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Press Release Details

U.S. Cellular Reports First Quarter 2015 Results

05/01/2015

Increases guidance for operating cash flow and adjusted EBITDA
As previously announced, U.S. Cellular will hold a teleconference May 1, 2015 at 9:30 a.m. CDT. Listen to the live call via the Events & Presentations page of investors.uscellular.com.

CHICAGO, May 1, 2015 /PRNewswire/ -- United States Cellular Corporation (NYSE: USM) reported total operating revenues of $965.2 million for the first quarter of 2015, versus $925.8 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $160.1 million and $1.89, respectively, for the first quarter of 2015, compared to $19.5 million and $0.23, respectively, in the comparable period one year ago. 

"We had another encouraging quarter at U.S. Cellular, building on the turnaround in customer growth that we achieved in 2014," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We grew our postpaid customer base through strong sales of connected devices and significantly lower customer churn, and we significantly increased operating cash flow.

"We are pleased with the strong adoption of shared data plans and increasing number of devices per account, which are driving revenue growth. Our 4G LTE network will cover 98 percent of customers by the end of the year.

"We are focused on continuing to grow our customer base and increasing revenue and operating cash flow in 2015 by offering innovative services and exciting devices that run on our high-quality network."

2015 Estimated Results
U.S. Cellular's estimates of full-year 2015 results are shown below.  Such estimates represent management's view as of May 1, 2015.  Such forward-looking statements should not be assumed to be current as of any future date.  U.S. Cellular undertakes no duty to update such information, whether as a result of new information, future events or otherwise.  There can be no assurance that final results will not differ materially from such estimated results.



2015 Estimated Results



Current


Previous

(Dollars in millions)




Total operating revenues

$4,000-$4,200


Unchanged

Operating cash flow (1)

$400-$500


$350-$450

Adjusted EBITDA (1)

$580-$680


$530-$630

Capital expenditures

$600


Unchanged



(1)

Operating cash flow is defined as net income, adjusted for the items set forth in the reconciliation below.  Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation below.  Operating cash flow and Adjusted EBITDA exclude these items in order to show operating results on a more comparable basis from period to period. From time to time, U.S. Cellular may exclude other items from Operating cash flow and/or Adjusted EBITDA if such items help reflect operating results on a more comparable basis. U.S. Cellular does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future.  Operating cash flow and Adjusted EBITDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States ("GAAP") and should not be considered as alternatives to net income as indicators of the company's operating performance or as alternatives to cash flows from operating activities, determined in accordance with GAAP, as indicators of cash flows or as measures of liquidity. U.S. Cellular believes Operating cash flow and Adjusted EBITDA are useful measures of U.S. Cellular's operating results before significant recurring non-cash charges, gains and losses, and other items as indicated below. The following tables provide a reconciliation to Operating cash flow and Adjusted EBITDA for 2015 estimated results, actual results for the three months ended March 31, 2015 and 2014 actual results:

 





Actual Results



2015 Estimated

Results (2)


Three Months Ended

March 31, 2015


Year Ended

December 31, 2014

(Dollars in millions)






Net income (loss) (GAAP)

N/A


$165


($47)

Add back:







Income tax expense (benefit)

N/A


$108


($12)

Income (loss) before income taxes (GAAP)

$140-$240


$273


($59)

Add back:







Interest expense

$80


$20


$57


Depreciation, amortization and accretion expense

$580


$147


$606

EBITDA

$800-$900


$440


$605

Add back (deduct):







(Gain) loss on sale of business and other exit costs, net

($110)


($111)


($33)


(Gain) loss on license sales and exchanges, net

($125)


($123)


($113)


(Gain) loss on assets disposals, net

$15


$4


$21

Adjusted EBITDA

$580-$680


$209


$480

Deduct:







Equity in earnings of unconsolidated entities

($130)


($34)


($130)


Interest and dividend income

($50)


($8)


($12)

Operating cash flow (3)

$400-$500


$167


$338








Note: Totals may not foot due to rounding differences.















