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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File Number 1-9712
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UNITED STATES CELLULAR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 62-1147325
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8410 West Bryn Mawr, Suite 700, Chicago, Illinois 60631
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 399-
8900
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 28, 1995
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Common Shares, $1 par value 49,845,192 Shares
Series A Common Shares, $1 par value 33,005,877 Shares
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<PAGE>
UNITED STATES CELLULAR CORPORATION
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1ST QUARTER REPORT ON FORM 10-Q
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INDEX
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Page No.
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Part I. Financial Information
Management's Discussion and Analysis of
Results of Operations and Financial Condition 2-14
Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994 15
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 16
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 17-18
Notes to Consolidated Financial Statements 19-22
Part II. Other Information 23
Signatures 24
<PAGE>
PART I. FINANCIAL INFORMATION
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UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
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AND FINANCIAL CONDITION
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RESULTS OF OPERATIONS
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Three Months Ended 3/31/95 Compared to Three Months Ended
3/31/94
United States Cellular Corporation (the "Company" or "USM")
owns, operates and invests in cellular telephone systems
throughout the United States. USM owns or has the right to
acquire both majority and minority interests in 210 cellular
markets at March 31, 1995, representing 25,245,000 population
equivalents ("pops"). USM managed the operations of 147
cellular markets at March 31, 1995. The Company has agreed to
divest its controlling interests in 12 of these markets and
its noncontrolling interest in one other market and manage the
operations of 15 additional markets. In total, USM expects to
manage 149 markets under agreements in place as of March 31,
1995. Interests in the 61 remaining markets are or will be
managed by others. All 61 of these markets were served by
operational systems at March 31, 1995. The following table is
a summary of the Company's markets and consolidated
operations.
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<PAGE>
UNITED STATES CELLULAR CORPORATION
Three Months Ended
March 31, March 31,
1995 1994
Majority-Owned, Managed
and Consolidated Markets:
(1)
Population equivalents
(in thousands) (2) 18,266 18,775
Total population (in
thousands) 22,061 19,927
Customers 478,000 294,000
Market penetration 2.17% 1.48%
Markets in operation 135 120
Cell sites in service 841 566
Average monthly revenue
per customer $71 $76
Churn rate per month 2.1% 2.3%
Marketing cost per net
customer addition $646 $711
Minority-Owned and
Managed Markets: (3)
Population equivalents
(in thousands) (2) 686 996
Markets in operation 11 19
Markets to be Managed,
Net of Markets to be
Divested: (4)
Population equivalents
(in thousands) (2) 2,477 748
Markets 3 4
Total Markets Managed and
to be Managed by USM:
Population equivalents
(in thousands) (2) 21,429 20,519
Markets 149 143
Markets Managed by
Others: (5)
Population equivalents
(in thousands) (2) 3,816 3,458
Markets in operation 61 62
Total Markets:
Population equivalents
(in thousands) (2) 25,245 23,977
Markets 210 205
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<PAGE>
(1) Includes one market managed by a third party.
(2) 1994 Donnelley Marketing Service estimates are used for
both periods. Includes population equivalents relating
to interests which are acquirable in the future.
(3) Includes two markets where the Company has the right to
acquire an interest but did not own an interest at the
respective dates; excludes one market in 1995 which will
become a market managed by others.
(4) "Markets to be Managed" represents markets which are
managed by third parties until the Company acquires a
majority interest in the markets. In 1995, represents
the net of 15 markets to be managed and 12 markets which
are currently majority-owned and managed and will be
divested.
(5) Represents markets in which the Company owns or has the
right to acquire a minority interest and which are
managed by others.
The Company's consolidated results of operations include 100%
of the revenues and expenses of the systems serving
majority-owned and managed markets plus its corporate office
operations. The consolidated results of operations for the
quarter ended March 31, 1995 include 135 markets with a total
population of 22.1 million, compared to 120 markets with a
total population of 19.9 million for the first quarter of
1994.
Investment income includes the Company's share of the net
income or loss of each of the minority-owned and managed
markets and also includes the Company's share of the net
income or loss of each of those markets managed by others for
which the Company follows the equity method of accounting.
USM follows the cost method of accounting for its remaining
interests in markets managed by others. This information is
shown in the table below.
March 31,
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1995 1994
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Minority-owned and Managed 9 17
Managed by Others - Equity Method 18 16
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Total Markets Included in Investment Income 27 33
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Managed by Others - Cost Method 43 46
==== ====
Operating results for the first three months of 1995 primarily
reflect improvement in the Company's more established markets
(those 120 markets consolidated at March 31, 1994), the
acquisition of majority interests in 14 operational markets,
the start-up expenses associated with initiating operations in
two additional majority-owned and managed markets and the
divestiture of one market since March 31, 1994. Operating
revenues, driven primarily by increases in customers served,
rose $33.5 million, or 51%. Operating expenses rose $24.4
million, or 36%. Operating cash flow increased $14.0 million,
or 102%.
Investment and other income increased $23.1 million, due
primarily to gains on the sales of cellular interests totaling
$18.5 million and an increase in investment income.
Investment income increased $4.5 million in 1995, mostly due
to improved results in markets managed by others. Interest
expense increased $3.7 million as a result of both a 39%
increase in average debt balances and higher interest rates.
Net income totaled $23.6 million in 1995 compared to a net
loss of $1.8 million in 1994, reflecting gains on the sale of
cellular interests, improved operating results, increased
investment income and increased interest expense. On a
comparable basis, excluding the effect of the 1995 gains on
sales of cellular interests (net of tax), net income increased
to $6.4 million in 1995 as compared to the net loss of $1.8
million in 1994.
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<PAGE>
The Company expects to add a net of five markets to
consolidated operations by the end of 1995, through the
acquisition of majority interests in 17 operational markets
and the divestiture of 12 markets currently majority-owned and
managed by the Company. Of the 17 majority interests to be
acquired, the Company currently owns a minority interest in
and manages two of these markets. The Company expects to
acquire a majority interest in these two markets and 15
additional markets by the end of 1995.
The Company anticipates increasing growth in cellular units in
service and revenues as it continues its expansion and
development programs. Marketing and system operations
expenses associated with this expansion will most likely
reduce the rate of growth in operating cash flow and operating
income over the next several quarters. The Company
anticipates that the seasonality of revenue streams and
operating expenses may affect the Company's operating and net
results over the next several quarters.
Operating Revenues
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Operating revenues totaled $99.7 million in 1995, up $33.5
million, or 51%, over 1994. Market acquisitions and start-ups
increased operating revenues $5.8 million, or 9%, in 1995.
This "acquisitions and start-ups" effect is defined as: (i)
the operations of markets added to the consolidated group in
1995 since their respective dates of acquisition, plus (ii)
for any market added to the consolidated group in 1994, the
portion of 1995 operations which correspond to that portion of
1994 prior to the market's addition to the consolidated group.
