OKLAHOMA CITY, Nov. 6, 2006 (PRIMEZONE) -- Dobson Communications Corporation (Nasdaq:DCEL) continued to increase subscribers and EBITDA in the third quarter of 2006, compared with the same period of 2005. Strong performance in the third quarter set the stage for the Company to achieve its 2006 operating goals and to maintain strong growth momentum as it enters 2007, Dobson said.
Dobson reported net income applicable to common shareholders of $25.9 million, or $0.14 per share on a fully diluted basis, for the third quarter ended September 30, 2006. Net income for the quarter included a $7.9 million income tax benefit. (See Table 1.) For the third quarter of 2005, Dobson reported a net loss applicable to common shareholders of $65.9 million, or $0.45 per share, which included a $66.4 million loss on redemption and repurchases of mandatorily redeemable preferred stock.
Third quarter 2006 gross subscriber additions continued to trend favorably. The Company reported 139,500 total gross additions for the third quarter of 2006, an increase of 6.2 percent over the third quarter of 2005. The increase in postpaid customers was even stronger, with Dobson reporting 92,100 postpaid gross additions in the third quarter of 2006, an 8.6 percent increase over postpaid gross additions in the third quarter of 2005. (See Table 3.)
The Company also substantially improved its customer retention results. Postpaid customer churn was 1.95 percent in the third quarter of 2006, compared with 2.82 percent in the third quarter of 2005.
As a result, Dobson increased its subscriber base for the third consecutive quarter. The Company reported 23,500 net subscriber additions for the third quarter of 2006, which included 11,300 postpaid customers, 14,500 prepaid customers, and a reduction of 2,300 reseller customers. Dobson added another 1,400 subscribers through acquisitions in Alaska during the third quarter.
In the third quarter of 2005, Dobson reported a reduction of 24,100 net subscribers, which included a reduction of 34,500 postpaid customers and the addition of 3,300 prepaid and 7,100 reseller subscribers.
The Company reported EBITDA of $124.7 million for the third quarter of 2006, an increase of 4.4 percent over EBITDA of $119.5 million for the third quarter of 2005. Please see Table 3 for the reconciliation of EBITDA to GAAP measures.
"With a third consecutive quarter of positive results this year, Dobson is poised to complete a strong 2006 and to continue growing EBITDA, operating margins and free cash flow in 2007," said Steve Dussek, president and chief executive officer. "Our goal is to continue improving the overall customer experience companywide. We remain focused on growing our subscriber base, revenue, EBITDA and operating margins."
Service Revenue and ARPU Continued to Increase
Third quarter service revenue continued to increase, driven by Dobson's growing subscriber base and continued increases in average revenue per unit (ARPU). Service revenue was $232.3 million for the third quarter of 2006, reflecting ARPU of $49.16. This compared with $221.3 million in service revenue and ARPU of $46.77 for the third quarter of 2005.
Growth in data revenue helped generate higher ARPU and service revenue. Data contributed $4.34 in third quarter ARPU, compared with $2.56 in the third quarter of 2005 and $3.79 in second quarter 2006.
Roaming revenue for the third quarter 2006 was $87.4 million, based on 846 million roaming minutes of use (MOUs) and an average yield of 10.3 cents. This compared with roaming revenue of $80.4 million for the third quarter of 2005, which reflected 669 million roaming MOUs and an average yield of 12.0 cents.
Third quarter 2006 operating expenses were generally in line with the Company's expectations, with increased marketing and selling expense reflecting growth in gross additions and higher retail operating costs, and increased cost of service reflecting the deployment of additional cell sites, the costs of operating acquired properties, and higher incollect roaming costs.
Cost of service for the third quarter of 2006 was $88.8 million, an increase of $10.9 million over cost of service for the third quarter of 2005. Approximately $4.4 million of this increase related primarily to the operating costs of 264 cell sites that the Company has added since October 1, 2005, and the cost of operating another 109 cell sites that were acquired in Texas and Alaska in June and August 2006.
