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Press Release Details

U.S. Cellular reports third quarter 2015 results

10/30/2015

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

CHICAGO, Oct. 30, 2015 /PRNewswire/ -- United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,068.9 million for the third quarter of 2015, versus $1,000.4 million for the same period one year ago. Net income (loss) attributable to U.S. Cellular shareholders and related diluted earnings per share were $63.6 million and $0.75, respectively, for the third quarter of 2015, compared to $(22.2) million and $(0.26), respectively, in the comparable period one year ago. 

Effective September 1, 2015, U.S. Cellular discontinued it loyalty rewards program.  All unredeemed rewards points expired and the deferred revenue related to the expired points was recognized as $58.2 million in service revenues in the quarter.  

"This quarter we completed our 4G LTE network rollout.  This was one of our major priorities for the year.  It allows our customers, even in our very rural areas, to receive the benefits of our data services.  The results of this customer focus manifests itself in high customer loyalty and lower churn," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We also continued to manage our expense levels, which contributed to the growth in operating cash flow.

"As we move into the holiday sales season, we plan to grow our customer base and increase revenue through our competitive pricing and promotions, that showcase our high-quality 4G 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 October 30, 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

Approx. $

4,000


$4,000-$4,100

Operating cash flow (1)

$540-$620


$440-$540

Adjusted EBITDA (1)

$710-$790


$600-$700

Capital expenditures

Approx. $

600


Unchanged

The following tables provide a reconciliation to Operating Cash Flow and Adjusted EBITDA for 2015 estimated results, actual results for the nine months ended September 30, 2015 and 2014 actual results:








Actual Results





2015 Estimated

Results (2)



Nine Months Ended September 30, 2015



Year Ended

December 31, 2014

(Dollars in millions)










Net income (loss) (GAAP)



N/A


$

250


$

(47)

Add back:











Income tax expense (benefit)



N/A



161



(12)

Income (loss) before income taxes

   (GAAP)


$

275-355


$

411


$

(59)

Add back:











Interest expense



80



61



57


Depreciation, amortization and accretion expense



600



450



606

EBITDA


$

955-1,035


$

922


$

605

Add back (deduct):











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



(115)



(114)



(33)


(Gain) loss on license sales and exchanges, net



(145)



(147)



(113)


(Gain) loss on assets disposals, net



15



12



21

Adjusted EBITDA


$

710-790


$

674


$

480

Deduct:











Equity in earnings of unconsolidated entities



(135)



(110)



(130)


Interest and dividend income



(35)



(26)



(12)

Operating cash flow (3)


$

540-620


$

538


$

338












Note: Totals may not foot due to rounding differences.



(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 above.



(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 September 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 October 30, 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 6,400 full- and part-time associates as of September 30, 2015. At the end of the third 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.   

For more information about U.S. Cellular, visit:
U.S. Cellular: www.uscellular.com



United States Cellular Corporation

Summary Operating Data (Unaudited)
















As of or for the Quarter Ended

9/30/2015


6/30/2015


3/31/2015


12/31/2014


9/30/2014

Retail Customers
















Postpaid

















Total at end of period


4,341,000



4,324,000



4,307,000



4,298,000



4,200,000



Gross additions


200,000



191,000



200,000



302,000



251,000



Net additions (losses)


17,000



17,000



9,000



98,000



52,000



ARPU (1)

$

58.12


$

53.62


$

54.87


$

56.51


$

56.37



ARPA (2)

$

147.00


$

133.85


$

134.94


$

136.13


$

132.99



Churn rate (3)


1.4%



1.3%



1.5%



1.6%



1.6%



Smartphone penetration (4)


72%



69%



67%



65%



62%


Prepaid

















Total at end of period


380,000



368,000



360,000



348,000



350,000



Gross additions


71,000



65,000



73,000



60,000



64,000



Net additions (losses)


12,000



8,000



12,000



(2,000)



(2,000)



ARPU (1)

$

35.64


$

35.98


$

35.72


$

35.33


$

34.40



Churn rate (3)


5.2%



5.2%



5.8%



5.9%



6.3%

Total customers at end of period


4,807,000



4,779,000



4,775,000



4,760,000



4,674,000

Billed ARPU (1)

$

55.42


$

51.29


$

52.29


$

53.63


$

53.24

Service revenue ARPU (1)

$

62.31


$

57.55


$

58.01


$

60.10


$

60.92

Smartphones sold as a percent of total handsets sold


87%



87%



86%



87%



81%

Total population

















Consolidated markets (5) (8)


50,313,000



52,809,000



52,822,000



58,840,000



60,136,000



Consolidated operating markets (5)


