U.S. Cellular Corp. and its parent company, Telephone and Data Systems Inc., again delayed reporting their third-quarter 2005 results and financial restatements dating back to 2000. The American Stock Exchange granted the companies their fourth filing extension, giving them until June 30 to make those filings as well as year-end 2005 and first-quarter 2006 results, which also are expected to be late.
The companies did provide guidance for the full-year 2005 and for fiscal 2006.
“The companies require additional time to complete their financial review, finalize the restatement and obtain required approvals,” TDS and U.S. Cellular said in a statement. “The ongoing review is related to specific accounting issues, primarily in the area of income taxes.”
The companies are restating the first and second quarters of 2005, each of the quarters of 2003 and 2004, the years 2002, 2003 and 2004 and “certain related financial data” for 2000 and 2001.
TDS expects a tax benefit for the third quarter of 2004. According to figures released by U.S. Cellular in November, most of its yearly adjustments for net income fall within a $3 million range of the originally reported figures-with the exception of 2003, where net income could be reduced by as much as $9 million.
TDS and U.S. Cellular have been working since November on the restatements, which must be completed before the quarterly filings can be made. The companies said that they plan to file the restatements, third-quarter 2005 results, year-end results and first-quarter 2006 results sequentially as they are completed, and that the last filings might not be turned in until late May or June.
Besides falling out of compliance with listing standards, the troubles have also put the companies into default on some of their revolving credit agreements. TDS and U.S. Cellular said they obtained waivers on the defaults through March 31 and that they have started discussions with lenders to further extend the waivers.
For its 2005 guidance, U.S. Cellular offered expectations of about $2.8 billion in service revenue for the year and operating revenue between $220 million to $260 million. The company said it expects depreciation, amortization and accretion of about $515 million and capital expenditures of $580 million to $590 million. The carrier said its actual net retail customer additions for the year were 411,000 subscribers-fewer than the 627,000 customers it added in 2004 and 447,000 subscribers added in 2003.
The delay announcement sparked a stock sell-off, but U.S. Cellular shares were trading above $55 a share after the extension was confirmed; the stock spent most of the last three months below $52.
William Ho, senior analyst for wireless services with Current Analysis, said that the repeated delays “impacts employee morale more than anything. … From the Wall Street standard, it doesn’t look like they’ve been hit materially, and [their stock has] climbed back from their lows to almost their original high from before it was announced they needed to restate.”
He added that the company didn’t have a good 2005 and that its guidance for 2006 was in the same vein, although the company expects to generate a bit more service revenue this year. U.S. Cellular said it expects to add between 390,000 and 450,000 subscribers in 2006, and that service revenues could reach between $3.1 billion and $3.2 billion, compared to about $2.8 billion in 2005. In March, the company had predicted it would add between 475,000 and 525,000 net new customers, but by November it had lowered its estimates to between 400,000 and 425,000.
