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):  February 26, 2014

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, 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 February 26, 2014, United States Cellular Corporation (“U.S. Cellular”) issued a news release announcing its results of operations for the period ended December 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:  February 26, 2014

By:	/s/ Steven T. Campbell
	Steven T. Campbell Executive Vice President – Finance, Chief Financial Officer and Treasurer (principal financial officer)

EXHIBIT INDEX

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

Exhibit No.	Description
99.1	Earnings Press Release dated February 26, 2014
99.2	Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement

EX-99.1

 

Exhibit 99.l   NEWS RELEASE

 

As previously announced, U.S. Cellular will hold a teleconference Feb. 26, 2014 at 9:30 a.m. CST.  Listen to the live call via the Events & Presentations pages of investors.teldta.com or investors.uscellular.com. 

FOR IMMEDIATE RELEASE

U.S. cellular reports fourth quarter 2013 results

CHICAGO, (Feb. 26, 2014) — United States Cellular Corporation (NYSE:USM) reported service revenues of $825.1 million for the fourth quarter of 2013, versus $1,008.9 million for the comparable period one year ago. Net income (loss) attributable to U.S. Cellular shareholders and related diluted earnings (loss) per share were $1.6 million and $0.02 respectively, for the fourth quarter of 2013, compared to $(39.6) million and $(0.47), respectively, in the comparable period one year ago.

Year-over-year comparisons are affected by the Divestiture Transaction and the deconsolidation of certain partnerships, in 2013.

“Billing system issues affected churn and overall financial performance for the fourth quarter.  However, we took important strategic actions in 2013 that position U.S. Cellular to compete more effectively,” said Kenneth R. Meyers, U.S. Cellular president and CEO. “We divested underperforming markets to focus on markets where we’re stronger, we converted to a new billing and operational support system to enable more effective service and product delivery, and we introduced Apple products and shared data plans to monetize the continued growth in data usage on the 4G LTE network. We ended the year with a strong balance sheet, after returning approximately $482 million to U.S. Cellular shareholders through a special dividend and we have agreements to sell non-strategic spectrum for over $400 million.

“We also expanded the 4G LTE network to nearly 90 percent of customers, giving us very competitive coverage in our markets to support our data growth strategies. We’ll continue to invest in our future by further expanding and enhancing our network. Network quality is the foundation of our strategy to increase customer additions and build loyalty, together with competitive devices, plans and pricing, outstanding customer service, and a Rewards Program that makes customers feel like members. We’re also committed to seeking opportunities to increase operational efficiency.”

2014 Estimated Results

Capital expenditures for 2014 are expected to be approximately $640 million, down from $738 million in 2013.  U.S. Cellular is not providing guidance for 2014 revenues and profitability at this time due to a number of factors, which involve significant uncertainty and affect the company’s ability to estimate future results with reasonable confidence.  Such factors include (i) the unprecedented number of actions related to pricing of service plans and devices, including device financing, announced by competitors in recent weeks, for which the company is evaluating and determining its response; and (ii) continuing elevated churn due, at least in part, to issues arising from the company’s billing system implementation in the second half of 2013.  Although the company expects churn to improve over the next several months, the extent and timing of the improvement is uncertain.

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2013 Estimated and Actual Results

	2013 Estimated and Actual Results for the Year Ended December 31, 2013 (1)
	Estimate	Actual
(Dollars in millions)
Service revenues	$3,590-$3,640	$3,595
Adjusted income before income taxes (2)	$600-$700	$585
Capital expenditures	$735	$738

(1)These estimated results were announced by U.S. Cellular on Nov. 1, 2013.  Both estimated and actual results reflect U.S. Cellular’s consolidated results for 2013. 

(2)Adjusted income before income taxes is defined as income before income taxes, adjusted for the items set forth in the reconciliation below. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. In addition, U.S. Cellular may exclude other items from adjusted income before income taxes if such items help reflect operating results on a more comparable basis. U.S. Cellular does not intend to imply that any such amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future. Adjusted income before income taxes is not a measure of financial performance under Generally Accepted Accounting Principles in the United States (“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 useful measure of U.S. Cellular’s operating results before significant recurring non-cash charges, discrete gains and losses, and financing charges (interest expense). The following table provides a reconciliation of income (loss) before income taxes to adjusted income before income taxes for 2013 estimated and actual results:

	2013 Estimated and Actual Results for the Year Ended December 31, 2013 (1)
	Estimate	Actual
(Dollars in millions)
Income (loss) before income taxes	$350-$450	$258
Depreciation, amortization and accretion expense	$790	$804
(Gain) loss on sale of business and other exit costs, net	($245)	($247)
(Gain) loss on license sales and exchanges	($325)	($255)
(Gain) loss on investments	($20)	($19)
Interest expense	$50	$44
Adjusted income before income taxes	$600-$700	$585

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Conference Call Information

U.S. Cellular will hold a conference call on Feb. 26, 2014 at 9:30 a.m. CST.

