NON-CASH IMPAIRMENT CHARGE RELATED TO SFAS 142
Note: Comparisons are year over year unless otherwise noted.
4Q 2008 Highlights
- 2.0 percent increase in service revenues, to $977.0 million.
- 31.8 percent increase in data revenues, to $142.1 million, representing
14.5 percent of service revenues.
- Postpay churn of 1.6 percent; postpay customers comprised 95 percent of
retail customers.
- 7.7 percent increase in cell sites in service, to 6,877.
- Repurchased 150,000 common shares for $5.2 million, to offset dilution
from employee benefit plans.
Full-Year 2008 Highlights
- 7.1 percent increase in service revenues, to $3,940.3 million.
- 39.1 percent increase in data revenues, to $511.7 million.
- 4.0 percent increase in ARPU to $53.23.
- 6.9 percent increase in cash flows from operating activities, to $922.8
million.
- Postpay churn low at 1.5 percent.
- Repurchased 600,000 shares in 2008 at a total cost of $32.9 million, to
offset dilution from employee benefit plans.
CHICAGO, Feb. 26 /PRNewswire-FirstCall/ -- United States Cellular Corporation (NYSE: USM) reported service revenues of $977.0 million for the fourth quarter of 2008, a 2.0 percent increase from $957.9 million in the comparable period one year ago. In the fourth quarter, U.S. Cellular recorded a $386.7 million impairment discussed later in this release. Although this resulted in a loss for the quarter, the impairment was a non-cash charge and did not affect cash or cash flow.
"We finished the year with some solid operating results, despite difficult economic conditions," said John E. Rooney, U.S. Cellular president and chief executive officer. "We added 41,000 net retail postpay customers in the quarter, postpay being the market segment we focus on given our high customer satisfaction model. In fact, 95 percent of our retail customers are postpay. Spending on advertising and promotions remained high given the aggressive competition and waning consumer confidence.
"Data revenues continued to grow nicely in the quarter, increasing 32 percent and representing 14.5 percent of service revenues," Rooney continued. "Smart phone sales are up sharply and carry higher ARPU due to data packages. ARPU has increased year over year for 13 consecutive quarters."
"In 2008, U.S. Cellular continued to improve its handset selection and rolled out five new smart phone models and one premium touchscreen phone," said Jay M. Ellison, U.S. Cellular executive vice president and chief operating officer. "Additionally, to support the growing demand for data, we have in place a Mobile Broadband (EVDO Rev. A) network that was available to approximately 23 percent of our cell sites at year end, and will cover more than 60 percent of our cell sites by the end of 2009. Our broad suite of handsets, coupled with the 3G speeds of Mobile Broadband, provide customers an ideal data experience. We also expanded our network during the year, adding nearly 500 cell sites and ending the year with approximately 6,900 cell sites in service."
OUTLOOK
"For 2009," continued Jack Rooney, "we intend to not only retain and grow our customer base, but also invest in the company on a number of fronts, so that we emerge from the economic downturn stronger than ever. In addition to the continued overlay of EVDO, we are pursuing a number of multi-year initiatives to make this happen."
The initiatives include:
-- A new point-of-sale system to consolidate billing on one platform. This will enable reduced time to market and improved testing capabilities, and give U.S. Cellular the ability to develop more flexible pricing and services.
-- Development of an Electronic Data Warehouse/Customer Relationship Management (EDW/CRM) System. This system will allow U.S. Cellular to collect and analyze information more efficiently to build and improve customer relationships.
-- An Internet/Web initiative that will enable customers to make a wide range of transactions and, eventually, to manage their accounts online.
SFAS 142 Impairment Charge
U.S. Cellular recorded an impairment of licenses of $386.7 million (pre- tax) in the fourth quarter of 2008 in accordance with Statement of Financial Accounting Standards, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
The impairment charge had no impact on cash or cash flow.
In accordance with SFAS No. 142, U.S. Cellular performed its annual impairment test of licenses and goodwill in the second quarter of 2008 and concluded at the time that there was no impairment. As a result of the further deterioration in the credit and financial markets and the accelerated decline in the overall economy in the fourth quarter of 2008, U.S. Cellular updated its impairment assessment of licenses and goodwill as of Dec. 31, 2008. The impairment assessment resulted in a $386.7 million impairment to licenses and no impairment to goodwill.
Material Weakness Eliminated
In the fourth quarter of 2008, U.S. Cellular and Telephone and Data Systems, Inc. (NYSE: TDS, TDS.S) completed the implementation of previously reported enhanced internal controls related to income tax accounting. TDS provides shared services to U.S. Cellular, including assistance with accounting for income taxes. These controls are operating effectively and, as a result, the company no longer has a material weakness related to income taxes.
