,000 83,014,000
Consolidated
operating
markets(1) 46,306,000 46,306,000 46,306,000 46,306,000 46,009,000
Market
penetration
at end of
period
Consolidated
markets(3) 6.8% 7.2% 7.4% 7.5% 7.5%
Consolidated
operating
markets(3) 13.3% 13.2% 13.3% 13.5% 13.5%
All customers
Total at end
of period 6,141,000 6,131,000 6,155,000 6,243,000 6,196,000
Gross
additions 399,000 386,000 317,000 404,000 395,000
Net additions
(losses) 10,000 (24,000) (88,000) 47,000 20,000
Retail customers
Total at end
of period 5,744,000 5,705,000 5,711,000 5,770,000 5,707,000
Gross
additions 354,000 351,000 286,000 366,000 352,000
Net postpay
additions
(losses) 26,000 8,000 (32,000) 60,000 41,000
Net prepay
additions
(losses) 13,000 (14,000) (27,000) 3,000 (8,000)
Service
revenue
components
(000s)
Retail service
revenue $867,765 $865,867 $871,209 $874,098 $860,503
Inbound
roaming
revenue 61,728 68,767 62,223 60,057 78,768
Other revenue 56,814 50,289 41,323 47,719 37,681
------ ------ ------ ------ ------
Total service
revenues
(000s) $986,307 $984,923 $974,755 $981,874 $976,952
Divided by
average
customers
(000s) 6,139 6,138 6,199 6,229 6,178
Divided by
three months
in each quarter 3 3 3 3 3
--- --- --- --- ---
Average
monthly
revenue per
unit(4) $53.55 $53.49 $52.41 $52.54 $52.71
Retail service
revenue per
unit (4) $47.12 $47.02 $46.85 $46.78 $46.43
Inbound
roaming
revenue per
unit(4) $3.35 $3.73 $3.35 $3.21 $4.25
Other revenue
per unit(4) $3.08 $2.74 $2.21 $2.55 $2.03
Postpay churn
rate(5) 1.6% 1.7% 1.7% 1.5% 1.6%
Capital
expenditures
(000s) $189,000 $128,900 $91,200 $137,700 $190,000
Cell sites in
service 7,279 7,161 7,043 6,942 6,877
(1) Used only to calculate market penetration of consolidated markets
and consolidated operating markets, respectively, which is
calculated by dividing customers by the total market population
(without duplication of population in overlapping markets).
(2) Includes 4.5 million incremental population counts resulting from
the licenses awarded to King Street Wireless L.P. in December 2009.
(3) 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.
(4) Calculated by dividing the components of Service Revenues by the
average customers and number of months in the quarter.
(5) Calculated by dividing the total postpay customer disconnects during
the quarter by the average postpay customer base for the quarter.
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS
Three Months Ended December 31,
(Unaudited, dollars and shares in thousands, except per share amounts)
Increase (Decrease)
-------------------
2009 (1)(2) 2008 Amount Percent
----------- ---- ------ -------
Operating revenues
Service $986,307 $976,952 $9,355 1%
Equipment sales 74,690 75,910 (1,220) (2%)
------ ------ ------
Total operating
revenues 1,060,997 1,052,862 8,135 1%
--------- --------- -----
Operating expenses
System operations
(excluding
Depreciation,
amortization
and accretion
reported below) 196,350 198,916 (2,566) (1%)
Cost of equipment sold 211,883 203,224 8,659 4%
Selling, general
and administrative 471,403 442,873 28,530 6%
Depreciation,
amortization and
accretion 146,807 143,709 3,098 2%
Loss on impairment
of intangible assets 14,000 386,653 (372,653) (96%)
Loss on asset
disposals, net 7,528 6,602 926 14%
----- ----- ---
Total operating
expenses 1,047,971 1,381,977 (334,006) (24%)
--------- --------- --------
Operating income (loss) 13,026 (329,115) 342,141 >100%
------ -------- -------
Investment and other
income (expense)
Equity in earnings
of unconsolidated
entities 23,553 25,620 (2,067) (8%)
Interest and
dividend income 949 1,259 (310) (25%)
Interest expense (18,600) (16,579) (2,021) (12%)
Other, net 259 160 99 62%
--- --- ---
Total investment
and other income
(expense) 6,161 10,460 (4,299) (41%)
----- ------ ------
Income (loss)
before income taxes 19,187 (318,655) 337,842 >100%
Income tax expense
(benefit) 2,582 (129,007) 131,589 >100%
----- -------- -------
Net income (loss) 16,605 (189,648) 206,253 >100%
Less: Net income
attributable to
noncontrolling
interests,
net of tax (4,185) (10,470) 6,285 60%
------ ------- ----
Net income (loss)
attributable to
U.S. Cellular
shareholders $12,420 $(200,118) $212,538 >100%
======= ========= ========
Basic weighted average
shares outstanding 86,719 87,340 (621) (1%)
Basic earnings
(loss) per share $0.14 $(2.29) $2.43 >100%
Diluted weighted
average shares outstanding 87,087 87,340 (253) -
Diluted earnings
(loss) per share $0.14 $(2.29) $2.43 >100%
(1) During the three months ended December 31, 2009, Operating expenses
were reduced by a $7.1 million out-of-period adjustment to correct
rent expense. $6.1 million of this adjustment reduced System
operations expense and $1.0 million reduced Selling, general and
administrative expense. Management does not believe that the
adjustment is material to the current year or any prior year's
earnings, earnings trends or financial statement line items. The
adjustment was recorded in the three months ended December 31, 2009
and no prior periods were adjusted.
