Revises 2010 financial guidance
CHICAGO, Aug 05, 2010 /PRNewswire via COMTEX/ --
Note: Comparisons are year over year unless otherwise noted.
2Q 2010 Highlights
- 7,000 retail net additions, reflecting a gain of 29,000 prepaid customers and a loss of 22,000 postpaid customers.
- Service revenues were $972.6 million.
- 33 percent increase in data revenues to $215.3 million, representing 22 percent of total service revenues.
- Retail service ARPU (average revenue per unit) was $46.81 compared to $46.82.
- Retail postpaid churn remained low at 1.4 percent; postpaid customers comprised 94 percent of retail customers.
- Expanded 3G network to cover approximately 98 percent of customers.
- 5 percent increase in cell sites in service to 7,416.
- Repurchased 395,344 common shares for $16.2 million.
-
As previously announced, U.S. Cellular will hold a teleconference Aug. 5 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com or uscellular.com.
United States Cellular Corporation (NYSE: USM) reported service revenues of $972.6 million for the second quarter of 2010, versus $974.3 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $40.8 million and $0.47, respectively, for the second quarter of 2010, compared to $81.8 million and $0.94, respectively, in the comparable period one year ago.
"We faced significant challenges from competition and the economy in the second quarter of 2010," said U.S. Cellular president and CEO Mary N. Dillon, who joined the company June 1. "Consequently, our performance results were mixed. We achieved improvements in retail net additions and customer churn, and data revenues grew by 33 percent. However, total service revenues and operating income were below our expectations. We continue to feel the impact of lower voice revenues, reflecting industry competition as more customers choose value-priced plans, and investments in the major initiatives currently underway that will enable us to build a strong foundation for future growth. As part of these initiatives, we recently implemented new programs that enable associates in our retail stores and customer care centers to better meet our customers' needs by offering more targeted service and product recommendations.
"Going forward, we plan to continue to drive data revenue growth with a strong smartphone portfolio that includes the Android(TM)-powered phones our customers are asking for. We launched the Samsung Acclaim(TM) in early July, and we plan to offer the much-anticipated HTC Desire(TM) in August and the Samsung Galaxy S(TM) later this year. Now that we offer data services to the vast majority of customers across our fast and reliable 3G network, we expect sales of data-optimized devices--which were 24 percent of all devices sold in the quarter--to continue to grow rapidly. And we're excited about giving our customers even more innovative programs like Battery Swap and Overage Protection that show we have our customers' backs.
"I'm honored to be leading a company that is so thoroughly unified around its commitment to ensuring positive experiences for its customers. Although we face a number of challenges, we have a culture of success--the Dynamic Organization--that will enable us to overcome these challenges by leveraging our strengths. U.S. Cellular's customers believe that we offer something better than our competitors, and we intend to prove that they can rely on us for service and communications experiences that are above and beyond what customers have come to expect from a wireless provider."
Guidance
Guidance for the year ending Dec. 31, 2010 as of Aug. 5, 2010 is provided below, compared to previous guidance provided on May 10, 2010. There can be no assurance that final results will not differ materially from this guidance.
Current guidance Previous guidance
---------------- -----------------
Service revenues $3,925-$4,000 million $3,975-$4,075 million
Adjusted OIBDA(1) $800-$850 million $850-$950 million
Operating income $200-$250 million $250- $350 million
Depreciation,
amortization and
accretion(2) Approx. $600 million Unchanged
Capital expenditures Approx. $600 million Unchanged
(1) Adjusted OIBDA is defined as operating income excluding the
effects of: depreciation, amortization and accretion (OIBDA); the
net gain or loss on asset disposals (if any); and the loss on
impairment of assets (if any). This measure also may be commonly
referred to by management as operating cash flow. This measure
should not be confused with cash flows from operating activities,
which is a component of the consolidated statement of cash flows.
(2) The 2010 estimated results include estimated losses on disposals
of assets, but does not include an estimate for losses on impairment
of assets, since these cannot be predicted.
The foregoing guidance represents the views of management as of Aug. 5, 2010 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events or otherwise.
Conference call information
U.S. Cellular will hold a conference call on Aug. 5, 2010 at 9:30 a.m. CDT.
Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of
uscellular.com
. The call will be archived on the Conference Calls page of
uscellular.com
.
About U.S. Cellular
United States Cellular Corporation, the nation's sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to approximately 6.1 million customers in 26 states. The Chicago-based company employed approximately 8,900 full-time equivalent associates as of June 30, 2010. At the end of the quarter, Telephone and Data Systems, Inc. owned 82 percent of U.S. Cellular.
Visit uscellular.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
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: The ability of the company to successfully manage and grow its markets; the economy; competition; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company; and the ability to obtain or maintain roaming arrangements with other carriers. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.
United States Cellular Corporation
Summary Operating Data
Quarter Ended 6/30/2010 3/31/2010 12/31/2009
--------- --------- ----------
Total population
Consolidated markets (1) 90,468,000 90,468,000 89,712,000
Consolidated operating markets
(1) 46,546,000 46,546,000 46,306,000
Market penetration at end of
period
Consolidated markets (2) 6.8% 6.8% 6.8%
Consolidated operating markets
(2) 13.2% 13.2% 13.3%
All customers
Total at end of period 6,144,000 6,147,000 6,141,000
Gross additions 349,000 358,000 399,000
Net additions (losses) (3,000) 6,000 10,000
Retail customers
Total at end of period 5,775,000 5,768,000 5,744,000
Gross additions 307,000 305,000 354,000
Net retail additions (losses)
(3) 7,000 24,000 39,000
Net postpaid additions (losses) (22,000) (9,000) 26,000
Net prepaid additions (losses) 29,000 33,000 13,000
Service revenues components
(000s)
Voice and other retail service $648,565 $663,759 $677,107
Data service 215,271 201,280 189,759
------- ------- -------
Total retail service $863,836 $865,039 $866,866
Inbound roaming 60,902 51,942 61,728
Other 47,838 48,027 56,814
------ ------ ------
Total service revenues (000s)
(4) $972,576 $965,008 $985,408
Divided by average customers
(000s) 6,151 6,137 6,139
Divided by three months in each
quarter 3 3 3
--- --- ---
Average monthly revenue per
unit (5) $52.71 $52.41 $53.51
Voice and other retail service
(5) $35.14 $36.05 $36.77
Data service (5) $11.67 $10.93 $10.30
------ ------ ------
Total retail service (5) $46.81 $46.98 $47.07
Inbound roaming (5) $3.30 $2.82 $3.35
Other (5) $2.60 $2.61 $3.09
Postpaid churn rate (6) 1.4% 1.4% 1.6%
Capital expenditures (000s) $133,500 $121,500 $189,000
Cell sites in service 7,416 7,310 7,279
Quarter Ended 9/30/2009 6/30/2009
--------- ---------
Total population
Consolidated markets (1) 85,118,000 83,726,000
Consolidated operating markets
(1) 46,306,000 46,306,000
Market penetration at end of
period
Consolidated markets (2) 7.2% 7.4%
Consolidated operating markets
(2) 13.2% 13.3%
All customers
Total at end of period 6,131,000 6,155,000
Gross additions 386,000 317,000
Net additions (losses) (24,000) (88,000)
Retail customers
Total at end of period 5,705,000 5,711,000
Gross additions 351,000 286,000
Net retail additions (losses)
(3) (6,000) (59,000)
Net postpaid additions (losses) 8,000 (32,000)
Net prepaid additions (losses) (14,000) (27,000)
Service revenues components
(000s)
Voice and other retail service $690,576 $708,847
Data service 174,286 161,955
------- -------
Total retail service $864,862 $870,802
Inbound roaming 68,767 62,223
Other 50,289 41,323
------ ------
Total service revenues (000s)
(4) $983,918 $974,348
Divided by average customers
(000s) 6,138 6,199
Divided by three months in each
quarter 3 3
--- ---
Average monthly revenue per
unit (5) $53.43 $52.39
Voice and other retail service
(5) $37.51 $38.11
Data service (5) $9.46 $8.71
----- -----
Total retail service (5) $46.97 $46.82
Inbound roaming (5) $3.73 $3.35
Other (5) $2.73 $2.22
Postpaid churn rate (6) 1.7% 1.7%
Capital expenditures (000s) $128,900 $91,200
Cell sites in service 7,161 7,043
(1) Used only to calculate market penetration of consolidated markets
and consolidated operating markets, respectively, which is
calculated by dividing customers by the total market population
(without duplication of population in overlapping markets).
