OKLAHOMA CITY, Nov. 8, 2007 (PRIME NEWSWIRE) -- Dobson Communications Corporation (Nasdaq:DCEL) today announced its operating results for the third quarter ended September 30, 2007.
Dobson reported net income applicable to common shareholders of $24.9 million, or $0.14 per share, for the third quarter of 2007. (See Table 1.) For the third quarter of 2006, Dobson reported net income applicable to common shareholders of $25.9 million, or $0.15 per share. Net income for the third quarter of 2007 included an income tax expense of $29.1 million, compared with an income tax benefit of $7.9 million for the third quarter of 2006.
EBITDA for the third quarter of 2007 was $153.5 million, an increase of 23.0 percent over EBITDA of $124.7 million for the third quarter of 2006. Please see Table 3 for the reconciliation of EBITDA to GAAP measures.
Service revenue for the third quarter of 2007 was $274.8 million, an increase of 18.3 percent over service revenue of $232.3 million in the third quarter of 2006. Average revenue per unit (ARPU) was $52.54 for the third quarter of 2007, compared with ARPU of $49.16 for the third quarter in 2006. Data revenue contributed $7.03 to ARPU in the third quarter of 2007, compared with $4.34 in the third quarter of 2006.
Roaming revenue was $98.0 million in the third quarter of 2007, an increase of 12.2 percent over the same period of 2006. Roaming traffic totaled 1.0 billion minutes of use (MOUs) for the third quarter of 2007, a 23.0 percent increase over the third quarter of 2006. Blended roaming yield was 9.4 cents for the third quarter of 2007.
Dobson noted that third quarter total revenue was 16.6 percent higher than that for the third quarter of 2006. Driving even stronger growth in EBITDA was the fact that total operating expenses grew by only 12.8 percent, despite the recognition of $10.5 million in merger-related costs, most of which were included in general and administrative expense. On June 29, 2007, Dobson Communications announced its agreement to be acquired by AT&T Inc. (NYSE:T).
Cost of service expense was $102.2 million in the third quarter of 2007, compared with $88.8 million for the third quarter of 2006. Incollect (off-network) expense was $28.6 million for the third quarter of 2007, compared with incollect expense of $22.3 million for the third quarter of 2006.
Marketing and selling expense was $43.5 million for the third quarter of 2007, compared with $42.2 million for the third quarter last year.
General and administrative expense was $59.1 million in the third quarter of 2007, compared with $47.5 million for the third quarter of 2006.
Subscriber growth
Dobson reported total gross subscriber additions of 186,500 for the third quarter of 2007, compared with 139,500 gross additions in the third quarter of 2006. (See Table 3.)
Postpaid gross additions were 98,200 for the third quarter of 2007, compared with 92,100 postpaid gross additions for the third quarter of 2006.
Postpaid customer churn was 2.01 percent in the third quarter of 2007, compared with 1.95 percent for the third quarter last year.
Consequently, Dobson reported 49,100 net subscriber additions in the third quarter of 2007, comprised of 8,200 postpaid customers, 5,500 prepaid customers, and 35,400 reseller customers. In the third quarter of 2006, Dobson reported 23,500 net additional subscribers, which included the addition of 11,300 postpaid customers, the addition of 14,500 prepaid customers, and a reduction of 2,300 reseller customers. The Company also acquired 1,400 customers during last year's third quarter through two acquisitions in Alaska.
At the end of the third quarter of 2007, 95.3 percent of total customers were on GSM calling plans, compared with 85.8 percent at the end of the third quarter of 2006. Dobson recently mailed letters to its remaining TDMA and analog customers encouraging them to switch to GSM service before March 1, 2008 to avoid interruption of their mobile service. The Company plans to cease offering service on its TDMA and analog networks after that date.
Capital expenditures for the third quarter of 2007 were $20.0 million, reflecting the addition of 42 cell sites to Dobson's network and other capital improvements. Between its two principal operating subsidiaries, Dobson Cellular's capital expenditures were $9.9 million, compared with $10.2 million at American Cellular. As of September 30, 2007, Dobson's total network included 3,257 cell sites.
