Data revenues increase 28 percent; postpay churn reduced to 1.4 percent
CHICAGO, May 10, 2010 /PRNewswire via COMTEX/ --Note: Comparisons are year over year unless otherwise noted.
1Q 2010 Highlights
- 24,000 retail net additions, reflecting a gain of 33,000 prepaid customers and a loss of 9,000 postpay customers.
- Service revenues of $965.2 million decreased 2 percent due to reductions in voice and inbound roaming revenues, offset by higher data revenues.
- 28 percent increase in data revenues to $201.3 million, representing 21 percent of total service revenues.
- Retail service ARPU (average revenue per unit) increased to $46.99 from $46.87.
- Retail postpay churn of 1.4 percent; postpay customers comprised 95 percent of retail customers.
- 5 percent increase in cell sites in service to 7,310.
- Repurchased 127,500 common shares for $5.2 million.
As previously announced, U.S. Cellular will hold a teleconference on May 10, 2010, at 9:30 am CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com or uscellular.com.
United States Cellular Corporation (NYSE: USM) reported service revenues of $965.2 million for the first quarter of 2010, a 2 percent decrease from $983.6 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $48.2 million and $0.55, respectively, for the first quarter of 2010, compared to $84.5 million and $0.97, respectively, in the comparable period one year ago.
"U.S. Cellular's commitment to providing excellent communications experiences including superior data services delivered results in important areas," said John E. Rooney, U.S. Cellular president and CEO. "Data revenues grew 28 percent due to the continuing rapid adoption of smartphones and premium phones, and the increased data use related to these phones, as well as to overall increases in text and picture messaging. The growth in data revenues partially offset the effect of lower voice revenues and inbound roaming revenues.
"We also achieved a reduction in churn, as customers responded well to our high-quality services and wide range of feature-rich handsets, and to our Battery Swap and Overage Protection programs, demonstrating that we understand our customers' needs and exceed their expectations.
"As we expand 3G availability and add to our portfolio of smartphones, including two new Android phones--one from HTC and an exclusive from Samsung, we expect data revenues to continue to grow and to comprise an ever larger share of service revenues.
"Though postpay customers remain our primary focus, we are executing on growth opportunities in the prepaid segment. The improved prepaid additions this quarter are proof that we provide outstanding communications experiences for all of our customers. To build on this success, we significantly enhanced our prepaid offerings at the end of the quarter by adding new data services such as picture messaging, applications such as ring tones and games, e-mail and web services.
"Also, as part of our major enablement initiatives, we upgraded our campaign management system to facilitate more targeted and effective direct mail campaigns. Though profitability for the quarter was impacted by planned expenditures related to these initiatives, we expect that the initiatives will ultimately reduce operational expenses and support our customer-focused strategy over the long term."
Guidance
Guidance for the year ending Dec. 31, 2010 as of May 10, 2010 is as follows. Guidance is unchanged from Feb. 25, 2010 except that the company has commenced guidance on adjusted OIBDA. There can be no assurance that final results will not differ materially from this guidance.
Service revenues $3,975-$4,075 million
Adjusted OIBDA(1) $850-$950 million
Operating income $250-$350 million
Depreciation, amortization and
accretion(2) Approx. $600 million
Capital expenditures Approx. $600 million
(1) Defined as operating income excluding the effects of:
depreciation, amortization and accretion (OIBDA); the net gain or
loss on asset disposals (if any); and the loss on impairment of
intangible assets (if any). This amount may also be commonly
referred to by management as operating cash flow. This amount should
not be confused with cash flows from operating activities, which is
a component of the consolidated statement of cash flows.
(2) Includes estimated losses on disposals of assets but does not
include an estimate for loss on impairment of intangible assets
since this cannot be predicted.
The foregoing guidance represents the views of management as of May 10, 2010 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 May 10, 2010 at 9:30 a.m. CDT.
Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of 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 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 approximately 6.1 million customers in 26 states. The Chicago-based company employed approximately 8,900 full-time equivalent associates as of March 31, 2010. At the end of the quarter, Telephone and Data Systems, Inc. owned 82 percent of U.S. Cellular.
Visit uscellular.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
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 its markets; the economy; competition; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company; and the ability to obtain or maintain roaming arrangements with other carriers. 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.