Another $3.7 million in additional cost of service reflected the year-over-year increase in incollect roaming -- the cost incurred when Dobson customers roam off-network. However, the Company noted that the growth rate of incollect MOUs per subscriber is slowing as it completes the transition of its subscriber base from TDMA to GSM calling plans. Incollect MOUs per subscriber were 84 per month in the third quarter of 2006, an increase of 7.7 percent from the second quarter of 2006. From the second to the third quarter of 2005, incollect MOUs per subscriber increased 15.7 percent.
Incollect cost per MOU declined by 1.1 cents, to 5.6 cents in the third quarter of 2006, compared with 6.7 cents in the third quarter last year.
Marketing and selling expense increased on a year-over-year basis primarily in line with higher gross additions and increases in agent commissions, retail rent and other retail operating costs. Cost per gross addition was $434 in the third quarter of 2006, compared with $421 in the same period of 2005.
Dobson reduced general and administrative expense by $3.2 million to $47.5 million for the third quarter of 2006, compared with $50.7 million in the third quarter of 2005. This improvement occurred despite the recognition of $1.8 million related to the expensing of stock options associated with SFAS 123R, which became effective January 1, 2006. Of this total amount, $1.4 million was in general and administrative expense for the third quarter of 2006.
The Company's subscriber base was 1,588,600 subscribers as of September 30, 2006. At September 30, 2006, 86 percent of subscribers and 90 percent of postpaid subscribers were on GSM calling plans.
At the end of the third quarter of 2005, Dobson had 1,565,900 subscribers, with 58 percent of total subscribers and 62 percent of postpaid customers on GSM calling plans.
Capital expenditures were $35.1 million in the third quarter of 2006, of which $24.6 million was reported by Dobson Cellular Systems and $10.5 million by American Cellular Corporation. In total, the Company built 73 cell sites and acquired an additional 6 in new markets during the third quarter of 2006. Consequently, Dobson operated a total of 2,850 cell sites at September 30, 2006.
At September 30, 2006, Dobson's balance sheet included $222.5 million in cash, short-term investments and restricted investments; $2.6 billion in long-term debt; and $135.7 million in preferred stock. (See Table 2.)
Settlement of Shareholder Suit
Dobson also announced that it has reached an agreement in principle to settle the previously disclosed consolidated securities class action pending in the United States District Court for the Western District of Oklahoma. The settlement agreement, which is subject to court approval, would resolve all pending claims against the Company and all named individual defendants and includes all persons who purchased the Company's publicly traded securities between May 6, 2003 and August 9, 2004. The settlement provides for $3.4 million to be paid to settle claims submitted by class members and the plaintiffs' attorneys' fees. A substantial portion of the settlement amount is covered by insurance.
Third Quarter 2006 Conference Call
On Tuesday, November 7, 2006, Dobson plans to conduct its third quarter earnings conference call beginning at 9:00 a.m. CT (10:00 a.m. ET). Along with third quarter results, Dobson may comment on recent operating trends and its outlook. Investors may 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) 946-0783 International (719) 457-2658 Pass code 7604378
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 7604378
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 on or before Nov. 9, 2006.
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.
