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):  May 3, 2013

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):

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

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

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

o 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 May 3, 2013, United States Cellular Corporation (“U.S. Cellular”) issued a news release announcing its results of operations for the period ended March 31, 2013.  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:  May 3, 2013

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 May 03, 2013
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 May 3, 2013 at 9:30 a.m. CDT.  Listen to the live call via the Conference Calls page of teldta.com or uscellular.com. 

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

                    (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 first QUARTER 2013 RESULTS

U.S. Cellular to offer Apple products later this year; updates 2013 guidance

CHICAGO – May 3, 2013 – United States Cellular Corporation [NYSE:USM] reported service revenues of $996.3 million for the first quarter of 2013, versus $1,023.8 million for the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $4.9 million and $0.06 respectively, for the first quarter of 2013, compared to $62.5 million and $0.73, respectively, in the comparable period one year ago.

As previously announced on Nov. 7, 2012, U.S. Cellular reached a definitive agreement to sell its Chicago, St. Louis, central Illinois and three other markets (the “Divestiture Markets”) to subsidiaries of Sprint Nextel Corporation [NYSE:S] for $480 million (the “Divestiture Transaction”).  The transaction has been approved by the FCC and the closing is expected to occur in the second quarter of 2013. 

“We continued to expand our 4G LTE network and encourage customers to migrate, which has helped us further increase smartphone penetration and shift more customers to 4G LTE,”  said Mary N. Dillon, U.S. Cellular president and CEO. “We added new prepaid customers through our Walmart distribution.  In our core markets, postpaid gross additions were relatively flat and elevated churn resulted in a net customer loss.

“We have a number of strategies in progress to increase loyalty and attract more customers, including our announcement today that we will begin offering Apple products later this year. By further strengthening our device portfolio, we’ll give consumers another great reason to switch to U.S. Cellular, and enable our existing customers to choose from an even wider variety of iconic smartphones, and enjoy the outstanding U.S. Cellular customer experiences they deserve. Our smartphone penetration is currently 43 percent of core market customers and growing quickly. We believe there will be strong, ongoing demand for smartphones and data products and services from our customers, and we have significant room for growth in this area.

“We’re supporting this growth by bringing 4G LTE to 87 percent of our customers in 2013, and increasing our network capacity. In our core markets, 4G LTE smartphones were 76 percent of smartphones sold in the quarter, while smartphones overall were 62 percent of devices sold. We recently launched the 4G LTE Samsung Galaxy S® 4, and we have more devices to come throughout the year. While profitability continues to be impacted by the higher subsidies for 4G LTE smartphones, our long-term strategy is to balance those costs with growth in ARPU and reduced capital expenditures for our legacy networks.

“We’re continuing to enhance and differentiate the U.S. Cellular customer experience and expand our distribution. We began offering U.S. Cellular service through select Sam’s Club locations in 14 states in April, to increase availability in new channels. To attract more small and medium business customers, we’re launching a marketing campaign this month that addresses their unique needs. We’re also focused across U.S. Cellular on simplifying our operations and processes to increase efficiency and reduce complexity and cost.”

1

2013 ESTIMATES

U.S. Cellular’s estimates of full-year 2013 results are shown below.  Such estimates represent U.S. Cellular’s views as of the date of filing of U.S. Cellular’s Form 10-Q for the quarter ended March 31, 2013.  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 such estimated results.

	2013 Estimated Results (1)
	Core Markets (2)		Divestiture Markets (2)(3)		U.S. Cellular Consolidated (2)(3)
	Previous	Current	Previous	Current	Previous	Current
(Dollars in millions)
Service revenues	$3,600 - $3,700	$3,475 - $3,575	$165 - $185	$145 - $165	$3,765 - $3,885	$3,620 - $3,740
Adjusted income before   income taxes (4) (5)	$765 - $865	$560 - $660	$15 - $35	$35 - $55	$780 - $900	$595 - $715
Capital expenditures	Approx. $600	Approx. $730	—	$5	Approx. $600	Approx. $735

(1)These estimates are based on U.S. Cellular’s current plans, which include an expansion of the multi-year deployment of 4G LTE technology which commenced in 2011; such expansion includes deployment in additional markets as well as deployment on the 850 MHz band to provide additional capacity for future growth in data usage, enable potential future 4G LTE roaming, and support the sale of Apple products.  These estimates also reflect the estimated impacts of selling Apple products and the deconsolidation of certain partnerships that will be accounted for as equity method investments effective April 3, 2013.  New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges) could affect U.S. Cellular’s plans and, therefore, its 2013 estimated results.

