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Press Release Details

U.S. Cellular reports third quarter 2019 results

10/31/2019
Growth in revenues; 5G and network modernization initiatives progressing

CHICAGO, Oct. 31, 2019 /PRNewswire/ --

As previously announced, U.S. Cellular will hold a teleconference November 1, 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 $1,031 million for the third quarter of 2019, versus $1,001 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $23 million and $0.27, respectively, for the third quarter of 2019 compared to $36 million and $0.41, respectively, in the same period one year ago.

"I'm pleased with the progress we made this quarter," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We generated improved financial results and although subscriber activity was slow early in the quarter, we gained momentum and finished strong, achieving sequential improvement in postpaid handset net additions by delivering on our customer satisfaction strategy and implementing many of our strategic initiatives. Our efforts produced growth in revenue and Adjusted EBITDA. Continued popularity of our unlimited Total Plans drove increases in average revenue per user and increased inbound roaming contributed to growth in service revenue. I am pleased to see these trends as we head into the important holiday season.

"We recently completed a brand refresh and launched a new more modern look and a brand promise around 'Bringing Fairness to Wireless,' to reinforce the values that have always been part of U.S. Cellular.  Another driver of customer satisfaction is our high-quality network, which is performing well even as data usage continues to increase. Our network modernization efforts are progressing as we ready our network for 5G, so that even customers with 4G devices have experienced better network quality and improved speeds. Additionally, we are on track to launch 5G service in Iowa and Wisconsin during the first quarter of 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 October 31, 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

$3,900-$4,100

$3,950-$4,050

Adjusted OIBDA1

$725-$875

$750-$850

Adjusted EBITDA1

$900-$1,050

$925-$1,025

Capital expenditures

$625-$725

Unchanged

The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2019 estimated results, actual results for the nine months ended September 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


Nine Months Ended
September 30, 2019


Year Ended
December 31, 2018

(Dollars in millions)






Net income (GAAP)

N/A


$

115



$

164


Add back or deduct:






Income tax expense

N/A


55



51


Income before income taxes (GAAP)

$80-$180


$

170



$

215


Add back:






Interest expense

115


87



116


Depreciation, amortization and accretion expense

710


524



640


EBITDA (Non-GAAP)1

$905-$1,005


$

781



$

971


Add back or deduct:






(Gain) loss on asset disposals, net

20


13



10


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


(1)




(Gain) loss on license sales and exchanges, net




(18)


Adjusted EBITDA (Non-GAAP)1

$925-$1,025


$

793



$

963


Deduct:






Equity in earnings of unconsolidated entities

160


128



159


Interest and dividend income

15


14



15


Other, net




(1)


Adjusted OIBDA (Non-GAAP)1

$750-$850


$

651



$

790




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 September 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 November 1, 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 5,500 full- and part-time associates as of September 30, 2019. At the end of the third 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

9/30/2019


6/30/2019


3/31/2019


12/31/2018


9/30/2018

Retail Connections










Postpaid










Total at end of period

4,395,000



4,414,000



4,440,000



4,472,000



4,466,000


Gross additions

163,000



137,000



137,000



179,000



172,000


Feature phones

3,000



5,000



4,000



4,000



3,000


Smartphones

121,000



97,000



98,000



132,000



130,000


Connected devices

39,000



35,000



35,000



43,000



39,000


Net additions (losses)

(19,000)



(26,000)



(32,000)



6,000



(1,000)


Feature phones

(11,000)



(10,000)



(13,000)



(11,000)



(14,000)


Smartphones

9,000



(1,000)



(1,000)



31,000



29,000


Connected devices

(17,000)



(15,000)



(18,000)



(14,000)



(16,000)