Service revenues primarily consist of: (i) charges for access,
airtime and value-added services provided to the Company's
local retail customers who use the local systems operated by
the Company; (ii) charges to customers of other systems who
use the Company's cellular systems when roaming ("inbound
roaming"); and (iii) charges for long-distance calls made on
the Company's systems. Service revenues totaled $96.4 million
in 1995, up $33.0 million, or 52%, over 1994. The increase
was primarily due to the growing number of local retail
customers and the growth in inbound roaming revenue.
Acquisitions and start-ups increased service revenues $5.6
million, or 9%, in 1995. Average monthly service revenue per
customer totaled $71 in 1995 compared to $76 in 1994. The 6%
decrease in average monthly service revenue per customer in
1995 was primarily a result of the decline in average local
minutes of use per local retail customer and a decrease in per
customer inbound roaming revenue. The Company anticipates
that average monthly service revenue per customer unit will
continue to decline as its distribution channels provide
additional customers who generate fewer local minutes of use
and as roaming revenues grow more slowly.
Revenue from local retail customers' usage of USM's systems
increased $20.0 million, or 52%, in 1995. Growth in the
number of customers in the systems serving the Company's
consolidated markets was the primary reason for the increase
in local retail revenue. The number of customers increased
63% to 478,000 at March 31, 1995 from 294,000 at March 31,
1994. Excluding the effect of acquisitions and dispositions,
the Company's consolidated markets added 158,000 customers
since March 31, 1994. Of these additions, 150,000 were in
markets in service and consolidated at March 31, 1994,
representing a 51% increase over the 294,000 customers served
at that date. While the percentage increase is expected to be
lower in future periods, management anticipates that the total
number of net customer additions will increase. Acquisitions
and start-ups increased local revenue $2.9 million, or 7%, in
1995.
Average monthly local retail revenue per customer declined to
$43 in 1995 from $46 in 1994. Monthly local minutes of use
per customer averaged 86 in 1995 compared to 89 in 1994. This
decline in average local minutes of use follows an industry-
wide trend and is believed to be related to the tendency of
the early customers in a market to be the heaviest users. It
also
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<PAGE>
reflects the Company's and the industry's continued
penetration of the consumer market, which tends to include
more lower-usage customers.
Inbound roaming revenue increased $9.8 million, or 50%, in
1995. This increase was attributable to the rise in the
number of customers from other systems using the Company's
systems when roaming. Also contributing were the increased
number of Company-managed systems and cell sites within those
systems. Monthly inbound roaming revenue per customer
averaged $22 in 1995 and $24 in 1994. Acquisitions and start-
ups increased inbound roaming revenue $2.2 million, or 11%, in
1995.
Long-distance revenue increased $2.2 million, or 49%, in 1995
as the volume of long-distance calls billed by the Company
increased. Monthly long-distance revenue per customer
averaged $5 in 1995 and 1994. Acquisitions and start-ups
increased long-distance revenue $447,000, or 10%, in 1995.
Equipment sales revenues totaled $3.3 million in 1995, up
$476,000, or 17%, over 1994. Equipment sales reflect the sale
of 54,400 and 28,700 cellular telephone units in 1995 and
1994, respectively, plus installation and accessories revenue.
The average revenue per unit was $62 in 1995 compared to $100
in 1994. The average revenue per unit decline partially
reflects the Company's decision to reduce sales prices on
cellular telephones to increase the number of customers, to
maintain its market position and to meet competitive prices as
well as to reflect reduced manufacturers' prices.
Acquisitions and start-ups increased equipment sales revenues
$209,000, or 7%, in 1995.
Operating Expenses
------------------
Operating expenses totaled $91.7 million in 1995, up $24.4
million, or 36%, over 1994. Market acquisitions and start-ups
increased operating expenses $4.6 million, or 7%, in 1995.
System operations expenses increased $3.5 million, or 36%, in
1995 as a result of increases in customer usage expenses and
costs associated with operating the Company's increased number
of cellular systems and with the growing number of cell sites
within those systems. Costs are expected to continue to
increase as the number of cell sites within the Company's
systems grows. Customer usage expenses represent charges from
other telecommunications service providers for USM's
customers' use of their facilities as well as for the
Company's inbound roaming traffic on these facilities, offset
somewhat by pass-through roaming revenue. These expenses also
include local interconnection to the landline network, toll
charges and roaming expenses from the Company's customers' use
of systems other than their local systems. Customer usage
expenses were $5.4 million in 1995 compared to $4.1 million in
1994, and represented 6% of service revenues in 1995 and 1994.
Maintenance, utility and cell site expenses grew $2.2 million,
or 39%, in 1995, primarily reflecting an increase in the
number of cell sites in the systems serving all majority-owned
and managed markets, from 566 in 1994 to 841 in 1995.
Acquisitions and start-ups increased system operations
expenses $681,000, or 7%, in 1995.
Marketing and selling expenses increased $5.9 million, or 42%,
in 1995. Marketing and selling expenses primarily consist of
salaries, commissions and expenses of field sales and retail
personnel and offices, agent commissions, promotional
expenses, local advertising and public relations expenses.
The 1995 increase was primarily due to a 57% rise in the
number of gross customer activations (excluding acquisitions
and divestitures), to 72,000 in the first three months of 1995
from 46,000 in 1994. Cost per gross customer addition
decreased 8% to $386 in 1995 from $417 in 1994. Excluding
acquisitions and divestitures, the Company added 43,000 net
new customers in 1995 compared to 27,000 in 1994, a 59%
increase. The churn rate decreased to
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2.1% for the first three months of 1995 from 2.3% in 1994.
Acquisitions and start-ups increased marketing and selling
expenses $819,000, or 6%, in 1995.
Cost of equipment sold increased $3.2 million, or 40%, in
1995. The increase reflects the growth in unit sales related
to both the rise in gross customer activations made through
the Company's direct and retail distribution channels, offset
somewhat by falling manufacturer prices per unit. The average
cost to the Company of a telephone unit sold, including
accessories and installation, was $206 in 1995 compared to
$279 in 1994. Acquisitions and start-ups increased cost of
goods sold $508,000, or 6%, in 1995.
General and administrative expenses increased $6.9 million, or
33%, in 1995. These expenses include the costs of operating
the Company's local business offices and its corporate
expenses. This increase includes the effects of an increase
in the number of consolidated markets, an increase in expenses
required to serve the growing customer base in existing
markets and an expansion of both local administrative office
and corporate staff, necessitated by growth in the Company's
business and the start-up of and acquisition of additional
operations. The Company is using an ongoing clustering
strategy to combine local operations wherever feasible in
order to gain operational efficiencies and reduce its
administrative expenses. Acquisitions and start-ups increased
direct field-related general and administrative expenses $1.4
million, or 7%, in 1995.
