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Press Release Details

U.S. Cellular reports second quarter 2017 results

08/04/2017

Growth in subscribers reflecting lowest ever handset churn 2017 guidance reaffirmed
As previously announced, U.S. Cellular will hold a teleconference August 4, 2017, at 9:30 a.m. CDT. Listen to the live call via the Events & Presentations page of investors.uscellular.com.

CHICAGO, Aug. 4, 2017 /PRNewswire/ -- United States Cellular Corporation (NYSE:USM) reported total operating revenues of $963 million for the second quarter of 2017, versus $992 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $12 million and $0.14, respectively, for the second quarter of 2017, compared to $27 million and $0.32, respectively, in the same period one year ago. 

"We had a successful quarter building on our number one objective – protecting and growing our customer base," said Kenneth R. Meyers, U.S. Cellular president and CEO.  "Our Total Plans, which include an unlimited data option, have been effective in both attracting new customers and meeting the needs of our current customers.

"Although the current pricing environment and the investments we made in growing our customer base impacted short-term profitability this quarter, we were able to minimize those impacts through our on-going cost management initiatives.  Lower roaming rates, continued customer adoption of Equipment Installment Plans, and cost reduction initiatives drove a decrease in cash expenses even as data traffic increased 51% on a year-over-year basis.

"We are continually making enhancements to our already high-quality network to ensure it remains one of our primary competitive advantages. This quarter, our network team successfully completed our first commercial VoLTE launch in Iowa. VoLTE brings benefits such as simultaneous voice and data sessions to customers as well as additional opportunities for roaming revenues. We plan to continue commercial rollouts of VoLTE to additional markets in 2018."

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 August 4, 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

Adjusted OIBDA (1)(2)(3)

$550-$650


Unchanged

Adjusted EBITDA (2)

$700-$800


Unchanged

Capital expenditures

Approx.

$500


Unchanged


The following table provides a reconciliation of Net Income to Adjusted OIBDA and Adjusted EBITDA for 2017 estimated results, actual results for the six months ended June 30, 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



Six Months Ended
June 30, 2017



Year Ended
December 31,
2016

(Dollars in millions)










Net income (GAAP)



N/A


$

40


$

49

Add back:











Income tax expense



N/A



33



33

Income (loss) before income taxes (GAAP)


$

(30)-70


$

73


$

82

Add back:











Interest expense



110



56



113


Depreciation, amortization and accretion expense



620



307



618

EBITDA (Non-GAAP)


$

700-800


$

436


$

813

Add back (deduct):











(Gain) loss on license sales and exchanges, net



(20)



(19)



(19)


(Gain) loss on assets disposals, net



20



9



22

Adjusted EBITDA (Non-GAAP) (2)


$

700-800


$

426


$

816

Deduct:











Equity in earnings of unconsolidated entities



140



66



140


Interest and dividend income (1)



10



5



6


Other, net





(1)



1

Adjusted OIBDA (Non-GAAP) (1)(2)(3)


$

550-650


$

356


$

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 is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted OIBDA is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted EBITDA and Adjusted OIBDA 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 Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate.  Management believes Adjusted EBITDA and Adjusted OIBDA 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 Adjusted OIBDA 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 Adjusted OIBDA to the corresponding GAAP measure, Net income or Income (loss) before income taxes.



(3)

A reconciliation of Adjusted OIBDA (Non-GAAP) to Operating income (GAAP) for June 30, 2017, actual results can be found on U.S. Cellular's website at investors.uscellular.com.

Conference Call Information

U.S. Cellular will hold a conference call on August 4, 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 6,100 full- and part-time associates as of June 30, 2017. At the end of the second 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

6/30/2017


3/31/2017


12/31/2016



9/30/2016


6/30/2016

Retail Connections
















Postpaid

















Total at end of period


4,478,000



4,455,000



4,482,000



4,484,000



4,490,000



Gross additions


174,000



146,000



187,000



174,000



197,000




Feature phones


7,000



7,000



7,000



10,000



8,000




Smartphones


116,000



88,000



109,000



105,000



107,000




Connected devices


51,000



51,000



71,000



59,000



82,000



Net additions (losses)


23,000



(27,000)



(2,000)



(6,000)



36,000




Feature phones


(15,000)



(19,000)



(21,000)



(20,000)



(21,000)




Smartphones


34,000



(9,000)



(4,000)



(7,000)



8,000




Connected devices


4,000



1,000



23,000



21,000



49,000



ARPU (1)

$

44.60


$

45.42


$

45.19


$

47.08


$

47.37



ABPU (Non-GAAP)(2)

$

55.19


$

55.82


$

55.43


$

56.79


$

56.09



ARPA (3)

$

119.73


$

121.88


$

120.67


$

125.31


$

124.91



ABPA (Non-GAAP)(4)

$

148.15


$

149.78


$

148.02


$

151.16


$

147.90



Churn rate (5)