(2) Calculated by dividing the number of wireless customers at the
end of the period by the total population of consolidated markets
and consolidated operating markets, respectively, as estimated by
Claritas.
(3) Calculated by adding net postpaid additions (losses) and net
prepaid additions (losses).
(4) U.S. Cellular adjusted previously reported service revenues for
the three months ended March 31, 2010 and all quarterly periods in
2009. Previously reported service revenues for the quarterly period
ended March 31, 2010 and for the quarterly periods ended December
31, September 30, and June 30, 2009 (as reported in U.S. Cellular's
Form 8-K filed on May 10, 2010 for all such periods), were $965.2
million, $984.9 million, $983.4 million and $974.1 million,
respectively.
(5) Calculated by dividing the components of service revenues by the
average customers and number of months in the quarter.
(6) Calculated by dividing the total postpaid customer disconnects
during the quarter by the average postpaid customer base for the
quarter.
United States Cellular Corporation
Consolidated Statement of Operations Highlights
Three Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Increase (Decrease)
-------------------
2010 2009 (1) Amount Percent
---- ------- ------ -------
Operating revenues
Service $972,576 $974,348 $(1,772) -
Equipment sales 57,317 67,795 (10,478) (15%)
------ ------ -------
Total operating
revenues 1,029,893 1,042,143 (12,250) (1%)
--------- --------- -------
Operating expenses
System operations
(excluding
Depreciation,
amortization and
accretion reported
below) 213,542 194,709 18,833 10%
Cost of equipment
sold 161,965 156,055 5,910 4%
Selling, general and
administrative 445,177 411,153 34,024 8%
Depreciation,
amortization and
accretion 144,455 138,777 5,678 4%
Loss on asset
disposals, net 1,250 2,611 (1,361) (52%)
----- ----- ------
Total operating
expenses 966,389 903,305 63,084 7%
------- ------- ------
Operating income 63,504 138,838 (75,334) (54%)
Investment and other
income (expense)
Equity in earnings
of unconsolidated
entities 25,753 24,794 959 4%
Interest and
dividend income 862 751 111 15%
Interest expense (16,438) (19,856) 3,418 17%
Other, net 472 (2) 474 >100%
--- --- ---
Total investment and
other income
(expense) 10,649 5,687 4,962 87%
------ ----- -----
Income before income
taxes 74,153 144,525 (70,372) (49%)
Income tax expense 28,181 56,788 (28,607) (50%)
------ ------ -------
Net income 45,972 87,737 (41,765) (48%)
Less: Net income
attributable to
noncontrolling
interests, net of
tax (5,219) (5,969) 750 13%
------ ------ ---
Net income
attributable to
U.S. Cellular
shareholders $40,753 $81,768 $(41,015) (50%)
======= ======= ========
Basic weighted
average shares
outstanding 86,425 86,992 (567) (1%)
Basic earnings per
share attributable
to
U.S. Cellular
shareholders $0.47 $0.94 $(0.47) (50%)
===== ===== ======
Diluted weighted
average shares
outstanding 86,787 87,177 (390) -
Diluted earnings per
share attributable
to
U.S. Cellular
shareholders $0.47 $0.94 $(0.47) (50%)
===== ===== ======
(1) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
United States Cellular Corporation
Consolidated Statement of Operations Highlights
Six Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
2010 2009 (1)
---- -------
Operating revenues
Service $1,937,584 $1,957,802
Equipment sales 116,166 138,685
------- -------
Total operating revenues 2,053,750 2,096,487
--------- ---------
Operating expenses
System operations
(excluding
Depreciation,
amortization and
accretion reported
below) 420,656 394,697
Cost of equipment sold 323,070 341,756
Selling, general and
administrative 874,782 819,616
Depreciation,
amortization and
accretion 287,688 276,655
Loss on asset disposals,
net 6,426 6,556
----- -----
Total operating expenses 1,912,622 1,839,280
--------- ---------
Operating income 141,128 257,207
Investment and other
income (expense)
Equity in earnings of
unconsolidated entities 50,447 50,121
Interest and dividend
income 1,883 1,228