(2)The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets.  The amounts for the Core Markets and Divestiture Markets represent non-GAAP financial measures.  U.S. Cellular believes that the amounts for the Core Markets and Divestiture Markets may be useful to investors and other users of its financial information in evaluating the separate results for the Core Markets.Divestiture Markets are comprised of U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets.  Core Markets are comprised of all other markets in which U.S. Cellular conducts business including Peoria, Rockford and certain other areas in Illinois, and in Columbia, Joplin, Jefferson City and certain other areas in Missouri.  Core Markets as defined also includes any other income or expenses due to U.S. Cellular’s direct or indirect ownership interests in other spectrum in the Divestiture Markets which was not included in the sale and other retained assets from the Divestiture Markets.

(3)These estimates assume the Divestiture Transaction closes in the second quarter of 2013.  Actual effects could vary significantly from these estimates as a result of a change in the expected timing of the Divestiture Transaction or changes in other terms and conditions of the sale.

(4)Adjusted income before income taxes is a non-GAAP financial measure defined as Income before income taxes, adjusted for:  Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs (if any), and Interest expense. Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company’s operating performance or as an alternative to Cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity.  U.S. Cellular believes Adjusted income before income taxes is a meaningful measure of U.S. Cellular’s operating results before significant recurring non-cash charges, gains and losses and financing charges (Interest expense) 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; such amounts may occur in the future. The following tables provide a reconciliation of Income (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results and 2012 actual results:

	2013 Estimated Results
	Core Markets (2)	Divestiture Markets (2)(3)		U.S. Cellular Consolidated (2)(3)
(Dollars in millions)
Income (loss) before income taxes (5)	($30)-$70	($215)-($195)		($245)-($125)
Depreciation, amortization and accretion expense (6)	Approx. $540	Approx. $250		Approx. $790
Interest expense	Approx. $50	—		Approx. $50
Adjusted income before income taxes	$560-$660	$35-$55		$595-$715
	U.S. Cellular Consolidated Actual Results
		Three Months Ended March 31, 2013		Year Ended December 31, 2012
Income before income taxes		$	18	$	205
Depreciation, amortization and accretion expense (6)			190		609
(Gain) loss on sale of business and other exit costs, net			7		21
Interest expense			11		42
Adjusted income before income taxes		$	226	$	877

2

(5)This amount does not include any estimate for (Gain) loss on sale of business and other exit costs, net, as the timing of such amount is not readily estimable.

(6)The 2013 estimated amounts for depreciation, amortization and accretion expense in the Divestiture Markets include approximately $185 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.  Actual results for the three months ended March 31, 2013 and the year ended December 31, 2012 include $38 million and $20 million, respectively, of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.

Conference Call Information

U.S. Cellular will hold a conference call on May 3, 2013 at 9:30 a.m. CDT.

§Access the live call on the Conference Calls page of uscellular.com  or at

http://www.media-server.com/m/acs/1b33881ae5323e924285a4a1458e63c1. 

§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. 

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 5.7 million customers in 26 states. The Chicago-based company had 8,000 full- and part-time associates as of March 31, 2013. At the end of the year, Telephone and Data Systems, Inc. owned 85 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: impacts of the Divestiture Transaction including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transaction and the financial impacts of such transaction; the ability of the company to successfully manage and grow its markets; the overall economy; competition; 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 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; and changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company. 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 (“SEC”), which are incorporated by reference herein.

For more information about U.S. Cellular, visit uscellular.com. 

3

United States Cellular Corporation
Total Markets Summary Operating Data (Unaudited)
Quarter Ended			3/31/2013		12/31/2012		9/30/2012		6/30/2012		3/31/2012
Retail Customers
	Postpaid
		Total at end of period (1)		5,060,000		5,134,000		5,175,000		5,213,000		5,261,000
		Gross additions		191,000		241,000		230,000		199,000		210,000
		Net additions (losses)		(74,000)		(41,000)		(38,000)		(48,000)		(38,000)
		ARPU (2)	$	54.85	$	54.56	$	54.34	$	54.42	$	54.00
		Churn rate (3)		1.7%		1.8%		1.7%		1.6%		1.6%
		Smartphone penetration (4) (5)		43.5%		41.8%		38.6%		36.8%		34.4%
	Prepaid
		Total at end of period		446,000		423,000		386,000		329,000		309,000
		Gross additions		104,000		107,000		120,000		78,000		63,000
		Net additions (losses)		23,000		37,000		57,000		20,000		4,000
		ARPU (2)	$	33.31	$	33.56	$	32.97	$	33.59	$	33.17
		Churn rate (3)		6.2%		5.8%		5.9%		6.2%		6.4%
Total customers at end of period (1)				5,736,000		5,798,000		5,808,000		5,799,000		5,837,000
Billed ARPU (2)			$	51.13	$	50.94	$	50.83	$	50.99	$	50.52
Service revenue ARPU (2)			$	57.63	$	58.00	$	59.57	$	59.05	$	58.21
Smartphones sold as a percent of total   devices sold				61.7%		62.9%		53.0%		51.9%		54.1%
Total population
		Consolidated markets (6)		93,943,000		93,244,000		92,996,000		92,684,000		92,684,000
		Consolidated operating markets (6)		47,440,000		46,966,000		46,966,000		46,966,000		46,966,000
Market penetration at end of period
		Consolidated markets (7)		6.1%		6.2%		6.2%		6.3%		6.3%
		Consolidated operating markets (7)		12.1%		12.3%		12.4%		12.3%		12.4%
Capital expenditures (000s)			$	118,400	$	253,100	$	199,100	$	183,200	$	201,300
Total cell sites in service				8,027		8,028		7,984		7,932		7,875
Owned towers in service				4,411		4,408		4,377		4,346		4,318