Guidance
Guidance for the year ending Dec. 31, 2009 is as follows. There can be no assurance that final results will not differ materially from this guidance.
U.S. Cellular 2009 guidance as of Feb. 26, 2009 is as follows:
Net Retail Customer Additions 75,000-150,000
Service Revenues $3,900-$4,000 million
Operating Income $275-$350 million
Depreciation, Amortization and Accretion(1) Approx. $600 million
Capital Expenditures Approx. $575 million
(1) Includes losses on disposals of assets
The foregoing guidance represents the views of management as of Feb. 26, 2009 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.
Conference Call Information
U.S. Cellular will hold a conference call on Feb. 26, 2009 at 10:00 a.m. Chicago time.
-- Access the live call online at http://www.videonewswire.com/event.asp?id=56184 or on the Conference Calls page of http://www.uscellular.com.
-- Access the call by phone at 800/706-9695 (US/Canada) and use conference ID 86129191.
Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of http://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 http://www.uscellular.com.
About U.S. Cellular(R)
United States Cellular Corporation, the nation's fifth-largest, full- service wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to nearly 6.2 million customers in 26 states. The Chicago-based company employed 8,500 full-time equivalent associates as of Dec. 31, 2008. For more information about U.S. Cellular, visit http://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; the current credit crisis affecting financial markets, and its effect on the overall economy; 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: http://www.uscellular.com.
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
Quarter Ended 12/31/2008 9/30/2008 6/30/2008 3/31/2008 12/31/2007
Total Population:
Consolidated
markets (1) 83,014,000 82,875,000 82,875,000 82,846,000 82,371,000
Consolidated
operating
markets (1) 46,009,000 45,493,000 45,493,000 45,262,000 44,955,000
All customers:
Customer
units (2) 6,196,000 6,176,000 6,194,000 6,175,000 6,102,000
Gross customer
unit additions 395,000 367,000 365,000 408,000 436,000
Net customer
unit additions
(losses) 20,000 (18,000) 16,000 73,000 44,000
Market penetration
at end of period:
Consolidated
markets (3) 7.5% 7.5% 7.5% 7.5% 7.4%
Consolidated
operating
markets (3) 13.5% 13.6% 13.6% 13.6% 13.6%
Retail customers:
Customer
units (2) 5,707,000 5,674,000 5,677,000 5,640,000 5,564,000
Gross customer
unit additions 352,000 325,000 318,000 360,000 367,000
Net postpay
customer
unit additions 41,000 12,000 33,000 72,000 70,000
Net prepay
customer
unit additions
(losses) (8,000) (15,000) 1,000 13,000 (6,000)
Cell sites in
service 6,877 6,716 6,596 6,452 6,383
Average monthly
revenue per
unit (4) $52.71 $54.59 $53.27 $52.24 $52.60
Retail service
revenue per
unit (4)(7) $46.43 $46.97 $46.53 $46.18 $46.39
Inbound roaming
revenue per
unit (4)(7) $4.25 $5.03 $4.54 $3.95 $4.22
Other revenue
per unit (4)(7) $2.03 $2.59 $2.20 $2.11 $1.99
Minutes of use
(MOU) - Voice (5) 678 695 704 701 689
Postpay churn
rate (6) 1.6% 1.6% 1.4% 1.4% 1.5%
Construction
Expenditures
(000s) $190,000 $146,100 $137,800 $111,700 $188,100
(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 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) All customer units as of December 31, 2007 and March 31, 2008, and
retail customer units as of March 31, 2008 have been adjusted from
amounts previously reported, as a result of a review of U.S.
Cellular's customer reporting procedures.
(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) Per unit revenue measurements are derived from Service Revenues as
reported in Financial Highlights for each respective quarter as
follows:
Service Revenues
(000s) $976,952 $1,013,928 $987,352 $962,094 $957,896
Components:
Retail service
revenue (000s) 860,503 872,397 862,392 850,470 844,848
Inbound roaming
revenue (000s) 78,768 93,472 84,201 72,755 76,850
Other
revenue (000s) 37,681 48,059 40,759 38,869 36,198
Divided by
average
customers (000s) 6,178 6,191 6,178 6,139 6,070
Divided by
three months
in each quarter 3 3 3 3 3
Average monthly
revenue
per unit $52.71 $54.59 $53.27 $52.24 $52.60
Retail service
revenue
per unit $46.43 $46.97 $46.53 $46.18 $46.39
Inbound roaming
revenue
per unit $4.25 $5.03 $4.54 $3.95 $4.22
Other revenue
per unit $2.03 $2.59 $2.20 $2.11 $1.99
(5) Average monthly voice minutes of use per customer (without roaming).
(6) Postpay churn rate is calculated by dividing the total postpay
customer disconnects during the quarter by the average postpay
customer base for the quarter.