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; substantial leverage and debt service requirements; 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; regulatory changes; changes in end-user requirements and preferences; 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 Nine Months Ended September 30, September 30, ------------------------ ------------------------ 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ($ in thousands except per share data) (unaudited) Operating Revenue Service revenue $ 232,324 $ 221,311 $ 671,679 $ 643,377 Roaming revenue 87,365 80,430 213,188 195,009 Equipment & other revenue 16,681 14,078 51,161 46,857 ----------- ----------- ----------- ----------- Total 336,370 315,819 936,028 885,243 ----------- ----------- ----------- ----------- Operating Expenses (excluding depreciation & amortization) Cost of service (exclusive of depreciation & amortization shown separately below) 88,809 77,950 246,385 219,214 Cost of equipment 33,152 32,156 102,267 96,777 Marketing & selling 42,155 35,535 121,274 105,484 General & administrative 47,527 50,725 141,596 144,844 ----------- ----------- ----------- ----------- Total 211,643 196,366 611,522 566,319 ----------- ----------- ----------- ----------- EBITDA(a) 124,727 119,453 324,506 318,924 Gain on disposition of operating assets 1,566 1,432 4,823 2,371 Depreciation & amortization (47,776) (49,102) (146,206) (151,012) ----------- ----------- ----------- ----------- Operating income 78,517 71,783 183,123 170,283 Interest expense (57,840) (62,457) (172,661) (184,457) Loss from extinguishment of debt -- -- (12,717) -- Loss on redemption of mandatorily redeemable preferred stock -- (66,383) (1,482) (66,383) Dividends on mandatorily redeemable preferred stock -- (5,464) (709) (21,391) Other income, net 1,810 2,633 5,345 2,611 Minority interests in income of subsidiaries (2,447) (2,347) (6,980) (6,823) ----------- ----------- ----------- ----------- Income (loss) before income taxes 20,040 (62,235) (6,081) (106,160) Income tax benefit (expense) 7,939 (1,196) 17,120 9,443 ----------- ----------- ----------- ----------- Net income (loss) 27,979 (63,431) 11,039 (96,717) Dividends on preferred stock (2,036) (2,419) (6,785) (6,708) ----------- ----------- ----------- ----------- Net income (loss) applicable to common stockholders $ 25,943 $ (65,850) $ 4,254 $ (103,425) =========== =========== =========== =========== Basic net income (loss) applicable to common stockholders per common share $ 0.15 $ (0.45) $ 0.03 $ (0.75) =========== =========== =========== =========== Basic weighted average common shares outstanding 170,482,730 146,485,519 169,996,467 138,173,375 =========== =========== =========== =========== Diluted net income (loss) applicable to common stockholders per common share $ 0.14 $ (0.45) $ 0.02 $ (0.75) =========== =========== =========== =========== Diluted weighted average common shares outstanding(b) 203,456,163 146,485,519 173,393,296 138,173,375 =========== =========== =========== =========== (a) EBITDA is defined as income (loss) from continuing operations before depreciation and amortization, gain on disposition of operating assets, interest expense, loss from extinguishment of debt, loss on redemption of mandatorily redeemable preferred stock, dividends on mandatorily redeemable preferred stock, other income, net, minority interest in income of subsidiaries and income tax benefit (expense). 