Interest expense (32,962) (39,283)
Other, net 407 278
--- ---
Total investment and
other income (expense) 19,775 12,344
------ ------
Income before income
taxes 160,903 269,551
Income tax expense 61,843 91,747
------ ------
Net income 99,060 177,804
Less: Net income
attributable to
noncontrolling
interests, net of tax (10,938) (11,977)
------- -------
Net income attributable
to U.S. Cellular
shareholders $88,122 $165,827
======= ========
Basic weighted average
shares outstanding 86,500 87,093
Basic earnings per share
attributable to
U.S. Cellular
shareholders $1.02 $1.90
===== =====
Diluted weighted average
shares outstanding 86,873 87,308
Diluted earnings per
share attributable to
U.S. Cellular
shareholders $1.01 $1.90
===== =====
Increase
(Decrease)
----------
Amount Percent
------ -------
Operating revenues
Service $(20,218) (1%)
Equipment sales (22,519) (16%)
-------
Total operating revenues (42,737) (2%)
-------
Operating expenses
System operations
(excluding
Depreciation,
amortization and
accretion reported
below) 25,959 7%
Cost of equipment sold (18,686) (5%)
Selling, general and
administrative 55,166 7%
Depreciation,
amortization and
accretion 11,033 4%
Loss on asset disposals,
net (130) (2%)
----
Total operating expenses 73,342 4%
------
Operating income (116,079) (45%)
Investment and other
income (expense)
Equity in earnings of
unconsolidated entities 326 1%
Interest and dividend
income 655 53%
Interest expense 6,321 16%
Other, net 129 46%
---
Total investment and
other income (expense) 7,431 60%
-----
Income before income
taxes (108,648) (40%)
Income tax expense (29,904) (33%)
-------
Net income (78,744) (44%)
Less: Net income
attributable to
noncontrolling
interests, net of tax 1,039 9%
-----
Net income attributable
to U.S. Cellular
shareholders $(77,705) (47%)
========
Basic weighted average
shares outstanding (593) (1%)
Basic earnings per share
attributable to
U.S. Cellular
shareholders $(0.88) (46%)
======
Diluted weighted average
shares outstanding (435) -
Diluted earnings per
share attributable to
U.S. Cellular
shareholders $(0.89) (47%)
======
(1) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
ASSETS
December
June 30, 31,
2010 2009 (1)
---- -------
Current assets
Cash and cash equivalents $232,853 $294,411
Short-term investments 135,798 330
Accounts receivable from
customers and other 411,450 425,057
Inventory 120,304 152,556
Prepaid income taxes - 717
Prepaid expenses 65,219 63,463
Net deferred income tax asset 21,570 21,570
Other current assets 48,662 51,013
------ ------
1,035,856 1,009,117
Investments
Licenses 1,445,501 1,435,000
Goodwill 494,737 494,737
Customer lists 1,701 4,083
Investments in unconsolidated
entities 163,518 161,481
Notes and interest receivable -
long-term 4,143 4,214
Long-term investments 40,987 -
------ ---
2,150,587 2,099,515
Property, plant and equipment
In service and under
construction 6,096,533 5,884,307
Less: accumulated depreciation 3,525,193 3,282,969
--------- ---------
2,571,340 2,601,338
Other assets and deferred
charges 37,865 38,776
Total assets $5,795,648 $5,748,746
========== ==========
(1) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
2010 2009 (1)
---- -------
Current liabilities
Current portion of long-term debt $86 $76
Accounts payable
Affiliated 11,714 14,732
Trade 262,279 296,288
Customer deposits and deferred revenues 144,101 140,248
Accrued taxes 90,802 57,507
Accrued compensation 45,086 62,242
Other current liabilities 80,322 92,884
------ ------
634,390 663,977
Deferred liabilities and credits
Net deferred income tax liability 497,797 513,994
Other deferred liabilities and credits 273,467 262,412
Long-term debt 867,880 867,522
Commitments and contingencies
Noncontrolling interests with mandatory
redemption features 746 727
Equity
U.S. Cellular shareholders' equity
Series A Common and Common Shares, par
value $1 per share 88,074 88,074
Additional paid-in capital 1,364,129 1,356,322
Treasury shares (80,107) (69,616)
Retained earnings 2,090,966 2,013,633