Depreciation expense increased $3.6 million, or 42%, in 1995,
reflecting an increase in the average fixed asset balance of
54% since the first quarter of 1994. Acquisitions and start-
ups increased depreciation expense $584,000, or 7%, in 1995.
Amortization of intangibles increased $1.3 million, or 22%, in
1995, primarily due to an increase in license costs as a
result of the acquisition of or the commencement of service in
16 markets since March 31, 1994. License costs related to
consolidated markets increased $123.9 million, or 14%, since
March 31, 1994. Acquisitions and start-ups increased
amortization of intangibles $543,000, or 9%, in 1995.
Operating Income (Loss) before Minority Share
---------------------------------------------
Operating income before minority share totaled $8.1 million in
1995 compared to a loss of $1.0 million in 1994. The
operating margin (as a percent of service revenues) improved
to 8% in 1995 from (2%) in 1994. The 1995 operating income
reflects improved results in the more established markets and
increased revenues resulting from growth in the number of
customers served by the Company's systems, partially offset by
costs associated with the growth of the Company's operations
and increased losses on equipment sales. Acquisitions and
start-ups increased operating income before minority share
$1.2 million, or 119%, in 1995.
The Company expects service revenues to continue to grow
during the remainder of 1995 as it adds customers and cell
sites to its existing systems, realizes a full year of
revenues from customers and cell sites added in 1994 and
completes acquisitions of operational systems. Additionally,
the Company expects expenses to increase significantly during
the remainder of 1995 as it incurs costs for markets and cell
sites added in 1994 and 1995, incurs costs associated with
customer and system growth and acquires existing markets. At
least five markets are expected to be added to consolidated
operations before the end of 1995, through the acquisition of
majority interests in 17 operational markets and the
divestiture of 12 majority-owned and managed markets. The
Company anticipates increasing growth in cellular units in
service and revenues as it continues its expansion and
development programs. Marketing and system operations
expenses associated with this expansion will most likely
reduce the rate of growth in operating cash flow and operating
income over the next several quarters. The Company
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<PAGE>
anticipates that the seasonality of revenue streams and
operating expenses may affect the Company's operating and net
results over the next several quarters.
Investment and Other Income
---------------------------
Investment and other income totaled $28.3 million in 1995 and
$5.3 million in 1994. Investment income was $9.7 million in
1995, a $4.5 million, or 87%, increase over 1994. The
Company's share of the income or loss from the markets managed
by others that are accounted for by the equity method totaled
$9.8 million in 1995 compared to $5.1 million in 1994. There
were 18 such markets in 1995 and 16 in 1994. The Company's
share of losses from minority-owned markets it manages totaled
$127,000 in 1995 compared to income of $71,000 in 1994. There
were nine such markets in 1995 and 17 in 1994.
Gain on sale of cellular interests of $18.5 million in 1995
reflects the sales of the Company's 100% interest in one
market, which generated a gain of $13.4 million, and its
investment interests in two other markets, which produced
aggregate gains of $5.1 million.
Interest and Income Taxes
-------------------------
Interest expense increased $3.7 million, or 93%, in 1995, on a
39% increase in the average amount of debt outstanding plus
increased interest rates. Interest expense is primarily
related to borrowings under the Revolving Credit Agreement
with Telephone and Data Systems, Inc. ("TDS") and borrowings
under a vendor financing agreement. Borrowings under the
Revolving Credit Agreement bear interest at a floating rate
equal to prime plus 1.5% (for a rate of 10.50% at March 31,
1995) and are used to finance system construction, working
capital requirements, and acquisitions of cellular interests.
Interest expense relating to the Revolving Credit Agreement
was $6.1 million in 1995 and $3.0 million in 1994. The average
amount of debt outstanding under the Revolving Credit Agree-
ment was $222.0 million in the first three months of 1995 and
$164.3 million in 1994. The average interest rate on such debt
was 11.0% in 1995 and 7.4% in 1994.
The Company has borrowings outstanding under a financing
agreement with an equipment vendor entered into in 1994. This
agreement is an amendment and restatement of a similar 1991
agreement with the same equipment vendor under which the
Company had previous borrowings outstanding. In addition to
the amounts previously borrowed under the 1991 agreement, the
Company has new borrowings outstanding under the 1994
agreement as of March 31, 1995. Borrowings under the 1991
agreement bear interest at a rate of 2.307% over the 90-day
Commercial Paper Rate of high-grade, unsecured notes (for a
rate of 8.5% at March 31, 1995). Borrowings under the 1994
agreement bear interest at a rate of 2.25% over the 90-day
Commercial Paper Rate of high-grade, unsecured notes (for a
rate of 8.5% at March 31, 1995). All borrowings under the
vendor financing agreement were used to finance certain of
USM's equipment purchases and construction costs. Interest
expense related to the vendor financing agreement was $1.6
million in 1995 and $902,000 in 1994. The average amount of
debt outstanding under the vendor financing agreement was
$91.2 million in the first three months of 1995 and $61.0
million in 1994. The average interest rate on such debt was
7.0% in 1995 and 6.0% in 1994.
Continued capital expenditures and the completion of pending
acquisitions will require additional funding over the next
few years. These funding requirements may be at least part-
ially met through additional debt, which would likely result
in increased interest expense as debt balances increase. Add-
itional borrowings also may be required to fund additional
future acquisitions and their construction and operations. See
"Financial Resources and Liquidity."
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Income tax expense was $3.2 million in 1995 and $980,000 in
1994. Income tax expense includes the federal income taxes of
majority-owned and managed subsidiaries not included in the
TDS consolidated federal income tax return. State income tax
expense in 1995 and 1994 was primarily related to subsidiaries
generating taxable income after utilization of state net
operating losses. Also in 1995, $1.3 million of state income
tax expense was generated by the gains on sales of cellular
interests. USM is included in a consolidated federal income
tax return with other members of the TDS consolidated group.
TDS and USM are parties to a Tax Allocation Agreement under
which USM is able to carry forward its losses and credits and
use them to offset any current or future income tax
liabilities to TDS. The amount of the federal net operating
loss carryforward available to offset future taxable income
aggregated approximately $165 million at December 31, 1994,
and expires between 2002 and 2009. The amount of the state
net operating loss carryforward available to offset future
taxable income aggregated approximately $227 million at
December 31, 1994, and expires between 1998 and 2009.
Net Income (Loss)
-----------------
Net income totaled $23.6 million in 1995 compared to a net
loss of $1.8 million in 1994. The 1995 improvement resulted
from gains on the sales of cellular interests, improved
operating results in the established markets and increased
investment income, partially offset by increased interest
expense. Earnings per share was $.29 in 1995 compared to
earnings per share of ($.02) in 1994, reflecting both the
improvement in net income and the increase in weighted average
Common and Series A Common Shares outstanding. Weighted
average number of Common and Series A Common Shares
outstanding for the first quarter of 1995 increased 9% over
the shares outstanding for 1994 primarily as a result of
Common Shares issued in connection with acquisitions and the
inclusion of dilutive common stock equivalents in 1995
weighted average common shares outstanding as a result of the
1995 net income. On a comparable basis, excluding the effect
of the 1995 gain on sale of cellular interests (net of tax),
net income increased to $6.4 million in 1995 from the net loss
of $1.8 million in 1994 and earnings per share increased to
$.08 in 1995 from earnings per share of ($.02) in 1994.