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. (b) For the three months ended September 30, 2006, 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, 2006, dilutive shares include potentially dilutive shares from option grants. Both our series F convertible preferred stock and our convertible debt were anti-dilutive for the nine month period ending September 30, 2006. Table 2 Dobson Communications Corporation Selected Balance Sheet and Statistical Data Balance Sheet Data: September 30, December 31, 2006 2005 ------------- ----------- ($ in millions) ($ in millions) (unaudited) Cash and cash equivalents (unrestricted)(a)(b) $ 212.8 $ 196.5 Restricted investments $ 4.4 $ 4.5 Short-term investments $ 5.3 $ -- Debt: DCC Senior Floating Rate Notes $ 150.0 $ 150.0 DCC Senior Convertible Debentures 160.0 160.0 DCS 8.375% Senior Notes 511.7 250.0 DCS 9.875% Senior Notes 325.0 325.0 DCS Floating Rate Senior Notes 15.6 250.0 DCC 8.875% Senior Notes 419.7 419.7 ACC Credit Facility 100.0 -- ACC 9.5% Senior Notes, net 15.5 14.8 ACC 10.0% Senior Notes 900.0 900.0 --------- --------- Total debt $ 2,597.5 $ 2,469.5 ========= ========= Preferred Stock: Senior Exchangeable Preferred Stock, 12.25%, net (c) -- 5.1 Senior Exchangeable Preferred Stock, 13.00%, net (d) -- 27.7 Series F Preferred Stock 135.7 135.7 --------- --------- Total preferred stock $ 135.7 $ 168.5 ========= ========= Nine Months Ended September 30, ------------------------------ 2006 2005 -------------- -------------- ($ in millions) ($ in millions) Capital Expenditures: $ 116.5 $ 113.2 ============== ============== (a) Includes $114.1 million and $76.6 million of cash and cash equivalents from American Cellular at September 30, 2006 and December 31, 2005, respectively. (b) At September 30, 2006, this balance included $95 million that was used to purchase Highland Cellular on October 5, 2006. (c) Net of discount of $(0.1) million at December 31, 2005. (d) Net of deferred financing costs of $(0.1) million at December 31, 2005. Table 3 Dobson Communications Corporation For the Quarter Ended 9/30/2006 6/30/2006 3/31/2006 12/31/2005 9/30/2005 --------- --------- --------- --------- --------- ($ in thousands except per subscriber data) (unaudited) Operating Revenue Service revenue $ 232,324 $ 223,260 $ 216,095 $ 215,008 $ 221,311 Roaming revenue 87,365 71,043 54,780 63,398 80,430 Equipment and other revenue 16,681 17,756 16,724 15,813 14,078 --------- --------- --------- --------- --------- Total 336,370 312,059 287,599 294,219 315,819 --------- --------- --------- --------- --------- Operating Expenses (excluding depre- ciation and amortization) Cost of service 88,809 81,503 76,073 77,380 77,950 Cost of equipment 33,152 36,545 32,570 33,334 32,156 Marketing and selling 42,155 39,996 39,123 35,769 35,535 General and administrative 47,527 46,744 47,325 52,052 50,725 -------- --------- --------- --------- --------- Total 211,643 204,788 195,091 198,535 196,366 -------- --------- --------- --------- --------- EBITDA(a)(b) $124,727 $ 107,271 $ 92,508 $ 95,684 $ 119,453 ======== ========= ========= ========= ========= Pops 12,052,700 12,039,200 11,854,000 11,854,000 11,854,000 Post-paid Gross Adds 92,100 89,600 84,800 80,400 84,800 Net Adds 11,300 13,800 -- (28,000) (34,500) Subscribers 1,390,800 1,378,900 1,364,700 1,364,700 1,392,700 Churn 1.95% 1.84% 2.08% 2.62% 2.82% Pre-paid Gross Adds 33,300 23,900 22,000 19,000 21,600 Net Adds 14,500 7,700 6,300 300 3,300 Subscribers 88,500 73,200 65,400 59,100 58,800 Reseller Gross Adds 14,100 14,400 18,500 23,200 25,000 Net Adds (2,300) (4,200) (3,800) 5,200 7,100 Subscribers 109,300 111,600 115,800 119,600 