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Press Release Details

U.S. Cellular reports second quarter 2018 results

08/03/2018
U.S. Cellular raises guidance

CHICAGO, Aug. 3, 2018 /PRNewswire/ --

As previously announced, U.S. Cellular will hold a teleconference August 3, 2018, 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 $974 million for the second quarter of 2018, versus $963 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $49 million and $0.56, respectively, for the second quarter of 2018, compared to $12 million and $0.14, respectively, in the same period one year ago. 

"I'm very pleased with the progress we made this quarter and in the first half of the year," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We generated improved financial results by delivering on our customer satisfaction strategy.  Our efforts produced both revenue growth and improvements in our cost structure.  Combined these factors drove a 25% increase in Adjusted EBITDA in the quarter.  Also these results provided the confidence to raise our 2018 guidance. 

"It's been a year since we launched our Total Plans, and they continue to be effective in attracting new customers and meeting the needs of our current customers. Both postpaid handset net additions and gross additions increased sequentially, and postpaid handset churn remained exceptionally low. Another driver of customer satisfaction is our high-quality network, which continues to perform well even as data usage increases significantly. Additionally, our network team completed commercial rollouts of VoLTE in our California, Oregon and Washington markets."

2018 Estimated Results
U.S. Cellular's current estimates of full-year 2018 results are shown below.  Such estimates represent management's view as of August 3, 2018.  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.



2018 Estimated Results



Current (1)


Previous

(Dollars in millions)




Total operating revenues

$3,925-$4,025


$3,850-$4,050

Adjusted OIBDA (2)(3)

$700-$800


$625-$775

Adjusted EBITDA (2)

$850-$950


$765-$915

Capital expenditures

$500-$550


Unchanged

The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2018 estimated results, actual results for the six months ended June 30, 2018, and actual results for the year ended December 31, 2017.  In providing 2018 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






2018 Estimated
Results (1)



Six Months Ended
June 30, 2018 (1)



Year Ended

December 31,
2017

(Dollars in millions)










Net income (GAAP)



N/A


$

107


$

15

Add back or deduct:











Income tax expense (benefit)



N/A



40



(287)

Income (loss) before income taxes (GAAP)


$

110-210


$

147


$

(272)

Add back:











Interest expense



110



58



113


Depreciation, amortization and accretion expense



640



317



615

EBITDA (Non-GAAP) (2)


$

860-960


$

522


$

456

Add back or deduct:











Loss on impairment of goodwill







370


(Gain) loss on asset disposals, net



10



2



17


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







(1)


(Gain) loss on license sales and exchanges, net



(20)



(17)



(22)

Adjusted EBITDA (Non-GAAP) (2)


$

850-950


$

507


$

820

Deduct:











Equity in earnings of unconsolidated entities



135



78



137


Interest and dividend income



15



7



8


Other, net





(1)



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


$

700-800


$

423


$

675













Note: Totals may not foot due to rounding differences.


(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach.  Under this method, the new accounting standard is applied only to the most recent period presented.  As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.



(2)

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above.  EBITDA, 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 EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income (loss) before income taxes.


(3)

Additional information and reconciliations related to Non-GAAP financial measures for June 30, 2018, 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 3, 2018 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 5.1 million connections in 22 states. The Chicago-based company had 5,700 full- and part-time associates as of June 30, 2018. At the end of the second quarter of 2018, 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

6/30/2018(1)


3/31/2018(1)


12/31/2017



9/30/2017


6/30/2017

Retail Connections
















Postpaid

















Total at end of period


4,468,000



4,481,000



4,518,000



4,513,000



4,478,000



Gross additions


146,000



129,000



177,000



191,000



174,000




Feature phones


5,000



5,000



5,000



7,000



7,000




Smartphones


106,000



91,000



128,000



132,000



116,000




Connected devices


35,000



33,000



44,000



52,000



51,000



Net additions (losses)


(13,000)



(37,000)



5,000



35,000



23,000




Feature phones


(12,000)



(15,000)



(15,000)



(15,000)



(15,000)




Smartphones


17,000



(1,000)



33,000



44,000



34,000




Connected devices


(18,000)



(21,000)



(13,000)



6,000



4,000



ARPU (2)

$

44.74


$

44.34


$

44.12


$

43.41


$

44.60



ABPU (Non-GAAP)(3)

$

57.75


$

57.10


$

56.69


$

54.71


$

55.19



ARPA (4)

$

118.57


$

118.22


$

118.05


$

116.36


$

119.73



ABPA (Non-GAAP)(5)