TDS owned an aggregate of 66,284,155 shares of common stock of
the Company at March 31, 1995, representing 81.1% of the
combined total of the Company's outstanding Common and Series
A Common Shares and 95.9% of their combined voting power.
Assuming the Company's Common Shares are issued in all
instances in which the Company has the choice to issue its
Common Shares or other consideration and assuming all
issuances of the Company's common stock to TDS and third
parties for completed and pending acquisitions and redemptions
of the Company's Preferred Stock and TDS's Preferred Shares
had been completed at March 31, 1995, TDS would have owned
79.9% of the total outstanding common stock of the Company and
controlled 95.6% of the combined voting power of both classes
of its common stock.
FINANCIAL RESOURCES AND LIQUIDITY
The Company operates a capital- and marketing-intensive
business. Rapid growth in markets operated by the Company and
customers served has caused financing requirements for
acquisitions, construction and operations to exceed internally
generated cash flow. The Company requires capital to complete
acquisitions in process, to fund construction and operating
expenses of the cellular systems it operates, to fund
investments in minority partnership interests in other
cellular markets and to pay principal and interest on its
outstanding debt. The Company has only recently achieved
profitability and has previously incurred significant start-up
costs and operating losses. The Company anticipates
increasing growth in cellular units in service and revenues as
it continues its expansion and development programs.
Marketing and system operations
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<PAGE>
expenses associated with this expansion will most likely
reduce the rate of growth in operating cash flow and operating
income over the next several quarters. Since the Company has
only recently begun to generate positive operating income and
cash flows from operating activities, it requires outside
financing to provide the funds necessary for investment.
Cash flows from operating activities provided $22.6 million in
1995 and $13.2 million in 1994. Operating cash flow provided
cash totaling $27.8 million in 1995 and $13.7 million in 1994.
The 1995 increase in operating cash flow primarily reflects
improvement in the more established markets. Acquisitions and
start-ups increased operating cash flow $2.3 million, or 17%,
in 1995. Cash flows from other operating activities
(investment and other income, interest expense, changes in
working capital and changes in other assets and liabilities)
required cash investments totaling $5.2 million in 1995 and
$521,000 in 1994.
Cash flows from financing activities required $3.7 million in
1995 and provided $27.9 million in 1994. Cash flows from
financing activities include cash flows from borrowings under
the Revolving Credit Agreement with TDS, vendor financing
transactions and sales of Common Shares. In 1995, repayments
of both amounts owed under the Revolving Credit Agreement with
TDS totaling $52.8 million and amounts owed under the vendor
financing agreement totaling $4.9 million were partially
offset by additional vendor financing transactions which
provided cash totaling $54.2 million. Borrowings under the
Revolving Credit Agreement with TDS totaling $31.4 million
provided a majority of the Company's external financing
requirements in 1994.
Cash flows from investing activities required cash investments
totaling $10.8 million in 1995 and $38.3 million in 1994.
Such cash requirements primarily consisted of cash additions
to property, plant, and equipment and cash requirements for
acquisitions and for investments in cellular markets. In
1995, the Company received cash proceeds totaling $30.3
million relating to the sales of cellular interests in three
markets. Cash expenditures for property, plant and equipment
totaled $37.4 million in 1995 (excluding noncash expenditures
of $873,000), representing the construction of 38 cell sites
and other plant additions. Cash expenditures for property,
plant and equipment totaled $31.2 million in 1994 (of which
$12.7 million relates to 1993 additions), representing the
construction of 29 cell sites and other plant additions.
Anticipated capital requirements for 1995 reflect the
Company's construction and system expansion program, funding
of working capital needs, investments in entities in which the
Company has a minority interest, scheduled debt repayments and
pending acquisitions. The Company's consolidated construction
budget for 1995 is approximately $180 million, consisting
primarily of new cell sites to expand and enhance the
Company's coverage in its service areas.
During the first three months of 1995, the Company completed
the acquisition of controlling interests in six markets and
several additional minority interests. During the first three
months of 1994, the Company completed the acquisition of
controlling interests in six markets and several additional
minority interests. Some of the markets acquired during 1995
and 1994 were subject to acquisition agreements which were
entered into prior to the year in which the acquisitions were
completed. The following table summarizes the consideration
issued for these acquisitions.
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COMPLETED ACQUISITIONS Three Months Ended March 31,
----------------------------
1995 1994
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(in millions)
Pops Acquired 1.0 .8
Total Consideration $ 80.4 $ 98.7
Details of Total Consideration:
USM Common Shares
Shares Issued 2.0 2.9
Recorded Cost $ 66.5 $ 92.5
USM Common Shares to be issued
in the future (in 1995)
Shares Issuable -- --
Recorded Cost $ .1 $ --
Revolving Credit Agreement - TDS 11.2 .2
Cancellation of Notes Receivable -- 1.4
Cash $ 2.6 $ 4.6
Of the total 1995 and 1994 consideration, the debt under the
Revolving Credit Agreement and the USM Common Shares (except
112,000 shares issued to third parties in 1995) were issued to
TDS to reimburse TDS for TDS Common Shares issued and issuable
and cash paid to third parties in connection with 1995 and
1994 acquisitions. Additionally, the Company had commitments
at March 31, 1995, to issue 542,000 Common Shares in 1995 and
1996 related to certain completed acquisitions. The Company
and TDS have the option to deliver TDS Common Shares and/or
cash in lieu of the Company's Common Shares in connection with
certain of these acquisitions.
The Company maintains an ongoing acquisition program to seek
to maximize its future potential, including seeking
opportunities to combine operations and achieve increased
economies of scale. These economies of scale include the
sharing of market personnel, equipment and office resources.
The Company plans to continue its acquisition program as long
as it is feasible to acquire cellular interests that fit into
its business objectives.
At March 31, 1995, the Company, or TDS for the benefit of the
Company, had agreements pending to acquire controlling
interests in four markets and one minority interest. The
following table summarizes the consideration to be issued by
USM for these acquisitions if they are completed as planned.
-11-
<PAGE>
PENDING ACQUISITIONS March 31, 1995
-------------------- --------------
(in millions)
Pops to be Acquired .4
Estimated Consideration to be Paid $ 47.1
Details of Consideration:
USM Common Shares
Shares to be Issued 1.1
Estimated Cost at Agreement Date $ 31.6
Cash $ 15.5
Cellular interests acquired by TDS in these transactions are
expected to be assigned to the Company and at the time this
occurs the Company will reimburse TDS for TDS's consideration
delivered and costs incurred in such acquisitions. Of the
consideration for these pending acquisitions, the USM Common
Shares (except approximately 297,000 shares to be issued to
third parties) are to be issued to TDS to reimburse TDS for
TDS Common Shares to be issued and cash to be paid to third
parties in connection with these pending acquisitions.