Dobson's balance sheet at September 30, 2007 included $250.0 million in cash, $4.4 million in restricted investments and $1.0 million in short-term investments; $2.7 billion in total debt; and $115.2 million in preferred stock.
Other matters
Given its pending acquisition by AT&T, Dobson will not conduct a conference call to discuss its third quarter results. For further analysis of quarterly results, please see the Company's quarterly report on Form 10-Q, which Dobson plans to file Friday, November 9, 2007.
On November 5, 2007, Dobson received notice that the U.S. District Court for the District of Columbia had preliminarily approved a consent decree filed by the U.S. Department of Justice that allows the merger to proceed while requiring that AT&T divest Dobson's operations in three rural service areas -- one in Oklahoma and two in Kentucky -- and the Cellular One brand name that Dobson currently owns, as previously announced. Final approval of the decree will occur after a mandated notice and comment period, but the parties are allowed to close the transaction in the interim.
A review of the merger of Dobson with AT&T is pending with the Federal Communications Commission ("FCC"). Dobson is hopeful that the approval process with the FCC will be completed and expects to close promptly after receipt of that approval. There can be no assurance, however, that the merger will become effective. The merger may become effective this year, on a later date, or not at all, and is subject to the satisfaction or waiver of all of the conditions to closing set forth in the Agreement and Plan of Merger dated June 29, 2007, among Dobson, AT&T Inc. and Alpine Merger Sub, Inc.
Dobson Communications is a leading provider of wireless phone services to rural and suburban markets in the United States. Headquartered in Oklahoma City, the Company owns wireless operations in 17 states. For additional information, please visit its web site at www.dobson.net.
The description of our plans and expectations set forth herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These plans and expectations involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from the plans and expectations include, without limitation, our ability to complete in a timely fashion the merger with AT&T, our substantial leverage and debt service requirements, our ability to satisfy the financial covenants of our outstanding debt instruments and to raise additional capital, our ability to manage our business successfully and to compete effectively in our wireless business against competitors with greater financial, technical, marketing and other resources, changes in end-user requirements and preferences, the development of other technologies and products that may gain more commercial acceptance than those of ours, terms in our roaming agreements, and adverse regulatory changes. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date hereof including, without limitation, changes in our business strategy or expected capital expenditures, or to reflect the occurrence of unanticipated events.
Table 1
Dobson Communications Corporation
Statements of Operations
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
($ in thousands except per share data)
(unaudited)
Operating
Revenue
Service
revenue $ 274,831 $ 232,324 $ 793,557 $ 671,679
Roaming
revenue 98,015 87,365 236,490 213,188
Equipment
and
other
revenue 19,310 16,681 56,698 51,161
----------- ----------- ----------- -----------
Total 392,156 336,370 1,086,745 936,028
----------- ----------- ----------- -----------
Operating
Expenses
(excluding
depreciation
and
amortization)
Cost of
service
(exclusive
of
depreciation
and
amortization
shown
separately
below) 102,214 88,809 292,384 246,385
Cost of
equipment 33,815 33,152 101,860 102,267
Marketing and
selling 43,548 42,155 131,890 121,274
General and
administrative 59,105 47,527 158,756 141,596
----------- ----------- ----------- -----------
Total 238,682 211,643 684,890 611,522
----------- ----------- ----------- -----------
EBITDA (a) 153,474 124,727 401,855 324,506
Gain on
disposition
of operating
assets 1,567 1,566 4,700 4,823
Depreciation
and
amortization (44,234) (47,776) (142,866) (146,206)
----------- ------------ ----------- -----------
Operating
income 110,807 78,517 263,689 183,123