1.13%



1.29%



1.41%



1.34%



1.20%




Handsets


0.91%



1.08%



1.23%



1.22%



1.10%




Connected devices


2.35%



2.55%



2.49%



2.04%



1.84%


Prepaid

















Total at end of period


484,000



480,000



484,000



480,000



413,000



Gross additions


73,000



78,000



83,000



132,000



73,000



Net additions (losses)


3,000



(4,000)



4,000



67,000



14,000



ARPU (1)

$

33.52


$

33.66


$

33.25


$

34.39


$

34.58



Churn rate (5)


4.93%



5.69%



5.44%



4.84%



4.86%

Total connections at end of period (6)


5,023,000



4,996,000



5,031,000



5,030,000



4,973,000

Market penetration at end of period
















Consolidated operating population


32,089,000



32,089,000



31,994,000



31,994,000



31,994,000


Consolidated operating penetration (7)


16%



16%



16%



16%



16%

Capital expenditures (millions)

$

84


$

61


$

171


$

103


$

93

Total cell sites in service


6,421



6,417



6,415



6,374



6,324

Owned towers


4,044



4,041



4,040



4,015



3,988























(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 June 30,




2017


2016


2017 vs. 2016






Increase (Decrease)

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











Operating revenues












Service(1) 

$

740


$

774


$

(34)


(4)%


Equipment sales


223



218



5


2%



Total operating revenues(1)


963



992



(29)


(3)%














Operating expenses












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


189



193



(4)


(2)%


Cost of equipment sold


260



262



(2)


(1)%


Selling, general and administrative


351



357



(6)


(2)%


Depreciation, amortization and accretion


155



154



1


-


(Gain) loss on asset disposals, net


5



5




6%


(Gain) loss on license sales and exchanges, net


(2)



(9)



7


81%



Total operating expenses


958



962



(4)


(1)%














Operating income(1)


5



30



(25)


(82)%














Investment and other income (expense)












Equity in earnings of unconsolidated entities


33



37



(4)


(9)%


Interest and dividend income(1)


2



2




29%


Interest expense


(28)



(28)




(1)%


Other, net




(1)



1


(56)%



Total investment and other income(1)


7



10



(3)


(32)%














Income before income taxes


12



40



(28)


(70)%


Income tax expense




13



(13)


(97)%

Net income


12



27



(15)


(57)%


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







>100%

Net income attributable to U.S. Cellular shareholders

$

12


$

27


$

(15)


(58)%













Basic weighted average shares outstanding


85



85




-

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

$

0.14


$

0.32


$

(0.18)


(56)%














Diluted weighted average shares outstanding


86



85



1


-

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

$

0.14


$

0.32


$

(0.18)


(56)%
















(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 Operations Highlights

(Unaudited)

















Six Months Ended June 30,




2017


2016


2017 vs. 2016






Increase (Decrease)

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











Operating revenues












Service(1)

$

1,486


$

1,545


$

(59)


(4)%


Equipment sales


413



417



(4)


(1)%



Total operating revenues(1)


1,899



1,962



(63)


(3)%














Operating expenses












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


364



376



(12)


(3)%


Cost of equipment sold


488



518



(30)


(6)%


Selling, general and administrative


691



719



(28)


(4)%


Depreciation, amortization and accretion


307



307




-


(Gain) loss on asset disposals, net


9



10



(1)


(12)%


(Gain) loss on license sales and exchanges, net


(19)



(9)



(10)


>(100)%



Total operating expenses


1,840



1,921



(81)


(4)%














Operating income(1)


59



41



18


45%














Investment and other income (expense)












Equity in earnings of unconsolidated entities


66



72



(6)


(8)%


Interest and dividend income(1)


5



3



2


38%


Interest expense


(56)



(56)




(1)%


Other, net


(1)





(1)


(23)%



Total investment and other income(1)


14



19



(5)


(27)%














Income before income taxes


73



60



13


22%


Income tax expense


33



23



10


43%

Net income


40



37



3


8%


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


2



1



1


>100%

Net income attributable to U.S. Cellular shareholders

$

38


$

36


$

2


5%













Basic weighted average shares outstanding


85



85




-

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

$

0.45


$

0.43


$

0.02


5%














Diluted weighted average shares outstanding


86



85



1


1%

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

$

0.44


$

0.43


$

0.01


2%
















(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)



Six Months Ended


June 30,


2017


2016

(Dollars in millions)






Cash flows from operating activities







Net income

$

40


$

37


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









Depreciation, amortization and accretion


307



307




Bad debts expense


47



44




Stock-based compensation expense


14



12




Deferred income taxes, net


(27)



7




Equity in earnings of unconsolidated entities


(66)



(72)




Distributions from unconsolidated entities


65



30




(Gain) loss on asset disposals, net


9



10




(Gain) loss on license sales and exchanges, net


(19)



(9)




Noncash interest expense


1



1




Other operating activities




(2)


Changes in assets and liabilities from operations









Accounts receivable


(5)