4

United States Cellular Corporation
Core Markets Summary Operating Data (Unaudited)
Quarter Ended			3/31/2013		12/31/2012		9/30/2012		6/30/2012		3/31/2012
Retail Customers
	Postpaid
		Total at end of period (1)		4,639,000		4,672,000		4,688,000		4,708,000		4,736,000
		Gross additions		184,000		218,000		204,000		176,000		182,000
		Net additions (losses)		(32,000)		(16,000)		(20,000)		(28,000)		(21,000)
		ARPU (2)	$	54.23	$	53.92	$	53.68	$	53.70	$	53.25
		Churn rate (3)		1.5%		1.7%		1.6%		1.4%		1.4%
		Smartphone penetration (4) (5)		43.0%		41.1%		37.8%		36.0%		34.3%
	Prepaid
		Total at end of period		373,000		342,000		305,000		246,000		223,000
		Gross additions		92,000		86,000		100,000		59,000		42,000
		Net additions (losses)		31,000		38,000		59,000		23,000		5,000
		ARPU (2)	$	32.92	$	33.21	$	33.09	$	33.37	$	32.69
		Churn rate (3)		5.7%		5.0%		5.0%		5.2%		5.6%
Total customers at end of period (1)				5,225,000		5,238,000		5,223,000		5,196,000		5,210,000
Billed ARPU (2)			$	50.65	$	50.43	$	50.34	$	50.43	$	49.91
Service revenue ARPU (2)			$	57.37	$	57.90	$	59.66	$	59.03	$	58.20
Smartphones sold as a percent of total   devices sold				62.1%		62.9%		53.0%		52.0%		54.1%
Total population
		Consolidated markets (6)		84,625,000		83,864,000		83,075,000		82,763,000		82,763,000
		Consolidated operating markets (6)		32,422,000		31,925,000		31,590,000		31,590,000		31,590,000
Market penetration at end of period
		Consolidated markets (7)		6.2%		6.2%		6.3%		6.3%		6.3%
		Consolidated operating markets (7)		16.1%		16.4%		16.5%		16.4%		16.5%
Capital expenditures (000s)			$	113,300	$	241,400	$	184,100	$	163,600	$	179,700
Total cell sites in service				6,277		6,292		6,251		6,199		6,146
Owned towers in service				3,846		3,847		3,818		3,787		3,761

(1)Includes 176,000 and 168,000 postpaid customers at March 31, 2013 and 2012, respectively, related to the St. Lawrence Seaway RSA Cellular Partnership (“NY1”) and New York RSA 2 Cellular Partnership (“NY2” and, together with NY1, the “Partnerships”).

(2)ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period.  These revenue bases and customer populations are shown below:

a.Postpaid ARPU consists of total postpaid service revenues and postpaid customers.

b.Prepaid ARPU consists of total prepaid service revenues and prepaid customers.

c.Billed ARPU consists of total retail service revenues and postpaid, prepaid and reseller customers.

d.Service revenue ARPU consists of total retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(3)Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

(4)Smartphones represent wireless devices which run on an Android^TM, BlackBerry® or Windows Mobile® operating system, excluding tablets.

(5)Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(6)Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (7) below.

(7)Market penetration is 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®.