Interest
expense (55,762) (57,840) (169,849) (172,661)
Loss on
redemption
of
mandatorily
redeemable
preferred
stock -- -- -- (1,482)
Dividends on
mandatorily
redeemable
preferred
stock -- -- -- (709)
Loss from
extinguish-
ment of debt -- -- (57,578) (12,717)
Other income,
net 2,947 1,810 6,991 5,345
Minority
interests in
income of
subsidiaries (2,724) (2,447) (7,459) (6,980)
----------- ------------ ----------- -----------
Income (loss)
before income
taxes 55,268 20,040 35,794 (6,081)
Income tax
(expense)
benefit (29,064) 7,939 (22,086) 17,120
----------- ----------- ----------- -----------
Net income 26,204 27,979 13,708 11,039
Dividends on
preferred
stock (1,256) (2,036) (5,326) (6,785)
----------- ------------ ----------- -----------
Net income
applicable
to common
stockholders $ 24,948 $ 25,943 $ 8,382 $ 4,254
=========== =========== =========== ===========
Basic net
income
applicable to
common
stockholders
per common
share $ 0.14 $ 0.15 $ 0.05 $ 0.03
=========== =========== =========== ===========
Basic weighted
average
common
shares
outstanding 172,638,721 170,482,730 171,775,323 169,996,467
=========== =========== =========== ===========
Diluted net
income
applicable to
common
stockholders
per common
share $ 0.13 $ 0.14 $ 0.05 $ 0.02
=========== =========== =========== ===========
Diluted
weighted
average
common
shares
outstanding
(b) 207,826,514 205,190,796 177,110,691 173,042,182
=========== =========== =========== ===========
(a) EBITDA is defined as net income before gain on disposition of
operating assets, depreciation and amortization, interest
expense, loss on redemption of mandatorily redeemable preferred
stock, dividends on mandatorily redeemable preferred stock, loss
from extinguishment of debt, other income, net, minority interest
in income of subsidiaries and income tax (expense) benefit. We
believe that EBITDA provides meaningful additional information
concerning a company's operating results and its ability to
service its long- term debt and other fixed obligations and to
fund its continued growth. Many financial analysts consider
EBITDA to be a meaningful indicator of an entity's ability to
meet its future financial obligations, and they consider growth
in EBITDA to be an indicator of future profitability, especially
in a capital intensive industry such as wireless communications.
You should not construe EBITDA as an alternative to net loss as
determined in accordance with generally accepted accounting
principles, or GAAP, as an alternative to cash flows from
operating activities in accordance with GAAP or a measure of
liquidity. Because EBITDA is not calculated in the same manner by
all companies, it may not be comparable to other similarly titled
measures of other companies.
(b) For the three months ended September 30, 2007, dilutive shares
include potentially dilutive shares from option grants, our
series F convertible preferred stock and our convertible debt.
For the nine months ended September 30, 2007, dilutive shares
include potentially dilutive shares from option grants. Our
series F convertible preferred stock and our convertible debt is
anti-dilutive for the nine months ended September 30, 2007.
Table 2
Dobson Communications Corporation
Selected Balance Sheet and Statistical Data
Sept 30, Dec 31,
Balance Sheet Data: 2007 2006
-------- --------
($ in millions)
(unaudited)
Cash and cash equivalents (unrestricted) (a) $ 250.0 $ 117.1
Restricted investments $ 4.4 $ 4.4
Short-term investments $ 1.0 $ 5.0
Debt:
DCC Senior Floating Rate Notes $ 150.0 $ 150.0
DCC Senior Convertible Debentures 160.0 160.0
DCS 8.375% Senior Notes 509.4 511.2
DCS 9.875% Senior Notes 325.0 325.0
DCC 8.875% Senior Notes 419.7 419.7
ACC Credit Facility 897.8 124.7
ACC 9.5% Senior Notes, net 16.6 15.8
ACC 10.0% Senior Notes 185.7 900.0
-------- --------
Total debt $2,664.2 $2,606.4
======== ========
Preferred Stock:
-------- --------
Series F Preferred Stock (b) $ 115.2 $ 135.7
======== ========
Nine Months Ended
Sept 30,
----------------------
2007 2006
-------- --------
($ in millions)
Capital Expenditures: $ 99.3 $ 116.5
======== ========
(a) Includes $50.8 million and $36.5 million of cash and cash
equivalents from American Cellular Corporation at September 30,
2007 and December 31, 2006, respectively.