(2) During the three months ended December 31, 2009, U.S. Cellular
recorded adjustments that reduced System operations expense and
increased Selling, general and administrative expense by $9.7 million
and $11.6 million, respectively, to reflect revised estimates related
to customer usage charges and bad debts expense. The net of these
adjustments was an increase to Operating expenses of $1.9 million
during the three months ended December 31, 2009.
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS
Twelve Months Ended December 31,
(Unaudited, dollars and shares in thousands, except per share amounts)
Increase (Decrease)
-------------------
2009(1) 2008 Amount Percent
------- ---- ------ -------
Operating revenues
Service $3,927,859 $3,940,326 $(12,467) -
Equipment sales 286,752 302,859 (16,107) (5%)
------- ------- -------
Total operating
revenues 4,214,611 4,243,185 (28,574) (1%)
--------- --------- -------
Operating expenses
System operations
(excluding
Depreciation,
amortization
and accretion
reported below) 796,617 784,057 12,560 2%
Cost of
equipment sold 742,993 743,406 (413) -
Selling, general
and administrative 1,748,760 1,701,050 47,710 3%
Depreciation,
amortization
and accretion 570,658 576,931 (6,273) (1%)
Loss on impairment of
intangible assets 14,000 386,653 (372,653) (96%)
Loss on asset
disposals, net 15,176 23,378 (8,202) (35%)
------ ------ ------
Total operating
expenses 3,888,204 4,215,475 (327,271) (8%)
--------- --------- --------
Operating income 326,407 27,710 298,697 >100%
------- ------ -------
Investment and
other income (expense)
Equity in earnings
of unconsolidated
entities 96,800 91,981 4,819 5%
Interest and
dividend income 3,597 5,730 (2,133) (37%)
Gain on
disposition of
investments - 16,628 (16,628) N/M
Interest expense (76,367) (77,190) 823 1%
Other, net 1,442 1,269 173 14%
----- ----- ---
Total investment and
other income (expense) 25,472 38,418 (12,946) (34%)
------ ------ -------
Income before income taxes 351,879 66,128 285,751 >100%
Income tax expense 114,103 8,055 106,048 >100%
------- ----- -------
Net income 237,776 58,073 179,703 >100%
Less: Net income
attributable to
noncontrolling
interests, net of tax (21,768) (25,083) 3,315 13%
Net income attributable
to U.S. Cellular
shareholders $216,008 $32,990 $183,018 >100%
======== ======= ========
Basic weighted average
shares outstanding 86,946 87,457 (511) (1%)
Basic earnings per share $2.48 $0.38 $2.10 >100%
Diluted weighted average
shares outstanding 87,168 87,754 (586) (1%)
Diluted earnings per share $2.48 $0.38 $2.10 >100%
(1) During the twelve months ended December 31, 2009, Operating expenses
were reduced by a $6.5 million out-of-period adjustment to correct
rent expense. $5.8 million of this adjustment reduced System
operations expense and $0.7 million reduced Selling, general and
administrative expense. Management does not believe that the
adjustment is material to the current year or any prior year's
earnings, earnings trends or financial statement line items. The
adjustment was recorded in the twelve months ended December 31, 2009
and no prior periods were adjusted.