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
Quarter Ended 3/31/2010 12/31/2009 9/30/2009
--------- ---------- ---------
Total population
Consolidated markets (1) 90,468,000 89,712,000 85,118,000
Consolidated operating
markets (1) 46,546,000 46,306,000 46,306,000
Market penetration at end of
period
Consolidated markets (2) 6.8% 6.8% 7.2%
Consolidated operating
markets (2) 13.2% 13.3% 13.2%
All customers
Total at end of period 6,147,000 6,141,000 6,131,000
Gross additions 358,000 399,000 386,000
Net additions (losses) 6,000 10,000 (24,000)
Retail customers
Total at end of period 5,768,000 5,744,000 5,705,000
Gross additions 305,000 354,000 351,000
Net retail additions (losses)(3) 24,000 39,000 (6,000)
Net postpay additions (losses) (9,000) 26,000 8,000
Net prepaid additions (losses) 33,000 13,000 (14,000)
Service revenues components
(000s)
Voice and other retail service $663,939 $676,554 $690,106
Data service 201,280 189,759 174,286
------- ------- -------
Total retail service $865,219 $866,313 $864,392
Inbound roaming 51,942 61,728 68,767
Other 48,027 56,814 50,289
------ ------ ------
Total service revenues (000s)(4) $965,188 $984,855 $983,448
Divided by average customers
(000s) 6,137 6,139 6,138
Divided by three months in each
quarter 3 3 3
--- --- ---
Average monthly revenue per
unit (5) $52.42 $53.48 $53.41
Voice and other retail
service (5) $36.06 $36.75 $37.48
Data service (5) $10.93 $10.30 $9.46
------ ------ -----
Total retail service (5) $46.99 $47.05 $46.94
Inbound roaming (5) $2.82 $3.35 $3.73
Other (5) $2.61 $3.08 $2.74
Postpay churn rate (6) 1.4% 1.6% 1.7%
Capital expenditures (000s) $121,500 $189,000 $128,900
Cell sites in service 7,310 7,279 7,161
Quarter Ended 6/30/2009 3/31/2009
--------- ---------
Total population
Consolidated markets (1) 83,726,000 83,726,000
Consolidated operating markets(1) 46,306,000 46,306,000
Market penetration at end of
period
Consolidated markets (2) 7.4% 7.5%
Consolidated operating markets(2) 13.3% 13.5%
All customers
Total at end of period 6,155,000 6,243,000
Gross additions 317,000 404,000
Net additions (losses) (88,000) 47,000
Retail customers
Total at end of period 5,711,000 5,770,000
Gross additions 286,000 366,000
Net retail additions (losses)(3) (59,000) 63,000
Net postpay additions (losses) (32,000) 60,000
Net prepaid additions (losses) (27,000) 3,000
Service revenues components (000s)
Voice and other retail service $708,609 $718,885
Data service 161,955 156,954
------- -------
Total retail service $870,564 $875,839
Inbound roaming 62,223 60,057
Other 41,323 47,719
------ ------
Total service revenues (000s)(4) $974,110 $983,615
Divided by average customers
(000s) 6,199 6,229
Divided by three months in each
quarter 3 3
--- ---
Average monthly revenue per
unit (5) $52.38 $52.64
Voice and other retail service(5) $38.11 $38.47
Data service (5) $8.71 $8.40
----- -----
Total retail service (5) $46.82 $46.87
Inbound roaming (5) $3.35 $3.21
Other (5) $2.21 $2.56
Postpay churn rate (6) 1.7% 1.5%
Capital expenditures (000s) $91,200 $137,700
Cell sites in service 7,043 6,942
(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) 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) Calculated by adding net postpay additions (losses) and net
prepaid additions (losses).
(4) U.S. Cellular revised previously reported Service revenues for
all quarterly periods in 2009 to reflect certain corrections. See
"Revision of Prior Period Amounts" section for additional details.
Previously reported Service revenues were $986.3 million, $984.9
million, $974.8 million and $981.9 million for the three month
periods ended December 31, September 30, June 30 and March 31, 2009,
respectively.
(5) Calculated by dividing the components of service revenues by the
average customers and number of months in the quarter.