(7) Long-distance revenue was reclassified in the fourth quarter of 2008
from Long-distance/Other revenue to Retail service revenue and Inbound
roaming revenue. Previous quarters have been adjusted to reflect this
change.
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)
2008 2007 Amount Percent
Operating Revenues
Service $ 976,952 $ 957,896 $ 19,056 2.0%
Equipment sales 75,910 66,214 9,696 14.6%
Total operating
revenues 1,052,862 1,024,110 28,752 2.8%
Operating Expenses
System operations
(excluding
Depreciation,
amortization and
accretion reported
below) 198,916 187,903 11,013 5.9%
Cost of equipment
sold 203,224 168,987 34,237 20.3%
Selling, general
and administrative 442,873 414,719 28,154 6.8%
Depreciation,
amortization and
accretion 143,709 142,279 1,430 1.0%
Loss on impairment
of intangible
assets 386,653 20,840 365,813 N/M
Loss on asset
disposals, net 6,602 26,117 (19,515) (74.7%)
Total operating
expenses 1,381,977 960,845 421,132 43.8%
Operating Income
(Loss) (329,115) 63,265 (392,380) N/M
Investment and Other
Income (Expense)
Equity in earnings of
unconsolidated
entities 25,620 20,173 5,447 27.0%
Interest and dividend
income 1,259 4,461 (3,202) (71.8%)
Gain on disposition
of investments --- 6,301 (6,301) N/M
Interest expense (16,579) (20,045) 3,466 17.3%
Other, net 160 (395) 555 N/M
Total Investment
and Other Income
(Expense) 10,460 10,495 (35) (0.3%)
Income (Loss) Before
Income Taxes and
Minority Interest (318,655) 73,760 (392,415) N/M
Income tax expense
(benefit) (129,007) 40,169 (169,176) N/M
Income (Loss) Before
Minority Interest (189,648) 33,591 (223,239) N/M
Minority share of
income, net of tax (10,470) (4,384) (6,086) N/M
Net Income (Loss) $ (200,118) $ 29,207 $ (229,325) N/M
Basic Weighted Average
Common Shares
Outstanding 87,340 87,691 (351) (0.4%)
Basic Earnings (Loss)
Per Share $ (2.29) $0.33 $ (2.62) N/M
Diluted Weighted Average
Common Shares Outstanding 87,340 88,309 (969) (1.1%)
Diluted Earnings (Loss)
Per Share $ (2.29) $ 0.33 $ (2.62) N/M
N/M - Percentage change not meaningful
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)
2008 2007 Amount Percent
Operating Revenues
Service $3,940,326 $3,679,237 $261,089 7.1 %
Equipment sales 302,859 267,027 35,832 13.4 %
Total operating
revenues 4,243,185 3,946,264 296,921 7.5 %
Operating Expenses
System operations
(excluding Depreciation,
amortization and
accretion reported
below) 784,057 717,075 66,982 9.3 %
Cost of equipment sold 743,406 637,297 106,109 16.6 %
Selling, general and
administrative 1,701,050 1,558,568 142,482 9.1 %
Depreciation,
amortization and
accretion 576,931 578,186 (1,255) (0.2%)
Loss on impairment of
intangible assets 386,653 24,923 361,730 N/M
Loss on asset disposals,
net 23,378 34,016 (10,638) (31.3%)
Total operating
expenses 4,215,475 3,550,065 665,410 18.7 %
Operating Income 27,710 396,199 (368,489) (93.0)%
Investment and Other Income
(Expense)
Equity in earnings of
unconsolidated entities 91,981 90,033 1,948 2.2 %
Interest and dividend
income 5,730 13,059 (7,329) (56.1%)
Fair value adjustment of
derivative instruments --- (5,388) 5,388 N/M
Gain on disposition of
investments 16,628 137,987 (121,359) (87.9%)
Interest expense (77,190) (84,679) 7,489 8.8 %
Other, net 1,269 (710) 1,979 N/M
Total Investment and
Other Income
(Expense) 38,418 150,302 (111,884) (74.4%)
Income Before Income Taxes and
Minority Interest 66,128 546,501 (480,373) (87.9%)
Income tax expense 8,055 216,711 (208,656) (96.3%)
Income Before Minority Interest 58,073 329,790 (271,717) (82.4%)
Minority share of income, net (25,083) (15,056) (10,027) (66.6%)
Net Income $ 32,990 $ 314,734 $(281,744) (89.5%)
Basic Weighted Average Common
Shares Outstanding 87,457 87,730 (273) (0.3%)
Basic Earnings Per Share $ 0.38 $ 3.59 $ (3.21) (89.4%)
Diluted Weighted Average Common
Shares Outstanding 87,754 88,481 (727) (0.8%)
Diluted Earnings Per Share $ 0.38 $ 3.56 $ (3.18) (89.3%)
N/M - Percentage change not meaningful
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
ASSETS
December 31, December 31,
2008 2007
Current Assets
Cash and cash equivalents $ 170,996 $ 204,533
Accounts receivable from customers and other 419,619 435,497
Marketable equity securities --- 16,352
Inventory 116,564 100,990
