RURAL CELLULAR CORPORATION 
By Rural Cellular Corporation (?RCC? or ?the Company?) (NASDAQ:RCCC) announces fourth quarter and full year 2006 financial results.
RCC's fourth quarter 2006 highlights include:
Service Revenue - The increase in service revenue for the quarter reflects LSR increasing to $52 per month compared to $51 per month last year. LSR reflects increased data revenue, which averaged $2.75 per month for the quarter compared to $1.13 per month last year.
Customers - During the quarter total customers increased by 11,081 to 705,658, reflecting improved retention to 97.8% compared to 97.3% last year. Postpaid customer gross additions increased to 46,004 for the quarter compared to 44,285 last year. Postpaid customer growth was 8,098 during the quarter compared to a loss of 3,930 last year. As of December 31, 2006, approximately 82% of our postpaid customers were using new technology devices compared to 47% at December 31, 2005.
Roaming Revenue ?The 9% increase in roaming revenue reflects a 17% increase in outcollect minutes and a 320% increase in data revenue. The Company's outcollect yield for the quarter was $0.11 per minute as compared to $0.12 per minute last year. Data roaming for the quarter was $3.4 million compared to $811,000 last year.
Network Costs - Network costs for the quarter increased 12% to $35.7 million. The increase reflects the additional costs of operating multiple networks (analog, TDMA, GSM/GPRS/EDGE and CDMA/1XRTT), and 97 cell sites added since December 31, 2005. Incollect expense, a component of network costs, increased 7% to $12.3 million for the quarter. Per minute incollect cost for the quarter was approximately $0.08 per minute compared to $0.10 last year.
Selling, General and Administrative - SG&A increased 2% to $39.1 million for the quarter, reflecting increased G&A and sales and marketing costs which were partially offset by a 37% decrease in bad debt expense.
Operating income before depreciation, amortization, impairment, and stock-based compensation- was $52.4 million during the quarter ended December 31, 2006 compared to $54.4 million last year.
Depreciation and Amortization - Depreciation and amortization expense increased 25% for the quarter to $36.3 million, reflecting depreciation expense related to our new networks and accelerated depreciation of the Company's legacy networks.
Goodwill and Indefinite-Lived Intangible Assets - In accordance with the Company's annual impairment assessment under SFAS No. 142, the Company recorded an impairment cost of $23.8 million in the quarter ended December 31, 2006, reflecting impairment of certain assets in our South territory.
Interest Expense - Interest expense for the quarter decreased to approximately $47.4 million compared to $47.7 million last year, reflecting a lower average cost of debt partially offset by increased senior and junior preferred stock dividends.
Redemption of Senior Exchangeable Preferred Stock for Cash. During the quarter, we redeemed 13,161 shares of our senior exchangeable preferred stock for $16.1 million. The corresponding gain of $612,000, not including transaction commissions and other related fees, was recorded as a reduction of interest expense in the quarter.
Redemption of Senior Exchangeable Preferred Stock with Class A Common Stock. During the quarter, the Company redeemed 10,500 shares of our senior exchangeable preferred stock in exchange for 1,166,500 shares of our Class A common stock in negotiated transactions. The corresponding loss of $519,000, not including transaction commissions and other related fees, is recorded as an increase in interest expense. The shares of common stock were issued in reliance upon the exemption from registration provided in Section 3(a)(9) of the Securities Act of 1933, as amended.
Capital Expenditures - Total capital expenditures for the fourth quarter and year were approximately $12.1 million and $47.5 million, respectively. At December 31, 2006, we had 1,158 cell sites compared to 1,061 cell sites at December 31, 2005.
Acquisition of Southern Minnesota Markets - In December 2006, RCC entered into an agreement to purchase from Alltel Communications, Inc. certain southern Minnesota wireless markets. Closing of this transaction is subject to federal regulatory approvals and certain other conditions. Under the agreement, RCC will receive network assets and A-block cellular licenses covering Minnesota RSAs 7, 8, 9, and 10. The southern Minnesota service area is adjacent to RCC's northern Minnesota service area and includes approximately 80 cell sites and 33 distribution points. These markets include 28 counties in southern Minnesota. The southern Minnesota RSAs being acquired utilize CDMA technology consistent with the Company's northern Minnesota networks. With these new properties, the population covered by RCC's marketed networks will increase by approximately 621,000, then totaling 7.2 million. RCC plans to use existing cash on hand to finance the purchase.
