FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 27, 1995
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UNITED STATES CELLULAR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-9712 62-1147325
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) 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
Not Applicable
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(Former name or former address, if changed since last report)
The Exhibit Index is Located on Page 4 of 9 Total Pages.
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Item 5. Other Events.
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On April 18, 1995, the Company announced its earnings
for the first quarter of 1995. This Current Report on Form
8-K is being filed for the purpose of filing the Press Release
issued by the Company relating to such announcement as an
exhibit.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
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The exhibit accompanying this report is listed in the
accompanying Exhibit Index.
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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, thereto duly
authorized.
United States Cellular Corporation
(Registrant)
Date: April 27, 1995
By: /s/ PHILLIP A. LORENZINI
-------------------------------------
Phillip A. Lorenzini
Controller
(principal accounting officer)
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EXHIBIT INDEX
Exhibit Number Description of Exhibit Sequentially Numbered Page
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99 Press Release dated 5
April 18, 1995
4
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Exhibit 99
For Release: Immediate
UNITED STATES CELLULAR REPORTS A 63% INCREASE IN CUSTOMERS AND
A 102% INCREASE IN OPERATING CASH FLOW; OPERATIONS AND GAINS
PRODUCE NET INCOME OF $.29 PER SHARE FOR THE FIRST QUARTER
April 18, 1995, Chicago, Illinois -- United States Cellular
Corporation (AMEX symbol "USM") reported continuing rapid
growth in service revenues, operating cash flow and net income
for the first quarter of 1995. Customer units increased 63%
from a year earlier, leading to a 52% increase in service
revenues during the quarter. Operating cash flow climbed
102%, totaling $27.8 million for the quarter. USM produced
its fourth consecutive quarter of positive operating income
before minority share, generating $8.1 million in 1995
compared to an operating loss of $1.0 million in the previous
year. Net income for the quarter totaled $23.6 million, or
$.29 per share, compared to a net loss of $1.8 million, or
$.02 per share, in 1994. Included in USM's 1995 net income
were gains on the sales of cellular interests, net of related
income taxes, totaling $17.2 million, or $.21 per share.
Excluding the effect of these gains, USM produced net income
of $6.4 million during the quarter, or $.08 per share.
Financial Highlights
Three Months Ended March 31
(Unaudited) %
(Dollars in Millions) 1995 1994 Change
------- ------
Service Revenues $ 96.4 $ 63.4 52%
Operating Cash Flow 27.8 13.7 102%
Operating Income (Loss)
before Minority Share 8.1 (1.0) N/M
Investment Income 9.7 5.2 87%
Gain on Sale of Cellular
Interests 18.5 -- N/M
Income before Interest
and Taxes 34.5 3.1 N/M
Interest Expense 7.7 4.0 93%
Net Income (Loss) $ 23.6 $ (1.8) N/M
N/M: Percent change not meaningful.
"Our first quarter results continue to show the benefits of
our clustering strategy," noted H. Donald Nelson, the
Company's President and Chief Executive Officer. "Customer
additions, revenues, operating income and operating cash flow
all increased substantially over 1994. Additionally, we are
continuing to acquire, exchange and dispose of markets to
strengthen our clusters. We are progressing toward our 1995
goals while focusing our efforts on improving long-term
customer satisfaction."
FIRST QUARTER RESULTS
---------------------
Service revenues totaled $96.4 million for the three months
ended March 31, 1995, a 52% increase over the $63.4 million
reported for 1994. Growth in the number of customer units and
strong inbound roaming revenue were the driving factors behind
this improvement. The customer base in USM's 135 majority-
owned and managed markets ("consolidated markets") totaled
478,000 customer units at March 31, 1995, a 63% increase over
the 294,000 total of twelve months earlier. Excluding
acquisitions, USM's distribution channels added 43,000 new
customer units during the first quarter, a 59% increase over
the 27,000 net new customer units added during the same
quarter in 1994. Acquisitions and divestitures netted an
additional 14,000 customer units in the first quarter of 1995
compared to 6,000 during the first quarter of 1994. Inbound
roaming revenue increased 50% to $29.6
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million for the quarter.
Average monthly service revenue per customer unit totaled $71
during the first quarter of 1995, down from $76 for the same
period in 1994 and from the $78 generated in the fourth
quarter of 1994. This decline reflects both seasonal usage
patterns and USM's larger customer base. Local revenue from
USM's customer units averaged $43 during the first quarter of
1995 compared to $46 in the same quarter of 1994, while
inbound, or keeper, roaming revenue per customer unit averaged
$22 in the most recent quarter compared to $24 in 1994. These
decreases were expected and were outweighed by the effect of
the increase in customer units.