31,814,000



31,814,000



31,814,000



31,729,000



31,729,000

Market penetration at end of period

















Consolidated markets (6)


10%



9%



9%



8%



8%



Consolidated operating markets (6)


15%



15%



15%



15%



15%

Capital expenditures (000s)

$

134,816


$

133,666


$

66,460


$

181,655


$

142,452

Total cell sites in service


6,246



6,223



6,219



6,220



6,209

Owned towers (7)


3,957



3,940



3,936



4,280



4,487





















(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)

During the third quarter of 2015 U.S. Cellular reassessed population statistics with respect to markets which U.S. Cellular consolidates and revised its calculations to more accurately accumulate such population statistics.  As a result, prior period population data and corresponding market penetration ratios were revised for markets that U.S. Cellular currently consolidates, or previously consolidated in the periods presented.  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.

(7)

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

(8)

As licenses awarded in Auction 97 have not yet been granted, population statistics related to such licenses have not been included in population data.

 


 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

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






      Change




2015


2014


Amount


Percent

Operating revenues












Service

$

895,960


$

851,063


$

44,897


5%


Equipment sales


172,946



149,356



23,590


16%



Total operating revenues


1,068,906



1,000,419



68,487


7%














Operating expenses












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


198,982



199,750



(768)


-


Cost of equipment sold


287,256



307,862



(20,606)


(7)%


Selling, general and administrative


374,585



397,545



(22,960)


(6)%


Depreciation, amortization and accretion


152,369



148,952



3,417


2%


(Gain) loss on asset disposals, net


2,618



7,947



(5,329)


(67)%


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


(643)



(10,283)



9,640


94%


(Gain) loss on license sales and exchanges, net


(23,986)





(23,986)





Total operating expenses


991,181



1,051,773



(60,592)


(6)%














Operating income (loss)


77,725



(51,354)



129,079


>100%














Investment and other income (expense)












Equity in earnings of unconsolidated entities


39,674



35,971



3,703


10%


Interest and dividend income


9,299



3,572



5,727


>100%


Interest expense


(21,121)



(13,514)



(7,607)


(56)%


Other, net


78



95



(17)


(18)%



Total investment and other income


27,930



26,124



1,806


7%














Income (loss) before income taxes


105,655



(25,230)



130,885


>100%


Income tax expense (benefit)


40,634



(1,459)



42,093


>100%

Net income (loss)


65,021



(23,771)



88,792


>100%


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


1,427



(1,606)



3,033


>100%

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

$

63,594


$

(22,165)


$

85,759


>100%













Basic weighted average shares outstanding


84,333



84,233



100


-

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

$

0.75


$

(0.26)


$

1.02


>100%














Diluted weighted average shares outstanding


84,947



84,233



714


1%

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

$

0.75


$

(0.26)


$

1.01


>100%

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

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






Change




2015


2014


Amount


Percent

Operating revenues












Service

$

2,548,544


$

2,548,149


$

395


-


Equipment sales


461,274



335,854



125,420


37%



Total operating revenues


3,009,818



2,884,003



125,815


4%














Operating expenses












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


585,935



567,488



18,447


3%


Cost of equipment sold


779,228



850,314



(71,086)


(8)%


Selling, general and administrative


1,106,524



1,197,361



(90,837)


(8)%


Depreciation, amortization and accretion


450,035



465,042



(15,007)


(3)%


(Gain) loss on asset disposals, net


12,268



16,774



(4,506)


(27)%


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


(113,825)



(27,694)



(86,131)


>(100)%


(Gain) loss on license sales and exchanges, net


(146,884)



(91,446)



(55,438)


(61)%



Total operating expenses


2,673,281



2,977,839



(304,558)


(10)%














Operating income (loss)


336,537



(93,836)



430,373


>100%














Investment and other income (expense)












Equity in earnings of unconsolidated entities


109,729



106,166



3,563


3%


Interest and dividend income


25,834



6,029



19,805


>100%


Interest expense


(61,239)



(42,712)



(18,527)


(43)%


Other, net


274



281



(7)


(2)%



Total investment and other income


74,598



69,764



4,834


7%














Income (loss) before income taxes


411,135



(24,072)



435,207


>100%


Income tax expense


161,214



746



160,468


>100%

Net income (loss)


249,921



(24,818)



274,739


>100%


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


6,911



(3,346)



10,257


>100%

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

$

243,010


$

(21,472)


$

264,482


>100%













Basic weighted average shares outstanding


84,224



84,262



(38)


-

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

$

2.89


$

(0.25)


$

3.14


>100%














Diluted weighted average shares outstanding


84,869



84,262



607


1%

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

$

2.86


$

(0.25)


