OKLAHOMA CITY, Aug. 8, 2006 (PRIMEZONE) -- Dobson Communications Corporation (Nasdaq:DCEL) today reported sequential growth in sales, roaming revenue, EBITDA and EBITDA margin for the second quarter of 2006, compared with the first quarter of 2006.
The Company reported approximately 127,900 total gross subscriber additions for the second quarter of 2006, an increase of 2.1 percent over the 125,300 total gross additions in the first quarter of 2006. Postpaid sales grew at a faster rate of 5.7 percent to 89,600 in the second quarter of 2006, versus 84,800 in the first quarter of 2006. The Company reported 131,500 total gross additions and 87,600 postpaid gross additions for the second quarter of 2005.
Postpaid customer churn continued its recent positive trend, declining to 1.84 percent in the second quarter of 2006, compared with 2.25 percent in the second quarter of 2005, 2.82 percent in the third quarter of 2005, 2.62 percent in the fourth quarter of 2005 and 2.08 percent in the first quarter of 2006.
As a result, Dobson reported 17,300 net subscriber additions for the second quarter of 2006, which included 13,800 postpaid customers, 7,700 prepaid customers, and a reduction of 4,200 reseller customers. Dobson reported 2,500 net subscriber additions for the first quarter of 2006, which was the first time in six quarters that the Company had grown its subscriber base. In the second quarter of 2005, the Company reported a reduction of 1,100 customers.
For the second quarter ended June 30, 2006, Dobson reported a net loss applicable to common shareholders of $8.4 million, or $0.05 per share, which included a $12.7 million loss from extinguishment of debt. (See Table 1.) For the second quarter of 2005, Dobson reported a net loss applicable to common shareholders of $12.2 million, or $0.09 per share.
Service revenue for the second quarter of 2006 was $223.3 million, compared with $216.0 million for the second quarter of 2005. Dobson reported $47.89 average revenue per unit (ARPU) for the second quarter of 2006, compared with ARPU of $45.28 for the second quarter of 2005.
Dobson reported second quarter 2006 roaming revenue of $71.0 million, compared with $61.1 million for the second quarter of 2005. The Company's new roaming agreement with its principal roaming partner, Cingular, was applied initially to the second quarter results for 2005. Dobson also signed a new roaming agreement in the fourth quarter of 2005 with T-Mobile America, its second largest roaming partner.
Second quarter 2006 roaming revenue reflected 676 million roaming minutes of use (MOUs), a 31 percent increase over the 517 million MOUs reported for the second quarter of 2005. Roaming yield was 10.5 cents per MOU for the second quarter of 2006, versus 11.8 cents for the second quarter last year.
Equipment and other revenue was $17.8 million for the second quarter of 2006, compared with $20.5 million in the second quarter of 2005. However, equipment and other revenue for the second quarter of 2005 included a prior-period payment of $5.8 million as part of a settlement under various agreements between Dobson and the former AT&T Wireless.
Second quarter 2006 operating expenses were generally in line with the Company's expectations. Cost of service for the second quarter of 2006 increased by $12.5 million to $81.5 million, as compared with the second quarter of 2005. Incollect costs contributed $5.3 million of this increase -- higher off-network usage by the Company's growing GSM subscriber base was partially offset by lower off-network per-minute rates, which were negotiated in the Company's new roaming agreements that it signed last year. Higher cell site costs contributed an additional $3.6 million to the year-over-year increase in cost of service. Cell site costs increased due to new cell sites added over the last year and due to the sale of most of the Company's owned towers in 2005. Cell site expense for the second quarter of 2006 included the lease cost for these sites. In the same quarter last year, there was no lease cost on these towers, because they had not yet been sold.
Dobson reduced general and administrative expense by $2.6 million to $46.7 million for the second quarter of 2006, compared with $49.3 million in the second quarter of 2005. Last year's G&A expense included a $2.8 million accrual related to closing the Frederick, Maryland call center, while this year's second quarter G&A expense included approximately $1.5 million related to the expensing of stock options associated with SFAS 123R, which were not expensed last year. (Dobson implemented SFAS 123R on January 1, 2006. An additional $0.4 million for SFAS 123R stock options expense was recognized in other expense lines in the second quarter of 2006.) Aside from the call center charge last year and the implementation of SFAS 123R, the Company continued to see improvements in operations in the second quarter of 2006, most notably in bad debt and certain customer service operations.