Teleconference - On March 6, 2007 at 8:00 AM CT, a teleconference will be held to discuss RCC's fourth quarter and full year performance. To participate in the call, dial (800) 240-4186, and give the operator your name and company affiliation. To access a replay of this call through March 15, 2007, dial (800) 405-2236 and 11084260# as the pass code. An audio replay of the teleconference can also be accessed by logging onto the Company's website at www.unicel.com. To access the audio stream, click on the Investor Relations section.
About the Company - Rural Cellular Corporation, based in Alexandria, Minnesota, provides wireless communication services to Central, Midwest, Northeast, South and Northwest territories located in 15 states.
Forward-looking statements - Statements about RCC's future prospects are forward-looking and, therefore, involve certain risks and uncertainties, including but not limited to: the ability to integrate newly acquired properties with current operations, competitive considerations, success of customer enrollment and retention initiatives, the ability to increase wireless usage and reduce customer acquisition costs, the ability to deploy new network technology on a timely basis, and the ability to service debt. These and other risk factors are discussed in RCC's Report on Form 10-K for the year ended December 31, 2006 and from time to time in its other filings with the Securities and Exchange Commission. The Company's filings with the Securities and Exchange Commission can be accessed by logging onto the SEC web site at www.sec.gov or by logging onto the Company's website at www.unicel.com and clicking on the Investor Relations section.
| Consolidated Operating Data: | Three months ended |
Year ended | ||||||
2006 | 2005 | 2006 | 2005 | |||||
| Penetration (1) (2) | 9.0% | 9.5% | 9.0% | 9.5% | ||||
| Retention (3) | 97.8% | 97.3% | 97.5% | 97.3% | ||||
| Average monthly revenue per customer (4) | $75 | $71 | $74 | $67 | ||||
| Local service revenue per customer (5) | $52 | $51 | $52 | $50 | ||||
| Acquisition cost per customer (6) | $542 | $514 | $534 | $497 | ||||
| Voice customers at period end | ||||||||
| Postpaid | 586,092 | 597,769 | ||||||
| Prepaid | 9,433 | 11,663 | ||||||
| Wholesale | 110,133 | 96,170 | ||||||
| Total customers | 705,658 | 705,602 | ||||||
| Direct marketed POPs (1) | ||||||||
| RCC Cellular | 5,828,000 | 5,751,000 | ||||||
| Wireless Alliance | 776,000 | 754,000 | ||||||
| Total POPs | 6,604,000 | 6,505,000 | ||||||
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(1) Reflects 2000 U.S. Census Bureau population data updated for December 2005. | ||||||||
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(2) Represents the ratio of wireless voice customers, excluding wholesale customers, at the end of the period to population served ("POPs"). | ||||||||
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(3) Determined for each period by dividing total postpaid wireless voice customers discontinuing service during such period by the average postpaid wireless voice customers for such period (customers at the beginning of the period plus customers at the end of the period, divided by two), dividing that result by the number of months in the period, and subtracting such result from one. | ||||||||
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(4) Determined for each period by dividing the sum of service revenue (not including pass-through regulatory fees) and roaming revenue by the monthly average postpaid customers for such period. | ||||||||
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(5) Determined for each period by dividing service revenue (not including pass-through regulatory fees) by the monthly average postpaid customers for such period. | ||||||||
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(6) Determined for each period by dividing the sum of selling and marketing expenses, net cost of equipment sales, and depreciation of rental telephone equipment by the gross postpaid wireless voice customers added during such period. | ||||||||
