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U.S. Cellular reports first quarter 2019 results

CHICAGO, May 2, 2019 /PRNewswire/ -- 

As previously announced, U.S. Cellular will hold a teleconference May 3, 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 (USM) reported total operating revenues of $966 million for the first quarter of 2019, versus $942 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $54 million and $0.62, respectively, for the first quarter of 2019 compared to $45 million and $0.52, respectively, in the same period one year ago.

"U.S. Cellular had a solid start to 2019 as we improved customer results year over year and increased revenue and profitability," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We have begun our network modernization initiative to ready our network for 5G and to ensure our network continues to meet the growing expectations of our customers and remains a competitive advantage.

"Our postpaid handset gross additions were up modestly year over year in what has historically been a seasonally slow quarter and postpaid handset churn remained low. Greater adoption of our Unlimited Total Plans had a positive impact on customer satisfaction.  I am particularly pleased with the year over year growth in average revenue per user, which increased $1.10 and was the major factor to the increase in service revenue. Our diligent focus on cost management combined with the revenue growth resulted in a meaningful increase in profitability this quarter."

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 May 2, 2019.  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 estimated results.


2019 Estimated Results


Previous

Current

(Dollars in millions)



Total operating revenues

$4,100-$4,300

$4,000-$4,200*

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 three months ended March 31, 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


Three Months Ended
March 31, 2019


Year Ended
December 31, 2018

(Dollars in millions)






Net income (GAAP)

N/A



$

58



$

164


Add back or deduct:






Income tax expense

N/A



27



51


Income before income taxes (GAAP)

$70-$220



$

85



$

215


Add back:






Interest expense

115



29



116


Depreciation, amortization and accretion expense

700



169



640


EBITDA (Non-GAAP) (1)

$885-$1,035



$

283



$

971


Add back or deduct:






(Gain) loss on asset disposals, net

15



2



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



$

281



$

963


Deduct:






Equity in earnings of unconsolidated entities

155



44



159


Interest and dividend income

20



6



15


Other, net





(1)


Adjusted OIBDA (Non-GAAP) (1)

$725-$875



$

231



$

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 (loss) before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for March 31, 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 May 3, 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 March 31, 2019. At the end of the first 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

3/31/2019



12/31/2018



9/30/2018



6/30/2018



3/31/2018


Retail Connections










Postpaid










Total at end of period

4,440,000



4,472,000



4,466,000



4,468,000



4,481,000


Gross additions

137,000



179,000



172,000



146,000



129,000


Feature phones

4,000



4,000



3,000



5,000



5,000


Smartphones

98,000



132,000



130,000



106,000



91,000


Connected devices

35,000



43,000



39,000



35,000



33,000


Net additions (losses)

(32,000)



6,000



(1,000)



(13,000)



(37,000)


Feature phones

(13,000)



(11,000)



(14,000)



(12,000)



(15,000)


Smartphones

(1,000)



31,000



29,000



17,000



(1,000)


Connected devices

(18,000)



(14,000)



(16,000)



(18,000)



(21,000)


ARPU (1)

$

45.44



$

45.58



$

45.31



$

44.74



$

44.34


ARPA (2)

$

118.84



$

119.60



$

119.42



$

118.57



$

118.22


Churn rate (3)

1.26

%


1.29

%


1.29

%


1.19

%


1.23

%

Handsets

0.99

%


1.00

%


1.02

%


0.92

%


0.97

%

Connected devices

3.08

%


3.20

%


3.04

%


2.85

%


2.79

%

Prepaid










Total at end of period

503,000



516,000



528,000



527,000



525,000


Gross additions

61,000



66,000



80,000



78,000



88,000


Net additions (losses)

(13,000)



(12,000)



1,000



2,000



6,000


ARPU (1)

$

33.44



$

32.80



$

32.09



$

32.32



$

31.78


Churn rate (3)

4.92

%


4.98

%


4.98

%


4.83

%


5.27

%

Total connections at end of period (4)

4,995,000



5,041,000



5,050,000



5,051,000



5,063,000


Market penetration at end of period










Consolidated operating population

31,310,000



31,469,000



31,469,000



31,469,000



31,469,000


Consolidated operating penetration (5)

16

%


16

%


16

%


16

%


16

%

Capital expenditures (millions)

$

102



$

242



$

118



$

86



$

70


Total cell sites in service

6,537



6,531



6,506



6,478



6,473


Owned towers

4,106



4,129



4,119



4,105



4,099




(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
March 31,


2019


2018


2019 vs.
2018

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






Operating revenues






Service

$

741



$

724



2

%

Equipment sales

225



218



3

%

Total operating revenues

966



942



3

%







Operating expenses






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

176



179



(1)

