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Press Release Details

U.S. Cellular reports first quarter 2017 results

05/05/2017

CHICAGO, May 5, 2017 /PRNewswire/ --

As previously announced, U.S. Cellular will hold a teleconference May 5, 2017, at 9:30 a.m. CDT.  Listen to the live call via the Events & Presentations page of investors.uscellular.com.

United States Cellular Corporation (NYSE:USM) reported total operating revenues of $936 million for the first quarter of 2017, versus $969 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $26 million and $0.31, respectively, for the first quarter of 2017, compared to $9 million and $0.10, respectively, in the same period one year ago. 

"As we outlined at the beginning of 2017, our priorities for the year include protecting our customer base and aggressively promoting our products and services with economically justified offerings," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We executed on these priorities during the first quarter and made important progress.

"Although we would have liked to have seen more new customer connections, we were very pleased with the continuing loyalty of our existing customers which was reflected in low handset churn.  We also have seen a favorable response to our new Total Plans, including unlimited options, and the recent launch of the Samsung Galaxy S8. Our disciplined approach to promotional activity and our focus on cost management in all parts of the business resulted in a strong increase in profitability this quarter. 

"We continued making investments in our high-quality network, moving closer to our first commercial deployment of Voice over LTE technology.  Also, in the recently completed FCC incentive auction, we acquired 600 MHz low-band spectrum in many of our markets which will enable us to better meet our customers' growing demand for data services over the long-term."

2017 Estimated Results
U.S. Cellular's current estimates of full-year 2017 results are shown below.  Such estimates represent management's view as of May 5, 2017.  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.



2017 Estimated Results



Current


Previous

(Dollars in millions)





Total operating revenues (1)

$3,800-$4,000


Unchanged

Operating cash flow (1)(2)(3)

$550-$650


$500-$650

Adjusted EBITDA (2)

$700-$800


$650-$800

Capital expenditures

Approx.

$500


Unchanged

The following table provides a reconciliation of Net income to Operating cash flow and Adjusted EBITDA for 2017 estimated results, actual results for the three months ended March 31, 2017, and actual results for the year ended December 31, 2016.  In providing 2017 estimated results, U.S. Cellular has not completed the below reconciliation to net income because it does not provide guidance for income taxes.  Although potentially significant, U.S. Cellular believes that the impact of income taxes cannot be reasonably predicted; therefore, U.S. Cellular is unable to provide such guidance.









Actual Results






2017 Estimated

Results



Three Months Ended
March 31, 2017



Year Ended

December 31, 2016

(Dollars in millions)










Net income (GAAP)



N/A


$

28


$

49

Add back:











Income tax expense



N/A



33



33

Income (loss) before income taxes











(GAAP)


$

(45)-55


$

61


$

82

Add back:











Interest expense



110



28



113


Depreciation, amortization and accretion expense



630



153



618

EBITDA (Non-GAAP)


$

695-795


$

242


$

813

Add back (deduct):











(Gain) loss on license sales and

exchanges, net


(15)



(17)



(19)


(Gain) loss on assets disposals, net



20



4



22

Adjusted EBITDA (Non-GAAP) (2)


$

700-800


$

229


$

816

Deduct:











Equity in earnings of unconsolidated entities



140



33



140


Interest and dividend income (1)



10



3



6


Other, net





(1)



1

Operating cash flow (Non-GAAP) (1)(2)(3)


$

550-650


$

194


$

669













Note: Totals may not foot due to rounding differences.

 

(1)

Equipment installment plan interest income is reflected as a component of Service revenues consistent with an accounting policy change effective January 1, 2017.  All prior period numbers have been recast to conform to this accounting change. 



