: 37.81  +0.20
news

Press Release Details

U.S. Cellular reports second quarter 2019 results

08/01/2019
5G and network modernization initiatives progressing

CHICAGO, Aug. 1, 2019 /PRNewswire/ -- 

As previously announced, U.S. Cellular will hold a teleconference August 2, 2019, at 9:00 a.m. CDT.  Listen to the call live via the Events & Presentations page of investors.uscellular.com.

United States Cellular Corporation (NYSE:USM) reported total operating revenues of $973 million for the second quarter of 2019, versus $974 million for the same period one year ago.  Net income attributable to U.S. Cellular shareholders and related diluted earnings per share declined to $31 million and $0.35, respectively, for the second quarter of 2019 compared to $49 million and $0.56, respectively, in the same period one year ago.

"Our number one focus is to strengthen our customer base," said Kenneth R. Meyers, U.S. Cellular president and CEO.  "In the quarter, we delivered on our customer satisfaction strategy and postpaid handset churn remained low. However, phone sales came in below expectations as customers continue to hold their phones longer and gross additions declined.  We have aggressive plans and strategies in place to attract new customers in the second half of the year.  Service revenues continue to meet our expectation and show the positive impact of higher ARPU which helped to increase Adjusted EBITDA 3.4 percent to $257 million.

"We continue to believe excellent customer service coupled with an outstanding network is what differentiates us from our competitors. U.S. Cellular was once again recognized for highest wireless network quality in the North Central Region by the J. D. Power 2019 U.S. Wireless Network Quality Performance Study - Vol. 2.  Our deployment of Voice over LTE continues with plans to deploy VoLTE in our New England and Mid-Atlantic markets in the third quarter. I am also very excited about the progress on our 5G and network modernization initiatives. We are making significant investments to bring LTE advanced capabilities to our customers that will improve coverage and capacity and support future 5G deployments. In addition, we acquired new licenses during the FCC's recent millimeter wave auctions, giving us access to high frequency spectrum required to deliver high speed and low latency capabilities of 5G to our current and future customers. Together, the millimeter wave spectrum we acquired provides at least 300 MHz of spectrum in markets that serve 97% of our customer base. We expect to begin commercial launch of 5G services in 2020."

2019 Estimated Results

U.S. Cellular's current estimates of full-year 2019 results are shown below.  Such estimates represent management's view as of August 1, 2019 and should not be assumed to be current as of any future date.  U.S. Cellular undertakes no duty to update such estimates, whether as a result of new information, future events or otherwise.  There can be no assurance that final results will not differ materially from estimated results.


2019 Estimated Results


Previous

Current

(Dollars in millions)



Total operating revenues

$4,000-$4,200

$3,900-$4,100*

Adjusted OIBDA (1)

$725-$875

Unchanged

Adjusted EBITDA (1)

$900-$1,050

Unchanged

Capital expenditures

$625-$725

Unchanged


*   Change represents lower equipment sales revenues.

The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2019 estimated results, actual results for the six months ended June 30, 2019, and actual results for the year ended December 31, 2018.  In providing 2019 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


2019 Estimated
Results


Six Months Ended
June 30, 2019


Year Ended
December 31, 2018

(Dollars in millions)






Net income (GAAP)

N/A



$

90



$

164


Add back or deduct:






Income tax expense

N/A



41



51


Income before income taxes (GAAP)

$70-$220



$

131



$

215


Add back:






Interest expense

115



58



116


Depreciation, amortization and accretion expense

700



345



640


EBITDA (Non-GAAP) (1)

$885-$1,035



$

534



$

971


Add back or deduct:






(Gain) loss on asset disposals, net

15



7



10


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



(2)




(Gain) loss on license sales and exchanges, net



(2)



(18)


Adjusted EBITDA (Non-GAAP) (1)

$900-$1,050



$

537



$

963


Deduct:






Equity in earnings of unconsolidated entities

155



84



159


Interest and dividend income

20



11



15


Other, net



(1)



(1)


Adjusted OIBDA (Non-GAAP) (1)

$725-$875



$

443



$

790




(1)

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 before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for June 30, 2019, 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 2, 2019 at 9:00 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 5.0 million connections in 21 states. The Chicago-based company had 5,600 full- and part-time associates as of June 30, 2019. At the end of the second quarter of 2019, Telephone and Data Systems, Inc. owned 82 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