Dobson reported EBITDA of $107.3 million for the second quarter of 2006, compared with EBITDA of $109.3 million for the second quarter of 2005. As noted above, the year-over-year decline is primarily related to a $5.8 million prior-period payment received in last year's second quarter. Please see Table 3 for the reconciliation of EBITDA to GAAP measures.
The Company had 1,563,700 subscribers as of June 30, 2006, with approximately 82 percent on GSM calling plans. As of the same date, 87 percent of Dobson's postpaid customers were on GSM calling plans.
Capital expenditures were $50.1 million in the second quarter of 2006, of which $31.6 million was reported by Dobson Cellular Systems and $18.4 million by American Cellular Corporation. In total, the Company added 73 cell sites during the second quarter of 2006, bringing its total cell sites to 2,679 at June 30, 2006.
At June 30, 2006, Dobson's balance sheet included $116.4 million in unrestricted cash and cash equivalents, and $2.0 million in unrestricted short term investments; $4.4 million in restricted investments; $2.5 billion in long-term debt; and $135.7 million in preferred stock. (See Table 2.)
Outlook for 2006
Given its first-half results, the Company is lowering its full-year ARPU guidance to a range of $48.00 to $48.50. Although ARPU grew in the first half of 2006, the growth was not as strong as anticipated. Dobson expects continued ARPU growth in the second half of 2006, primarily through higher usage and increased data revenue, but these increases are not expected to be sufficient to offset the lower growth rates experienced in the first half.
In addition, the Company now expects total gross subscriber additions to grow in a range of 4 percent to 7 percent for 2006, versus the previous guidance range of 10 percent to 12 percent. Dobson expects continued strength in postpaid and prepaid gross additions; the change in gross additions guidance is related entirely to the underachievement in the reseller channel.
Despite the above changes and as noted in its press release published July 10, 2006, the Company expects to report net subscriber additions for 2006 at the high end of its guidance range of 30,000 to 40,000.
Roaming yield for the second half of 2006 is expected to average 9.5 cents to 10 cents.
The Company's 2006 capital expenditures budget was increased to $170 million in May 2006. Dobson's other 2006 guidance, including EBITDA in a range of $435 million to $445 million, remains unchanged.
Second Quarter 2006 Conference Call
On Wednesday, August 9, 2006, Dobson plans to conduct its second quarter earnings conference call beginning at 9:00 a.m. CT (10:00 a.m. ET). Along with second quarter results, Dobson may comment on recent operating trends and its outlook for 2006 as a whole. Investors will be able to listen by phone or via web-cast on Dobson's web site at www.dobson.net. Those interested may access the call by dialing:
Conference call (800) 289-0726
International (913) 981-5545
Pass code 9643445
A replay of the call will be available later in the day via Dobson's web site or by phone.
Replay (888) 203-1112 or (719) 457-0820
Pass code 9643445
The replay will be available by phone for two weeks. For further analysis of quarterly results, please see the Company's quarterly report on Form 10-Q, which Dobson plans to file tomorrow.
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 16 states. For additional information, please visit its web site at www.dobson.net.
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements regarding the Company's plans, intentions and expectations. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, but are not limited to, increased levels of competition or other factors that might inhibit the growth of its subscriber base; shortages of key network equipment and/or handsets; restrictions on the Company's ability to finance its growth; increased operating costs; changes in the Company's roaming agreements that could affect revenue and/or earnings expectations; technology changes; and other factors. A more extensive discussion of the risk factors that could impact these areas and the Company's overall business and financial performance can be found in the Company's reports and other filings filed with the Securities and Exchange Commission. Given these concerns, investors and analysts should not place undue reliance on forward-looking statements.