(2)

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) is defined as net income adjusted for the items set forth in the reconciliation above.  Operating cash flow is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted EBITDA and Operating cash flow 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 or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.  U.S. Cellular does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future.  Management uses Adjusted EBITDA and Operating cash flow as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate.  Management believes Adjusted EBITDA and Operating cash flow are useful measures of U.S. Cellular's operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of U.S. Cellular's financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance.  Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Operating cash flow reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.  The table above reconciles Adjusted EBITDA and Operating cash flow to the corresponding GAAP measure, Net income or Income (loss) before income taxes.



(3)

A reconciliation of Operating cash flow (Non-GAAP) to Operating income (GAAP) for March 31, 2017, 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 5, 2017 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 customers with 5 million connections in 23 states. The Chicago-based company had 6,200 full- and part-time associates as of March 31, 2017. At the end of the first quarter of 2017, Telephone and Data Systems, Inc. owned 83 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: intense competition; the ability to execute U.S. Cellular's business strategy; uncertainties in U.S. Cellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on U.S. Cellular indebtedness or comply with the terms of debt covenants; 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 access to and pricing of unbundled network elements; 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 of U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; 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 services and products 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, 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

3/31/2017


12/31/2016


9/30/2016



6/30/2016


3/31/2016

Retail Connections
















Postpaid

















Total at end of period


4,455,000



4,482,000



4,484,000



4,490,000



4,454,000



Gross additions


146,000



187,000



174,000



197,000



215,000




Feature phones


7,000



7,000



10,000



8,000



9,000




Smartphones


88,000



109,000



105,000



107,000



124,000




Connected devices


51,000



71,000



59,000



82,000



82,000



Net additions (losses)


(27,000)



(2,000)



(6,000)



36,000



45,000




Feature phones


(19,000)



(21,000)



(20,000)



(21,000)



(25,000)




Smartphones


(9,000)



(4,000)



(7,000)



8,000



20,000




Connected devices


1,000



23,000



21,000



49,000



50,000



ARPU (1)

$

45.42


$

45.19


$

47.08


$

47.37


$

48.13



ABPU (Non-GAAP)(2)

$

55.82


$

55.43


$

56.79


$

56.09


$

56.06



ARPA (3)

$

121.88


$

120.67


$

125.31


$

124.91


$

125.36



ABPA (Non-GAAP)(4)

$

149.78


$

148.02


$

151.16


$

147.90


$

145.99



Churn rate (5)


1.29%



1.41%



1.34%



1.20%



1.28%




Handsets


1.08%



1.23%



1.22%



1.10%



1.18%




Connected devices


2.55%



2.49%



2.04%



1.84%



2.01%


Prepaid

















Total at end of period


480,000



484,000



480,000



413,000



399,000



Gross additions


78,000



83,000



132,000



73,000



75,000



Net additions (losses)


(4,000)



4,000



67,000



14,000



12,000



ARPU (1)

$

33.66


$

33.25


$

34.39


$

34.58


$

35.51



Churn rate (5)


5.69%



5.44%



4.84%



4.86%



5.37%

Total connections at end of period (6)


4,996,000



5,031,000



5,030,000



4,973,000



4,926,000

Market penetration at end of period
















Consolidated operating population


32,089,000



31,994,000



31,994,000



31,994,000



31,994,000


Consolidated operating penetration (7)


16%



16%



16%



16%



15%

Capital expenditures (millions)

$

61


$

171


$

103


$

93


$

79

Total cell sites in service


6,417



6,415



6,374



6,324



6,306

Owned towers


4,041



4,040



4,015



3,988



3,989





















(1)

Average Revenue Per User ("ARPU") – metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period.  These revenue bases and connection populations are shown below:




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




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

(2)

Average Billings Per User ("ABPU") – non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid connections and by the number of months in the period.  Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(3)

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

(4)

Average Billings Per Account ("ABPA") – non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.  Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(5)

Churn rate represents the percentage of the connections that disconnect service each month.  These rates represent the average monthly churn rate for each respective period.

(6)

Includes reseller and other connections.