(2)

In providing 2015 Estimated Results, U.S. Cellular has not completed the above reconciliation to net income because it does not provide guidance for income taxes. U.S. Cellular believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance. Accordingly, a reconciliation to net income is not available without unreasonable effort.

(3)

A reconciliation of Operating cash flow (Non-GAAP) to Operating income (GAAP) for March 31, 2015 actual results can be found on the company's website at investors.uscellular.com.

Conference Call Information
U.S. Cellular will hold a conference call on May 1, 2015 at 9:30 a.m. Central Time.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.uscellular.com. The call will be archived on the Events & Presentations page of investors.uscellular.com.

About U.S. Cellular
United States Cellular Corporation provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to 4.8 million customers in 23 states. The Chicago-based company had 6,600 full- and part-time associates as of March 31, 2015. At the end of the first quarter of 2015, Telephone and Data Systems, Inc. owned 84 percent of U.S. Cellular. For more information about U.S. Cellular, visit uscellular.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:  All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: impacts of any pending acquisition and divestiture transactions,  including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the overall economy; competition; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets;  pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of products and services offered by U.S. Cellular. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by U.S. Cellular to furnish this press release to the Securities and Exchange Commission ("SEC"), which are incorporated by reference herein.   

 


United States Cellular Corporation

Summary Operating Data (Unaudited)


















As of or for the Quarter Ended

3/31/2015


12/31/2014


9/30/2014


6/30/2014


3/31/2014

Retail Customers















   Postpaid















     Total at end of period


4,307,000



4,298,000



4,200,000



4,148,000



4,174,000

     Gross additions


200,000



302,000



251,000



190,000



197,000

     Net additions (losses)


9,000



98,000



52,000



(26,000)



(93,000)

     ARPU (1)

$

54.87


$

56.51


$

56.37


$

56.82


$

57.59

     ARPA (2)

$

134.94


$

136.13


$

132.99


$

131.95


$

132.03

     Churn rate (3)


1.5%



1.6%



1.6%



1.7%



2.3%

     Smartphone penetration (4)


66.9%



64.8%



61.7%



58.4%



55.8%

   Prepaid















     Total at end of period


360,000



348,000



350,000



352,000



356,000

     Gross additions


73,000



60,000



64,000



65,000



85,000

     Net additions (losses)


12,000



(2,000)



(2,000)



(4,000)



13,000

     ARPU (1)

$

35.72


$

35.33


$

34.40


$

34.02


$

32.22

     Churn rate (3)


5.8%



5.9%



6.3%



6.5%



6.9%

Total customers at end of period


4,775,000



4,760,000



4,674,000



4,653,000



4,684,000

Billed ARPU (1)

$

52.29


$

53.63


$

53.24


$

53.36


$

53.93

Service revenue ARPU (1)

$

58.01


$

60.10


$

60.92


$

60.32


$

60.19

Smartphones sold as a percent of total

  handsets sold


85.7%



86.5%



80.8%



79.0%



78.2%

Total population















     Consolidated markets (5)


45,737,000



50,906,000



54,817,000



54,817,000



54,817,000

     Consolidated operating markets (5)


31,814,000



31,729,000



31,729,000



31,729,000



31,729,000

Market penetration at end of period















     Consolidated markets (6)


10.4%



9.4%



8.5%



8.5%



8.5%

     Consolidated operating markets (6)


15.0%



15.0%



14.7%



14.7%



14.8%

Capital expenditures (000s)

$

66,460


$

181,655


$

142,452


$

143,927


$

89,581

Total cell sites in service


6,219



6,220



6,209



6,183



6,165

Owned towers (7)


3,955



4,281



4,487



4,457



4,448



(1)

Average Revenue Per User ("ARPU") metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period.  These revenue bases and customer populations are shown below:



a.

Postpaid ARPU consists of total postpaid service revenues and postpaid customers.



b.

Prepaid ARPU consists of total prepaid service revenues and prepaid customers.



c.

Billed ARPU consists of total postpaid, prepaid and reseller service revenues and postpaid,  prepaid and reseller customers.



d. 