5

United States Cellular Corporation
Consolidated Statement of Operations Highlights
Three Months Ended March 31,
(Unaudited, dollars and shares in thousands, except per share amounts)
							Increase (Decrease)
			2013		2012		Amount		Percent
Operating revenues
	Service		$	996,349	$	1,023,820	$	(27,471)	(3%)
	Equipment sales			85,397		68,301		17,096	25%
		Total operating revenues		1,081,746		1,092,121		(10,375)	(1%)
Operating expenses
	System operations (excluding Depreciation, amortization and accretion   reported below)			216,299		233,164		(16,865)	(7%)
	Cost of equipment sold			241,691		187,036		54,655	29%
	Selling, general and administrative			420,080		442,244		(22,164)	(5%)
	Depreciation, amortization and accretion			189,845		146,685		43,160	29%
	Loss on asset disposals, net			5,434		2,003		3,431	>100%
	(Gain) loss on sale of business and other exit costs, net			6,931		(4,213)		11,144	>(100%)
		Total operating expenses		1,080,280		1,006,919		73,361	7%
Operating income				1,466		85,202		(83,736)	(98%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities			26,835		21,614		5,221	24%
	Interest and dividend income			903		1,043		(140)	(13%)
	Interest expense			(10,910)		(13,411)		2,501	19%
	Other, net			(215)		202		(417)	>(100%)
		Total investment and other income		16,613		9,448		7,165	76%
Income before income taxes				18,079		94,650		(76,571)	(81%)
	Income tax expense			7,369		25,638		(18,269)	(71%)
Net income				10,710		69,012		(58,302)	(84%)
	Less: Net income attributable to noncontrolling interests, net of tax			(5,796)		(6,520)		724	11%
Net income attributable to U.S. Cellular shareholders			$	4,914	$	62,492	$	(57,578)	(92%)
Basic weighted average shares outstanding				83,838		84,570		(732)	(1%)
Basic earnings per share attributable to U.S. Cellular shareholders			$	0.06	$	0.74	$	(0.68)	(92%)
Diluted weighted average shares outstanding				84,403		85,133		(730)	(1%)
Diluted earnings per share attributable to U.S. Cellular shareholders			$	0.06	$	0.73	$	(0.67)	(92%)

6

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
ASSETS
		March 31,		December 31,
		2013		2012
Current assets
	Cash and cash equivalents	$	419,696	$	378,358
	Short-term investments		110,585		100,676
	Accounts receivable from customers and others		394,701		445,220
	Inventory		139,136		155,886
	Income taxes receivable		2,776		1,612
	Prepaid expenses		64,365		62,560
	Net deferred income tax asset		36,302		35,419
	Other current assets		17,111		16,745
			1,184,672		1,196,476
Assets held for sale			213,593		216,763
Investments
	Licenses		1,470,944		1,456,794
	Goodwill		421,743		421,743
	Customer lists, net		68		102
	Investments in unconsolidated entities		165,529		144,531
	Long-term investments		40,142		50,305
			2,098,426		2,073,475
Property, plant and equipment
	In service and under construction		7,562,931		7,478,428
	Less: Accumulated depreciation		4,614,423		4,455,840
			2,948,508		3,022,588
Other assets and deferred charges			78,436		78,148
Total assets		$	6,523,635	$	6,587,450

7

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
			March 31,		December 31,
			2013		2012
Current liabilities
	Current portion of long-term debt		$	93	$	92
	Accounts payable
		Affiliated		8,792		10,725
		Trade		281,762		310,936
	Customer deposits and deferred revenues			202,209		192,113
	Accrued taxes			43,357		35,834
	Accrued compensation			50,698		90,418
	Other current liabilities			98,657		114,881
				685,568		754,999
Liabilities held for sale				18,360		19,594
Deferred liabilities and credits
	Net deferred income tax liability			857,439		849,818
	Other deferred liabilities and credits			292,687		288,441
Long-term debt				878,975		878,858
Noncontrolling interests with redemption features				466		493
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			1,417,308		1,412,453
	Treasury shares			(183,385)		(165,724)
	Retained earnings			2,403,325		2,399,052
		Total U.S. Cellular shareholders' equity		3,725,322		3,733,855
Noncontrolling interests				64,818		61,392
	Total equity			3,790,140		3,795,247
Total liabilities and equity			$	6,523,635	$	6,587,450

8

United States Cellular Corporation

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)

The following table presents U.S. Cellular’s cash and cash equivalents and investments at March 31, 2013 and December 31, 2012.

		March 31,		December 31,
		2013		2012
Cash and cash equivalents		$	419,696	$	378,358
Amounts included in short-term investments (1)(2)
	Government-backed securities (3)		110,585		100,676
Amounts included in long-term investments (1)(4)
	Government-backed securities (3)		40,142		50,305
Total cash and cash equivalents and investments		$	570,423	$	529,339

(1)Designated as held-to-maturity investments and are recorded at amortized cost on the Consolidated Balance Sheet.