N/M - Percentage change not meaningful
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
ASSETS
December 31, December 31,
2009 2008
---- ----
Current assets
Cash and cash equivalents $294,411 $170,996
Accounts receivable from customers and other 421,528 419,619
Inventory 152,556 116,564
Prepaid income taxes 717 22,515
Prepaid expenses 63,463 51,645
Net deferred income tax asset 21,570 19,481
Other current assets 51,343 14,227
------ ------
1,005,588 815,047
--------- -------
Investments
Licenses 1,435,000 1,433,415
Goodwill 494,737 494,279
Customer lists, net 4,083 8,936
Investments in unconsolidated entities 161,481 156,637
Notes and interest receivable--long-term 4,214 4,297
----- -----
2,099,515 2,097,564
--------- ---------
Property, plant and equipment
In service and under construction 5,884,307 5,884,383
Less: accumulated depreciation 3,282,969 3,264,007
--------- ---------
2,601,338 2,620,376
--------- ---------
Other assets and deferred charges 38,776 33,055
------ ------
Total assets $5,745,217 $5,566,042
========== ==========
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
December 31, December 31,
2009 2008
---- ----
Current liabilities
Current portion of long-term debt $76 $10,258
Accounts payable
Affiliated 14,732 9,613
Trade 296,288 248,785
Customer deposits and deferred revenues 143,760 151,082
Accrued taxes 34,583 17,643
Accrued compensation 62,242 55,969
Other current liabilities 92,884 108,533
------ -------
644,565 601,883
------- -------
Deferred liabilities and credits
Net deferred income tax liability 513,994 478,106
Other deferred liabilities and credits 262,412 233,619
------- -------
776,406 711,725
------- -------
Long-term debt 867,522 996,636
------- -------
Commitments and contingencies
Noncontrolling interests with redemption features 727 589
--- ---
Equity
U.S. Cellular shareholders' equity
Common Shares, par value $1 per share 55,068 55,068
Series A Common Shares,
par value $1 per share 33,006 33,006
Additional paid-in capital 1,356,322 1,340,146
Treasury Shares (69,616) (50,258)
Retained earnings 2,029,516 1,828,680
--------- ---------
Total U.S. Cellular shareholders equity 3,404,296 3,206,642
--------- ---------
Noncontrolling interests 51,701 48,567
------ ------
Total equity 3,455,997 3,255,209
--------- ---------
Total liabilities and equity $5,745,217 $5,566,042
========== ==========
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve Months Ended December 31,
(Unaudited, dollars in thousands)
2009 2008
---- ----
Cash flows from operating activities
Net income $237,776 $58,073
Add (deduct) adjustments to reconcile
net income to net cash flows from operating
activities
Depreciation, amortization and accretion 570,658 576,931
Bad debts expense 107,991 73,157
Stock-based compensation expense 16,362 15,122
Deferred income taxes, net 45,439 (83,121)
Equity in earnings of
unconsolidated entities (96,800) (91,981)
Distributions from unconsolidated
entities 91,105 91,845
Gain on disposition of investments - (16,628)
Loss in impairment of intangible assets 14,000 386,653
Loss on asset disposals, net 15,176 23,378
Noncash interest expense 2,442 1,772
Excess tax benefit from stock awards (24) (1,151)
Other operating activities - 210
Changes in assets and liabilities
from operations
Accounts receivable (109,817) (68,039)
Inventory (35,992) (15,563)
Accounts payable - trade 47,503 (4,572)
Accounts payable - affiliate 5,119 1,093
Customer deposits and deferred revenues (7,323) 7,628
Accrued taxes 37,931 (34,699)
Accrued interest (2,121) -
Other assets and liabilities (57,617) 2,669
------- -----
881,808 922,777
------- -------
Cash flows from investing activities
Additions to property, plant and equipment (546,758) (585,590)
Proceeds from disposition of investments - 16,690
Cash received from divestitures 50 6,838
Cash paid for acquisitions and licenses (16,027) (341,694)
Other investing activities 1,284 (271)
----- ----
(561,451) (904,027)
-------- --------
Cash flows from financing activities
Borrowings from revolving credit facilities - 100,000
Repayment of revolving credit facilities - (100,000)
Repayment of long-term debt (140,236) (3,039)
Common shares reissued, net of tax payments (82) (2,288)
Common shares repurchased (33,585) (28,366)
Excess tax benefit from stock awards 24 1,151
Payment of debt issuance costs (4,421) -
Distributions to noncontrolling interests (18,426) (19,676)
Other financing activities (216) (69)
---- ---
(196,942) (52,287)
-------- -------
Net increase (decrease) in cash and
cash equivalents 123,415 (33,537)
Cash and cash equivalents
Beginning of period 170,996 204,533
------- -------
End of period $294,411 $170,996
======== ========
SOURCE United States Cellular Corporation
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