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Press Release Details

U.S. Cellular reports second quarter 2015 results

07/31/2015

Increases guidance for operating cash flow and adjusted EBITDA
As previously announced, U.S. Cellular will hold a teleconference July 31, 2015 at 9:30 a.m. CDT. Listen to the live call via the Events & Presentations page of investors.uscellular.com

CHICAGO, July 31, 2015 /PRNewswire/ -- United States Cellular Corporation (NYSE:USM) reported total operating revenues of $975.7 million for the second quarter of 2015, versus $957.8 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $19.4 million and $0.23, respectively, for the second quarter of 2015, compared to $(18.8) million and $(0.22), 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 and continued to drive churn lower, 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. 

"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.  Our 4G LTE network will cover 98 percent of customers by the end of the year."

2015 Estimated Results

U.S. Cellular's estimates of full-year 2015 results are shown below.  Such estimates represent management's view as of July 31, 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-$4,100


$4,000-$4,200

Operating cash flow (1)

$440-$540


$400-$500

Adjusted EBITDA (1)

$600-$700


$580-$680

Capital expenditures

Approx. $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 six months ended June 30, 2015 and 2014 actual results:

 








Actual Results





2015 Estimated

Results (2)



Six Months Ended June 30, 2015



Year Ended

December 31, 2014

(Dollars in millions)










Net income (loss) (GAAP)



N/A


$

185


$

(47)

Add back:











Income tax expense (benefit)



N/A



121



(12)

Income (loss) before income taxes (GAAP)


$

165-265


$

306


$

(59)

Add back:











Interest expense



80



40



57


Depreciation, amortization and accretion expense



600



298



606

EBITDA


$

845-945


$

643


$

605

Add back (deduct):











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



(115)



(113)



(33)


(Gain) loss on license sales and exchanges, net



(145)



(123)



(113)


(Gain) loss on assets disposals, net



15



10



21

Adjusted EBITDA


$

600-700


$

417


$

480

Deduct:











Equity in earnings of unconsolidated entities



(125)



(70)



(130)


Interest and dividend income



(35)



(17)



(12)

Operating cash flow (3)


$

440-540


$

330


$

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 June 30, 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 July 31, 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 6,500 full- and part-time associates as of June 30, 2015. At the end of the second 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 acquisitions/divestitures/exchanges of properties and/or licenses,  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 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; 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

6/30/2015


3/31/2015


12/31/2014


9/30/2014


6/30/2014

Retail Customers
















Postpaid

















Total at end of period


4,324,000



4,307,000



4,298,000



4,200,000



4,148,000



Gross additions


191,000



200,000



302,000



251,000



190,000



Net additions (losses)


17,000



9,000



98,000



52,000



(26,000)



ARPU (1)

$

53.62


$

54.87


$

56.51


$

56.37


$

56.82



ARPA (2)

$

133.85


$

134.94


$

136.13


$

132.99


$

131.95



Churn rate (3)


1.3%



1.5%



1.6%



1.6%



1.7%



Smartphone penetration (4)


69.1%



66.9%



64.8%



61.7%



58.4%


Prepaid

















Total at end of period


368,000



360,000



348,000



350,000



352,000



Gross additions


65,000



73,000



60,000



64,000



65,000



Net additions (losses)


8,000



12,000



(2,000)



(2,000)



(4,000)



ARPU (1)

$

35.98


$

35.72


$

35.33


$

34.40


$

34.02



Churn rate (3)


5.2%



5.8%



5.9%



6.3%



6.5%

Total customers at end of period


4,779,000



4,775,000



4,760,000



4,674,000



4,653,000

Billed ARPU (1)

$

51.29


$

52.29


$

53.63


$

53.24


$

53.36

Service revenue ARPU (1)

$

57.55


$

58.01


$

60.10


$

60.92


$

60.32

Smartphones sold as a percent of total handsets sold


86.7%



85.7%



86.5%



80.8%



79.0%

Total population

















Consolidated markets (5)


45,737,000



45,737,000



50,906,000



54,817,000



54,817,000



Consolidated operating markets (5)


31,814,000



31,814,000



31,729,000



31,729,000



31,729,000

Market penetration at end of period

















Consolidated markets (6)


10.4%



10.4%



9.4%



8.5%



8.5%



Consolidated operating markets (6)


15.0%



15.0%



15.0%



14.7%



14.7%

Capital expenditures (000s)