6/30/2019


3/31/2019


12/31/2018


9/30/2018


6/30/2018

Retail Connections










Postpaid










Total at end of period

4,414,000



4,440,000



4,472,000



4,466,000



4,468,000


Gross additions

137,000



137,000



179,000



172,000



146,000


Feature phones

5,000



4,000



4,000



3,000



5,000


Smartphones

97,000



98,000



132,000



130,000



106,000


Connected devices

35,000



35,000



43,000



39,000



35,000


Net additions (losses)

(26,000)



(32,000)



6,000



(1,000)



(13,000)


Feature phones

(10,000)



(13,000)



(11,000)



(14,000)



(12,000)


Smartphones

(1,000)



(1,000)



31,000



29,000



17,000


Connected devices

(15,000)



(18,000)



(14,000)



(16,000)



(18,000)


ARPU (1)

$

45.90



$

45.44



$

45.58



$

45.31



$

44.74


ARPA (2)

$

119.46



$

118.84



$

119.60



$

119.42



$

118.57


Churn rate (3)

1.23

%


1.26

%


1.29

%


1.29

%


1.19

%

Handsets

0.97

%


0.99

%


1.00

%


1.02

%


0.92

%

Connected devices

3.01

%


3.08

%


3.20

%


3.04

%


2.85

%

Prepaid










Total at end of period

500,000



503,000



516,000



528,000



527,000


Gross additions

61,000



61,000



66,000



80,000



78,000


Net additions (losses)

(2,000)



(13,000)



(12,000)



1,000



2,000


ARPU (1)

$

34.43



$

33.44



$

32.80



$

32.09



$

32.32


Churn rate (3)

4.20

%


4.92

%


4.98

%


4.98

%


4.83

%

Total connections at end of period (4)

4,967,000



4,995,000



5,041,000



5,050,000



5,051,000


Market penetration at end of period










Consolidated operating population

31,310,000



31,310,000



31,469,000



31,469,000



31,469,000


Consolidated operating penetration (5)

16

%


16

%


16

%


16

%


16

%

Capital expenditures (millions)

$

195



$

102



$

242



$

118



$

86


Total cell sites in service

6,535



6,506



6,531



6,506



6,478


Owned towers

4,116



4,106



4,129



4,119



4,105




(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 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.



(3)

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.



(4)

Includes reseller and other connections.



(5)

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,


Six Months Ended
June 30,


2019


2018


2019 vs. 2018


2019


2018


2019 vs. 2018

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












Operating revenues












Service

$

757



$

741



2

%


$

1,498



$

1,465



2

%

Equipment sales

216



233



(7)

%


441



450



(2)

%

Total operating revenues

973



974




1,939



1,915



1

%













Operating expenses












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

193



187



3

%


369



365



1

%

Cost of equipment sold

224



240



(6)

%


458



459



Selling, general and administrative

344



342



1

%


669



668



Depreciation, amortization and accretion

177



159



11

%


345



317



8

%

(Gain) loss on asset disposals, net

5



1



N/M



7



2



N/M


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





N/M



(2)





N/M


(Gain) loss on license sales and exchanges, net



(11)



N/M



(2)



(17)



88

%

Total operating expenses

943



918



3

%


1,844



1,794



3

%













Operating income

30



56



(45)

%


95



121



(21)

%













Investment and other income (expense)












Equity in earnings of unconsolidated entities

40



40



1

%


84



78



8

%

Interest and dividend income

5



3



63

%


11



7



60

%

Interest expense

(29)



(29)



1

%


(58)



(58)



Other, net





N/M



(1)



(1)



N/M


Total investment and other income

16



14



10

%


36



26



36

%













Income before income taxes

46



70



(34)

%


131



147



(11)

%

Income tax expense

14



18



(24)

%


41



40



Net income

32



52



(38)

%


90



107



(15)

%

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

1



3



(76)

%


4



14



(66)

%

Net income attributable to U.S. Cellular shareholders

$

31



$

49



(35)

%


$

86



$

93



(8)

%













Basic weighted average shares outstanding

87



86



1

%


87



85



1

%

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

$

0.36



$

0.57



(36)

%


$

0.99



$

1.09



(9)

%













Diluted weighted average shares outstanding

88



86



2

%


88



86



2

%

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

$

0.35



$

0.56



(37)

%


$

0.97



$

1.08



(10)

%


N/M - Percentage change not meaningful


 

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)


Six Months Ended
June 30,


2019


2018

(Dollars in millions)




Cash flows from operating activities




Net income

$

90



$

107


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




Depreciation, amortization and accretion

345



317


Bad debts expense

48



40


Stock-based compensation expense

25



17


Deferred income taxes, net

27



9


Equity in earnings of unconsolidated entities

(84)