Not included in these pending acquisitions are exchanges and
divestitures of cellular interests pursuant to agreements with
six cellular companies. In one agreement, the Company will
exchange its controlling interest in one market for a
controlling interest in another market the Company currently
manages. Under a second agreement, the Company will exchange
its 100% interests in one entire market and a partition of
another market plus cash for 100% interests in one entire
market and a partition of another market. In a third
agreement, the Company will exchange its 100% interests in two
markets for 100% interests in four markets. In a separate
agreement with the same company, the Company will sell its
100% interest in a partition of a market. Pursuant to a
fourth agreement, the Company will exchange its 100% interests
in three entire markets and partitions of two other markets
for 100% interests in two markets. In a related agreement
with the same company, the Company will divest its investment
interest in one market to complete an exchange of investment
interests which was partially completed in 1994. Under a
fifth agreement, the Company will exchange its 100% interests
in four markets for 100% interests in four other markets.
Finally, under a sixth agreement, the Company will sell its
controlling interest in one market and, in connection with
certain litigation related to a second market, will sell its
noncontrolling interest in that market.
Management believes the acquisitions and exchanges currently
pending will enhance the Company's clustering strategy by
divesting markets which are less strategic for cash or markets
which add to its current clusters. All of the pending
acquisition, exchange and sale agreements discussed above are
expected to be completed during 1995. Certain of the
divestitures and exchanges will generate substantial gains for
book and tax purposes.
TDS and the Company are parties to a legal proceedings before
the Federal Communications Commission ("FCC") involving a
cellular license in a Wisconsin Rural Service Area ("RSA").
In March 1995, a preliminary settlement was reached with a
group of Wisconsin telephone companies (the "Settlement
Group") involved in that proceeding, and a definitive
agreement was executed with another party to the same
proceeding. The proposed settlements, which follow extensive
discovery by the FCC and other parties, contemplate a summary
decision finding that TDS and its affiliates are fully
qualified to be FCC licensees. The final settlements will be
subject
-12-
<PAGE>
to the negotiation of a definitive agreement with the
Settlement Group and the action of the judge presiding in the
FCC proceeding. See Note 15 of Notes to Consolidated
Financial Statements, Legal Proceedings (La Star and Wisconsin
RSA 8 Applications), in the Company's Annual Report to
Shareholders for the year ended December 31, 1994 for further
discussion of the proceeding involving the Wisconsin RSA.
Liquidity
---------
The Company anticipates that the aggregate resources required
for the remainder of 1995 will include approximately: (i)
$142 million for capital spending; (ii) $15 million for cash
acquisitions; and (iii) $7 million of scheduled debt
repayments. Additionally, the Company anticipates it will
reimburse TDS, as each acquisition is completed, for TDS
Common Shares valued at approximately $22.2 million to be
issued and $790,000 in cash to be paid by TDS to third parties
in connection with acquisitions anticipated to be completed by
the end of 1995. The reimbursement to TDS is expected to be
in the form of 765,000 Common Shares of the Company. Not
included in the above amounts are acquisitions that may be
signed during the remainder of 1995. These potential
acquisitions may require substantial funding for both their
acquisition and operation during the remainder of 1995.
At March 31, 1995, the Company had $14 million of cash and
cash equivalents, $116 million remaining under the $300
million Revolving Credit Agreement with TDS as amended
effective March 28, 1995 and $3 million remaining under the
new vendor financing agreement entered into in 1994.
Additionally, the Company anticipates generating additional
amounts of positive cash flows from operating activities
during the remainder of 1995.
Pursuant to the Revolving Credit Agreement, the Company may
borrow up to an aggregate of $300 million from TDS, at an
interest rate equal to 1.5% above the prime rate. The
advances made by TDS under the Revolving Credit Agreement are
unsecured. Interest on the balance due under the Revolving
Credit Agreement is payable quarterly and no principal is
payable until July 1, 1996, subject to acceleration under
certain circumstances, at which time the entire principal
balance then outstanding is scheduled to become due and
payable. The Company may prepay the balance due under the
Revolving Credit Agreement at any time, in whole or in part,
without premium.
The Company filed a registration statement with the Securities
and Exchange Commission ("SEC") on April 28, 1995 covering the
sale of approximately $200 million net proceeds of zero coupon
convertible debt. This convertible debt will be issued in the
form of Liquid Yield OptionTM Notes ("LYONs"TM) (TM Trademark
of Merrill Lynch & Co., Inc.), which LYONs will be 20-year
fixed-rate securities and will be subordinated to all senior
indebtedness of the Company. Each LYON will be convertible at
the option of the holder at any time on or prior to maturity
at a to-be-determined conversion rate. Upon conversion, USM
may elect the delivery of its Common Shares or cash equal to
the market value of the Common Shares into which the LYONs are
convertible. Beginning five years after the date of issue,
the LYONs may be redeemed at any time for cash at the option
of the Company at redemption prices equal to the issue price
plus accrued original issue discount through the date of
redemption. On the fifth anniversary of the issue date, USM
will purchase LYONs at the option of the holder at the issue
price plus accrued original issue discount through that date.
USM will have the option of purchasing such LYONs with cash,
USM Common Shares or TDS common equity securities, or any
combination thereof. The Company anticipates using the net
proceeds from this offering to repay borrowings under the
Revolving Credit Agreement. Any additional net proceeds will
be used for general corporate purposes. The Company
anticipates that the line of credit available under the
Revolving Credit Agreement will be $100 million after the
application of the net proceeds of the LYONs offering.
-13-
<PAGE>
The Company anticipates that it may require funding to acquire
cellular markets and build and operate cellular systems in the
future. The timing and amount of such funding requirements
will depend on the timing of the completion of pending
acquisitions, the number of additional licenses acquired by
the Company, the construction and operational plans for the
individual cellular projects and other relevant factors. The
Company will need to raise additional capital to meet these
requirements. These additional requirements may be met
through internally generated funds, additional borrowings from
TDS, the issuance of additional equity or debt securities,
vendor financing, bank financing, the sale of assets or a
combination of the above. There can be no assurance that
sufficient funds will be available to the Company on terms or
at prices acceptable to the Company. If sufficient funding is
not available to the Company on terms and prices acceptable to
the Company, the Company would have to reduce its
construction, development and acquisition programs. In the
long term, reduction of these programs would have a negative
impact on the ability of the Company to increase its
consolidated revenues and cash flows.