Table 1
Dobson Communications Corporation
Statements of Operations
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
($ in thousands except per share data)
(unaudited)
Operating Revenue
Service
revenue $ 223,260 $ 215,984 439,355 $ 422,066
Roaming
revenue 71,043 61,149 125,823 114,579
Equipment &
other revenue 17,756 20,533 34,480 32,779
----------- ----------- ----------- -----------
Total 312,059 297,666 599,658 569,424
----------- ----------- ----------- -----------
Operating
Expenses
(excluding
depreciation &
amortization)
Cost of service
(exclusive of
depreciation &
amortization
shown
separately
below) 81,503 68,965 157,576 141,264
Cost of
equipment 36,545 34,255 69,115 64,621
Marketing &
selling 39,996 35,855 79,119 69,949
General &
administrative 46,744 49,308 94,069 94,119
----------- ----------- ----------- -----------
Total 204,788 188,383 399,879 369,953
----------- ----------- ----------- -----------
EBITDA(a) 107,271 109,283 199,779 199,471
Gain on
disposition
of operating
assets 1,593 939 3,257 939
Depreciation &
amortization (48,155) (50,340) (98,430) (101,910)
----------- ----------- ----------- -----------
Operating income 60,709 59,882 104,606 98,500
Interest
expense (57,414) (61,258) (114,821) (122,000)
Dividends on
mandatorily
redeemable
preferred
stock -- (7,996) (709) (15,927)
Other income
(expense),
net 1,636 744 3,535 (22)
Loss from
extinguishment
of debt (12,660) -- (12,717) --
Loss on
redemption
of
mandatorily
redeemable
preferred
stock (37) -- (1,482) --
Minority
interests in
income of
subsidiaries (2,169) (2,646) (4,533) (4,476)
----------- ----------- ----------- -----------
Loss before
income taxes (9,935) (11,274) (26,121) (43,925)
Income tax
benefit 3,892 1,245 9,181 10,639
----------- ----------- ----------- -----------
Net loss (6,043) (10,029) (16,940) (33,286)
Dividends on
preferred
stock (2,374) (2,144) (4,749) (4,289)
----------- ----------- ----------- -----------
Net loss
applicable to
common
stockholders $ (8,417) $ (12,173) $ (21,689) $ (37,575)
=========== =========== =========== ===========
Basic and
diluted net
loss applicable
to common
stockholders
per common
share $ (0.05) $ (0.09) $ (0.13) $ (0.28)
=========== =========== =========== ===========
Basic and
diluted
weighted
average
common
shares
outstanding 170,100,621 134,011,175 169,749,306 133,948,417
=========== =========== =========== ===========
(a) EBITDA is defined as loss from continuing operations before
depreciation and amortization, gain on disposition of operating
assets, interest expense, loss on redemption of mandatorily
redeemable preferred stock, dividends on mandatorily redeemable
preferred stock, other income (expense), net, minority interest
in income of subsidiaries and income tax 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 GAAP, as an alternative to cash flows from
operating activities as determined 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.
Table 2
Dobson Communications Corporation
Selected Balance Sheet and Statistical Data
Balance Sheet Data: June 30, December 31,
2006 2005
------------- -------------
($ in millions) ($ in millions)
(unaudited)
Cash and cash equivalents
(unrestricted)(a) $ 116.4 $ 196.5
Restricted investments $ 4.4 $ 4.5
Short-term investments $ 2.0 $ --
Debt:
DCC Senior Floating
Rate Notes $ 150.0 $ 150.0
DCC Senior Convertible
Debentures 160.0 160.0
DCS 8.375% Senior Notes 512.3 250.0
DCS 9.875% Senior Notes 325.0 325.0
DCS Floating Rate Senior
Notes 15.5 250.0
DCC 8.875% Senior Notes 419.7 419.7
ACC 9.5% Senior Notes, net 15.3 14.8
ACC 10.0% Senior Notes 900.0 900.0
------------- -------------
Total debt $ 2,497.8 $ 2,469.5
============= =============
Preferred Stock:
Senior Exchangeable
Preferred Stock, 12.25%,
net (b) -- 5.1
Senior Exchangeable
Preferred Stock, 13.00%,
net (c) -- 27.7
Series F Preferred Stock 135.7 135.7
------------- -------------
Total preferred stock $ 135.7 $ 168.5
============= =============
Six Months Ended June 30,
--------------------------------
2006 2005
------------- -------------
($ in millions) ($ in millions)
Capital Expenditures: $ 81.4 $ 76.3
============= =============
(a) Includes $39.9 million and $76.6 million of cash and cash
equivalents from American Cellular at June 30, 2006 and December
31, 2005, respectively.