(78)


Distributions from unconsolidated entities

76



70


(Gain) loss on asset disposals, net

7



2


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

(2)




(Gain) loss on license sales and exchanges, net

(2)



(17)


Other operating activities

2



2


Changes in assets and liabilities from operations




Accounts receivable

3



43


Equipment installment plans receivable

(11)



(47)


Inventory

(4)



(3)


Accounts payable

(7)



(35)


Customer deposits and deferred revenues

8



(23)


Accrued taxes

3



6


Other assets and liabilities

(48)



(45)


Net cash provided by operating activities

476



365






Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(282)



(173)


Cash paid for licenses

(255)



(2)


Cash received from investments

11



50


Cash paid for investments

(11)




Cash received from divestitures and exchanges

32



21


Other investing activities

(1)



3


Net cash used in investing activities

(506)



(101)






Cash flows from financing activities




Repayment of long-term debt

(10)



(10)


Common Shares reissued for benefit plans, net of tax payments

(8)




Distributions to noncontrolling interests

(2)



(4)


Other financing activities

(1)



(5)


Net cash used in financing activities

(21)



(19)






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

(51)



245






Cash, cash equivalents and restricted cash




Beginning of period

583



352


End of period

$

532



$

597


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS



June 30, 2019 (1)


December 31, 2018

(Dollars in millions)




Current assets




Cash and cash equivalents

$

528



$

580


Short-term investments

18



17


Accounts receivable

959



976


Inventory, net

146



142


Prepaid expenses

48



63


Other current assets

36



34


Total current assets

1,735



1,812






Assets held for sale



54






Licenses

2,469



2,186






Investments in unconsolidated entities

450



441






Property, plant and equipment, net

2,154



2,202






Operating lease right-of-use assets

888








Other assets and deferred charges

527



579






Total assets

$

8,223



$

7,274


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY



June 30, 2019 (1)


December 31, 2018

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$

19



$

19


Accounts payable

321



313


Customer deposits and deferred revenues

164



157


Accrued taxes

32



30


Accrued compensation

45



78


Short-term operating lease liabilities

101




Other current liabilities

65



94


Total current liabilities

747



691






Liabilities held for sale



1






Deferred liabilities and credits




Deferred income tax liability, net

538



510


Long-term operating lease liabilities

858




Other deferred liabilities and credits

299



389






Long-term debt, net

1,596



1,605






Noncontrolling interests with redemption features

10



11






Equity




U.S. Cellular shareholders' equity




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

88



88


Additional paid-in capital

1,615



1,590


Treasury shares

(50)



(65)


Retained earnings

2,509



2,444


Total U.S. Cellular shareholders' equity

4,162



4,057






Noncontrolling interests

13



10






Total equity

4,175



4,067






Total liabilities and equity

$

8,223



$

7,274




(1)

As of January 1, 2019, U.S. Cellular adopted the new lease accounting standard, ASC 842. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2019 amounts include the impacts of ASC 842, but 2018 amounts remain as previously reported.

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow



Three Months Ended
June 30,


Six Months Ended
June 30,


2019


2018


2019


2018

(Dollars in millions)








Cash flows from operating activities (GAAP)

$

189



$

178



$

476



$

365


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

175



98



282



173


Free cash flow (Non-GAAP) (1)

$

14



$

80



$

194



$

192




(1)

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.

EBITDA, Adjusted EBITDA and Adjusted OIBDA

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net Income and Operating income.


Three Months Ended
June 30,


2019


2018

(Dollars in millions)




Net income (GAAP)

$

32



$

52


Add back:




Income tax expense

14



18


Interest expense

29



29


Depreciation, amortization and accretion

177



159


EBITDA (Non-GAAP)

252



258


Add back or deduct:




(Gain) loss on asset disposals, net

5



1


(Gain) loss on license sales and exchanges, net



(11)


Adjusted EBITDA (Non-GAAP)

257



248


Deduct:




Equity in earnings of unconsolidated entities

40



40


Interest and dividend income

5



3


Adjusted OIBDA (Non-GAAP)

212



205


Deduct:




Depreciation, amortization and accretion

177



159


(Gain) loss on asset disposals, net

5



1


(Gain) loss on license sales and exchanges, net



(11)


Operating income (GAAP)

$

30



$

56


 

Cision View original content:http://www.prnewswire.com/news-releases/us-cellular-reports-second-quarter-2019-results-300895289.html

SOURCE United States Cellular Corporation