8-K

FORM 8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  August 5, 2010

UNITED STATES CELLULAR CORPORATION
 (Exact name of registrant as specified in its charter)

Delaware	1-9712	62-1147325
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)
8410 West Bryn Mawr, Suite 700, Chicago, Illinois		60631
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code:  (773) 399-8900

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

On August 5, 2010, United States Cellular Corporation (“U.S. Cellular”) issued a news release announcing its results of operations for the period ended June 30, 2010.  A copy of the news release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

The information in this Item 2.02 of Form 8-K is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.

Item 9.01.  Financial Statements and Exhibits

(d)Exhibits:

                In accordance with the provisions of Item 601 of Regulation S-K, any Exhibits filed or furnished herewith are set forth on the Exhibit Index attached hereto.

Attached as Exhibit 99.2 is a safe harbor cautionary statement under the Private Securities Litigation Reform Act of 1995.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

United States Cellular Corporation

(Registrant)          

Date:  August 5, 2010

By:	/s/ Steven T. Campbell
	Steven T. Campbell Executive Vice President – Finance,       Chief Financial Officer and Treasurer

 

EXHIBIT INDEX

The following exhibits are filed or furnished herewith as noted below.

Exhibit No.	Description
99.1	Earnings Press Release dated August 5, 2010
99.2	Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement

EX-99.1

Exhibit 99.1

 

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.

Contact:         Jane W. McCahon, Vice President, Corporate Relations

                        (312) 592-5379 jane.mccahon@teldta.com

                        Julie D. Mathews, Manager, Investor Relations

                        (312) 592-5341 julie.mathews@teldta.com

FOR RELEASE: IMMEDIATE

U.S. cellular Reports Second QUARTER 2010 RESULTS

Revises 2010 financial guidance

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.

CHICAGO – Aug. 5, 2010 – 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 ce nters 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™-powered phones our customers are asking for. We launched the Samsung Acclaim™ in early July, and we plan to offer the much-anticipated HTC Desire™ in August and the Samsung Galaxy S™ 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.

·Access the live call on the Conference Calls page of uscellular.com at  http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=67422&eventID=3258722.

·Access the call by phone at 877/407-8029 (US/Canada) no pass code required.

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.

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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.

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United States Cellular Corporation Summary Operating Data
Quarter Ended			6/30/2010			3/31/2010			12/31/2009			9/30/2009			6/30/2009
Total population
	Consolidated markets (1)			90,468,000			90,468,000			89,712,000			85,118,000			83,726,000
	Consolidated operating markets (1)			46,546,000			46,546,000			46,306,000			46,306,000			46,306,000
Market penetration at end of period
	Consolidated markets (2)			6.8	%		6.8	%		6.8	%		7.2	%		7.4	%
	Consolidated operating markets (2)			13.2	%		13.2	%		13.3	%		13.2	%		13.3	%
All customers
	Total at end of period			6,144,000			6,147,000			6,141,000			6,131,000			6,155,000
	Gross additions			349,000			358,000			399,000			386,000			317,000
	Net additions (losses)			(3,000	)		6,000			10,000			(24,000	)		(88,000	)
Retail customers
	Total at end of period			5,775,000			5,768,000			5,744,000			5,705,000			5,711,000
	Gross additions			307,000			305,000			354,000			351,000			286,000
	Net retail additions (losses) (3)			7,000			24,000			39,000			(6,000	)		(59,000	)
		Net postpaid additions (losses)		(22,000	)		(9,000	)		26,000			8,000			(32,000	)
		Net prepaid additions (losses)		29,000			33,000			13,000			(14,000	)		(27,000	)
Service revenues components (000s)
	Voice and other retail service		$	648,565		$	663,759		$	677,107		$	690,576		$	708,847
	Data service			215,271			201,280			189,759			174,286			161,955
	Total retail service		$	863,836		$	865,039		$	866,866		$	864,862		$	870,802
	Inbound roaming			60,902			51,942			61,728			68,767			62,223
	Other			47,838			48,027			56,814			50,289			41,323
Total service revenues (000s) (4)			$	972,576		$	965,008		$	985,408		$	983,918		$	974,348
	Divided by average customers (000s)			6,151			6,137			6,139			6,138			6,199
	Divided by three months in each quarter			3			3			3			3			3
Average monthly revenue per unit (5)			$	52.71		$	52.41		$	53.51		$	53.43		$	52.39
	Voice and other retail service (5)		$	35.14		$	36.05		$	36.77		$	37.51		$	38.11
	Data service (5)		$	11.67		$	10.93		$	10.30		$	9.46		$	8.71
	Total retail service (5)		$	46.81		$	46.98		$	47.07		$	46.97		$	46.82
	Inbound roaming (5)		$	3.30		$	2.82		$	3.35		$	3.73		$	3.35
	Other (5)		$	2.60		$	2.61		$	3.09		$	2.73		$	2.22
Postpaid churn rate (6)				1.4	%		1.4	%		1.6	%		1.7	%		1.7	%
Capital expenditures (000s)			$	133,500		$	121,500		$	189,000		$	128,900		$	91,200
Cell sites in service				7,416			7,310			7,279			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.