§Access the live call on the Events & Presentation page of investors.uscellular.com or at http://www.videonewswire.com/event.asp?id=98193.

§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 investors.uscellular.com. The call will be archived on the Events & Presentations page of investors.uscellular.com. 

About U.S. Cellular

United States Cellular Corporation provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to 4.8 million customers in 23 states. The Chicago-based company had 6,700 full- and part-time associates as of Dec. 31, 2013. At the end of the fourth quarter of 2013, Telephone and Data Systems, Inc. owned 84 percent of U.S. Cellular. For more information about U.S. Cellular, visit uscellular.com. 

Contacts

Jane McCahon, Vice President, Corporate Relations and Corporate Secretary

312-592-5379

jane.mccahon@teldta.com

Julie Mathews, Investor Relations Manager

312-592-5341

julie.mathews@teldta.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 any pending acquisition and divestiture transactions,  including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the 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 TDS and U.S. Cellular 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 user, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by U.S. Cellular. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by U.S. Cellular to furnish this press release to the Securities and Exchange Commission (“SEC”), which are incorporated by reference herein.

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

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United States Cellular Corporation
Total Markets* Summary Operating Data (Unaudited)
As of or for the Quarter Ended			12/31/2013		9/30/2013		6/30/2013		3/31/2013		12/31/2012
Retail Customers
	Postpaid
		Total at end of period		4,267,000		4,343,000		4,412,000		5,060,000		5,134,000
		Gross additions		176,000		165,000		165,000		191,000		241,000
		Net additions (losses)		(71,000)		(60,000)		(120,000)		(74,000)		(41,000)
		ARPU (1)	$	53.53	$	54.64	$	54.18	$	54.85	$	54.56
		Churn rate (2)		1.9%		1.7%		2.0%		1.7%		1.8%
		Smartphone penetration (3) (4)		50.8%		47.1%		45.5%		43.5%		41.8%
	Prepaid
		Total at end of period		343,000		370,000		381,000		446,000		423,000
		Gross additions		63,000		65,000		77,000		104,000		107,000
		Net additions (losses)		(26,000)		(11,000)		(7,000)		23,000		37,000
		ARPU (1)	$	31.66	$	28.72	$	31.69	$	33.31	$	33.56
		Churn rate (2)		8.3%		6.8%		6.8%		6.2%		5.8%
Total customers at end of period				4,774,000		4,875,000		4,968,000		5,736,000		5,798,000
Billed ARPU (1)			$	50.25	$	50.92	$	50.60	$	51.13	$	50.94
Service revenue ARPU (1)			$	57.05	$	58.36	$	57.45	$	57.63	$	58.00
Smartphones sold as a percent of total   devices sold				79.6%		65.2%		66.0%		61.7%		62.9%
Total population
		Consolidated markets (5)		58,013,000		84,025,000		84,025,000		93,943,000		93,244,000
		Consolidated operating markets (5)		31,759,000		31,822,000		31,822,000		47,440,000		46,966,000
Market penetration at end of period
		Consolidated markets (6)		8.2%		5.8%		5.9%		6.1%		6.2%
		Consolidated operating markets (6)		15.0%		15.3%		15.6%		12.1%		12.3%
Capital expenditures (000s)			$	208,100	$	242,500	$	168,500	$	118,400	$	253,100
Total cell sites in service				6,975		7,687		7,748		8,027		8,028
Owned towers in service				4,448		4,422		4,411		4,411		4,408

*Represents U.S. Cellular’s consolidated markets. These are markets which U. S. Cellular currently consolidates, or previously consolidated in the periods presented, and is not adjusted in prior periods for subsequent divestitures or deconsolidations.

Refer to U.S. Cellular’s Form 8-K filed on February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the respective periods. Also refer to U.S. Cellular’s Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the twelve months ended December 31, 2012.