--------- ---------
Total U.S. Cellular shareholders' equity 3,463,062 3,388,413
Noncontrolling interests 58,306 51,701
------ ------
Total equity 3,521,368 3,440,114
Total liabilities and equity $5,795,648 $5,748,746
========== ==========
(1) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
United States Cellular Corporation
Schedule of Cash and Cash Equivalents and Investments
(Unaudited, dollars in thousands)
In an effort to improve investment returns, during the second quarter
of 2010, U.S. Cellular elected to use a portion of its cash balance
to directly purchase U.S. treasury securities and securities insured
by the Federal Deposit Insurance Corporation ("FDIC"), as opposed to
investing in money market funds. The maturity dates of such direct
investments were staggered in order to maintain cash balances and
liquidity at targeted levels. U.S. Cellular also continues to
invest in certificates of deposit that are insured by the FDIC. The
following table presents U.S. Cellular's cash and cash equivalents;
and investments in U.S. treasury securities, commercial paper and
certificates of deposit at June 30, 2010 and December 31, 2009.
December
June 30, 31,
2010 2009
---- ----
Cash and cash equivalents $232,853 $294,411
======== ========
Amounts included in short-term
investments
U.S. treasuries 110,451 -
Certificates of deposit
(1) 104 330
Commercial paper (2) 25,243 -
------ ---
$135,798 $330
======== ====
Amounts included in long-term
investments (3)
U.S. treasuries 10,071 -
Commercial paper (2) 30,916 -
------ ---
$40,987 $ -
======= === ===
(1) U.S. Cellular's investments in certificates of deposits are
insured by the FDIC.
(2) U.S. Cellular's investments in commercial paper are insured by
the FDIC under its Temporary Liquidity Guarantee Program.
(3) U.S. Cellular's long-term investments have maturity dates
between July 2011 and December 2012.
United States Cellular Corporation
Consolidated Statement of Cash Flows
Six Months Ended June 30,
(Unaudited, dollars in thousands)
2010 2009 (1)
---- -------
Cash flows from operating activities
Net income $99,060 $177,804
Add (deduct) adjustments to reconcile net income to
net
cash flows from operating activities
Depreciation, amortization and accretion 287,688 276,655
Bad debts expense 36,605 39,028
Stock-based compensation expense 9,012 7,974
Deferred income taxes, net (9,935) 19,084
Equity in earnings of unconsolidated entities (50,447) (50,121)
Distributions from unconsolidated entities 48,491 12,997
Loss on asset disposals, net 6,426 6,556
Other operating activities (464) 1,209
Changes in assets and liabilities from operations
Accounts receivable (22,995) (68,923)
Inventory 32,252 (10,391)
Accounts payable - trade (34,009) (41,378)
Accounts payable - affiliate (3,017) 4,137
Customer deposits and deferred revenues 3,854 (5,699)
Accrued taxes 27,744 71,041
Accrued interest 121 450
Other assets and liabilities (26,680) (67,300)
------- -------
403,706 373,123
------- -------
Cash flows from investing activities
Additions to property, plant and equipment (255,004) (228,902)
Cash paid for acquisitions and licenses (10,501) (12,327)
Cash paid for investments (175,000) (275)
Other investing activities 889 1,432
--- -----
(439,616) (240,072)
-------- --------
Cash flows from financing activities
Common shares reissued for benefit plans, net of tax
payments 144 (405)
Common shares repurchased (21,423) (19,332)
Payment of debt issuance costs - (4,309)
Distributions to noncontrolling interests (4,314) (4,060)
Other financing activities (55) (21)
--- ---
(25,648) (28,127)
------- -------
Net increase (decrease) in cash and cash equivalents (61,558) 104,924
Cash and cash equivalents
Beginning of period 294,411 170,996
------- -------
End of period $232,853 $275,920
======== ========
(1) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
Three Months Ended June Six Months Ended June
30 30
2010 2009 (5) 2010 2009 (5)
---- ------- ---- -------
Service
revenues $972,576 $974,348 $1,937,584 $1,957,802
Operating