9




Equipment installment plans receivable


(107)



(94)




Inventory


(2)



(27)




Accounts payable


(53)



35




Customer deposits and deferred revenues


(6)



(18)




Accrued taxes


45



41




Accrued interest




(1)




Other assets and liabilities


(23)



(49)





Net cash provided by operating activities


220



261











Cash flows from investing activities







Cash paid for additions to property, plant and equipment


(155)



(177)


Cash paid for licenses


(189)



(46)


Cash received from divestitures and exchanges


17



17


Federal Communications Commission deposit




(143)


Other investing activities




(1)





Net cash used in investing activities


(327)



(350)











Cash flows from financing activities







Repayment of long-term debt


(6)



(6)


Common shares reissued for benefit plans, net of tax payments




3


Common shares repurchased




(2)


Payment of debt issuance costs




(2)


Distributions to noncontrolling interests


(2)



(1)


Other financing activities


1



3





Net cash used in financing activities


(7)



(5)











Net decrease in cash and cash equivalents


(114)



(94)











Cash and cash equivalents







Beginning of period


586



715


End of period

$

472


$

621

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)









ASSETS












June 30,


December 31,




2017


2016

(Dollars in millions)






Current assets







Cash and cash equivalents

$

472


$

586


Accounts receivable from customers and others, net


732



727


Inventory, net


141



138


Prepaid expenses


80



84


Other current assets


15



23



Total current assets


1,440



1,558









Assets held for sale


4



8









Licenses


2,226



1,886

Goodwill


370



370

Investments in unconsolidated entities


414



413









Property, plant and equipment







In service and under construction


7,702



7,712


Less: Accumulated depreciation and amortization


5,398



5,242



Property, plant and equipment, net


2,304



2,470









Other assets and deferred charges


319



405









Total assets

$

7,077


$

7,110


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)









LIABILITIES AND EQUITY












June 30,


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


8



12



Trade


250



309


Customer deposits and deferred revenues


183



190


Accrued taxes


79



39


Accrued compensation


46



73


Other current liabilities


74



84



Total current liabilities


651



718









Deferred liabilities and credits







Deferred income tax liability, net


799



826


Other deferred liabilities and credits


316



302









Long-term debt, net


1,613



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


1,536



1,522


Treasury shares


(121)



(136)


Retained earnings


2,183



2,160



Total U.S. Cellular shareholders' equity


3,686



3,634









Noncontrolling interests


11



11










Total equity


3,697



3,645









Total liabilities and equity

$

7,077


$

7,110


 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)
















Free Cash Flow





Three Months Ended


Six Months Ended





June 30,


June 30,




2017



2016



2017



2016

(Dollars in millions)












Cash flows from operating activities (GAAP)


$

159


$

98


$

220


$

261

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



67



75



155



177



Free cash flow (Non-GAAP) (1)


$

92


$

23


$

65


$

84
















(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 liquidity, specifically, the amount of net cash generated by business operations after deducting 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


6/30/2017



3/31/2017



12/31/2016



9/30/2016



6/30/2016

(Dollars and connection counts in millions)















Calculation of Postpaid ARPU















Postpaid service revenues

$

597


$

608


$

607


$

635


$

636

Average number of postpaid connections


4.47



4.46



4.48



4.49



4.48

Number of months in period


3



3



3



3



3


Postpaid ARPU (GAAP metric)

$

44.60


$

45.42


$

45.19


$

47.08


$

47.37


















Calculation of Postpaid ABPU















Postpaid service revenues

$

597


$

608


$

607


$

635


$

636

Equipment installment plan billings


142



139



138



131



118


Total billings to postpaid connections

$

739


$

747


$

745


$

766


$

754

Average number of postpaid connections


4.47



4.46



4.48



4.49



4.48

Number of months in period


3



3



3



3



3


Postpaid ABPU (Non-GAAP metric)

$

55.19


$

55.82


$

55.43


$

56.79


$

56.09


















Calculation of Postpaid ARPA















Postpaid service revenues

$

597


$

608


$

607


$

635


$

636

Average number of postpaid accounts


1.66



1.66



1.68



1.69



1.70

Number of months in period


3



3



3



3



3


Postpaid ARPA (GAAP metric)

$

119.73


$

121.88


$

120.67


$

125.31


$

124.91


















Calculation of Postpaid ABPA















Postpaid service revenues

$

597


$

608


$

607


$

635


$

636

Equipment installment plan billings


142



139



138



131



118


Total billings to postpaid accounts

$

739


$

747


$

745


$

766


$

754

Average number of postpaid accounts


1.66



1.66



1.68



1.69



1.70

Number of months in period


3



3



3



3



3


Postpaid ABPA (Non-GAAP metric)

$

148.15


$

149.78


$

148.02


$

151.16


$

147.90

 

View original content:http://www.prnewswire.com/news-releases/us-cellular-reports-second-quarter-2017-results-300499748.html

SOURCE United States Cellular Corporation

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