114,400 Total Gross Adds 139,500 127,900 125,300 122,600 131,400 Net Adds 23,500 17,300 2,500 (22,500) (24,100) Subscribers 1,588,600 1,563,700 1,545,900 1,543,400 1,565,900 ARPU $ 49.16 $ 47.89 $ 46.76 $ 46.10 $ 46.77 Penetration 13.2% 13.0% 13.0% 13.0% 13.2% (a) Includes $2.7 million, $2.5 million, $2.6 million, $3.3 million and $2.7 million of EBITDA for the quarters ended September 30, 2006, June 30, 2006, March 31, 2006, December 31, 2005 and September 30, 2005, respectively, related to minority interests. (b) A reconciliation of EBITDA to net income (loss) as determined in accordance with generally accepted accounting principles is as follows: Net income (loss) $ 27,979 $ (6,043) $ (10,897) $ (24,893) $ (63,431) Add back non- EBITDA items included in net income (loss): Depreciation and amortization (47,776) (48,155) (50,275) (51,383) (49,102) Gain on disposi- tion of operating assets 1,566 1,593 1,664 1,483 1,432 Interest expense (57,840) (57,414) (57,407) (58,545) (62,457) Loss on redemp- tion of mandatorily re- deemable pre- ferred stock -- (37) (1,445) (4,457) (66,383) Dividends on mandatorily redeemable preferred stock -- -- (709) (1,161) (5,464) Other income, net 1,810 1,636 1,842 1,966 2,633 Loss from ex- tinguishment of debt -- (12,660) -- (21,698) -- Minority interests in income of subsidiaries (2,447) (2,169) (2,364) (2,932) (2,347) Income tax benefit (expense) 7,939 3,892 5,289 16,150 (1,196) --------- --------- --------- --------- --------- EBITDA $ 124,727 $ 107,271 $ 92,508 $ 95,684 $ 119,453 ========= ========= ========= ========= ========= Table 4 Dobson Cellular Systems For the Quarter Ended 9/30/2006 6/30/2006 3/31/2006 12/31/2005 9/30/2005 --------- --------- --------- --------- --------- ($ in thousands except per subscriber data) Operating Revenue (unaudited) Service revenue $ 140,711 $ 133,739 $ 128,622 $ 125,069 $ 128,599 Roaming revenue 47,869 41,548 31,797 38,532 45,771 Equipment and other revenue 14,701 15,277 14,478 13,271 12,295 --------- --------- --------- --------- --------- Total 203,281 190,564 174,897 176,872 186,665 --------- --------- --------- --------- --------- Operating Expenses (excluding de- preciation and amortization) Cost of service 55,018 52,478 48,206 48,312 48,376 Cost of equipment 20,676 22,613 20,356 20,102 18,708 Marketing and selling 25,007 24,311 23,083 20,770 20,531 General and administrative 27,919 27,319 27,739 30,684 30,137 --------- --------- --------- --------- --------- Total 128,620 126,721 119,384 119,868 117,752 --------- --------- --------- --------- --------- EBITDA(a)(b) $ 74,661 $ 63,843 $ 55,513 $ 57,004 $ 68,913 ========= ========= ========= ========= ========= Pops 6,724,700 6,711,200 6,687,500 6,687,500 6,687,500 Post-paid Gross Adds 58,200 56,100 51,900 48,400 50,800 Net Adds 11,700 11,500 3,300 (13,000) (15,700) Subscribers 797,600 785,300 773,800 770,500 783,500 Churn 1.96% 1.91% 2.10% 2.63% 2.80% Pre-paid Gross Adds 21,100 16,100 13,900 13,000 14,600 Net Adds 9,200 5,100 3,000 -- 1,700 Subscribers 58,000 48,000 42,900 39,900 39,900 Reseller Gross Adds 9,400 9,300 11,200 11,100 11,400 Net Adds 1,300 600 700 3,000 3,800 Subscribers 65,900 64,600 64,000 63,300 60,300 Total Gross Adds 88,700 81,500 77,000 72,500 76,800 Net Adds 22,200 17,200 7,000 (10,000) (10,200) Subscribers 921,500 897,900 880,700 873,700 883,700 ARPU $ 51.59 $ 50.15 $ 49.01 $ 47.44 $ 48.23 Penetration 13.7% 13.4% 13.2% 13.1% 13.2% (a) Includes $2.7 million, $2.5 million, $2.6 million, $3.3 million and $2.7 million of EBITDA for the quarters