SECURITIES
AND EXCHANGE COMMISSION
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| ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | June 30, 2003 |
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OR |
| ¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from | to |
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Commission file number 1-9712 UNITED STATES CELLULAR CORPORATION(Exact name of registrant as specified in its charter) |
| Delaware | 62-1147325 | |||
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 8410 West Bryn Mawr, Suite 700, Chicago, Illinois 60631 |
| (Address of principal executive offices) (Zip Code) |
| Registrant's telephone number, including area code: (773) 399-8900 |
|
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or |
| Class | Outstanding at June 30, 2003 | |||
| Common Shares, $1 par value Series A Common Shares, $1 par value |
53,132,721 Shares 33,005,877 Shares |
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UNITED STATES CELLULAR
CORPORATION |
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PART I. FINANCIAL
INFORMATION |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2003 | 2002 (As Restated) | 2003 | 2002 (As Restated) | |||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||
| OPERATING REVENUES | ||||||||||||||
| Service | $ | 610,109 | $ | 501,153 | $ | 1,174,710 | $ | 962,266 | ||||||
| Equipment sales | 29,701 | 23,186 | 61,014 | 40,493 | ||||||||||
| Total Operating Revenues | 639,810 | 524,339 | 1,235,724 | 1,002,759 | ||||||||||
| OPERATING EXPENSES | ||||||||||||||
| System operations | 147,032 | 118,138 | 284,997 | 226,059 | ||||||||||
| Marketing and selling | 98,548 | 78,899 | 207,469 | 158,125 | ||||||||||
| Cost of equipment sold | 57,362 | 36,588 | 122,127 | 66,955 | ||||||||||
| General and administrative | 175,638 | 113,033 | 333,087 | 221,511 | ||||||||||
| Depreciation | 87,104 | 68,957 | 182,976 | 134,934 | ||||||||||
| Amortization of deferred charges and customer lists | 16,167 | 7,452 | 29,798 | 14,227 | ||||||||||
| Loss on assets held for sale | 3,500 | — | 27,000 | — | ||||||||||
| Total Operating Expenses | 585,351 | 423,067 | 1,187,454 | 821,811 | ||||||||||
| OPERATING INCOME | 54,459 | 101,272 | 48,270 | 180,948 | ||||||||||
| INVESTMENT AND OTHER INCOME (EXPENSE) | ||||||||||||||
| Investment income | 13,484 | 7,287 | 25,862 | 17,748 | ||||||||||
| Interest income | 376 | 1,375 | 803 | 2,413 | ||||||||||
| Other income (expense), net | 1,145 | 1,268 | 979 | 1,626 | ||||||||||
| Interest expense | (16,444 | ) | (8,657 | ) | (31,898 | ) | (17,687 | ) | ||||||
| Loss on investments | — | (244,699 | ) | (3,500 | ) | (244,699 | ) | |||||||
| Total Investment and Other Income (Expense) | (1,439 | ) | (243,426 | ) | (7,754 | ) | (240,599 | ) | ||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ||||||||||||||
| AND MINORITY INTEREST | 53,020 | (142,154 | ) | 40,516 | (59,651 | ) | ||||||||
| Income tax expense (benefit) | 22,247 | (54,993 | ) | 21,129 | (19,316 | ) | ||||||||
| INCOME (LOSS) BEFORE MINORITY INTEREST | 30,773 | (87,161 | ) | 19,387 | (40,335 | ) | ||||||||
| Minority share of income | (1,659 | ) | (1,221 | ) | (4,916 | ) | (3,654 | ) | ||||||
| INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF | ||||||||||||||
| ACCOUNTING CHANGE | 29,114 | (88,382 | ) | 14,471 | (43,989 | ) | ||||||||
| Cumulative effect of accounting change, net of tax | — | — | — | 4,097 | ||||||||||
| NET INCOME (LOSS) | $ | 29,114 | $ | (88,382 | ) | $ | 14,471 | $ | (39,892 | ) | ||||
| BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (000s) | 86,134 | 86,083 | 86,127 | 86,068 | ||||||||||
| BASIC EARNINGS (LOSS) PER SHARE (Note 6) | ||||||||||||||
| Income (Loss) Before Cumulative Effect of Accounting Change | $ | 0.34 | $ | (1.03 | ) | $ | 0.17 | $ | (0.51 | ) | ||||
| Cumulative Effect of Accounting Change | — | — | — | 0.05 | ||||||||||
| Net Income (Loss) | $ | 0.34 | $ | (1.03 | ) | $ | 0.17 | $ | (0.46 | ) | ||||
| DILUTED WEIGHTED AVERAGE SHARES | ||||||||||||||
| OUTSTANDING(000s) | 86,501 | 86,083 | 86,483 | 86,068 | ||||||||||