RURAL CELLULAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (in thousands) (Unaudited) | ||||
| December 31, | ||||
| 2006 | 2005 | |||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | $ 72,495 | $ 86,822 | ||
| Short-term investments | 110,716 | 66,778 | ||
| Accounts receivable, less allowance for doubtful accounts of $2,676 and $3,567 | 62,592 | 72,887 | ||
Inventories | 11,366 | 12,849 | ||
| Other current assets | 4,265 | 4,280 | ||
| Total current assets | 261,434 | 243,616 | ||
| PROPERTY AND EQUIPMENT, net | 211,978 | 277,408 | ||
| LICENSES AND OTHER ASSETS: | ||||
| Licenses, net | 524,713 | 548,513 | ||
| Goodwill, net | 348,684 | 348,684 | ||
| Customer lists, net | 10,734 | 29,301 | ||
| Deferred debt issuance costs, net | 21,910 | 27,022 | ||
| Other assets, net | 5,195 | 6,138 | ||
| Total licenses and other assets | 911,236 | 959,658 | ||
| $1,384,648 | $1,480,682 | |||
RURAL CELLULAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Liabilities and Shareholders' Equity (in thousands, except per share data) (Unaudited) | ||||
| December 31, | ||||
| 2006 | 2005 | |||
| CURRENT LIABILITIES: | ||||
| Accounts payable | $ 38,580 | $ 53,492 | ||
| Advance billings and customer deposits | 12,031 | 11,885 | ||
| Accrued interest | 42,784 | 39,336 | ||
| Other accrued expenses | 7,832 | 8,981 | ||
| Total current liabilities | 101,227 | 113,694 | ||
| LONG-TERM LIABILITIES | 1,862,919 | 1,847,994 | ||
| Total liabilities | 1,964,146 | 1,961,688 | ||
| COMMITMENTS AND CONTINGENCIES (Note 9) | ||||
| REDEEMABLE PREFERRED STOCK | 185,658 | 170,976 | ||
| SHAREHOLDERS' DEFICIT: | ||||
| Class A common stock; $.01 par value; 200,000 shares authorized, 15,048 and 13,530 outstanding | 151 | 135 | ||
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Class B common stock; $.01 par value; 10,000 shares authorized,
398 and 427 outstanding | 4 | 4 | ||
| Additional paid-in capital | 228,149 | 212,420 | ||
| Accumulated deficit | (993,460) | (862,742) | ||
| Unearned compensation | - | (1,799) | ||
| Total shareholders' deficit | (765,156) | (651,982) | ||
| $1,384,648 | $1,480,682 | |||
RURAL CELLULAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share data) (Unaudited) | ||||||||
Three Months Ended |
For the Years Ended | |||||||
| 2006 | 2005 | 2006 | 2005 | |||||
| REVENUE: | ||||||||
| Service | $ 96,332 | $96,001 | $385,220 | $387,848 | ||||
| Roaming | 39,449 | 36,255 | 153,867 | 122,774 | ||||
| Equipment | 6,576 | 7,619 | 25,373 | 34,313 | ||||
| Total revenue | 142,357 | 139,875 | 564,460 | 544,935 | ||||
| OPERATING EXPENSES: | ||||||||
| Network costs, excluding depreciation | 35,704 | 31,945 | 138,047 | 120,322 | ||||
| Cost of equipment sales | 15,729 | 15,519 | 56,587 | 58,266 | ||||
| Selling, general and administrative | 39,100 | 38,255 | 147,271 | 152,918 | ||||
| Depreciation and amortization | 36,288 | 28,988 | 128,415 | 100,463 | ||||
| Impairment of assets | 23,800 | - | 23,800 | 7,020 | ||||
| Total operating expenses | 150,621 | 114,707 | 494,120 | 438,989 | ||||
| OPERATING INCOME | (8,264) | 25,168 | 70,340 | 105,946 | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest expense | (47,366) | (47,727) | (194,997) | (171,831) | ||||
| Interest and dividend income | 2,039 | 1,310 | 7,866 | 2,221 | ||||
| Other | (72) | (727) | 369 | (876) | ||||
| Other expense, net | (45,399) | (47,144) | (186,762) | (170,486) | ||||
| LOSS BEFORE INCOME TAX BENEFIT | (53,663) | (21,976) | (116,422) | (64,540) | ||||
| INCOME TAX BENEFIT | (68) | (105) | (381) | (418) | ||||
| NET LOSS | (53,595) | (21,871) | (116,041) | (64,122) | ||||
| PREFERRED STOCK DIVIDEND | (3,807) | 3,127 | (14,677) | (7,174) | ||||
| LOSS APPLICABLE TO COMMON SHARES | $(57,402) | $(18,744) | $(130,718) | $(71,296) | ||||
| BASIC AND DILUTED WEIGHTED AVERAGE SHARES USED TO COMPUTE LOSS PER SHARE: | Share
© Business Wire - 2007
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