(6) 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 March 31,
(Unaudited, dollars and shares in thousands, except per share amounts)
2010 2009 (1)
---- -------
Operating revenues
Service $965,188 $983,615
Equipment sales 58,849 70,890
------ ------
Total operating revenues 1,024,037 1,054,505
--------- ---------
Operating expenses
System operations (excluding
Depreciation, amortization and
accretion reported below) 207,077 199,883
Cost of equipment sold 161,105 185,701
Selling, general and administrative 428,661 408,159
Depreciation, amortization and
accretion 143,233 137,878
Loss on asset disposals, net 5,176 3,945
----- -----
Total operating expenses 945,252 935,566
------- -------
Operating income 78,785 118,939
Investment and other income (expense)
Equity in earnings of unconsolidated
entities 24,694 25,327
Interest and dividend income 1,021 477
Interest expense (16,286) (19,287)
Other, net (65) 280
--- ---
Total investment and other income
(expense) 9,364 6,797
----- -----
Income before income taxes 88,149 125,736
Income tax expense 34,198 35,226
------ ------
Net income 53,951 90,510
Less: Net income attributable to
noncontrolling interests,
net of tax (5,719) (6,008)
------ ------
Net income attributable to U.S.
Cellular shareholders $48,232 $84,502
======= =======
Basic weighted average shares
outstanding 86,576 87,196
Basic earnings per share attributable
to U.S. Cellular shareholders $0.56 $0.97
===== =====
Diluted weighted average shares
outstanding 86,978 87,446
Diluted earnings per share attributable
to U.S. Cellular shareholders $0.55 $0.97
===== =====
Increase (Decrease)
-------------------
Amount Percent
------ -------
Operating revenues
Service $(18,427) (2%)
Equipment sales (12,041) (17%)
-------
Total operating revenues (30,468) (3%)
-------
Operating expenses
System operations (excluding
Depreciation, amortization and
accretion reported below) 7,194 4%
Cost of equipment sold (24,596) (13%)
Selling, general and administrative 20,502 5%
Depreciation, amortization and
accretion 5,355 4%
Loss on asset disposals, net 1,231 31%
-----
Total operating expenses 9,686 1%
-----
Operating income (40,154) (34%)
Investment and other income (expense)
Equity in earnings of unconsolidated
entities (633) (2%)
Interest and dividend income 544 >100%
Interest expense 3,001 16%
Other, net (345) >(100)%
----
Total investment and other income
(expense) 2,567 38%
-----
Income before income taxes (37,587) (30%)
Income tax expense (1,028) (3%)
------
Net income (36,559) (40%)
Less: Net income attributable to
Noncontrolling interests, net of tax 289 5%
---
Net income attributable to U.S.
Cellular shareholders $(36,270) (43%)
========
Basic weighted average shares
outstanding (620) (1%)
Basic earnings per share attributable
To U.S. Cellular shareholders $(0.41) (42%)
======
Diluted weighted average shares
outstanding (468) (1%)
Diluted earnings per share attributable
To U.S. Cellular shareholders $(0.42) (43%)
======
(1) Amounts have been revised. See "Revision of Prior Period Amounts"
section for additional details.
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
ASSETS
March 31, December 31,
2010 2009 (1)
---- -------
Current assets
Cash and cash equivalents $289,658 $294,411
Short-term investments 25,534 330
Accounts receivable from customers and other 404,553 425,057
Inventory 153,278 152,556
Prepaid income taxes - 717
Prepaid expenses 72,829 63,463
Net deferred income tax asset 21,570 21,570
Other current assets 55,250 51,013
------ ------
1,022,672 1,009,117
Investments
Licenses 1,438,800 1,435,000
Goodwill 494,737 494,737
Customer lists 2,892 4,083
Investments in unconsolidated entities 178,903 161,481
Notes and interest receivable - long-term 4,179 4,214
----- -----
2,119,511 2,099,515
Property, plant and equipment
In service and under construction 5,975,704 5,884,307
Less: accumulated depreciation 3,397,244 3,282,969
--------- ---------
2,578,460 2,601,338
Other assets and deferred charges 38,393 38,776
Total assets $5,759,036 $5,748,746
(1) Amounts have been revised. See "Revision of Prior Period Amounts"
section for additional details.
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
2010 2009 (1)
---- -------
Current liabilities
Current portion of long-term debt $84 $76
Accounts payable
Affiliated 8,889 14,732
Trade 256,913 296,288
Customer deposits and deferred revenues 140,651 140,248
Accrued taxes 83,876 52,026
Accrued compensation 38,220 62,242
Other current liabilities 90,602 92,884
------ ------
619,235 658,496
Deferred liabilities and credits
Net deferred income tax liability 504,822 513,151
Other deferred liabilities and credits 268,795 262,412
------- -------
773,617 775,563
Long-term debt 867,662 867,522
Commitments and contingencies
Noncontrolling interests with mandatory
redemption features 752 727
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 1,360,712 1,356,322
Treasury shares (72,194) (69,616)
Retained earnings 2,066,066 2,019,957
--------- ---------
Total U.S. Cellular shareholders' equity 3,442,658 3,394,737
Noncontrolling interests 55,112 51,701
------ ------
Total equity 3,497,770 3,446,438
Total liabilities and equity $5,759,036 $5,748,746
(1) Amounts have been revised. See "Revision of Prior Period Amounts"
section for additional details.