(7)

Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)





Three Months Ended March 31,








2017 vs. 2016




2017


2016


Increase (Decrease)

(Dollars and shares in millions, except per share amounts)










Operating revenues












Service1

$

746


$

771


$

(25)


(3)%


Equipment sales


190



198



(8)


(4)%



Total operating revenues1


936



969



(33)


(3)%














Operating expenses












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


175



184



(9)


(4)%


Cost of equipment sold


228



256



(28)


(11)%


Selling, general and administrative


339



361



(22)


(6)%


Depreciation, amortization and accretion


153



153




1%


(Gain) loss on asset disposals, net


4



5



(1)


(28)%


(Gain) loss on license sales and exchanges, net


(17)





(17)


N/M



Total operating expenses


882



959



(77)


(8)%














Operating income1


54



10



44


>100%














Investment and other income (expense)












Equity in earnings of unconsolidated entities


33



35



(2)


(7)%


Interest and dividend income1


3



2



1


44%


Interest expense


(28)



(28)




(1)%


Other, net


(1)



1



(2)


(1)%



Total investment and other income1


7



10



(3)


(21)%














Income before income taxes


61



20



41


>100%


Income tax expense


33



11



22


>100%

Net income


28



9



19


>100%


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


2





2


>100%

Net income attributable to U.S. Cellular shareholders

$

26


$

9


$

17


>100%













Basic weighted average shares outstanding


85



84



1


1%

Basic earnings per share attributable to

   U.S. Cellular shareholders

$

0.31


$

0.10


$

0.21


>100%














Diluted weighted average shares outstanding


86



85



1


1%

Diluted earnings per share attributable to

   U.S. Cellular shareholders

$

0.31


$

0.10


$

0.21


>100%














(1)

Equipment installment plan interest income is reflected as a component of Service revenues consistent with an accounting policy change effective January 1, 2017.  All prior period numbers have been recast to conform to this accounting change.

 


United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)







Three Months Ended
March 31,


2017


2016

(Dollars in millions)






Cash flows from operating activities







Net income

$

28


$

9


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









Depreciation, amortization and accretion


153



153




Bad debts expense


24



19




Stock-based compensation expense


7



5




Deferred income taxes, net


1



4




Equity in earnings of unconsolidated entities


(33)



(35)




Distributions from unconsolidated entities


11



14




(Gain) loss on asset disposals, net


4



5




(Gain) loss on license sales and exchanges, net


(17)




Changes in assets and liabilities from operations









Accounts receivable


26



15




Equipment installment plans receivable


(44)



(41)




Inventory


(3)



(2)




Accounts payable


(78)



43




Customer deposits and deferred revenues


(10)



(6)




Accrued taxes


22



30




Accrued interest


9



9




Other assets and liabilities


(39)



(59)





Net cash provided by operating activities


61



163











Cash flows from investing activities







Cash paid for additions to property, plant and equipment


(88)



(103)


Cash paid for licenses


(3)




Cash received from divestitures and exchanges


16



2


Other investing activities




(1)





Net cash used in investing activities


(75)



(102)











Cash flows from financing activities







Repayment of long-term debt


(3)



(3)


Common shares reissued for benefit plans, net of tax payments


3



1


Common shares repurchased




(2)





Net cash used in financing activities




(4)











Net increase (decrease) in cash and cash equivalents


(14)



57











Cash and cash equivalents







Beginning of period


586



715


End of period

$

572


$

772

 


United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)









ASSETS












March 31,


December 31,




2017


2016

(Dollars in millions)






Current assets







Cash and cash equivalents

$

572


$

586


Accounts receivable from customers and others, net


705



727


Inventory, net


141



138


Prepaid expenses


85



84


Other current assets


21



23



Total current assets


1,524



1,558









Assets held for sale


5



8









Licenses


1,895



1,886

Goodwill


370



370

Investments in unconsolidated entities


434



413









Property, plant and equipment







In service and under construction


7,742



7,712


Less: Accumulated depreciation and amortization


5,365



5,242



Property, plant and equipment, net


2,377



2,470









Other assets and deferred charges


419



405









Total assets

$

7,024


$

7,110

 