-14-
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Unaudited
---------
Three Months Ended
March 31,
------------------------------------
1995 1994
--------------- --------------
(Dollars in thousands,
except per share amounts)
OPERATING REVENUES
Service $ 96,400 $ 63,361
Equipment sales 3,348 2,872
--------------- --------------
Total Operating Revenues 99,748 66,233
--------------- --------------
OPERATING EXPENSES
System operations 13,202 9,730
Marketing and selling 19,922 14,054
Cost of equipment sold 11,199 8,009
General and administrative 27,667 20,726
Depreciation 12,264 8,622
Amortization of intangibles 7,430 6,096
--------------- --------------
Total Operating Expenses 91,684 67,237
--------------- --------------
OPERATING INCOME (LOSS) BEFORE
MINORITY SHARE 8,064 (1,004)
Minority share of operating income (1,888) (1,118)
--------------- --------------
OPERATING INCOME (LOSS) 6,176 (2,122)
--------------- --------------
INVESTMENT AND OTHER INCOME
Investment income 9,717 5,191
Amortization of licenses and deferred costs
related to investments (232) (244)
Interest income 992 639
Other (expense), net (670) (324)
Gain on sale of cellular interests 18,517 ---
--------------- --------------
Total Investment and Other Income 28,324 5,262
--------------- --------------
INCOME BEFORE INTEREST AND INCOME TAXES 34,500 3,140
Interest expense - affiliate 6,090 3,032
Interest expense - other 1,615 959
--------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES 26,795 (851)
Income tax expense 3,197 979
--------------- --------------
NET INCOME (LOSS) $ 23,598 $ (1,830)
=============== ==============
WEIGHTED AVERAGE COMMON
AND SERIES A COMMON SHARES (000s) 82,131 75,140
EARNINGS PER COMMON AND
SERIES A COMMON SHARE $ .29 $ (.02)
=============== ==============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-15-
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Unaudited
---------
Three Months Ended
March 31,
------------------------------------
1995 1994
--------------- --------------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 23,598 $ (1,830)
Add (Deduct) adjustments to reconcile
net income (loss) to net cash
provided by operating activities
Depreciation and amortization 19,926 14,962
Investment income (9,717) (5,191)
Gain on sale of cellular interests (18,517) ---
Minority share of operating income 1,888 1,118
Other noncash expense 976 846
Change in accounts receivable 1,172 (2,837)
Change in accounts payable (6,462) (642)
Change in accrued interest 6,037 2,975
Change in accrued taxes 1,102 1,931
Change in other assets and
liabilities 2,562 1,861
--------------- --------------
22,565 13,193
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt borrowings 54,218 ---
Repayment of long-term debt (4,863) (3,095)
Change in Revolving Credit Agreement (52,781) 31,384
Common Shares issued 373 223
Minority partner capital distributions (656) (657)
--------------- --------------
(3,709) 27,855
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (37,375) (31,153)
Investments in and advances to minority
partnerships (4,063) (5,103)
Distributions from partnerships 1,790 4,659
Proceeds from sale of investments 30,300 ---
Acquisitions, excluding cash acquired (271) (3,943)
Other investments (1,158) (2,761)
--------------- --------------
(10,777) (38,301)
--------------- --------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 8,079 2,747
CASH AND CASH EQUIVALENTS-
Beginning of period 5,800 6,274
--------------- --------------
End of period $ 13,879 $ 9,021
=============== ==============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-16-
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
(Unaudited)
March 31, 1995 December 31, 1994
--------------- -----------------
(Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 12,105 $ 4,143
Affiliated cash investments 1,774 1,657
Accounts receivable
Customers 24,244 23,609
Roaming 20,990 18,881
Affiliates 1,644 3,549
Other 2,872 3,150
Inventory 4,991 5,435
Prepaid and other current assets 4,034 4,136
--------------- ----------------
72,654 64,560
--------------- ----------------
PROPERTY, PLANT AND EQUIPMENT
In service 516,370 464,132
Less accumulated depreciation 111,693 95,951
--------------- ----------------
404,677 368,181
--------------- ----------------
INVESTMENTS
Cellular partnerships - equity 95,061 86,215
Cellular partnerships - cost 10,641 13,280
Licenses, net of amortization 1,014,408 947,399
Marketable equity securities 20,742 20,145
Notes and interest receivable 13,700 14,535
--------------- ----------------
1,154,552 1,081,574
--------------- ----------------
DEFERRED CHARGES
Deferred start-up costs, net
of amortization 3,653 3,685
Other deferred charges, net
of amortization 17,856 16,787
--------------- ----------------
21,509 20,472
--------------- ----------------
Total Assets $ 1,653,392 $ 1,534,787
=============== ================
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-17-
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
(Unaudited)
March 31, 1995 December 31, 1994
--------------- -----------------
(Dollars in thousands)
CURRENT LIABILITIES
Current portion of long-term debt and
preferred stock $ 19,689 $ 20,804
Notes payable 637 637
Accounts payable
Affiliates 3,368 3,662
Other 46,386 49,114
Accrued interest, primarily
to affiliates 6,110 5,880
Customer deposits and
deferred revenues 6,761 5,933
Other current liabilities 13,457 12,343
--------------- ----------------
96,408 98,373
--------------- ----------------
REVOLVING CREDIT AGREEMENT - TDS 183,921 232,954
--------------- ----------------
LONG-TERM DEBT, excluding
current portion 119,597 57,691
--------------- ----------------
DEFERRED LIABILITIES AND CREDITS
Income taxes 6,784 5,017
Other 3,585 3,636
--------------- ----------------
10,369 8,653
--------------- ----------------
REDEEMABLE PREFERRED STOCK, excluding
current portion --- 9,597
--------------- ----------------
MINORITY INTEREST 35,934 33,552
--------------- ----------------
COMMON SHAREHOLDERS' EQUITY
Common Shares, par value $1 per share 48,775 45,584
Series A Common Shares, par value
$1 per share 33,006 33,006
Additional paid-in capital 1,174,809 1,083,698
Common Shares issuable, 541,780 shares and
802,802 shares, respectively 11,633 16,337
Retained (deficit) (61,060) (84,658)
--------------- ----------------
1,207,163 1,093,967
--------------- ----------------
Total Liabilities and
Shareholders' Equity $ 1,653,392 $ 1,534,787
=============== ================
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-18-
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the
disclosures are adequate to make the information presented
not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the
consolidated financial statements and the notes thereto
included in the Company's latest annual report on Form 10-
K.
The accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only
normal recurring items) necessary to present fairly the
financial position as of March 31, 1995 and December 31,
1994, and the results of operations and cash flows for the
three months ended March 31, 1995 and 1994. The results of
operations for the three months ended March 31, 1995 and
1994, are not necessarily indicative of the results to be
expected for the full year.