(b) As of September 30, 2007, 114,745 shares of the Series F
convertible preferred stock had been voluntarily converted into
2,341,727 shares of Class A Common Stock. Subsequent to September
30, 2007, the remaining shares of Series F convertible preferred
stock were either voluntarily converted into Class A common stock
or redeemed on or before October 4, 2007.
Table 3
Dobson Communications Corporation
For the Quarter Ended
9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
($ in thousands except per subscriber data)
(unaudited)
Operating
Revenue
Service
revenue $ 274,831 $ 264,781 $ 253,945 $ 247,106 $ 232,324
Roaming
revenue 98,015 76,525 61,950 70,089 87,365
Equipment
and
other
revenue 19,310 18,863 18,525 17,873 16,681
---------- ---------- ---------- ---------- ----------
Total 392,156 360,169 334,420 335,068 336,370
---------- ---------- ---------- ---------- ----------
Operating
Expenses
(excluding
depreciation
and
amortization)
Cost of
service 102,214 96,933 93,237 94,558 88,809
Cost of
equipment 33,815 34,253 33,792 33,911 33,152
Marketing
and
selling 43,548 45,497 42,845 43,854 42,155
General
and
admini-
strative 59,105 51,096 48,555 49,365 47,527
---------- ----------- ---------- ---------- ----------
Total 238,682 227,779 218,429 221,688 211,643
---------- ----------- ---------- ---------- ----------
EBITDA
(a) (b) $ 153,474 $ 132,390 $ 115,991 $ 113,380 $ 124,727
========== =========== ========== ========== ==========
Pops 12,672,900 12,672,900 12,672,900 12,672,900 12,052,700
Postpaid
Gross
Adds 98,200 99,300 94,300 95,000 92,100
Net
Adds 8,200 22,900 12,900 15,100 11,300
Sub-
scribers 1,497,200 1,489,000 1,466,100 1,453,200 1,390,800
Churn 2.01% 1.72% 1.86% 1.84% 1.95%
Prepaid
Gross
Adds 34,300 32,200 28,600 39,700 33,300
Net
Adds 5,500 5,900 1,200 16,100 14,500
Sub-
scribers 120,100 114,600 108,700 107,500 88,500
Reseller
Gross
Adds 54,000 27,100 9,800 11,100 14,100
Net
Adds 35,400 12,900 (4,200) (3,100) (2,300)
Sub-
scribers 150,300 114,900 102,000 106,200 109,300
Total
Gross
Adds 186,500 158,600 132,700 145,800 139,500
Net
Adds 49,100 41,700 9,900 28,100 23,500
Sub-
scribers 1,767,600 1,718,500 1,676,800 1,666,900 1,588,600
ARPU $ 52.54 $ 52.15 $ 50.73 $ 49.92 $ 49.16
Penetra-
tion 13.9% 13.6% 13.2% 13.2% 13.2%
(a) Includes $2.7 million, $2.8 million, $2.6 million, $2.5 million
and $2.7 million of EBITDA for the quarters ended September 30,
2007, June 30, 2007, March 31, 2007, December 31, 2006 and
September 30, 2006, respectively, related to minority interests.