| DILUTED EARNINGS (LOSS) PER SHARE (Note 6) | ||||||||||||||
| Income (Loss) Before Cumulative Effect of Accounting Change | $ | 0.34 | $ | (1.03 | ) | $ | 0.17 | $ | (0.51 | ) | ||||
| Cumulative Effect of Accounting Change | — | — | — | 0.05 | ||||||||||
| Net Income (Loss) | $ | 0.34 | $ | (1.03 | ) | $ | 0.17 | $ | (0.46 | ) | ||||
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The accompanying notes to consolidated financial statements are an integral part of these statements. -3- |
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UNITED STATES CELLULAR
CORPORATION AND SUBSIDIARIES |
| Six Months Ended June 30, | ||||||||
| 2003 | 2002 (As Restated) | |||||||
| (Dollars in thousands) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | 14,471 | $ | (39,892 | ) | |||
| Add (Deduct) adjustments to reconcile net income (loss) | ||||||||
| to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 212,774 | 149,161 | ||||||
| Deferred income tax provision | 18,620 | (56,688 | ) | |||||
| Investment income | (25,862 | ) | (17,748 | ) | ||||
| Minority share of income | 4,916 | 3,654 | ||||||
| Cumulative effect of accounting change | — | (4,097 | ) | |||||
| Loss on assets held for sale | 27,000 | — | ||||||
| Loss on investments | 3,500 | 244,699 | ||||||
| Other noncash expense | 7,021 | 5,702 | ||||||
| Changes in assets and liabilities | ||||||||
| Change in accounts receivable | 35,229 | (20,506 | ) | |||||
| Change in inventory | (32,643 | ) | 26,785 | |||||
| Change in accounts payable | (91,449 | ) | (19,462 | ) | ||||
| Change in accrued interest | 562 | 504 | ||||||
| Change in accrued taxes | 17,525 | 31,652 | ||||||
| Change in customer deposits and deferred revenues | 13,007 | 9,798 | ||||||
| Change in other assets and liabilities | (9,679 | ) | (6,771 | ) | ||||
| 194,992 | 306,791 | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Additions to property, plant and equipment | (294,461 | ) | (236,061 | ) | ||||
| System development costs | (9,541 | ) | (20,713 | ) | ||||
| Refund of deposit from FCC | — | 47,565 | ||||||
| Acquisitions, excluding cash acquired | (1,244 | ) | (18,010 | ) | ||||
| Distributions from unconsolidated entities | 17,564 | 5,773 | ||||||
| Other investing activities | (1,527 | ) | (2,097 | ) | ||||
| (289,209 | ) | (223,543 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from contracts payable | — | 159,918 | ||||||
| Increase in notes payable | 239,278 | 57,444 | ||||||
| Repayment of notes payable | (94,278 | ) | (306,444 | ) | ||||
| Repurchase of long-term debt | (40,680 | ) | — | |||||
| Capital (distributions) to minority partners | (1,706 | ) | (3,616 | ) | ||||
| Other financing activities | 2,428 | (1,247 | ) | |||||
| 105,042 | (93,945 | ) | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 10,825 | (10,697 | ) | |||||
| CASH AND CASH EQUIVALENTS- | ||||||||
| Beginning of period | 14,864 | 28,941 | ||||||
| End of period | $ | 25,689 | $ | 18,244 | ||||
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The accompanying notes to consolidated financial statements are an integral part of these statements. -4- |
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UNITED STATES CELLULAR
CORPORATION AND SUBSIDIARIES |
| June 30, 2003 | December 31, 2002 | |||||||
| (Dollars in thousands) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | ||||||||
| General funds | $ | 24,966 | $ | 14,155 | ||||
| Affiliated cash equivalents | 723 | 709 | ||||||
| 25,689 | 14,864 | |||||||
| Accounts Receivable | ||||||||
| Customers, less allowance of $19,330 and $17,866, respectively | 193,554 | 220,430 | ||||||
| Roaming | 42,203 | 53,545 | ||||||
| Other | 32,345 | 41,276 | ||||||
| Inventory | 87,498 | 55,490 | ||||||
| Prepaid expenses | 23,272 | 19,749 | ||||||
| Prepaid income taxes | 16,089 | 26,610 | ||||||
| Other current assets | 24,153 | 21,309 | ||||||
| 444,803 | 453,273 | |||||||
| INVESTMENTS | ||||||||
| Licenses | 979,759 | 1,038,556 | ||||||
| Goodwill | 547,663 | 643,629 | ||||||
| Customer lists, net of accumulated amortization | ||||||||