2. Earnings per Common and Series A Common Share for the three
months ended March 31, 1995, was computed by dividing Net
Income by the weighted average number of Common Shares,
Series A Common Shares and dilutive common equivalent
shares outstanding during the period. Dilutive common
stock equivalents at March 31, 1995, consist primarily of
dilutive Common Shares issuable and Redeemable Preferred
Stock. Earnings per Common Share for the three months
ended March 31, 1994 was computed by dividing Net (Loss) by
the weighted average number of Common Shares and Series A
Common Shares outstanding during the period.
Certain of the cellular acquisitions closed during 1995,
1992 and 1991 require USM to deliver Common Shares in the
future. USM is required to issue Common Shares to TDS and
third parties as follows:
Common Shares
Issuable
--------------
1995 362,957
1996 178,823
---------
541,780
=========
-19-
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Assuming that acquisitions accounted for as purchases
during the period January 1, 1994, to March 31, 1995, had
taken place on January 1, 1994, pro forma results of
operations would have been as follows:
Three Months Ended
March 31,
------------------------------------
1995 1994
--------------- --------------
(Dollars in thousands,
except per share amounts)
Service Revenues $ 97,682 $ 68,990
Equipment Sales 3,484 3,170
Interest Expense (including cost
to finance acquisitions) 7,611 4,065
Net Income (Loss) 22,897 (3,179)
Earnings per Common and Series A
Common Share $ .28 $ (.04)
5. The following summarized unaudited income statements are
the combined summarized income statements of the cellular
system partnerships listed below which are accounted for by
the Company following the equity method. The combined
summarized income statements were compiled from financial
statements and other information obtained by the Company as
a limited partner of the cellular limited partnerships as
set forth below. The cellular system partnerships included
in the combined summarized income statements and the
Company's ownership percentage of each cellular system
partnership at March 31, 1995, are set forth in the
following table.
The Company's
Limited
Partnership
Cellular System Partnership Interest
------------------------------------ -------------
Los Angeles SMSA Limited Partnership 5.5%
Nashville/Clarksville MSA Limited Partnership 49.0%
Baton Rouge MSA Limited Partnership 52.0%
-20-
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended
March 31,
------------------------------------
1995 1994
--------------- --------------
(Dollars in thousands)
REVENUES $ 184,825 $ 144,176
EXPENSES
Selling, general and administrative 87,664 75,948
Depreciation and amortization 15,222 14,964
--------------- --------------
102,886 90,912
--------------- --------------
OPERATING INCOME 81,939 53,264
OTHER INCOME, NET 1,741 1,166
--------------- --------------
NET INCOME $ 83,680 $ 54,430
=============== ==============
6. Supplemental Cash Flow Information
The Company acquired certain cellular licenses and interests
during the first three months of 1995 and 1994. In
conjunction with these acquisitions, the following assets
were acquired, liabilities assumed and Common Shares issued.
Three Months Ended
March 31,
------------------------------------
1995 1994
--------------- --------------
(Dollars in thousands)
Property, plant and equipment, net $ 12,829 $ 3,523
Cellular licenses 80,222 97,883
Decrease in equity-method investment
in cellular interests (1,943) (4,154)
Accounts receivable 2,241 565
Revolving Credit Agreement - TDS (12,103) (138)
Long-term debt (9,936)
Accounts payable (2,222) (560)
Other assets and liabilities,
excluding cash acquired (2,216) (654)
Common Shares issued and issuable (66,601) (92,522)
--------------- --------------
Decrease in cash due to acquisitions $ 271 $ 3,943
=============== ==============
-21-
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following summarizes certain noncash transactions, and interest
and income taxes paid.
Three Months Ended
March 31,
------------------------------------
1995 1994
--------------- --------------
(Dollars in thousands)
Interest paid $ 1,128 $ 966
Income taxes paid 318 255
Accrued interest converted into debt
under the Revolving Credit Agreement 5,864 5,737
Common Shares issued by USM
for conversion of USM Preferred Stock
and TDS Preferred Shares $ 22,236 $ 1,497
7. Contingencies
The Company's material contingencies as of March 31, 1995,
include the collectibility of a $5.4 million note receivable
under a long-term financing agreement with a cellular
company and a $9.9 million standby letter of credit in
support of a bank loan to an entity minority-owned by the
Company. For further discussion of these contingencies, see
Note 13 of Notes to Consolidated Financial Statements
included in the Company's 1994 Report on Form 10-K for the
year ended December 31, 1994.
-22-
<PAGE>
PART II. OTHER INFORMATION
----------------------------
Item 5. Other Information
--------------------------
The Company announced on April 28, 1995, that
it filed a registration statement with the Securities and
Exchange Commission covering the proposed sale of
approximately $200 million net proceeds of zero coupon
convertible debt. The net proceeds of the 20-year fixed rate
securities will be used to repay variable-rate borrowings from
TDS. See the news release attached as Exhibit 99 for further
information regarding the debt offering.
Item 6. Exhibits and Reports on Form 8-K.
------------------------------------------
(a) Exhibit 11 - Statement regarding computation of
per share earnings.
(b) Exhibit 12 - Statement regarding computation of
ratios.
(c) Exhibit 27 - Financial Data Schedule.
(d) Exhibit 99.1 - News release regarding the pro-
posed sale of approximately
$200 million net proceeds of
zero coupon convertible debt.
(e) Exhibit 99.2 - Unaudited Consolidated State-
ments of Operations for the
Twelve Months Ended March 31,
1995 and 1994.
(f) Reports on Form 8-K filed during the quarter
ended March 31, 1995:
The Company filed a Report on Form 8-K dated
March 15, 1995, which included a press release
regarding the announcement of a preliminary
settlement reached with a group of Wisconsin
telephone companies involved in a proceeding
initiated by the Federal Communications
Commission and that a definitive settlement
agreement had been reached with BellSouth
Mobility Inc with respect to the same
proceeding.
No other reports on Form 8-K were filed during
the quarter ended March 31, 1995.