ARPU1

$

46.16



$

45.90



$

45.44



$

45.58



$

45.31


ARPA2

$

119.87



$

119.46



$

118.84



$

119.60



$

119.42


Churn rate3

1.38

%


1.23

%


1.26

%


1.29

%


1.29

%

Handsets

1.09

%


0.97

%


0.99

%


1.00

%


1.02

%

Connected devices

3.44

%


3.01

%


3.08

%


3.20

%


3.04

%

Prepaid










Total at end of period

510,000



500,000



503,000



516,000



528,000


Gross additions

70,000



61,000



61,000



66,000



80,000


Net additions (losses)

9,000



(2,000)



(13,000)



(12,000)



1,000


ARPU1

$

34.35



$

34.43



$

33.44



$

32.80



$

32.09


Churn rate3

4.03

%


4.20

%


4.92

%


4.98

%


4.98

%

Total connections at end of period4

4,957,000



4,967,000



4,995,000



5,041,000



5,050,000


Market penetration at end of period










Consolidated operating population

31,310,000



31,310,000



31,310,000



31,469,000



31,469,000


Consolidated operating penetration5

16

%


16

%


16

%


16

%


16

%

Capital expenditures (millions)

$

170



$

195



$

102



$

242



$

118


Total cell sites in service

6,554



6,535



6,506



6,531



6,506


Owned towers

4,123



4,116



4,106



4,129



4,119





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
September 30,


Nine Months Ended
September 30,



2019


2018


2019 vs.
2018


2019


2018


2019 vs.
2018


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













Operating revenues













Service

$

774



$

759



2

%


$

2,272



$

2,224



2

%


Equipment sales

257



242



6

%


698



692



1

%


Total operating revenues

1,031



1,001



3

%


2,970



2,916



2

%















Operating expenses













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

199



200



(1)

%


568



566





Cost of equipment sold

266



258



3

%


724



716



1

%


Selling, general and administrative

358



346



3

%


1,027



1,014



1

%


Depreciation, amortization and accretion

181



160



13

%


524



478



10

%


(Gain) loss on asset disposals, net

5



3



66

%


13



5



N/M



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





N/M



(1)





N/M



(Gain) loss on license sales and exchanges, net

2





N/M





(18)



98

%


Total operating expenses

1,011



967



5

%


2,855



2,761



3

%















Operating income

20



34



(40)

%


115



155



(26)

%















Investment and other income (expense)













Equity in earnings of unconsolidated entities

44



42



5

%


128



120



7

%


Interest and dividend income

4



4



4

%


14



10



40

%


Interest expense

(29)



(29)



1

%


(87)



(87)





Total investment and other income

19



17



12

%


55



43



27

%















Income before income taxes

39



51



(23)

%


170



198



(14)

%


Income tax expense

15



14



2

%


55



55



1

%


Net income

24



37



(33)

%


115



143



(20)

%


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

1



1



29

%


6



14



(61)

%


Net income attributable to U.S. Cellular shareholders

$

23




$

36




(34)

%


$

109




$

129




(15)

%















Basic weighted average shares outstanding

86



86



1

%


87



85



1

%


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

$

0.27



$

0.42



(35)

%


$

1.26



$

1.51



(16)

%














Diluted weighted average shares outstanding

88



87



1

%


88



86



2

%


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

$

0.27



$

0.41



(35)

%


$

1.24



$

1.49



(17)

%


N/M - Percentage change not meaningful

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)


Nine Months Ended
September 30,


2019


2018

(Dollars in millions)




Cash flows from operating activities




Net income

$

115



$

143


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




Depreciation, amortization and accretion

524



478


Bad debts expense

77



67


Stock-based compensation expense

32



26


Deferred income taxes, net

(34)



(4)


Equity in earnings of unconsolidated entities

(128)



(120)


Distributions from unconsolidated entities

99



90


(Gain) loss on asset disposals, net

13



5


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

(1)




(Gain) loss on license sales and exchanges, net



(18)


Other operating activities

3



2


Changes in assets and liabilities from operations




Accounts receivable

(35)



(1)