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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.

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United States Cellular Corporation Consolidated Statement of Operations Highlights Six Months Ended June 30, (Unaudited, dollars and shares in thousands, except per share amounts)
									Increase (Decrease)
			2010			2009 (1)			Amount			Percent
Operating revenues
	Service		$	1,937,584		$	1,957,802		$	(20,218	)	(1	%)
	Equipment sales			116,166			138,685			(22,519	)	(16	%)
		Total operating revenues		2,053,750			2,096,487			(42,737	)	(2	%)
Operating expenses
	System operations (excluding Depreciation, amortization and accretion reported below)			420,656			394,697			25,959		7	%
	Cost of equipment sold			323,070			341,756			(18,686	)	(5	%)
	Selling, general and administrative			874,782			819,616			55,166		7	%
	Depreciation, amortization and accretion			287,688			276,655			11,033		4	%
	Loss on asset disposals, net			6,426			6,556			(130	)	(2	%)
		Total operating expenses		1,912,622			1,839,280			73,342		4	%
Operating income				141,128			257,207			(116,079	)	(45	%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities			50,447			50,121			326		1	%
	Interest and dividend income			1,883			1,228			655		53	%
	Interest expense			(32,962	)		(39,283	)		6,321		16	%
	Other, net			407			278			129		46	%
		Total investment and other income (expense)		19,775			12,344			7,431		60	%
Income before income taxes				160,903			269,551			(108,648	)	(40	%)
	Income tax expense			61,843			91,747			(29,904	)	(33	%)
Net income				99,060			177,804			(78,744	)	(44	%)
	Less: Net income attributable to noncontrolling interests, net of tax			(10,938	)		(11,977	)		1,039		9	%
Net income attributable to U.S. Cellular shareholders			$	88,122		$	165,827		$	(77,705	)	(47	%)
Basic weighted average shares outstanding				86,500			87,093			(593	)	(1	%)
Basic earnings per share attributable to U.S. Cellular shareholders			$	1.02		$	1.90		$	(0.88	)	(46	%)
Diluted weighted average shares outstanding				86,873			87,308			(435	)	—
Diluted earnings per share attributable to U.S. Cellular shareholders			$	1.01		$	1.90		$	(0.89	)	(47	%)

(1)Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

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United States Cellular Corporation Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands)
ASSETS
		June 30,		December 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.

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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.

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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.

		June 30, 2010		December 31, 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.

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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.

10

 

United States Cellular Corporation Financial Measures and Reconciliations (Unaudited, dollars in thousands)
			Three Months Ended June 30,						Six Months Ended June 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.   

11

 

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 dete rmined 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.