(b) A reconciliation of EBITDA to net income (loss) as determined in
accordance with GAAP is as follows:
Net income
(loss) $ 26,204 $ 18,102 $ (30,598) $ 1,742 $ 27,979
Add back
non-
EBITDA
items
included
in net
income
(loss):
De-
preciation
and
amortization (44,234) (48,453) (50,179) (50,097) (47,776)
Gain on
disposition
of
operating
assets 1,567 1,567 1,566 1,567 1,566
Interest
expense (55,762) (55,402) (58,685) (59,423) (57,840)
Loss on
redemption
of
mandatorily
redeemable
preferred
stock -- -- -- -- --
Loss from
extinguish-
ment of
debt -- (55) (57,523) (522) --
Other
income,
net 2,947 2,470 1,575 2,245 1,810
Minority
interests
in income
of
subsidiaries (2,724) (2,436) (2,299) (2,248) (2,447)
Income tax
(expense)
benefit (29,064) (11,979) 18,956 (3,160) 7,939
--------- --------- --------- --------- ---------
EBITDA $ 153,474 $ 132,390 $ 115,991 $ 113,380 $ 124,727
========= ========= ========= ========= =========
Table 4
Dobson Cellular Systems
For the Quarter Ended
9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
($ in thousands except per subscriber data)
(unaudited)
Operating
Revenue
Service
revenue $ 164,585 $ 158,486 $ 150,476 $ 146,198 $ 140,711
Roaming
revenue 53,079 42,096 33,386 36,724 47,869
Equipment
and
other
revenue 15,594 15,309 15,305 15,351 14,701
---------- ---------- ---------- ---------- ----------
Total 233,258 215,891 199,167 198,273 203,281
---------- ---------- ---------- ---------- ----------
Operating
Expenses
(excluding
de-
preciation
and
amortiz-
ation)
Cost of
service 61,716 57,805 56,601 55,703 55,018
Cost of
equipment 19,577 20,210 20,339 20,300 20,676
Marketing
and
selling 25,200 26,310 24,865 25,752 25,007
General
and
ad-
ministrative 29,964 29,881 27,926 28,922 27,919
---------- ---------- ---------- ---------- ----------
Total 136,457 134,206 129,731 130,677 128,620
---------- ---------- ---------- ---------- ----------
EBITDA
(a) (b) $ 96,801 $ 81,685 $ 69,436 $ 67,596 $ 74,661
========== ========== ========== ========== ==========
Pops 6,913,700 6,913,700 6,913,700 6,913,700 6,724,700
Postpaid
Gross
Adds 57,000 58,800 55,900 58,900 58,200
Net Adds 5,900 16,000 11,000 13,900 11,700
Sub-
scribers 844,400 838,500 822,500 811,500 797,600
Churn 2.02% 1.72% 1.83% 1.87% 1.96%
Prepaid
Gross
Adds 21,500 20,500 17,100 24,600 21,100
Net Adds 3,400 3,700 (200) 8,900 9,200
Sub-
scribers 73,800 70,400 66,700 66,900 58,000
Reseller
Gross
Adds 30,500 15,300 7,300 7,800 9,400
Net Adds 20,400 7,800 (200) 400 1,300
Sub-
scribers 94,300 73,900 66,100 66,300 65,900
Total
Gross
Adds 109,000 94,600 80,300 91,300 88,700
Net Adds 29,700 27,500 10,600 23,200 22,200
Sub-
scribers 1,012,500 982,800 955,300 944,700 921,500
ARPU $ 54.95 $ 54.70 $ 52.91 $ 52.34 $ 51.59
Penetra-
tion 14.6% 14.2% 13.8% 13.7% 13.7%
(a) Includes $2.7 million, $2.8 million, $2.6 million, $2.5 million
and $2.7 million of EBITDA for the quarters ended September 30,
2007, June 30, 2007, March 31, 2007, December 31, 2006 and
September 30, 2006, respectively, related to minority interests.