$

153.03


$

152.26


$

151.68


$

146.65


$

148.15



Churn rate (6)


1.19%



1.23%



1.27%



1.16%



1.13%




Handsets


0.92%



0.97%



1.00%



0.96%



0.91%




Connected devices


2.85%



2.79%



2.84%



2.33%



2.35%


Prepaid

















Total at end of period


527,000



525,000



519,000



515,000



484,000



Gross additions


78,000



88,000



83,000



102,000



73,000



Net additions


2,000



6,000



4,000



31,000



3,000



ARPU (2)

$

32.32


$

31.78


$

32.42


$

33.12


$

33.52



Churn rate (6)


4.83%



5.27%



5.09%



4.75%



4.93%

Total connections at end of period (7)


5,051,000



5,063,000



5,096,000



5,089,000



5,023,000

Market penetration at end of period
















Consolidated operating population


31,469,000



31,469,000



31,834,000



31,834,000



32,089,000


Consolidated operating penetration (8)


16%



16%



16%



16%



16%

Capital expenditures (millions)

$

86


$

70


$

213


$

112


$

84

Total cell sites in service


6,478



6,473



6,460



6,436



6,421

Owned towers


4,105



4,099



4,080



4,051



4,044


(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach.  Under this method, the new accounting standard is applied only to the most recent period presented.  As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.



(2)

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.



(3)

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.



(4)

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.



(5)

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.



(6)

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.



(7)

Includes reseller and other connections.



(8)

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


Six Months Ended




June 30,


June 30,



2018 (1)



2017


2018 vs.
2017



2018 (1)



2017


2018 vs.
2017

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
















Operating revenues

















Service

$

741


$

740


-


$

1,465


$

1,486


(1)%


Equipment sales


233



223


5%



450



413


9%



Total operating revenues


974



963


1%



1,915



1,899


1%



















Operating expenses

















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


187



189


(1)%



365



364


-


Cost of equipment sold


240



260


(8)%



459



488


(6)%


Selling, general and administrative


342



351


(2)%



668



691


(3)%


Depreciation, amortization and accretion


159



155


3%



317



307


3%


(Gain) loss on asset disposals, net


1



5


(84)%



2



9


(75)%


(Gain) loss on license sales and exchanges, net


(11)



(2)


>(100)%



(17)



(19)


8%



Total operating expenses


918



958


(4)%



1,794



1,840


(2)%



















Operating income


56



5


>100%



121



59


>100%



















Investment and other income (expense)

















Equity in earnings of unconsolidated entities


40



33


20%



78



66


18%


Interest and dividend income


3



2


63%



7



5


45%


Interest expense


(29)



(28)


(2)%



(58)



(56)


(3)%


Other, net





>100%



(1)



(1)


14%



Total investment and other income


14



7


>100%



26



14


85%



















Income before income taxes


70



12


>100%



147



73


>100%


Income tax expense


18




>100%



40



33


21%

Net income


52



12


>100%



107



40


>100%


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


3




>100%



14



2


>100%

Net income attributable to U.S. Cellular shareholders

$

49


$

12


>100%


$

93


$

38


>100%


















Basic weighted average shares outstanding


86



85


1%



85



85


-

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

$

0.57


$

0.14


>100%


$

1.09


$

0.45


>100%



















Diluted weighted average shares outstanding


86



86


1%



86



86


1%

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

$

0.56


$

0.14


>100%


$

1.08


$

0.44


>100%


(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.


 

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)












Six Months Ended June 30,

2018 (1)


2017

(Dollars in millions)






Cash flows from operating activities







Net income

$

107


$

40


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









Depreciation, amortization and accretion


317



307




Bad debts expense


40



47




Stock-based compensation expense


17



14




Deferred income taxes, net


9



(27)




Equity in earnings of unconsolidated entities


(78)



(66)




Distributions from unconsolidated entities


70



65




(Gain) loss on asset disposals, net


2



9




(Gain) loss on license sales and exchanges, net


(17)



(19)




Noncash interest


2



1


Changes in assets and liabilities from operations









Accounts receivable


43



(5)




Equipment installment plans receivable


(47)



(107)




Inventory


(3)



(2)




Accounts payable


(35)



(53)




Customer deposits and deferred revenues


(23)



(6)




Accrued taxes


6



45




Other assets and liabilities


(45)



(23)





Net cash provided by operating activities


365



220











Cash flows from investing activities







Cash paid for additions to property, plant and equipment


(173)



(155)


Cash paid for licenses


(2)



(189)


Cash received for investments


50




Cash received from divestitures and exchanges


21



17


Other investing activities


3







Net cash used in investing activities


(101)