12

EX-99.2

Exhibit 99.2

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Form 8-K and/or press release attached to this Form 8-K contain statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, that address activities, events or developments that United States Cellular Corporation (“U.S. Cellular”) intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements.  The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward‑looking statements involve known and unknown r isks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors include those set forth below, as more fully discussed under “Risk Factors” in the most recent filing of U.S. Cellular’s Form 10-K, as updated by any U.S. Cellular Form 10-Q filed subsequent to such Form 10-K.  However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document.  Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements.  U.S. Cellular undertakes no obligation to update publicly any forward-looking statements whether as a result of new informa tion, future events or otherwise.   You should carefully consider the Risk Factors in the most recent filing of U.S. Cellular’s Form 10-K, as updated by any U.S. Cellular Form 10-Q filed subsequent to such Form 10-K, the following factors and other information contained in, or incorporated by reference into, this Form 8-K and/or press release attached to this Form 8-K to understand the material risks relating to U.S. Cellular’s business.

·Intense competition in the markets in which U.S. Cellular operates could adversely affect U.S. Cellular's revenues or increase its costs to compete.

·A failure by U.S. Cellular to successfully execute its business strategy or allocate resources or capital could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·A failure by U.S. Cellular’s service offerings to meet customer expectations could limit U.S. Cellular’s ability to attract and retain customers and could have an adverse effect on U.S. Cellular’s operations.

·U.S. Cellular’s systems infrastructure may not be capable of supporting changes in technologies and services expected by customers, which could result in lost customers and revenues.

·An inability to obtain or maintain roaming arrangements with other carriers on terms that are acceptable to U.S. Cellular could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·U.S. Cellular currently receives a significant amount of roaming revenues.  As a result of consolidation of companies in the wireless industry, U.S. Cellular roaming revenues have declined significantly from amounts earned in certain prior years.  Further industry consolidation and continued build outs by existing and new wireless carriers could cause roaming revenues to decline even more, which would have an adverse effect on U.S. Cellular's business, financial condition and results of operations.

·A failure by U.S. Cellular to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on U.S. Cellular’s business and operations.

·     In the event that the FCC conducts auctions of additional spectrum in the future, U.S. Cellular is likely to participate in such auctions as an applicant or as a non-controlling partner in another auction applicant and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on U.S. Cellular.

·Changes in the regulatory environment or a failure by U.S. Cellular to timely or fully comply with any applicable regulatory requirements could adversely affect U.S. Cellular’s financial condition, results of operations or ability to do business.

·Changes in USF funding and/or intercarrier compensation could have a material adverse impact on U.S. Cellular’s financial position or results of operations.

·An inability to attract and/or retain management, technical, sales and other personnel could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

 

·U.S. Cellular’s assets are concentrated in the U.S. wireless telecommunications industry. As a result, its results of operations may fluctuate based on factors related entirely to conditions in this industry.

·The completion of acquisitions by other companies has led to increased consolidation in the wireless telecommunications industry.  U.S. Cellular's lower scale relative to larger wireless carriers has in the past and could in the future prevent or delay its access to new products including handsets, new technology and/or new content and applications which could adversely affect U.S. Cellular's ability to attract and retain customers and, as a result, could adversely affect its business, financial condition or results of operations.   

·Inability to manage its supply chain or inventory successfully could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

·Changes in general economic and business conditions, both nationally and in the markets in which U.S. Cellular operates, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·Changes in various business factors could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·Advances or changes in telecommunications technology, such as Voice over Internet Protocol (“VoIP”), High-Speed Packet Access, WiMAX or Long-Term Evolution (“LTE”), could render certain technologies used by U.S. Cellular obsolete, could reduce U.S. Cellular’s revenues or could increase its costs of doing business.

·U.S. Cellular could incur higher than anticipated intercarrier compensation costs.

·U.S. Cellular is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of these fees are subject to great uncertainty.

·Changes in U.S. Cellular’s enterprise value, changes in the market supply or demand for wireless licenses, adverse developments in the business or the industry in which U.S. Cellular is involved and/or other factors could require U.S. Cellular to recognize impairments in the carrying value of its license costs, goodwill and/or physical assets.