(b) A reconciliation of EBITDA to net income (loss) as determined in
accordance with GAAP is as follows:
Net income
(loss) $ 15,048 $ 10,597 $ 2,730 $ (293) $ 10,851
Add back
non-EBITDA
items
included
in net
income
(loss):
Depreciation
and
amortization (25,955) (28,239) (28,851) (28,938) (28,389)
Gain on
disposition
of
operating
assets 850 851 850 851 850
Interest
expense (37,858) (37,603) (37,367) (37,943) (38,232)
Loss from
extinguish-
ment of
debt -- -- -- (522) --
Other
income,
net (1,213) 3,253 2,651 3,052 2,030
Minority
interests
in income
of sub-
sidiaries (2,724) (2,436) (2,299) (2,248) (2,447)
Income tax
(expense)
benefit (14,853) (6,914) (1,690) (2,141) 2,378
---------- ---------- ---------- ---------- ----------
EBITDA $ 96,801 $ 81,685 $ 69,436 $ 67,596 $ 74,661
========== ========== ========== ========== ==========
Table 5
American Cellular Corporation
For the Quarter Ended
9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
($ in thousands except per subscriber data)
(unaudited)
Operating
Revenue
Service
revenue $ 110,246 $ 106,295 $ 103,469 $ 100,908 $ 91,613
Roaming
revenue 44,936 34,429 28,564 33,365 39,496
Equip-
ment
and
other
revenue 7,036 6,875 6,541 6,123 5,583
---------- ---------- ---------- ---------- ----------
Total 162,218 147,599 138,574 140,396 136,692
---------- ---------- ---------- ---------- ----------
Operating
Expenses
(excluding
deprecia-
tion and
amortiza-
tion)
Cost of
service 42,427 41,057 38,565 40,711 35,648
Cost of
equip-
ment 14,238 14,043 13,453 13,611 12,476
Marketing
and
selling 18,863 19,330 18,004 18,066 17,198
General
and
admini-
strative 24,508 22,597 22,011 22,178 21,344
---------- ---------- ---------- ---------- ----------
Total 100,036 97,027 92,033 94,566 86,666
---------- ---------- ---------- ---------- ----------
EBITDA(a) $ 62,182 $ 50,572 $ 46,541 $ 45,830 $ 50,026
========== ========== ========== ========== ==========
Pops 5,759,200 5,759,200 5,759,200 5,759,200 5,328,000
Postpaid
Gross
Adds 41,200 40,500 38,400 36,100 33,900
Net Adds 2,300 6,900 1,900 1,200 (400)
Sub-
scribers 652,800 650,500 643,600 641,700 593,200
Churn 1.99% 1.73% 1.90% 1.82% 1.93%
Prepaid
Gross
Adds 12,800 11,700 11,500 15,100 12,200
Net Adds 2,100 2,200 1,400 7,200 5,300
Sub-
scribers 46,300 44,200 42,000 40,600 30,500
Reseller
Gross Adds 23,500 11,800 2,500 3,300 4,700
Net Adds 15,000 5,100 (4,000) (3,500) (3,600)
Sub-
scribers 56,000 41,000 35,900 39,900 43,400
Total
Gross Adds 77,500 64,000 52,400 54,500 50,800
Net Adds 19,400 14,200 (700) 4,900 1,300
Sub-
scribers 755,100 735,700 721,500 722,200 667,100
ARPU $ 49.31 $ 48.76 $ 47.88 $ 46.78 $ 45.85
Penetra-
tion 13.1% 12.8% 12.5% 12.5% 12.5%
(a) A reconciliation of EBITDA to net income (loss) as determined in
accordance with GAAP is as follows:
Net income
(loss) $ 13,184 $ 4,089 $ (36,593) $ (1,359) $ 4,483
Add back
non-
EBITDA
items
included
in net
income
(loss):
Deprecia-
tion
and
amortiza-
tion (18,235) (20,171) (21,284) (21,115) (19,343)
Gain on
disposi-
tion
of operat-
ing
assets 717 716 716 716 716
Interest
expense (22,860) (22,591) (25,942) (26,420) (24,540)
Loss from
extinguish-
ment of
debt -- (55) (57,523) -- --
Other
income
(expense),
net 3,735 (1,157) (1,505) (1,177) (592)
Income tax
(expense)
benefit (12,355) (3,225) 22,404 807 (1,784)
---------- ---------- ---------- ---------- ----------
EBITDA $ 62,182 $ 50,572 $ 46,541 $ 45,830 $ 50,026
========== ========== ========== ========== ==========