(2)Maturities are less than twelve months from the respective balance sheet dates.

(3)Includes U.S. treasury securities and corporate notes guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.

(4)Maturities are 20 months from the balance sheet date.

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United States Cellular Corporation
Consolidated Statement of Cash Flows
Three Months Ended March 31,
(Unaudited, dollars in thousands)
			2013		2012
Cash flows from operating activities
	Net income		$	10,710	$	69,012
	Add (deduct) adjustments to reconcile net income to net cash flows from   operating activities
		Depreciation, amortization and accretion		189,845		146,685
		Bad debts expense		16,910		13,850
		Stock-based compensation expense		5,036		5,391
		Deferred income taxes, net		7,048		6,283
		Equity in earnings of unconsolidated entities		(26,835)		(21,614)
		Distributions from unconsolidated entities		5,836		2,822
		Loss on asset disposals, net		5,434		2,003
		(Gain) loss on sale of business and other exit costs, net		6,931		(4,213)
		Noncash interest expense		262		451
		Other operating activities		250		449
	Changes in assets and liabilities from operations
		Accounts receivable		33,611		36,621
		Inventory		16,750		(4,410)
		Accounts payable - trade		4,644		(17,689)
		Accounts payable - affiliate		(1,933)		2,989
		Customer deposits and deferred revenues		8,862		9,512
		Accrued taxes		6,175		79,765
		Accrued interest		9,201		9,167
		Other assets and liabilities		(75,122)		(80,107)
				223,615		256,967
Cash flows from investing activities
	Cash used for additions to property, plant and equipment			(151,024)		(209,160)
	Cash paid for acquisitions and licenses			(14,150)		(11,096)
	Cash received from divestitures			—		49,786
	Cash paid for investments			—		(10,000)
	Cash received for investments			—		10,000
	Other investing activities			3,654		296
				(161,520)		(170,174)
Cash flows from financing activities
	Repayment of long-term debt			(61)		(12)
	Common shares reissued for benefit plans, net of tax payments			123		357
	Common shares repurchased			(18,425)		—
	Distributions to noncontrolling interests			(2,396)		(218)
	Other financing activities			2		3
				(20,757)		130
Net increase in cash and cash equivalents				41,338		86,923
Cash and cash equivalents
	Beginning of period			378,358		424,155
	End of period		$	419,696	$	511,078

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United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
Three months ended March 31,				2013		2012
	Cash flows from operating activities		$	223,615	$	256,967
	Deduct:
	Cash used for additions to property, plant and equipment			151,024		209,160
		Free cash flow (1)	$	72,591	$	47,807

(1)Free cash flow is defined as Cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure. U.S. Cellular believes that free cash flow as reported by U.S. Cellular may be 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.

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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 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 risks, 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 information, 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 (including planned acquisitions, divestitures and exchanges) 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 business, financial condition or results of operations.

·U.S. Cellular’s system 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.  Further consolidation within the wireless industry, continued network build-outs by other wireless carriers and/or the inability to negotiate 4G LTE roaming agreements with other operators could cause roaming revenues to decline from current levels, which would have an adverse effect on U.S. Cellular’s business, financial condition or 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, financial condition or results of operations.

·To the extent conducted by the Federal Communications Commission (“FCC”), U.S. Cellular is likely to participate in FCC auctions of additional spectrum in the future as an applicant or as a noncontrolling 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 business, financial condition or results of operations.

·Changes in Universal Service Fund (“USF”) funding and/or intercarrier compensation could have an adverse impact on U.S. Cellular’s business, financial condition or results of operations.

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·An inability to attract and/or retain highly competent 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 primarily to conditions in this industry.

·U.S. Cellular's lower scale relative to larger competitors could adversely affect its 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 technology could render certain technologies used by U.S. Cellular obsolete, could put U.S. Cellular at a competitive disadvantage, could reduce U.S. Cellular’s revenues or could increase its costs of doing business.

·Complexities associated with deploying new technologies present substantial risk.

·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 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 business, financial condition or results of operations 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) or other operational difficulties of any of U.S. Cellular’s key suppliers, termination or impairment of U.S. Cellular’s relationships with such suppliers, 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.

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·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 Securities and Exchange Commission (“SEC”). Such amendments or restatements 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 business, financial condition or results of operations.

·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 business, financial condition or results of operations.

·Uncertainty of U.S. Cellular's ability to access capital, 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.

·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 business, financial condition or results of operations.

·The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless 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 products or 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 TDS 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 revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from U.S. Cellular’s forward-looking estimates by a material amount.

U.S. Cellular undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.  Readers should evaluate any statements in light of these important factors.

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