(b) Net of discount of $(0.1) million at December 31, 2005.
(c) Net of deferred financing costs of $(0.1) million at December 31,
2005.
Table 3
Dobson Communications Corporation
For the Quarter Ended
6/30/2006 3/31/2006 12/31/2005 9/30/2005 6/30/2005
($ in thousands except per subscriber data)
(unaudited)
Operating
Revenue
Service
revenue $ 223,260 $ 216,095 $ 215,008 $ 221,311 $ 215,984
Roaming
revenue 71,043 54,780 63,398 80,430 61,149
Equipment
and other
revenue 17,756 16,724 15,813 14,078 20,533
---------- ---------- ---------- ---------- ----------
Total 312,059 287,599 294,219 315,819 297,666
---------- ---------- ---------- ---------- ----------
Operating
Expenses
(excluding
deprecia
tion and
amorti-
zation)
Cost of
service 81,503 76,073 77,380 77,950 68,965
Cost of
equip-
ment 36,545 32,570 33,334 32,156 34,255
Marketing
and
selling 39,996 39,123 35,769 35,535 35,855
General
and ad-
ministra-
tive 46,744 47,325 52,052 50,725 49,308
---------- ---------- ---------- ---------- ----------
Total 204,788 195,091 198,535 196,366 188,383
---------- ---------- ---------- ---------- ----------
EBIT-
DA(a)(b) $ 107,271 $ 92,508 $ 95,684 $ 119,453 $ 109,283
========== ========== ========== ========== ==========
Pops 12,039,200 11,854,000 11,854,000 11,854,000 11,757,400
Post-paid
Gross Adds 89,600 84,800 80,400 84,800 87,600
Net Adds 13,800 -- (28,000) (34,500) (9,000)
Sub-
scribers 1,378,900 1,364,700 1,364,700 1,392,700 1,426,600
Churn 1.8% 2.1% 2.6% 2.8% 2.3%
Pre-paid
Gross Adds 23,900 22,000 19,000 21,600 20,700
Net Adds 7,700 6,300 300 3,300 5,300
Sub-
scribers 73,200 65,400 59,100 58,800 55,500
Reseller
Gross Adds 14,400 18,500 23,200 25,000 23,200
Net Adds (4,200) (3,800) 5,200 7,100 2,600
Sub-
scribers 111,600 115,800 119,600 114,400 107,300
Total
Gross Adds 127,900 125,300 122,600 131,400 131,500
Net Adds 17,300 2,500 (22,500) (24,100) (1,100)
Sub-
scribers 1,563,700 1,545,900 1,543,400 1,565,900 1,589,400
ARPU $ 47.89 $ 46.76 $ 46.10 $ 46.77 $ 45.28
Penetration 13.0% 13.0% 13.0% 13.2% 13.5%
(a) Includes $2.5 million, $2.6 million, $3.3 million, $2.7
million and $3.1 million of EBITDA for the quarters ended June
30, 2006, March 31, 2006, December 31, 2005, September 30, 2005
and June 30, 2005, respectively, related to minority interests.