Equipment installment plans receivable

(42)



(88)


Inventory

3



15


Accounts payable

(4)



21


Customer deposits and deferred revenues

(1)



(5)


Accrued taxes

81



1


Accrued interest

9



9


Other assets and liabilities

(24)



(21)


Net cash provided by operating activities

687



600






Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(439)



(277)


Cash paid for licenses

(257)



(2)


Cash received from investments

29



50


Cash paid for investments

(11)




Cash received from divestitures and exchanges

32



23


Other investing activities

(1)



3


Net cash used in investing activities

(647)



(203)






Cash flows from financing activities




Repayment of long-term debt

(14)



(14)


Common Shares reissued for benefit plans, net of tax payments

(8)



7


Repurchase of Common Shares

(21)




Distributions to noncontrolling interests

(3)



(5)


Other financing activities

(2)



(5)


Net cash used in financing activities

(48)



(17)






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

(8)



380






Cash, cash equivalents and restricted cash




Beginning of period

583



352


End of period

$

575



$

732


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS


September 30, 2019 1


December 31, 2018

(Dollars in millions)




Current assets




Cash and cash equivalents

$

570



$

580


Short-term investments



17


Accounts receivable

993



976


Inventory, net

139



142


Prepaid expenses

49



63


Other current assets

19



34


Total current assets

1,770



1,812






Assets held for sale

9



54






Licenses

2,461



2,186






Investments in unconsolidated entities

471



441






Property, plant and equipment, net

2,144



2,202






Operating lease right-of-use assets

897








Other assets and deferred charges

539



579






Total assets

$

8,291



$

7,274


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY


September 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

337



313


Customer deposits and deferred revenues

155



157


Accrued taxes

88



30


Accrued compensation

68



78


Short-term operating lease liabilities

104




Other current liabilities

78



94


Total current liabilities

849



691






Liabilities held for sale

1



1






Deferred liabilities and credits




Deferred income tax liability, net

477



510


Long-term operating lease liabilities

864




Other deferred liabilities and credits

312



389






Long-term debt, net

1,592



1,605






Noncontrolling interests with redemption features

11



11






Equity




U.S. Cellular shareholders' equity




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

88



88


Additional paid-in capital

1,622



1,590


Treasury shares

(70)



(65)


Retained earnings

2,532



2,444


Total U.S. Cellular shareholders' equity

4,172



4,057






Noncontrolling interests

13



10






Total equity

4,185



4,067






Total liabilities and equity

$

8,291



$

7,274




As of January 1, 2019, U.S. Cellular adopted the new lease accounting standard, ASC 842, using a modified retrospective method. 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
September 30,


Nine Months Ended
September 30,


2019


2018


2019


2018

(Dollars in millions)








Cash flows from operating activities (GAAP)

$

211



$

235



$

687



$

600


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

157



103



439



277


Free cash flow (Non-GAAP)1

$

54



$

132



$

248



$

323




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
September 30,


2019


2018

(Dollars in millions)




Net income (GAAP)

$

24



$

37


Add back:




Income tax expense

15



14


Interest expense

29



29


Depreciation, amortization and accretion

181



160


EBITDA (Non-GAAP)

249



240


Add back or deduct:




(Gain) loss on asset disposals, net

5



3


(Gain) loss on license sales and exchanges, net

2




Adjusted EBITDA (Non-GAAP)

256



243


Deduct:




Equity in earnings of unconsolidated entities

44



42


Interest and dividend income

4



4


Adjusted OIBDA (Non-GAAP)

208



197


Deduct:




Depreciation, amortization and accretion

181



160


(Gain) loss on asset disposals, net

5



3


(Gain) loss on license sales and exchanges, net

2




Operating income (GAAP)

$

20



$

34


 

Cision View original content:http://www.prnewswire.com/news-releases/us-cellular-reports-third-quarter-2019-results-300949464.html

SOURCE United States Cellular Corporation