$

133,666


$

66,460


$

181,655


$

142,452


$

143,927

Total cell sites in service


6,223



6,219



6,220



6,209



6,183

Owned towers (7)


3,940



3,936



4,280



4,487



4,457





















(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 June 30,

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










      Change




2015


2014


Amount


Percent

Operating revenues












Service

$

824,373


$

843,473


$

(19,100)


(2)%


Equipment sales


151,294



114,300



36,994


32%



Total operating revenues


975,667



957,773



17,894


2%














Operating expenses












System operations (excluding Depreciation, amortization and accretion reported below)


196,276



187,131



9,145


5%


Cost of equipment sold


253,671



271,978



(18,307)


(7)%


Selling, general and administrative


362,971



404,252



(41,281)


(10)%


Depreciation, amortization and accretion


150,581



148,337



2,244


2%


(Gain) loss on asset disposals, net


5,399



6,893



(1,494)


(22)%


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


(1,705)



(10,511)



8,806


84%


(Gain) loss on license sales and exchanges, net


(25)





(25)





Total operating expenses


967,168



1,008,080



(40,912)


(4)%














Operating income (loss)


8,499



(50,307)



58,806


>100%














Investment and other income (expense)












Equity in earnings of unconsolidated entities


35,584



33,120



2,464


7%


Interest and dividend income


8,969



1,573



7,396


>100%


Interest expense


(20,154)



(14,336)



(5,818)


(41)%


Other, net


91



100



(9)


(9)%



Total investment and other income


24,490



20,457



4,033


20%














Income (loss) before income taxes


32,989



(29,850)



62,839


>100%


Income tax expense (benefit)


13,079



(10,399)



23,478


>100%

Net income (loss)


19,910



(19,451)



39,361


>100%


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


558



(662)



1,220


>100%

Net income (loss) attributable to U.S. Cellular shareholders

$

19,352


$

(18,789)


$

38,141


>100%













Basic weighted average shares outstanding


84,293



84,341



(48)


-

Basic earnings (loss) per share attributable to U.S. Cellular shareholders

$

0.23


$

(0.22)


$

0.45


>100%














Diluted weighted average shares outstanding


84,892



84,341



551


1%

Diluted earnings (loss) per share attributable to U.S. Cellular shareholders

$

0.23


$

(0.22)


$

0.45


>100%

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Six Months Ended June 30,

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










      Change




2015


2014


Amount


Percent

Operating revenues












Service

$

1,652,584


$

1,697,086


$

(44,502)


(3)%


Equipment sales


288,328



186,498



101,830


55%



Total operating revenues


1,940,912



1,883,584



57,328


3%














Operating expenses












System operations (excluding Depreciation, amortization and accretion reported below)


386,953



367,738



19,215


5%


Cost of equipment sold


491,972



542,452



(50,480)


(9)%


Selling, general and administrative


731,939



799,816



(67,877)


(8)%


Depreciation, amortization and accretion


297,666



316,090



(18,424)


(6)%


(Gain) loss on asset disposals, net


9,650



8,827



823


9%


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


(113,182)



(17,411)



(95,771)


>(100)%


(Gain) loss on license sales and exchanges, net


(122,898)



(91,446)



(31,452)


(34)%



Total operating expenses


1,682,100



1,926,066



(243,966)


(13)%














Operating income


258,812



(42,482)



301,294


>100%














Investment and other income (expense)












Equity in earnings of unconsolidated entities


70,055



70,195



(140)


-


Interest and dividend income


16,535



2,457



14,078


>100%


Interest expense


(40,118)



(29,198)



(10,920)


(37)%


Other, net


196



186



10


5%



Total investment and other income


46,668



43,640



3,028


7%














Income before income taxes


305,480



1,158



304,322


>100%


Income tax expense


120,580



2,205



118,375


>100%

Net income


184,900



(1,047)



185,947


>100%


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


5,484



(1,740)



7,224


>100%

Net income attributable to U.S. Cellular shareholders

$

179,416


$

693


$

178,723


>100%













Basic weighted average shares outstanding


84,168



84,277



(109)


-

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

$

2.13


$

0.01


$

2.12


>100%














Diluted weighted average shares outstanding


84,849



85,041



(192)


-

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

$

2.11


$

0.01


$

2.10


>100%

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)