(b) A reconciliation of EBITDA to net loss as determined in accordance
with generally accepted accounting principles is as follows:
Net loss $ (6,043) $(10,897) $(24,893) $(63,431) $(10,029)
Add back
non-EBITDA
items in-
cluded in
net loss:
Deprecia-
tion and
amortiza-
tion (48,155) (50,275) (51,383) (49,102) (50,340)
Gain on
disposition
of operat-
ing assets 1,593 1,664 1,483 1,432 939
Interest
expense (57,414) (57,407) (58,545) (62,457) (61,258)
Loss on
redemption
of manda-
torily re-
deemable
preferred
stock (37) (1,445) (4,457) (66,383) --
Dividends
on manda-
torily re-
deemable
preferred
stock -- (709) (1,161) (5,464) (7,996)
Other in-
come, net 1,636 1,842 1,966 2,633 744
Loss from
extinguish-
ment of
debt (12,660) -- (21,698) -- --
Minority
interests
in income
of sub-
sidiaries (2,169) (2,364) (2,932) (2,347) (2,646)
Income tax
benefit
(expense) 3,892 5,289 16,150 (1,196) 1,245
-------- -------- -------- -------- --------
EBITDA $107,271 $ 92,508 $ 95,684 $119,453 $109,283
======== ======== ======== ======== ========
Table 4
Dobson Cellular Systems
For the Quarter Ended
6/30/2006 3/31/2006 12/31/2005 9/30/2005 6/30/2005
($ in thousands except per subscriber data)
(unaudited)
Operating
Revenue
Service
revenue $ 133,739 $ 128,622 $ 125,069 $ 128,599 $ 125,134
Roaming
revenue 41,548 31,797 38,532 45,771 34,985
Equipment
and other
revenue 15,277 14,478 13,271 12,295 17,606
---------- ---------- ---------- ---------- ----------
Total 190,564 174,897 176,872 186,665 177,725
---------- ---------- ---------- ---------- ----------
Operating
Expenses
(excluding
deprecia-
tion and
amortiza-
tion)
Cost of
service 52,478 48,206 48,312 48,376 43,374
Cost of
equipment 22,613 20,356 20,102 18,708 21,486
Marketing
and
selling 24,311 23,083 20,770 20,531 20,961
General
and ad-
ministra-
tive 27,319 27,739 30,684 30,137 27,838
---------- ---------- ---------- ---------- ----------
Total 126,721 119,384 119,868 117,752 113,659
---------- ---------- ---------- ---------- ----------
EBIT-
DA(a)(b) $ 63,843 $ 55,513 $ 57,004 $ 68,913 $ 64,066
========== ========== ========== ========== ==========
Pops 6,711,200 6,687,500 6,687,500 6,687,500 6,687,500
Post-paid
Gross Adds 56,100 51,900 48,400 50,800 52,500
Net Adds 11,500 3,300 (13,000) (15,700) (900)
Sub-
scribers 785,300 773,800 770,500 783,500 799,200
Churn 1.9% 2.1% 2.6% 2.8% 2.2%
Pre-paid
Gross Adds 16,100 13,900 13,000 14,600 14,200
Net Adds 5,100 3,000 -- 1,700 3,300
Sub-
scribers 48,000 42,900 39,900 39,900 38,200
Reseller
Gross Adds 9,300 11,200 11,100 11,400 11,100
Net Adds 600 700 3,000 3,800 1,100
Sub-
scribers 64,600 64,000 63,300 60,300 56,500
Total
Gross Adds 81,500 77,000 72,500 76,800 77,800
Net Adds 17,200 7,000 (10,000) (10,200) 3,500
Sub-
scribers 897,900 880,700 873,700 883,700 893,900
ARPU $ 50.15 $ 49.01 $ 47.44 $ 48.23 $ 46.75
Penetration 13.4% 13.2% 13.1% 13.2% 13.4%
(a) Includes $2.5 million, $2.6 million, $3.3 million, $2.7
million and $3.1 million of EBITDA for the quarters ended June
30, 2006, March 31,2006, December 31, 2005, September 30,2005 and
June 30, 2005, respectively, related to minority interests.