Total operating expenses, excluding depreciation and
amortization, increased 37% to $72.0 million in the first
quarter of 1995 from $52.5 million in 1994. Marketing
expenses, including losses on equipment sales, rose 45%, or
$8.6 million, due to a 59% increase in net customer
activations. The cost to add a net customer unit in 1995
decreased 9% to $646 from $711 in 1994. The Company's churn
rate was 2.1% in the first quarter of 1995, down from 2.3% in
the same quarter last year and from 2.4% in the fourth quarter
of 1994.
Rapid revenue growth, coupled with continued cost
efficiencies, drove a $14.0 million, or 102%, increase in
operating cash flow compared to the first quarter of 1994.
Operating cash flow margin improved to 29% in 1995 from 22% in
1994. Cash flow, including operating cash flow and $1.8
million of cash flow from minority cellular investments,
increased 61% to $29.6 million. Depreciation and amortization
increased 34% to $19.7 million due to a 14% increase in
license costs and a 54% rise in average fixed asset balances
since the first quarter of 1994. The Company's network
consisted of 841 cell sites serving 135 consolidated markets
at March 31, 1995, compared to 566 cell sites serving 120 such
markets at March 31, 1994.
Operating income before minority share totaled $8.1 million in
the most recent quarter compared to a loss of $1.0 million in
the same period of 1994. Investment income increased 87% to
$9.7 million, mostly as a result of an increase in investment
income from markets managed by others which USM accounts for
using the equity method. Interest expense increased $3.7
million, or 93%, as average debt balances increased 40% from
the first quarter of 1994 and as interest rates increased.
USM recorded pretax gains totaling $18.5 million on the sales
of its interests in three markets during the quarter. One
market was 100%-owned and managed and USM had investment
interests in the other two markets.
The Company generated net income of $23.6 million in the first
quarter of 1995, or $.29 per share, compared to a net loss of
$1.8 million, or $.02 per share, in 1994. Excluding the net-
of-tax effect of the gains on the sales of cellular interests,
net income was $6.4 million, an $8.2 million increase from
1994. Weighted Average Common and Series A Common Shares
outstanding increased 9% from the first quarter of 1994 to the
same period in 1995 primarily as a result of the issuance of
Common Shares as consideration for completed acquisitions.
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ACQUISITIONS
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In addition to its exceptional operating growth, USM increased
its opportunities for future growth during the first quarter
of 1995. USM signed agreements to exchange markets with
another cellular operator, to acquire outright three
additional markets and to divest two other markets. Pursuant
to the exchange, expected to be completed during the third
quarter of 1995, USM will receive 100% interests in four new
markets in exchange for 100% interests in four markets USM
currently owns. Additionally, USM agreed to sell its
controlling interest in one market and, in connection with
certain litigation related to a second market, agreed to
divest its noncontrolling interest in that market. The
markets the Company will receive, both from the exchange and
from the outright acquisitions, will make significant
additions to its current operational clusters. The markets to
be divested are not strategic to the development of the
Company's clusters.
(Unaudited, in Millions) Debt Equity(1 Shares(2)
----------------------------------------------------------
Outstanding at March 31, 1995
Common Shares(3) $ 48.8 48.8
Series A Common Shares 33.0 33.0
Preferred Stock(4) 9.6
Additional Paid-in Capital 1,174.8
Debt $314.8
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Total Outstanding at
March 31, 1995 314.8 1,266.2 81.8
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Estimated Common Shares
issuable for completed
acquisitions 11.6 0.6(3)
Estimated debt payable and
Common Shares to be issued
for pending acquisitions 15.5 35.8 1.1(3)
Common Shares issuable upon
redemption of Preferred
Stock 1.2(4)
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March 31, 1995 totals
adjusted for anticipated
acquisition-related
transactions $330.3 $1,313.6 84.7(3)
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(1) Does not include retained deficit.
(2) The information in the table above and these footnotes
assumes the issuance of USM shares in all instances in
which USM has the choice to issue USM shares, TDS shares
or cash.