Prepaid income taxes 22,515 ---
Prepaid expenses 51,645 41,588
Net deferred income tax asset 19,481 18,566
Other current assets 14,227 16,227
815,047 833,753
Investments
Licenses 1,433,415 1,482,446
Goodwill 494,279 491,316
Customer lists, net 8,936 15,375
Investments in unconsolidated entities 156,637 157,693
Notes and interest receivable--long-term 4,297 4,422
2,097,564 2,151,252
Property, Plant and Equipment
In service and under construction 5,884,383 5,409,115
Less accumulated depreciation 3,264,007 2,814,019
2,620,376 2,595,096
Other Assets and Deferred Charges 33,055 31,773
Total Assets $ 5,566,042 $ 5,611,874
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, December 31,
2008 2007
Current Liabilities
Current portion of long-term debt $10,258 $---
Accounts payable
Affiliated 9,613 8,519
Trade 248,785 252,272
Customer deposits and deferred revenues 151,082 143,445
Accrued taxes 17,643 43,105
Accrued compensation 55,969 59,224
Other current liabilities 108,533 97,678
601,883 604,243
Deferred Liabilities and Credits
Net deferred income tax liability 478,106 554,412
Other deferred liabilities and credits 233,619 211,374
711,725 765,786
Long-Term Debt 996,636 1,002,293
Commitments and Contingencies
Minority Interest 49,156 43,396
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 1,339,403 1,316,042
Treasury Shares (49,493) (41,094)
Accumulated other comprehensive income --- 10,134
Retained earnings 1,828,680 1,823,022
3,206,642 3,196,156
Total Liabilities and Shareholders' Equity $5,566,042 $5,611,874
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve Months Ended December 31,
(Unaudited, dollars in thousands)
2008 2007
Cash Flows from Operating Activities
Net income $32,990 $314,734
Add (deduct) adjustments to reconcile
net income to net cash flows from
operating activities:
Depreciation, amortization and accretion 576,931 578,186
Bad debts expense 73,157 66,923
Stock-based compensation expense 15,122 14,681
Deferred income taxes, net (83,121) (26,503)
Equity in earnings of unconsolidated
entities (91,981) (90,033)
Distributions from unconsolidated entities 91,845 86,873
Minority share of income 25,083 15,056
Unrealized fair value adjustment of
derivative instruments --- 5,388
Loss on disposition of investments (16,628) (137,987)
Loss on impairment of intangibles 386,653 24,923
Loss on asset disposals, net 23,378 34,016
Noncash interest expense 1,772 1,776
Excess tax benefit from stock awards (1,151) (11,718)
Other operating activities 210 (5,538)
Changes in assets and liabilities from
operations:
Change in accounts receivable (68,039) (98,634)
Change in inventory (15,563) 16,312
Change in accounts payable - trade (4,572) 10,969
Change in accounts payable - affiliate 1,093 (5,049)
Change in customer deposits and deferred
revenues 7,628 19,935
Change in accrued taxes (34,699) 36,051
Change in accrued interest --- (1,192)
Change in other assets and liabilities 2,669 13,909
922,777 863,078
Cash Flows from Investing Activities
Additions to property, plant and equipment (585,590) (565,495)
Proceeds from disposition of investments 16,690 4,301
Cash received from divestitures 6,838 4,277
Cash paid for acquisitions and licenses (341,694) (21,478)
Proceeds from return on investments 1,335 ---
Other investing activities (1,606) (1,086)
(904,027) (579,481)
Cash Flows from Financing Activities
Issuance of notes payable 100,000 25,000
Repayment of notes payable (100,000) (60,000)
Common shares reissued, net of tax payments (2,288) 10,073
Common shares repurchased (28,366) (87,902)
Excess tax benefit from exercise of
stock awards 1,151 11,718
Capital distributions to minority partners (19,676) (10,866)
Other financing activities (3,108) 1
(52,287) (111,976)
Net Increase (Decrease) in Cash and
Cash Equivalents (33,537) 171,621
Cash and Cash Equivalents
Beginning of period 204,533 32,912
End of period $170,996 $204,533
SOURCE United States Cellular Corporation
CONTACT: Mark A. Steinkrauss, Vice President, Corporate Relations, +1-312-592-5384, mark.steinkrauss@teldta.com,
or Julie D. Mathews, Manager, Investor Relations, +1-312-592-5341, julie.mathews@teldta.com,
both for United States Cellular Corporation
Web site: http://www.uscellular.com
(TDS USM TDS.S)