·Costs, integration problems or other factors associated with developing and enhancing business support systems, acquisitions/divestitures of properties or licenses and/or expansion of U.S. Cellular’s business could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·A significant portion of U.S. Cellular’s revenues is derived from customers who buy services through independent agents who market U.S. Cellular’s services on a commission basis. If U.S. Cellular’s relationships with these agents are seriously harmed, its revenues could be adversely affected.

·U.S. Cellular’s investments in technologies which are unproven may not produce the benefits that U.S. Cellular expects.

·A failure by U.S. Cellular to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network and support systems could have an adverse effect on its operations.

·Financial difficulties (including bankruptcy proceedings) of any of U.S. Cellular’s key suppliers or vendors, termination or impairment of U.S. Cellular’s relationships with such suppliers or vendors, or a failure by U.S. Cellular to manage its supply chain effectively could result in delays or termination of U.S. Cellular’s receipt of required equipment or services, or could result in excess quantities of required equipment or services, any of which could adversely affect U.S. Cellular’s business, financial condition or results of operations.

·U.S. Cellular has significant investments in entities that it does not control.  Losses in the value of such investments could have an adverse effect on U.S. Cellular’s financial condition or results of operations.

·A failure by U.S. Cellular to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, including breaches of network or information technology security, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

 

·Wars, conflicts, hostilities and/or terrorist attacks or equipment failures, power outages, natural disasters or other events could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·The market price of U.S. Cellular’s Common Shares is subject to fluctuations due to a variety of factors.

·Identification of errors in financial information or disclosures could require amendments to or restatements of financial information or disclosures included in this or prior filings with the SEC.

·Restatements of financial statements by U.S. Cellular and related matters, including resulting delays in filing periodic reports with the SEC, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·The existence of material weaknesses in the effectiveness of internal control over financial reporting could result in inaccurate financial statements or other disclosures or failure to prevent fraud, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·Changes in facts or circumstances, including new or additional information that affects the calculation of potential liabilities for contingent obligations under guarantees, indemnities, claims, litigation or otherwise, could require U.S. Cellular to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on U.S. Cellular’s financial condition or results of operations.

·Early redemptions or repurchases of debt, issuances of debt, changes in operating leases, changes in purchase obligations or other factors or developments could cause the amounts reported under Contractual Obligations in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in U.S. Cellular's most recent Annual Report on Form 10-K, as updated by the Quarterly Reports on Form 10-Q, to be different from the amounts actually incurred.

·An increase in the amount of U.S. Cellular’s debt could subject U.S. Cellular to higher interest costs and restrictions on its financing, investing and operating activities and could decrease its net income and cash flows.

·Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events, could, among other things, impede U.S. Cellular's access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on U.S. Cellular's financial condition or results of operations.

·Uncertainty of access to capital for telecommunications companies, deterioration in the capital markets, other changes in market conditions, changes in U.S. Cellular’s credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its construction, development or acquisition programs.

·U.S. Cellular's credit facility and the indenture governing its senior notes include restrictive covenants that limit its operating flexibility and U.S. Cellular may be unable to service its debt or to refinance its indebtedness before maturity.

·Changes in income tax rates, laws, regulations or rulings, or federal or state tax assessments, could have an adverse effect on U.S. Cellular’s financial condition or results of operations.

·Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on U.S. Cellular’s financial condition, results of operations or ability to do business.

·The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from handsets, wireless data devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent U.S. Cellular from using necessary technology to provide services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

·There are potential conflicts of interests between Telephone and Data Systems, Inc. (“TDS”), the parent of U.S. Cellular, and U.S. Cellular.

·Certain matters, such as control by TDS and provisions in the U.S. Cellular Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of U.S. Cellular.

·Any of the foregoing events or other events could cause customer net additions, revenues, operating income, capital expenditures and/or any other financial or statistical information to vary from U.S. Cellular’s forward-looking estimates by a material amount.