United States Cellular Corporation
Consolidated Statement of Cash Flows
Three Months Ended March 31,
(Unaudited, dollars in thousands)
2010 2009 (1)
---- -------
Cash flows from operating activities
Net income $53,951 $90,510
Add (deduct) adjustments to reconcile net income to
net cash flows from operating activities
Depreciation, amortization and accretion 143,233 137,878
Bad debts expense 19,193 18,704
Stock-based compensation expense 3,830 2,964
Deferred income taxes, net (2,419) 2,342
Equity in earnings of unconsolidated entities (24,694) (25,327)
Distributions from unconsolidated entities 7,238 5,908
Loss on asset disposals, net 5,176 3,945
Other operating activities 274 440
Changes in assets and liabilities from operations
Accounts receivable 1,313 (18,132)
Inventory (722) 7,204
Accounts payable - trade (39,375) (30,754)
Accounts payable - affiliate (5,843) (2,358)
Customer deposits and deferred revenues 403 (1,579)
Accrued taxes 29,860 42,144
Accrued interest 9,221 9,337
Other assets and liabilities (48,387) (57,664)
------- -------
152,252 185,562
------- -------
Cash flows from investing activities
Additions to property, plant and equipment (121,514) (137,741)
Cash paid for acquisitions and licenses (3,800) (12,127)
Cash paid for investments (25,000) (278)
Other investing activities 356 518
--- ---
(149,958) (149,628)
-------- --------
Cash flows from financing activities
Common shares reissued for benefit plans, net of tax
payments 486 356
Common shares repurchased (5,186) (13,291)
Distributions to noncontrolling interests (2,284) (2,101)
Other financing activities (63) (97)
--- ---
(7,047) (15,133)
------ -------
Net increase (decrease) in cash and cash equivalents (4,753) 20,801
Cash and cash equivalents
Beginning of period 294,411 170,996
------- -------
End of period $289,658 $191,797
======== ========
(1) Amounts have been revised. See "Revision of Prior Period Amounts"
section for additional details.
United States Cellular Corporation
Financial Measures and Reconciliations
Three Months Ended March 31,
(Unaudited, dollars in thousands)
2010 2009 (5)
---- -------
Service revenues $965,188 $983,615
Operating income 78,785 118,939
Add:
Depreciation,
amortization and
accretion $143,233 $137,878
Loss on asset disposals 5,176 3,945
----- -----
Adjusted OIBDA (1)(4) $227,194 $260,762
Adjusted OIBDA margin(2) 23.5% 26.5%
2010 2009
---- ----
Cash flows from operating
activities $152,252 $185,562
Deduct:
Capital expenditures 121,514 137,741
------- -------
Free cash flow (3) $30,738 $47,821
------- -------
(1) Adjusted OIBDA is defined as operating income excluding the
effects of: depreciation, amortization, and accretion (OIBDA); the
net gain or loss on asset disposals (if any); and the loss on
impairment of intangible assets (if any). This amount may also be
commonly referred to by management as operating cash flow. This
amount should not be confused with cash flows from operating
activities, which is a component of the consolidated statement of
cash flows.
(2) Defined as Adjusted OIBDA divided by service revenues. Equipment
revenues are excluded from the denominator of the calculation since
equipment is generally sold at a net negative margin, and the
equipment subsidy is effectively a cost for purposes of assessing
business results. U.S. Cellular believes that this calculation
method is consistent with the method used by certain investors to
assess U.S. Cellular's business results. Adjusted OIBDA margin may
also be commonly referred to by management as operating cash flow
margin.
(3) Defined as cash flows from operating activities minus capital
expenditures. Free cash flow is a Non-GAAP financial measure. U.S.
Cellular believes that free cash flow as reported by U.S. Cellular
is useful to investors and other users of its financial information
in evaluating the amount of cash generated by business operations,
after consideration of capital expenditures.
(4) Excludes the net gain or loss on asset disposals and loss on
impairment of intangible assets, if any, in order to show operating
results on a more comparable basis from period to period. U.S.