(327)











Cash flows from financing activities







Repayment of long-term debt


(10)



(6)


Payment of debt issuance costs


(1)




Distributions to noncontrolling interests


(4)



(2)


Other financing activities


(4)



1





Net cash used in financing activities


(19)



(7)











Net increase (decrease) in cash, cash equivalents and restricted cash


245



(114)











Cash, cash equivalents and restricted cash







Beginning of period


352



586


End of period

$

597


$

472


(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)









ASSETS












June 30,


December 31,




2018 (1)


2017

(Dollars in millions)






Current assets







Cash and cash equivalents

$

596


$

352


Short-term investments




50


Accounts receivable


875



843


Inventory, net


141



138


Prepaid expenses


63



79


Other current assets


34



21



Total current assets


1,709



1,483









Assets held for sale


1



10









Licenses


2,231



2,223









Investments in unconsolidated entities


439



415









Property, plant and equipment, net


2,159



2,320









Other assets and deferred charges


536



390









Total assets

$

7,075


$

6,841

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)









LIABILITIES AND EQUITY












June 30,


December 31,




2018 (1)


2017

(Dollars in millions, except per share amounts)






Current liabilities







Current portion of long-term debt

$

18


$

18


Accounts payable


257



310


Customer deposits and deferred revenues


127



185


Accrued taxes


58



56


Accrued compensation


48



74


Other current liabilities


82



90



Total current liabilities


590



733









Deferred liabilities and credits







Deferred income tax liability, net


522



461


Other deferred liabilities and credits


367



337









Long-term debt, net


1,614



1,622









Noncontrolling interests with redemption features


11



1









Equity






U.S. Cellular shareholders' equity







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


88



88


Additional paid-in capital


1,569



1,552


Treasury shares


(99)



(120)


Retained earnings


2,402



2,157



Total U.S. Cellular shareholders' equity


3,960



3,677









Noncontrolling interests


11



10










Total equity


3,971



3,687









Total liabilities and equity

$

7,075


$

6,841


(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach.  Under this method, the new accounting standard is applied only to the most recent period presented.  As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.


 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)











Free Cash Flow


Three Months Ended


Six Months Ended


June 30,


June 30,



2018


2017



2018


2017

(Dollars in millions)





Cash flows from operating activities (GAAP)

$

178

$

159


$

365

$

220

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


98


67



173


155


Free cash flow (Non-GAAP) (1)

$

80

$

92


$

192

$

65


(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 herein, 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


6/30/2018(1)



3/31/2018(1)



12/31/2017



9/30/2017



6/30/2017

(Dollars and connection counts in millions)















Calculation of Postpaid ARPU















Postpaid service revenues

$

600


$

598


$

598


$

586


$

597

Average number of postpaid connections


4.47



4.50



4.52



4.50



4.47

Number of months in period


3



3



3



3



3


Postpaid ARPU (GAAP metric)

$

44.74


$

44.34


$

44.12


$

43.41


$

44.60
















Calculation of Postpaid ABPU















Postpaid service revenues

$

600


$

598


$

598


$

586


$

597

Equipment installment plan billings


174



172



170



152



142


Total billings to postpaid connections

$

774


$

770


$

768


$

738


$

739

Average number of postpaid connections


4.47



4.50



4.52



4.50



4.47

Number of months in period


3



3



3



3



3


Postpaid ABPU (Non-GAAP metric)

$

57.75


$

57.10


$

56.69


$

54.71


$

55.19
















Calculation of Postpaid ARPA















Postpaid service revenues

$

600


$

598


$

598


$

586


$

597

Average number of postpaid accounts


1.69



1.69



1.69



1.68



1.66

Number of months in period


3



3



3



3



3

Postpaid ARPA (GAAP metric)

$

118.57


$

118.22


$

118.05


$

116.36


$

119.73
















Calculation of Postpaid ABPA















Postpaid service revenues

$

600


$

598


$

598


$

586


$

597

Equipment installment plan billings


174



172



170



152



142


Total billings to postpaid accounts

$

774


$

770


$

768


$

738


$

739

Average number of postpaid accounts


1.69



1.69



1.69



1.68



1.66

Number of months in period


3



3



3



3



3


Postpaid ABPA (Non-GAAP metric)

$

153.03


$

152.26


$

151.68


$

146.65


$

148.15


(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.

 

Cision View original content:http://www.prnewswire.com/news-releases/us-cellular-reports-second-quarter-2018-results-300691718.html

SOURCE United States Cellular Corporation