EX-99.1 2 ex991.htm ex991.htm - Generated by SEC Publisher for SEC Filing

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 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™-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.

 

2

 

 

 

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.

 

3

 

 
   

 

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.

 

4

 

 

 

 

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.

 

5

 

 

 

 

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.

 

6

 

   

 

 

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.

 

7

 

 

 

 

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.

 

8

 

 

 

 

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.

 

9

 

   

 

 

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 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.

 

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