%

Cost of equipment sold

233



219



7

%

Selling, general and administrative

326



326



Depreciation, amortization and accretion

169



159



6

%

(Gain) loss on asset disposals, net

2



1



55

%

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

(2)





N/M


(Gain) loss on license sales and exchanges, net

(2)



(7)



69

%

Total operating expenses

902



877



3

%







Operating income

64



65



(1)

%







Investment and other income (expense)






Equity in earnings of unconsolidated entities

44



38



16

%

Interest and dividend income

6



4



59

%

Interest expense

(29)



(29)



Other, net



(1)



92

%

Total investment and other income

21



12



65

%







Income before income taxes

85



77



10

%

Income tax expense

27



22



20

%

Net income

58



55



6

%

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

4



10



(64)

%

Net income attributable to U.S. Cellular shareholders

$

54



$

45



22

%







Basic weighted average shares outstanding

86



85



1

%

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

$

0.63



$

0.52



20

%







Diluted weighted average shares outstanding

88



86



2

%

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

$

0.62



$

0.52



19

%


N/M - Percentage change not meaningful

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)


Three Months Ended
March 31,


2019


2018

(Dollars in millions)




Cash flows from operating activities




Net income

$

58



$

55


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




Depreciation, amortization and accretion

169



159


Bad debts expense

24



19


Stock-based compensation expense

9



8


Deferred income taxes, net

17



15


Equity in earnings of unconsolidated entities

(44)



(38)


Distributions from unconsolidated entities

18



17


(Gain) loss on asset disposals, net

2



1


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

(2)




(Gain) loss on license sales and exchanges, net

(2)



(7)


Noncash interest

1



1


Changes in assets and liabilities from operations




Accounts receivable

31



69


Equipment installment plans receivable

(10)



(17)


Inventory

(15)



(2)


Accounts payable

56



(30)


Customer deposits and deferred revenues

7



(26)


Accrued taxes

11



5


Accrued interest

9



9


Other assets and liabilities

(52)



(50)


Net cash provided by operating activities

287



188






Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(107)



(76)


Cash paid for licenses

(1)



(1)


Cash received from investments

2



50


Cash paid for investments

(1)




Cash received from divestitures and exchanges

31



4


Advance payments for license acquisitions

(135)




Other investing activities

(1)




Net cash used in investing activities

(212)



(23)






Cash flows from financing activities




Repayment of long-term debt

(5)



(5)


Common shares reissued for benefit plans, net of tax payments



2


Distributions to noncontrolling interests

(1)




Other financing activities



(4)


Net cash used in financing activities

(6)



(7)






Net increase in cash, cash equivalents and restricted cash

69



158






Cash, cash equivalents and restricted cash




Beginning of period

583



352


End of period

$

652



$

510


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS


March 31, 2019 (1)


December 31, 2018

(Dollars in millions)




Current assets




Cash and cash equivalents

$

648



$

580


Short-term investments

17



17


Accounts receivable

941



976


Inventory, net

157



142


Prepaid expenses

47



63


Other current assets

29



34


Total current assets

1,839



1,812






Assets held for sale



54






Licenses

2,213



2,186






Investments in unconsolidated entities

468



441






Property, plant and equipment, net

2,137



2,202






Operating lease right-of-use assets

888








Other assets and deferred charges

684



579






Total assets

$

8,229



$

7,274


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY


March 31, 2019 (1)


December 31,
2018

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$

19



$

19


Accounts payable

364



313


Customer deposits and deferred revenues

164



157


Accrued taxes

34



30


Accrued compensation

42



78


Short-term operating lease liabilities

99




Other current liabilities

80



94


Total current liabilities

802



691






Liabilities held for sale



1






Deferred liabilities and credits




Deferred income tax liability, net

527



510


Long-term operating lease liabilities

858




Other deferred liabilities and credits

296



389






Long-term debt, net

1,601



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

1,599



1,590


Treasury shares

(63)



(65)


Retained earnings

2,497



2,444


Total U.S. Cellular shareholders' equity

4,121



4,057






Noncontrolling interests

13



10






Total equity

4,134



4,067






Total liabilities and equity

$

8,229



$

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
March 31,


2019


2018

(Dollars in millions)




Cash flows from operating activities (GAAP)

$

287



$

188


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

107



76


Free cash flow (Non-GAAP) (1)

$

180



$

112




(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.

 

Cision

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