United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)









LIABILITIES AND EQUITY












March 31,


December 31,




2017


2016

(Dollars and shares in millions, except per share amounts)






Current liabilities







Current portion of long-term debt

$

11


$

11


Accounts payable








Affiliated


9



12



Trade


208



309


Customer deposits and deferred revenues


180



190


Accrued taxes


58



39


Accrued compensation


43



73


Other current liabilities


78



84



Total current liabilities


587



718









Deferred liabilities and credits







Deferred income tax liability, net


827



826


Other deferred liabilities and credits


311



302









Long-term debt, net


1,616



1,618









Noncontrolling interests with redemption features


1



1









Equity






U.S. Cellular shareholders' equity







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


88



88


Additional paid-in capital


1,529



1,522


Treasury shares


(132)



(136)


Retained earnings


2,185



2,160



Total U.S. Cellular shareholders' equity


3,670



3,634









Noncontrolling interests


12



11










Total equity


3,682



3,645









Total liabilities and equity

$

7,024


$

7,110

 


United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)










Free Cash Flow





Three Months Ended





March 31,




2017



2016

(Dollars in millions)






Cash flows from operating activities (GAAP)


$

61


$

163

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



88



103



Free cash flow (Non-GAAP) (1)


$

(27)


$

60










(1)

Management uses Free cash flow as a liquidity measure and it is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment.  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, after Cash paid for additions to property, plant and equipment.

Postpaid ABPU and Postpaid ABPA

U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment sales resulting from the increased adoption of equipment installment plans.  Postpaid ABPU and Postpaid ABPA, as previously defined, are non-GAAP financial measures which U.S. Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment sales revenues received from customers. 


















For the Quarter Ended


3/31/2017



12/31/2016



9/30/2016



6/30/2016



3/31/2016

(Dollars and connection counts in millions)















Calculation of Postpaid ARPU















Postpaid service revenues

$

608


$

607


$

635


$

636


$

639

Average number of postpaid connections


4.46



4.48



4.49



4.48



4.43

Number of months in period


3



3



3



3



3


Postpaid ARPU (GAAP metric)

$

45.42


$

45.19


$

47.08


$

47.37


$

48.13


















Calculation of Postpaid ABPU















Postpaid service revenues

$

608


$

607


$

635


$

636


$

639

Equipment installment plan billings


139



138



131



118



105


Total billings to postpaid connections

$

747


$

745


$

766


$

754


$

744

Average number of postpaid connections


4.46



4.48



4.49



4.48



4.43

Number of months in period


3



3



3



3



3


Postpaid ABPU (Non-GAAP metric)

$

55.82


$

55.43


$

56.79


$

56.09


$

56.06


















Calculation of Postpaid ARPA















Postpaid service revenues

$

608


$

607


$

635


$

636


$

639

Average number of postpaid accounts


1.66



1.68



1.69



1.70



1.70

Number of months in period


3



3



3



3



3


Postpaid ARPA (GAAP metric)

$

121.88


$

120.67


$

125.31


$

124.91


$

125.36


















Calculation of Postpaid ABPA















Postpaid service revenues

$

608


$

607


$

635


$

636


$

639

Equipment installment plan billings


139



138



131



118



105


Total billings to postpaid accounts

$

747


$

745


$

766


$

754


$

744

Average number of postpaid accounts


1.66



1.68



1.69



1.70



1.70

Number of months in period


3



3



3



3



3


Postpaid ABPA (Non-GAAP metric)

$

149.78


$

148.02


$

151.16


$

147.90


$

145.99

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/us-cellular-reports-first-quarter-2017-results-300452263.html

SOURCE U.S. Cellular

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