Cellular does not intend to imply that any of such amounts that are
excluded are non-recurring, infrequent or unusual. Accordingly,
you should be aware that U.S. Cellular may incur such amounts in the
future.
(5) Previously reported GAAP amounts have been revised. See "Revision
of Prior Period Amounts" section for additional details.
Revision of Prior Period Amounts
In preparing its financial statements for the three months ended March 31, 2010, U.S. Cellular discovered certain errors related to accounting for service revenues and sales tax liabilities. These errors resulted in the overstatement of service revenues and understatement of sales tax liabilities for 2009, 2008 and 2007. In accordance with
SEC Staff Accounting Bulletin Nos. 99 and 108
("SAB 99 and SAB 108"), U.S. Cellular evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports was not required. However, if the adjustments to correct the cumulative errors had been recorded in the first quarter 2010, U.S. Cellular believes the impact would have been significant to the first quarter and would impact comparisons to prior periods. As permitted by SAB 108, U.S. Cellular revised in the current filing and plans to revise in the next filings of its quarterly and annual consolidated financial statements previously reported annual and quarterly results for 2009, 2008 and 2007 for these immaterial amounts. In addition to recording these adjustments, U.S. Cellular recorded and plans to record other adjustments to prior-year amounts to correct other immaterial items, which include adjustments related to rent expense as disclosed in U.S. Cellular's 2009 Form 10-K.
The Consolidated Balance Sheet at December 31, 2009 was revised to reflect the cumulative effect of these errors which resulted in a decrease to Retained earnings of $9.6 million. Also, in accordance with SAB 108, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows have been revised as follows:
Consolidated Statement of Operations -- Three Months Ended March 31, 2009
As
previously
(Dollars in thousands) reported Adjustment Revised
-------- ---------- -------
Service revenues $981,874 $1,741 $983,615
Total operating revenues 1,052,764 1,741 1,054,505
System operations expenses
(excluding Depreciation,
amortization and accretion) 200,003 (120) 199,883
Selling, general and
administrative expenses 412,448 (4,289) 408,159
Depreciation, amortization and
accretion 137,651 227 137,878
Loss on asset disposals, net 2,191 1,754 3,945
Total operating expenses 937,994 (2,428) 935,566
Operating income 114,770 4,169 118,939
Interest expense (19,022) (265) (19,287)
Total investment and other income
(expense) 7,062 (265) 6,797
Income before income taxes 121,832 3,904 125,736
Income tax expense 31,232 3,994 35,226
Net income 90,600 (90) 90,510
Net income attributable to U.S.
Cellular shareholders 84,592 (90) 84,502
Basic earnings attributable to
U.S. Cellular shareholders 0.97 - 0.97
Diluted earnings attributable to
U.S. Cellular shareholders 0.97 - 0.97
Consolidated Balance Sheet -- December 31, 2009
As
previously
(Dollars in thousands) reported Adjustment Revised
-------- ---------- -------
Accounts receivable from customers
and other $421,528 $3,529 $425,057
Total current assets 1,005,588 3,529 1,009,117
Total assets 5,745,217 3,529 5,748,746
Customer deposits and deferred
revenues 143,760 (3,512) 140,248
Accrued taxes 34,583 17,443 52,026
Total current liabilities 644,565 13,931 658,496
Net deferred income tax liability 513,994 (843) 513,151
Total deferred liabilities and
credits 776,406 (843) 775,563
Retained earnings 2,029,516 (9,559) 2,019,957
Total U.S. Cellular shareholders'
equity 3,404,296 (9,559) 3,394,737
Total equity 3,455,997 (9,559) 3,446,438
Total liabilities and equity 5,745,217 3,529 5,748,746
Consolidated Statement of Cash Flows -- Three Months Ended March 31, 2009
As
previously
(Dollars in thousands) reported Adjustment Revised
-------- ---------- -------
Net income $90,600 $(90) $90,510
Depreciation, amortization and
accretion 137,651 227 137,878
Deferred income taxes, net 1,673 669 2,342
Loss on asset disposals, net 2,191 1,754 3,945
Change in accounts receivable (13,468) (4,664) (18,132)
Change in customer deposits and
deferred revenues (1,392) (187) (1,579)
Change in accrued taxes 39,591 2,553 42,144
Change in other assets and
liabilities (57,402) (262) (57,664)
Cash flows from operating activities 185,562 - 185,562
SOURCE U.S. Cellular