income 63,504 138,838 141,128 257,207
Add:
Depreciation,
amortization
and accretion 144,455 138,777 287,688 276,655
Loss on asset
disposals 1,250 2,611 6,426 6,556
----- ----- ----- -----
Adjusted OIBDA
(1)(4) $209,209 $280,226 $435,242 $540,418
======== ======== ======== ========
Adjusted OIBDA
margin (2) 21.5% 28.8% 22.5% 27.6%
2010 2009 2010 2009
---- ---- ---- ----
Cash flows from
operating
activities $251,454 $187,561 $403,706 $373,123
Deduct:
Capital
expenditures 133,490 91,161 255,004 228,902
------- ------ ------- -------
Free cash flow
(3) $117,964 $96,400 $148,702 $144,221
======== ======= ======== ========
(1) Adjusted OIBDA is defined as operating income excluding the
effects of: depreciation, amortization, and accretion (OIBDA); the
net gain or loss on asset disposals (if any); and the loss on
impairment of assets (if any). This measure also may be commonly
referred to by management as operating cash flow. This measure
should not be confused with cash flows from operating activities,
which is a component of the consolidated statement of cash flows.
(2) Adjusted OIBDA margin is defined as adjusted OIBDA divided by
service revenues. Equipment revenues are excluded from the
denominator of the calculation since equipment is generally sold at
a net negative margin, and the equipment subsidy is effectively a
cost for purposes of assessing business results. U.S. Cellular
believes that this calculation method is consistent with the method
used by certain investors to assess U.S. Cellular's business
results. Adjusted OIBDA margin may also be commonly referred to by
management as operating cash flow margin.
(3) Free cash flow is defined as cash flows from operating activities
minus capital expenditures. Free cash flow is a non-GAAP financial
measure. U.S. Cellular believes that free cash flow as reported by
U.S. Cellular is useful to investors and other users of its
financial information in evaluating the amount of cash generated by
business operations, after consideration of capital expenditures.
(4) Adjusted OIBDA excludes the net gain or loss on asset disposals
and loss on impairment of assets, if any, in order to show operating
results on a more comparable basis from period to period. U.S.
Cellular does not intend to imply that any of such amounts that are
excluded are non-recurring, infrequent or unusual, and accordingly,
they may be incurred in the future.
(5) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
Revision of Prior Period Amounts
In preparing its financial statements for the three months ended March 31, 2010, U.S. Cellular discovered certain errors related to accounting for operating revenues and sales tax liabilities. The quantification of these errors was subsequently refined during the second quarter of 2010. These errors resulted in the overstatement of operating revenues and understatement of sales tax liabilities for the years ended December 31, 2009, 2008, 2007, and the three months ended March 31, 2010. In addition to recording these adjustments, U.S. Cellular recorded other adjustments to prior-period amounts to correct other immaterial items. In accordance with
SEC Staff Accounting Bulletin Nos. 99 and 108
("SAB 99 and SAB 108"), U.S. Cellular evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports was not required. However, if the adjustments to correct the cumulative errors had been recorded in the first or second quarter of 2010, U.S. Cellular believes the impact would have been significant to those respective periods and would impact comparisons to prior periods. As permitted by SAB 108, U.S. Cellular revised in the current filing its comparative consolidated financial statements for these immaterial amounts. In addition, on August 5, 2010, U.S. Cellular filed a Current Report on Form 8-K (Items 8.01 and 9.01) with the SEC to revise financial statements and other financial information previously included in its Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the period ended March 31, 2010.