Service revenue ARPU consists of total postpaid, prepaid and reseller service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)

Average Revenue Per Account ("ARPA") metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts by the number of months in the period.

(3)

Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

(4)

Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid handset customers.

(5)

The decrease in the population of Consolidated markets is due primarily to the license exchange transactions of certain non-operating licenses in North Carolina in December 2014 and Illinois and Indiana in March 2015. Total Population is used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively.  See footnote (6) below.

(6)

Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.  The increase in consolidated markets penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (5) above.

(7)

During the quarters ended March 31, 2015 and December 31, 2014, sold 359 and 236 towers, respectively, in divested markets.

 


United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended March 31,

(Unaudited, dollars and shares in thousands, except per share amounts)










      Change




2015


2014


Amount


Percent

Operating revenues











    Service

$

828,211


$

853,613


$

(25,402)


(3%)

    Equipment sales


137,034



72,198



64,836


90%

      Total operating revenues


965,245



925,811



39,434


4%














Operating expenses











    System operations (excluding Depreciation, amortization and accretion

reported below)


190,677



180,607



10,070


6%

    Cost of equipment sold


238,301



270,474



(32,173)


(12%)

    Selling, general and administrative


368,968



395,564



(26,596)


(7%)

    Depreciation, amortization and accretion


147,085



167,753



(20,668)


(12%)

    (Gain) loss on asset disposals, net


4,251



1,934



2,317


>100%

    (Gain) loss on sale of business and other exit costs, net


(111,477)



(6,900)



(104,577)


>100%

    (Gain) loss on license sales and exchanges, net


(122,873)



(91,446)



(31,427)


(34%)

      Total operating expenses


714,932



917,986



(203,054)


(22%)














Operating income


250,313



7,825



242,488


>100%














Investment and other income (expense)











    Equity in earnings of unconsolidated entities


34,471



37,075



(2,604)


(7%)

    Interest and dividend income


7,566



884



6,682


>100%

    Interest expense


(19,964)



(14,862)



(5,102)


(34%)

    Other, net


105



86



19


22%

       Total investment and other income


22,178



23,183



(1,005)


(4%)














Income before income taxes


272,491



31,008



241,483


>100%

    Income tax expense


107,501



12,604



94,897


>100%

Net income


164,990



18,404



146,586


>100%

    Less: Net income (loss) attributable to noncontrolling interests, net of tax


4,926



(1,078)



6,004


>(100%)

Net income attributable to U.S. Cellular shareholders

$

160,064


$

19,482


$

140,582


>100%













Basic weighted average shares outstanding


84,042



84,213



(171)


Basic earnings per share attributable to U.S. Cellular shareholders

$

1.90


$

0.23


$

1.67


>100%














Diluted weighted average shares outstanding


84,838



85,065



(227)


Diluted earnings per share attributable to U.S. Cellular shareholders

$

1.89


$

0.23


$

1.66


>100%

 


United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)








ASSETS

















March 31,


December 31,



2015


2014

Current assets






    Cash and cash equivalents

$

336,893


$

211,513

    Accounts receivable from customers and others


558,998



556,958

    Inventory, net


164,900



267,068

    Prepaid expenses


69,702



59,744

    Net deferred income tax asset


77,246



93,058

    Other current assets


18,112



90,834




1,225,851



1,279,175








Assets held for sale


22,203



107,055








Investments






    Licenses


1,827,102



1,443,438

    Goodwill


370,151



370,151

    Investments in unconsolidated entities


304,501



283,014




2,501,754



2,096,603








Property, plant and equipment






    In service and under construction


7,426,410



7,458,740

    Less: Accumulated depreciation


4,781,293



4,730,523




2,645,117



2,728,217








Other assets and deferred charges


211,453



276,218








Total assets

$

6,606,378


$

6,487,268

 


United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)