(b) A reconciliation of EBITDA to net (loss) income as determined
in accordance with generally accepted accounting principles is
as follows:
Net (loss)
income $ (9,303) $ (7,035) $ (7,625) $ 3,900 $ (2,478)
Add back
non-EBITDA
items in-
cluded in
net (loss)
income:
Deprecia-
tion and
amortiza-
tion (28,164) (28,778) (28,874) (28,744) (29,179)
Gain on
disposition
of operating
assets 857 915 802 783 --
Interest
expense (38,562) (38,434) (38,559) (38,198) (37,433)
Loss from
extinguish-
ment of
debt (12,549) -- -- -- --
Other income,
net 1,761 1,840 1,408 2,132 1,195
Minority
interests
in income
of sub-
sidiaries (2,169) (2,364) (2,932) (2,347) (2,646)
Income tax
benefit 5,680 4,273 3,526 1,361 1,519
-------- -------- -------- -------- --------
EBITDA $ 63,843 $ 55,513 $ 57,004 $ 68,913 $ 64,066
======== ======== ======== ======== ========
Table 5
American Cellular Corporation
For the Quarter Ended
6/30/2006 3/31/2006 12/31/2005 9/30/2005 6/30/2005
($ in thousands except per subscriber data)
(unaudited)
Operating
Revenue
Service
revenue $ 89,521 $ 87,473 $ 89,939 $ 92,712 $ 90,850
Roaming
revenue 29,495 22,983 24,866 34,659 26,164
Equipment
and other
revenue 6,080 5,848 5,554 4,794 5,939
-------- --------- --------- --------- ---------
Total 125,096 116,304 120,359 132,165 122,953
--------- --------- --------- --------- ---------
Operating
Expenses
(excluding
deprecia-
tion and
amortiza-
tion)
Cost of
service 30,881 29,723 30,366 30,872 26,890
Cost of
equipment 13,932 12,214 13,232 13,448 12,769
Marketing
and
selling 15,786 16,276 14,999 15,004 14,894
General
and ad-
ministra-
tive 21,165 21,327 23,077 22,296 23,178
--------- --------- --------- --------- ---------
Total 81,764 79,540 81,674 81,620 77,731
--------- --------- --------- --------- ---------
EBITDA(a) $ 43,332 $ 36,764 $ 38,685 $ 50,545 $ 45,222
========= ========= ========= ========= =========
Pops 5,328,000 5,166,500 5,166,500 5,166,500 5,069,900
Post-paid
Gross Adds 33,500 32,900 32,000 34,000 35,100
Net Adds 2,300 (3,300) (15,000) (18,800) (8,100)
Subscribers 593,600 590,900 594,200 609,200 627,400
Churn 1.8% 2.0% 2.6% 2.8% 2.3%
Pre-paid
Gross Adds 7,800 8,100 6,000 7,000 6,500
Net Adds 2,600 3,300 300 1,600 2,000
Subscribers 25,200 22,500 19,200 18,900 17,300
Reseller
Gross Adds 5,100 7,300 12,100 13,600 12,100
Net Adds (4,800) (4,500) 2,200 3,300 1,500
Subscribers 47,000 51,800 56,300 54,100 50,800
Total
Gross Adds 46,400 48,300 50,100 54,600 53,700
Net Adds 100 (4,500) (12,500) (13,900) (4,600)
Subscribers 665,800 665,200 669,700 682,200 695,500
ARPU $ 44.88 $ 43.80 $ 44.35 $ 44.88 $ 43.40
Penetration 12.5% 12.9% 13.0% 13.2% 13.7%
(a) A reconciliation of EBITDA to net (loss) income as determined
in accordance with generally accepted accounting principles is as
follows:
Net (loss)
income $ (100) $ (4,969) $ (4,434) $ 4,555 $ 481
Add back
non-EBITDA
items in-
cluded in
net (loss)
income:
Deprecia-
tion and
amortiza-
tion (19,948) (21,454) (22,509) (20,358) (21,161)
Gain on
disposi-
tion of
operating
assets 736 749 681 649 939
Interest
expense (23,779) (23,785) (23,782) (23,782) (23,778)
Other ex-
pense, net (483) (258) (227) (400) (446)
Income tax
benefit
(expense) 42 3,015 2,718 (2,099) (295)
--------- -------- -------- -------- --------
EBITDA $ 43,332 $ 36,764 $ 38,685 $ 50,545 $ 45,222
========= ======== ======== ======== ========