The Consolidated Balance Sheet at December 31, 2009 was revised to reflect the cumulative effect of these errors, which resulted in a decrease to retained earnings of $15.9 million. Also, in accordance with SAB 108, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows have been revised as follows:
Consolidated Balance Sheet - December 31, 2009
As previously (Dollars in thousands) reported (1) Adjustment Revised ------------ ---------- ------- Accounts receivable from customers and other $421,528 $3,529 $425,057 Total current assets 1,005,588 3,529 1,009,117 Total assets 5,745,217 3,529 5,748,746 Customer deposits and deferred revenues 143,760 (3,512) 140,248 Accrued taxes 34,583 22,924 57,507 Total current liabilities 644,565 19,412 663,977 Retained earnings 2,029,516 (15,883) 2,013,633 Total U.S. Cellular shareholders' equity 3,404,296 (15,883) 3,388,413 Total equity 3,455,997 (15,883) 3,440,114 Total liabilities and equity 5,745,217 3,529 5,748,746
Consolidated Statement of Operations - Three Months Ended June 30, 2009
As previously
(Dollars in thousands,
except per share
amounts) reported (2) Adjustment Revised
------------ ---------- -------
Service revenues $974,755 $(407) $974,348
Total operating revenues 1,042,550 (407) 1,042,143
System operations
expenses (excluding
Depreciation
amortization and
accretion) 194,806 (97) 194,709
Selling, general and
administrative expenses 410,070 1,083 411,153
Depreciation,
amortization and
accretion 138,614 163 138,777
Loss on asset disposals,
net 2,086 525 2,611
Total operating expenses 901,631 1,674 903,305
Operating income 140,919 (2,081) 138,838
Interest expense (19,387) (469) (19,856)
Total investment and
other income (expense) 6,156 (469) 5,687
Income before income
taxes 147,075 (2,550) 144,525
Income tax expense 57,748 (960) 56,788
Net income 89,327 (1,590) 87,737
Net income attributable
to U.S. Cellular
shareholders 83,358 (1,590) 81,768
Basic earnings per share
attributable to U.S.
Cellular shareholders 0.96 (0.02) 0.94
Diluted earnings per
share attributable to
U.S. Cellular
shareholders 0.96 (0.02) 0.94
Consolidated Statement of Operations - Six Months Ended June 30, 2009
As previously
(Dollars in thousands,
except per share
amounts) reported (2) Adjustment Revised
------------ ---------- -------
Service revenues $1,956,629 $1,173 $1,957,802
Total operating revenues 2,095,314 1,173 2,096,487
System operations
expenses (excluding
Depreciation,
amortization and
accretion) 394,809 (112) 394,697
Selling, general and
administrative expenses 822,518 (2,902) 819,616
Depreciation,
amortization and
accretion 276,265 390 276,655
Loss on asset disposals,
net 4,277 2,279 6,556
Total operating expenses 1,839,625 (345) 1,839,280
Operating income 255,689 1,518 257,207
Interest expense (38,409) (874) (39,283)
Total investment and
other income (expense) 13,218 (874) 12,344
Income before income
taxes 268,907 644 269,551
Income tax expense 88,980 2,767 91,747
Net income 179,927 (2,123) 177,804
Net income attributable
to U.S. Cellular
shareholders 167,950 (2,123) 165,827
Basic earnings per share
attributable to U.S.
Cellular shareholders 1.93 (0.03) 1.90
Diluted earnings per
share attributable to
U.S. Cellular
shareholders 1.92 (0.02) 1.90
Consolidated Statement of Cash Flows - Six Months Ended June 30, 2009
As previously
(Dollars in thousands) reported (2) Adjustment Revised
------------ ---------- -------
Net income $179,927 $(2,123) $177,804
Depreciation,
amortization and
accretion 276,265 390 276,655
Deferred income taxes,
net 19,604 (520) 19,084
Loss on asset disposals,
net 4,277 2,279 6,556
Change in accounts
receivable (63,510) (5,413) (68,923)
Change in customer
deposits and deferred
revenues (5,372) (327) (5,699)
Change in accrued taxes 64,851 6,190 71,041
Change in other assets
and liabilities (66,824) (476) (67,300)
Cash flows from operating
activities 373,123 - 373,123
(1) In Annual Report on Form 10-K for the year ended December 31,
2009 filed on February 25, 2010.
(2) In Quarterly Report on Form 10-Q for the period ended June 30,
2009 filed on August 6, 2009.
SOURCE United States Cellular Corporation