-23-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
UNITED STATES CELLULAR CORPORATION
(Registrant)
Date May 12, 1995 H. DONALD NELSON
------------ ---------------------------------
H. Donald Nelson
President
(Chief Executive Officer)
Date May 12, 1995 KENNETH R. MEYERS
------------ ----------------------------------
Kenneth R. Meyers
Vice President-Finance and
Treasurer
(Chief Financial Officer)
Date May 12, 1995 PHILLIP A. LORENZINI
------------ ----------------------------------
Phillip A. Lorenzini
Controller
(Principal Accounting Officer)
-24-
<PAGE>
Exhibit 11
United States Cellular Corporation
Computation of Earnings Per Common Share
(in thousands, except per share amounts)
Three Months Ended March 31, 1995 1994
------------------------------------------------------------------------
Primary Earnings
Net Income (Loss) Available to Common $ 23,598 $ (1,830)
========= =========
Primary Shares
Weighted average number of Common and Series A
Common Shares Outstanding 80,680 75,140
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 67 ---
Convertible Preferred Shares 779 ---
Common Shares Issuable 605 ---
--------- --------
Primary Shares 82,131 75,140
========= =========
Primary Earnings per Common Share
Net Income (Loss) $ .29 $ (.02)
========= =========
Fully Diluted Earnings*
Net Income (Loss) Available to Common $ 23,598 $ (1,830)
========= =========
Fully Diluted Shares
Weighted average number of Common and Series A
Common Shares Outstanding 80,680 75,140
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 67 ---
Convertible Preferred Shares 779 ---
Common Shares Issuable 605 ---
--------- ---------
Fully Diluted Shares 82,131 75,140
========= =========
Fully Diluted Earnings per Common Share
Net Income (Loss) $ .29 $ (.02)
========= =========
----------
* This calculation is submitted in accordance with Securities Act of 1934
Release No. 9083 although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
Exhibit 12
UNITED STATES CELLULAR CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
Three Months
Ended
March 31, 1995
--------------------
(Dollars in thousands)
EARNINGS
Income from Continuing Operations before
income taxes $ 26,795
Add (Deduct):
Minority Share of Cellular Losses (56)
Earnings on Equity Method (9,717)
Distributions from Minority Subsidiaries 1,790
Amortization of Capitalized Interest 1
Minority interest in income of majority-owned
subsidiaries that have fixed charges 510
--------------
19,323
Add fixed charges:
Consolidated interest expense 7,705
Interest Portion (1/3) of Consolidated
Rent Expense 533
--------------
$ 27,561
==============
FIXED CHARGES
Consolidated interest expense $ 7,705
Interest Portion (1/3) of Consolidated
Rent Expense 533
--------------
$ 8,238
==============
RATIO OF EARNINGS TO FIXED CHARGES 3.35
==============
Tax-Effected Preferred Dividends $ ---
Fixed Charges 8,238
--------------
Fixed Charges and Preferred Dividends $ 8,238
==============
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS 3.35
==============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF UNITED STATES CELLULAR CORPORATION
AS OF MARCH 31, 1995, AND FOR THE THREE MONTHS THEN ENDED, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 13,879
<SECURITIES> 20,742
<RECEIVABLES> 26,374
<ALLOWANCES> 2,130
<INVENTORY> 4,991
<CURRENT-ASSETS> 72,654
<PP&E> 516,370
<DEPRECIATION> 111,693
<TOTAL-ASSETS> 1,653,392
<CURRENT-LIABILITIES> 96,408
<BONDS> 303,518
<COMMON> 81,781
0
0
<OTHER-SE> 1,125,382
<TOTAL-LIABILITY-AND-EQUITY> 1,653,392
<SALES> 3,348
<TOTAL-REVENUES> 99,748
<CGS> 11,199
<TOTAL-COSTS> 91,684
<OTHER-EXPENSES> (28,324)
<LOSS-PROVISION> 1,899
<INTEREST-EXPENSE> 7,705
<INCOME-PRETAX> 26,795
<INCOME-TAX> 3,197
<INCOME-CONTINUING> 23,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,598
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
Exhibit 99.1
UNITED STATES CELLULAR REGISTERS
$200 MILLION OF CONVERTIBLE DEBT
April 28, 1995, Chicago, Illinois - United States
Cellular Corporation (AMEX symbol "USM") announced today that
it has filed a registration statement with the Securities and
Exchange Commission ("SEC") covering the sale of approximately
$200 million net proceeds of zero coupon convertible debt
(excluding the Underwriter's over-allotment option). The net
proceeds of the 20-year fixed-rate securities will be used to
repay variable-rate borrowings from USM's parent company,
Telephone and Data Systems, Inc. ("TDS"). Any additional net
proceeds will be used for general corporate purposes.
The convertible debt will be issued in the form of Liquid
Yield Option{TM} Notes ("LYONs"{TM}) underwritten by Merrill Lynch
& Co., Inc.
Each LYON will be convertible at the option of the Holder
at any time on or prior to maturity at a conversion rate to be
determined at pricing. Upon conversion, USM may elect to
deliver its Common Shares or cash equal to the market value of
the Common Shares into which the LYONs are convertible.
Beginning five years after the date of issue, the LYONs
may be redeemed at any time for cash at the option of USM at
redemption prices equal to the issue price plus accrued
Original Issue Discount through the date of redemption.
On the fifth anniversary of the issue date, USM will
purchase LYONs at the option of the Holder at the issue price
plus accrued Original Issue Discount through that date. USM
will have the option of purchasing such LYONs with cash, USM
Common Shares or TDS common equity securities, or any
combination thereof.
The registration statement relating to these securities
has been filed with the SEC but has not yet become effective.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
Headquartered in Chicago, USM manages and invests in
cellular systems throughout the United States. As of March
31, 1995, USM owned or had rights to acquire interests
representing 25.2 million population equivalents in 210
markets. At that date, USM managed operational systems
serving 147 markets.
For additional information, please contact Kenneth R.
Meyers, Vice President - Finance and Chief Financial Officer,
at (312) 399-8900. Out-of-town media, please call collect.
TM - Trademark of Merrill Lynch & Co., Inc.
Exhibit 99.2
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
---------
Twelve Months Ended
March 31,
--------------------------
1995 1994
------------ ------------
(Dollars in thousands,
except per share amounts)
OPERATING REVENUES
Service $ 351,688 $ 228,029
Equipment sales 14,231 11,046
----------- -----------
Total Operating Revenues 365,919 239,075
----------- -----------
OPERATING EXPENSES
System operations 50,341 37,181
Marketing and selling 74,940 48,221
Cost of equipment sold 42,621 29,826
General and administrative 101,134 80,073
Depreciation 43,162 28,738
Amortization of intangibles 27,268 21,316
----------- -----------
Total Operating Expenses 339,466 245,355
----------- -----------
OPERATING INCOME (LOSS) BEFORE MINORITY SHARE 26,453 (6,280)
Minority share of operating income (5,922) (3,847)
----------- -----------
OPERATING INCOME (LOSS) 20,531 (10,127)
----------- -----------
INVESTMENT AND OTHER INCOME
Investment income 31,066 19,048
Amortization of licenses and deferred costs
related to investments (901) (927)
Interest income 3,733 2,621
Other (expense), net (1,714) (693)
Gain on sale of cellular interests 21,838 4,851
----------- -----------
Total Investment and Other Income 54,022 24,900
----------- -----------
INCOME BEFORE INTEREST AND INCOME TAXES 74,553 14,773
Interest expense - affiliate 20,870 25,528
Interest expense - other 4,727 3,966
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 48,956 (14,721)
Income tax expense 7,135 3,342
----------- -----------
NET INCOME (LOSS) $ 41,821 $ (18,063)
=========== ===========
WEIGHTED AVERAGE COMMON AND
SERIES A COMMON SHARES (000s) 80,588 62,439
EARNINGS PER COMMON SHARE AND
SERIES A COMMON SHARE $ .52 $ (.29)
=========== ============