$

3.11


>100%

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)








ASSETS

















September 30,


December 31,



2015


2014

Current assets







Cash and cash equivalents

$

596,766


$

211,513


Accounts receivable from customers and others, net


628,796



556,958


Inventory, net


176,259



267,068


Prepaid expenses


88,041



59,744


Net deferred income tax asset


82,719



93,058


Other current assets


18,730



90,834




1,591,311



1,279,175








Assets held for sale




107,055








Investments







Licenses


1,834,061



1,443,438


Goodwill


369,596



370,151


Investments in unconsolidated entities


347,710



283,014




2,551,367



2,096,603








Property, plant and equipment







In service and under construction


7,511,997



7,458,740


Less: Accumulated depreciation


4,903,559



4,730,523




2,608,438



2,728,217








Other assets and deferred charges


187,268



276,218








Total assets

$

6,938,384


$

6,487,268

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)









LIABILITIES AND EQUITY




















September 30,


December 31,




2015


2014

Current liabilities







Current portion of long-term debt

$

8,501


$

46


Accounts payable








Affiliated


7,874



9,774



Trade


362,268



306,845


Customer deposits and deferred revenues


236,568



287,562


Accrued taxes


121,177



36,652


Accrued compensation


57,547



66,162


Other current liabilities


92,617



149,853





886,552



856,894









Liabilities held for sale




20,934









Deferred liabilities and credits







Net deferred income tax liability


828,563



859,867


Other deferred liabilities and credits


287,873



284,002









Long-term debt


1,368,656



1,151,819









Noncontrolling interests with redemption features


910



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


1,490,651



1,472,558


Treasury shares


(159,705)



(169,139)


Retained earnings


2,135,145



1,910,498



Total U.S. Cellular shareholders' equity


3,554,165



3,301,991









Noncontrolling interests


11,665



10,611










Total equity


3,565,830



3,312,602









Total liabilities and equity

$

6,938,384


$

6,487,268

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

Nine Months Ended September 30,

(Unaudited, dollars in thousands)







2015


2014

Cash flows from operating activities







Net income (loss)

$

249,921


$

(24,818)


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









Depreciation, amortization and accretion


450,035



465,042




Bad debts expense


78,370



74,357




Stock-based compensation expense


18,161



16,502




Deferred income taxes, net


(20,075)



(14,124)




Equity in earnings of unconsolidated entities


(109,729)



(106,166)




Distributions from unconsolidated entities


45,035



74,853




(Gain) loss on asset disposals, net


12,268



16,774




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


(113,825)



(27,694)




(Gain) loss on license sales and exchanges, net


(146,884)



(91,446)




Noncash interest expense


1,206



845




Other operating activities


(391)



66


Changes in assets and liabilities from operations









Accounts receivable


(54,437)



73,741




Equipment installment plans receivable


(95,799)



(131,520)




Inventory


90,811



53,367




Accounts payable


116,740



21,677




Customer deposits and deferred revenues


(51,026)



28,486




Accrued taxes


161,237



(18,453)




Accrued interest


10,814



9,140




Other assets and liabilities


(86,977)



(89,998)






555,455



330,631










Cash flows from investing activities







Cash used for additions to property, plant and equipment


(406,596)



(424,774)


Cash paid for acquisitions and licenses


(285,656)



(37,978)


Cash received from divestitures and exchanges


314,352



143,801


Cash received for investments




10,000


Other investing activities


990



804






(376,910)



(308,147)










Cash flows from financing activities







Issuance of long-term debt


225,000




Common shares reissued for benefit plans, net of tax payments


(868)



1,150


Common shares repurchased


(4,070)



(14,698)


Payment of debt issuance costs


(3,080)



(448)


Acquisition of towers in common control transaction


(2,437)



(76,298)


Distributions to noncontrolling interests


(6,097)



(439)


Other financing activities


(1,740)



(18)






206,708



(90,751)










Net increase (decrease) in cash and cash equivalents


385,253



(68,267)










Cash and cash equivalents







Beginning of period


211,513



342,065


End of period

$

596,766


$

273,798

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)




















Three Months Ended


Nine Months Ended





September 30,


September 30,



2015


2014


2015


2014
















Cash flows from operating activities


$

131,486


$

117,771


$

555,455


$

330,631

Add: Sprint Cost Reimbursement



4,422



17,896



27,596



52,012

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



147,361



162,377



406,596



424,774


Adjusted free cash flow (1)


$

(11,453)


$

(26,710)


$

176,455


$

(42,131)
















(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. Sprint decommissioning and Sprint Cost Reimbursement are further defined and discussed in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.  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-third-quarter-2015-results-300169479.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