LIABILITIES AND EQUITY




















March 31,


December 31,




2015


2014

Current liabilities






    Current portion of long-term debt

$

57


$

46

    Accounts payable






      Affiliated


8,044



9,774

      Trade


245,170



306,845

    Customer deposits and deferred revenues


301,419



287,562

    Accrued taxes


139,407



36,652

    Accrued compensation


36,957



66,162

    Other current liabilities


130,780



149,853





861,834



856,894









Liabilities held for sale


---



20,934









Deferred liabilities and credits






    Net deferred income tax liability


816,999



859,867

    Other deferred liabilities and credits


295,287



284,002









Long-term debt


1,151,901



1,151,819









Noncontrolling interests with redemption features


6,619



1,150









Equity






U.S. Cellular shareholders' equity






    Series A Common and Common Shares, par value $1 per share


88,074



88,074

    Additional paid-in capital


1,478,910



1,472,558

    Treasury shares


(170,544)



(169,139)

    Retained earnings


2,067,455



1,910,498

       Total U.S. Cellular shareholders' equity


3,463,895



3,301,991









Noncontrolling interests


9,843



10,611









    Total equity


3,473,738



3,312,602









Total liabilities and equity

$

6,606,378


$

6,487,268

 


United States Cellular Corporation

Consolidated Statement of Cash Flows

Three Months Ended March 31,

(Unaudited, dollars in thousands)







2015


2014

Cash flows from operating activities






    Net income (loss)

$

164,990


$

18,404

    Add (deduct) adjustments to reconcile net income to cash flows from

operating activities






        Depreciation, amortization and accretion


147,085



167,753

        Bad debts expense


29,132



20,492

        Stock-based compensation expense


5,740



4,955

        Deferred income taxes, net


(26,166)



(4,817)

        Equity in earnings of unconsolidated entities


(34,471)



(37,075)

        Distributions from unconsolidated entities


12,985



12,818

        (Gain) loss on asset disposals, net


4,251



1,934

        (Gain) loss on sale of business and other exit costs, net


(111,477)



(6,900)

        (Gain) loss on license sales and exchanges, net


(122,873)



(91,446)

        Noncash interest expense


386



269

        Other operating activities




47

    Changes in assets and liabilities from operations






        Accounts receivable


(1,437)



79,586

        Equipment installment plans receivable


(36,498)



2,394

        Inventory


102,167



19,306

        Accounts payable


(18,691)



(40,557)

        Customer deposits and deferred revenues


13,419



(1,510)

        Accrued taxes


189,387



(15,403)

        Accrued interest


9,504



9,182

        Other assets and liabilities


(71,955)



(75,896)






255,478



63,536










Cash flows from investing activities






    Cash used for additions to property, plant and equipment


(116,079)



(109,498)

    Cash paid for acquisitions and licenses


(279,656)



(9,135)

    Cash received from divestitures and exchanges


274,111



103,042

    Cash received for investments




10,000

    Other investing activities


1,151



584






(120,473)



(5,007)










Cash flows from financing activities






    Common shares reissued for benefit plans, net of tax payments


487



316

    Common shares repurchased


(2,302)



(2,000)

    Payment of debt issuance costs


(3,018)



    Acquisition of towers in common control transaction


(2,437)



    Distributions to noncontrolling interests


(225)



(346)

    Other financing activities


(2,130)



(23)






(9,625)



(2,053)










Net increase in cash and cash equivalents


125,380



56,476










Cash and cash equivalents






    Beginning of period


211,513



342,065

    End of period

$

336,893


$

398,541

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)














Three Months Ended





March 31,



2015


2014










Cash flows from operating activities


$

255,478


$

63,536

Add: Sprint Cost Reimbursement



15,712



11,254

Less: Cash used for additions to property, plant and equipment



116,079



109,498

     Adjusted free cash flow (1)


$

155,111


$

(34,708)



(1)

Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash used for additions to property, plant and equipment. Adjusted free cash flow is a non-GAAP financial measure which U.S. Cellular believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment.

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/us-cellular-reports-first-quarter-2015-results-300075867.html

SOURCE U.S. Cellular

Jane McCahon, Vice President, Corporate Relations and Corporate Secretary, 312-592-5379, jane.mccahon@tdsinc.com or Julie Mathews, Investor Relations Manager, 312-592-5341, julie.mathews@tdsinc.com