(3) Assuming USM shares are issued in all instances in which
USM has the choice to issue USM shares, TDS shares or
cash, the aggregate 2.9 million Common Shares committed
for issuance in future years are scheduled to be issued
as follows: approximately 1.5 million shares in 1995
and 1.4 million shares in 1996. Assuming all such
shares are issued for acquisitions and redemption of
preferred stock, TDS will own approximately 80.0% of
USM's common stock.
(4) USM Preferred Stock is convertible into approximately
600,000 USM Common Shares. Additionally, certain TDS
Preferred Shares are convertible into approximately
600,000 USM Common Shares.
The effects of the Company's acquisition program on its
capital structure are summarized in the above table. The
Company had a total of 81.8 million shares of common stock
outstanding as of March 31, 1995, and has commitments to issue
up to an additional 2.9 million Common Shares in the future.
These commitments include approximately 600,000 shares
issuable for completed acquisitions, 1.1 million shares to be
issued for pending acquisitions and 1.2 million shares to be
issued to redeem USM and Telephone and Data Systems, Inc.
("TDS") preferred stock currently outstanding. The Company
also had $315 million in total debt at March 31, 1995,
including $185 million under its Revolving Credit Agreement
with TDS.
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.
Today, at 2:00 p.m. Central Daylight Time, TDS, USM and
American Paging, Inc. will hold a joint news conference by
phone to discuss first quarter 1995 results of operations.
The news conference is available by calling (800) 275-3210.
For further information, please contact Kenneth R. Meyers,
Vice President and Chief Financial Officer, at (312) 399-8900.
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UNITED STATES CELLULAR CORPORATION
FINANCIAL HIGHLIGHTS
(Unaudited)
Three Months Ended Increase (Decrease)
3/31/95 3/31/94 Amount Percent
-------- -------- ------- -------
(Dollars in thousands, except per share amounts)
Operating Revenues
Service Revenues $ 96,400 $ 63,361 $33,039 52.1%
Equipment Sales 3,348 2,872 476 16.6%
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99,748 66,233 33,515 50.6%
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Operating Expenses (excluding depreciation
and amortization)
System operations 13,202 9,730 3,472 35.7%
Marketing and
selling 19,922 14,054 5,868 41.8%
Cost of
equipment sold 11,199 8,009 3,190 39.8%
General and
administrative 27,667 20,726 6,941 33.5%
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71,990 52,519 19,471 37.1%
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Operating Cash Flow 27,758 13,714 14,044 102.4%
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Depreciation 12,264 8,622 3,642 42.2%
Amortization of
intangibles 7,430 6,096 1,334 21.9%
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19,694 14,718 4,976 33.8%
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Operating Income (Loss) Before
Minority Share 8,064 (1,004) 9,068 N/M
Minority Share of
Operating Income (1,888) (1,118) (770) (68.8%)
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Operating Income
(Loss) 6,176 (2,122) 8,298 N/M
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Investment Income,
Net of License Cost
Amortization 9,485 4,947 4,538 91.7%
Gain on Sale of Cellular
Interests 18,517 --- 18,517 N/M
Other Income 322 315 7 2.3%
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Income Before Interest and
Income Taxes 34,500 3,140 31,360 N/M
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Interest Expense 7,705 3,991 3,714 93.1%
Income Tax Expense 3,197 979 2,218 N/M
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Net Income (Loss) $ 23,598 $(1,830) $25,428 N/M
======== ======= =======
Weighted Average Common and
Series A Common
Shares (000s) 82,131 75,140 6,991 9.3%
Earnings Per Common and
Series A Common
Share $ .29 $ (.02) $ .31 N/M
======== ======= =======
N/M: Percent change not meaningful.
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<TABLE>
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
<CAPTION>
Quarter Ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
1995 1994 1994 1994 1994
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Total population equivalents
(owned and acquirable, in
thousands) 25,245 25,201 24,534 24,673 23,977
Majority-Owned, Managed
and Consolidated
Markets:
Population equivalents
owned 20,471 19,784 19,372 19,183 18,794
Total population (000s) 22,061 21,314 20,531 20,344 19,927
Customers 478,000 421,000 364,000 331,000 294,000
Market penetration 2.17% 1.98% 1.77% 1.63% 1.48%
Markets in operation 135 130 124 123 120
Cell sites in service 841 790 686 610 566
Average monthly
revenue per customer $71 $78 $83 $82 $76
Churn rate per month 2.1% 2.4% 2.2% 2.1% 2.3%
Marketing cost per
net customer addition $646 $651 $698 $629 $711
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</TABLE>