ended September 30, 2006, June 30, 2006, March 31,2006, December 31, 2005 and September 30,2005, respectively, related to minority interests. (b) A reconciliation of EBITDA to net income (loss) as determined in accordance with generally accepted accounting principles is as follows: Net income (loss) $ 10,851 $ (9,303) $ (7,035) $ (7,625) $ 3,900 Add back non- EBITDA items included in net income (loss): Depreciation and amortization (28,389) (28,164) (28,778) (28,874) (28,744) Gain on disposi- tion of operating assets 850 857 915 802 783 Interest expense (38,232) (38,562) (38,434) (38,559) (38,198) Loss from ex- tinguishment of debt -- (12,549) -- -- -- Other income, net 2,030 1,761 1,840 1,408 2,132 Minority interests in income of subsidiaries (2,447) (2,169) (2,364) (2,932) (2,347) Income tax benefit 2,378 5,680 4,273 3,526 1,361 --------- --------- --------- --------- --------- EBITDA $ 74,661 $ 63,843 $ 55,513 $ 57,004 $ 68,913 ========= ========= ========= ========= ========= Table 5 American Cellular Corporation For the Quarter Ended 9/30/2006 6/30/2006 3/31/2006 12/31/2005 9/30/2005 --------- --------- --------- --------- --------- ($ in thousands except per subscriber data) (unaudited) Operating Revenue Service revenue $ 91,613 $ 89,521 $ 87,473 $ 89,939 $ 92,712 Roaming revenue 39,496 29,495 22,983 24,866 34,659 Equipment and other revenue 5,583 6,080 5,848 5,554 4,794 --------- --------- --------- --------- --------- Total 136,692 125,096 116,304 120,359 132,165 --------- --------- --------- --------- --------- Operating Expenses (excluding de- preciation and amortization) Cost of service 35,648 30,881 29,723 30,366 30,872 Cost of equipment 12,476 13,932 12,214 13,232 13,448 Marketing and selling 17,198 15,786 16,276 14,999 15,004 General and administrative 21,344 21,165 21,327 23,077 22,296 --------- --------- --------- --------- --------- Total 86,666 81,764 79,540 81,674 81,620 --------- --------- --------- --------- --------- EBITDA(a) $ 50,026 $ 43,332 $ 36,764 $ 38,685 $ 50,545 ========= ========= ========= ========= ========= Pops 5,328,000 5,328,000 5,166,500 5,166,500 5,166,500 Post-paid Gross Adds 33,900 33,500 32,900 32,000 34,000 Net Adds (400) 2,300 (3,300) (15,000) (18,800) Subscribers 593,200 593,600 590,900 594,200 609,200 Churn 1.93% 1.76% 2.04% 2.60% 2.85% Pre-paid Gross Adds 12,200 7,800 8,100 6,000 7,000 Net Adds 5,300 2,600 3,300 300 1,600 Subscribers 30,500 25,200 22,500 19,200 18,900 Reseller Gross Adds 4,700 5,100 7,300 12,100 13,600 Net Adds (3,600) (4,800) (4,500) 2,200 3,300 Subscribers 43,400 47,000 51,800 56,300 54,100 Total Gross Adds 50,800 46,400 48,300 50,100 54,600 Net Adds 1,300 100 (4,500) (12,500) (13,900) Subscribers 667,100 665,800 665,200 669,700 682,200 ARPU $ 45.85 $ 44.88 $ 43.80 $ 44.35 $ 44.88 Penetration 12.5% 12.5% 12.9% 13.0% 13.2% (a) A reconciliation of EBITDA to net income (loss) as determined in accordance with generally accepted accounting principles is as follows: Net income (loss) $ 4,483 $ (100) $ (4,969) $ (4,434) $ 4,555 Add back non- EBITDA items included in net income (loss): Depreciation and amortization (19,343) (19,948) (21,454) (22,509) (20,358) Gain on disposi- tion of operating assets 716 736 749 681 649 Interest expense (24,540) (23,779) (23,785) (23,782) (23,782) Other expense, net (592) (483) (258) (227) (400) Income tax (expense) benefit (1,784) 42 3,015 2,718 (2,099) --------- --------- --------- --------- --------- EBITDA $ 50,026 $ 43,332 $ 36,764 $ 38,685 $ 50,545 ========= ========= ========= ========= =========