ASSETS

















June 30,


December 31,



2015


2014

Current assets







Cash and cash equivalents

$

362,282


$

211,513


Accounts receivable from customers and others


562,468



556,958


Inventory, net


135,401



267,068


Prepaid expenses


73,319



59,744


Net deferred income tax asset


77,969



93,058


Other current assets


18,144



90,834




1,229,583



1,279,175








Assets held for sale


22,203



107,055








Investments







Licenses


1,827,656



1,443,438


Goodwill


369,596



370,151


Investments in unconsolidated entities


325,857



283,014




2,523,109



2,096,603








Property, plant and equipment







In service and under construction


7,420,889



7,458,740


Less: Accumulated depreciation


4,795,074



4,730,523




2,625,815



2,728,217








Other assets and deferred charges


195,909



276,218








Total assets

$

6,596,619


$

6,487,268

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)









LIABILITIES AND EQUITY




















June 30,


December 31,




2015


2014

Current liabilities







Current portion of long-term debt

$

57


$

46


Accounts payable








Affiliated


11,892



9,774



Trade


274,844



306,845


Customer deposits and deferred revenues


280,715



287,562


Accrued taxes


97,537



36,652


Accrued compensation


54,533



66,162


Other current liabilities


108,996



149,853





828,574



856,894









Liabilities held for sale




20,934









Deferred liabilities and credits







Net deferred income tax liability


827,339



859,867


Other deferred liabilities and credits


290,302



284,002









Long-term debt


1,151,999



1,151,819









Noncontrolling interests with redemption features


1,178



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


1,484,753



1,472,558


Treasury shares


(157,795)



(169,139)


Retained earnings


2,072,000



1,910,498



Total U.S. Cellular shareholders' equity


3,487,032



3,301,991









Noncontrolling interests


10,195



10,611










Total equity


3,497,227



3,312,602









Total liabilities and equity

$

6,596,619


$

6,487,268

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

Six Months Ended June 30,

(Unaudited, dollars in thousands)







2015


2014

Cash flows from operating activities







Net income (loss)

$

184,900


$

(1,047)


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









Depreciation, amortization and accretion


297,666



316,090




Bad debts expense


51,973



49,083




Stock-based compensation expense


11,913



10,560




Deferred income taxes, net


(16,549)



(13,267)




Equity in earnings of unconsolidated entities


(70,055)



(70,195)




Distributions from unconsolidated entities


27,214



65,565




(Gain) loss on asset disposals, net


9,650



8,827




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


(113,182)



(17,411)




(Gain) loss on license sales and exchanges, net


(122,898)



(91,446)




Noncash interest expense


795



540




Other operating activities


(387)



57


Changes in assets and liabilities from operations









Accounts receivable


4,669



79,148




Equipment installment plans receivable


(65,124)



(47,971)




Inventory


131,667



38,329




Accounts payable


25,404



(36,600)




Customer deposits and deferred revenues


(7,284)



10,793




Accrued taxes


138,804



(20,280)




Accrued interest


392



61




Other assets and liabilities


(65,599)



(67,976)






423,969



212,860










Cash flows from investing activities







Cash used for additions to property, plant and equipment


(259,235)



(262,397)


Cash paid for acquisitions and licenses


(279,656)



(17,245)


Cash received from divestitures and exchanges


281,573



125,905


Cash received for investments




10,000


Other investing activities


1,125



836






(256,193)



(142,901)










Cash flows from financing activities







Common shares reissued for benefit plans, net of tax payments


(1,570)



830


Common shares repurchased


(2,302)



(8,298)


Payment of debt issuance costs


(3,080)




Acquisition of towers in common control transaction


(2,437)




Distributions to noncontrolling interests


(5,872)



(482)


Other financing activities


(1,746)



(16)






(17,007)



(7,966)










Net increase in cash and cash equivalents


150,769



61,993










Cash and cash equivalents







Beginning of period


211,513



342,065


End of period

$

362,282


$

404,058

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)




















Three Months Ended


Six Months Ended





June 30,


June 30,




2015



2014



2015



2014
















Cash flows from operating activities


$

168,491


$

149,324


$

423,969


$

212,860

Add: Sprint Cost Reimbursement



7,462



22,862



23,174



34,116

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



143,156



152,899



259,235



262,397


Adjusted free cash flow (1)


$

32,797


$

19,287


$

187,908


$

(15,421)
















(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-second-quarter-2015-results-300121829.html

SOURCE United States Cellular Corporation

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