4

United States Cellular Corporation
Core Markets* Summary Operating Data (Unaudited)
As of or for the Quarter Ended			12/31/2013		9/30/2013		6/30/2013		3/31/2013		12/31/2012
Retail Customers
	Postpaid
		Total at end of period		4,267,000		4,343,000		4,412,000		4,463,000		4,496,000
		Gross additions		176,000		165,000		165,000		176,000		208,000
		Net additions (losses)		(71,000)		(60,000)		(53,000)		(33,000)		(19,000)
		ARPU (1)	$	53.53	$	54.64	$	54.44	$	54.21	$	53.91
		Churn rate (2)		1.9%		1.7%		1.6%		1.6%		1.7%
		Smartphone penetration (3) (4)		50.8%		47.1%		45.5%		43.0%		41.1%
	Prepaid
		Total at end of period		343,000		370,000		381,000		373,000		342,000
		Gross additions		63,000		65,000		76,000		91,000		87,000
		Net additions (losses)		(26,000)		(11,000)		8,000		31,000		37,000
		ARPU (1)	$	31.66	$	28.72	$	31.65	$	32.92	$	33.21
		Churn rate (2)		8.3%		6.8%		6.0%		5.6%		5.1%
Total customers at end of period				4,774,000		4,875,000		4,968,000		5,005,000		5,022,000
Billed ARPU (1)			$	50.25	$	50.92	$	50.98	$	50.93	$	50.71
Service revenue ARPU (1)			$	57.05	$	58.36	$	57.88	$	57.14	$	57.67
Smartphones sold as a percent of total   devices sold				79.6%		65.2%		66.1%		62.1%		62.9%
Total population
		Consolidated markets (5)		58,013,000		84,025,000		84,025,000		84,025,000		83,384,000
		Consolidated operating markets (5)		31,759,000		31,822,000		31,822,000		31,822,000		31,445,000
Market penetration at end of period
		Consolidated markets (6)		8.2%		5.8%		5.9%		6.0%		6.0%
		Consolidated operating markets (6)		15.0%		15.3%		15.6%		15.7%		16.0%
Capital expenditures (000s)			$	211,200	$	239,300	$	171,200	$	113,300	$	241,400
Total cell sites in service				6,161		6,127		6,113		6,113		6,130
Owned towers in service				3,913		3,859		3,844		3,846		3,847

*U.S. Cellular’s Core Markets excludes the Divestiture Markets and NY1 & NY2 markets for the periods presented.

Refer to U.S. Cellular’s Form 8-K filed on February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the respective periods. Also refer to U.S. Cellular’s Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the twelve months ended December 31, 2012.

(1)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 postpaid, prepaid and reseller 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.

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

(3)Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding tablets.

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

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

(6)Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated and core markets and consolidated and core operating markets, respectively, estimated by Claritas. 

5

		United States Cellular Corporation
		Consolidated Statement of Operations Highlights
		Three Months Ended December 31,
		(Unaudited, dollars and shares in thousands, except per share amounts)
							Increase (Decrease)
			2013		2012		Amount		Percent
Operating revenues
	Service		$	825,128	$	1,008,924	$	(183,796)	(18%)
	Equipment sales			77,596		106,282		(28,686)	(27%)
		Total operating revenues		902,724		1,115,206		(212,482)	(19%)
Operating expenses
	System operations (excluding Depreciation, amortization and accretion   reported below)			177,438		221,169		(43,731)	(20%)
	Cost of equipment sold			346,847		309,182		37,665	12%
	Selling, general and administrative			442,720		449,110		(6,390)	(1%)
	Depreciation, amortization and accretion			210,371		169,242		41,129	24%
	(Gain) loss on asset disposals, net			14,453		2,121		12,332	>100%
	(Gain) loss on sale of business and other exit costs, net			(3,140)		25,170		(28,310)	>(100%)
	(Gain) loss on license sales and exchanges			(255,479)		—		(255,479)	N/M
		Total operating expenses		933,210		1,175,994		(242,784)	(21%)
Operating loss				(30,486)		(60,788)		30,302	50%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities			32,152		18,780		13,372	71%
	Interest and dividend income			994		821		173	21%
	Gain on investment			29		10		19	>100%
	Interest expense			(11,570)		(7,121)		(4,449)	(62%)
	Other, net			135		327		(192)	(59%)
		Total investment and other income		21,740		12,817		8,923	70%
Loss before income taxes				(8,746)		(47,971)		39,225	82%
	Income tax benefit			(8,484)		(18,647)		10,163	55%
Net loss				(262)		(29,324)		29,062	99%
	Less: Net income (loss) attributable to noncontrolling interests, net of tax			(1,854)		10,298		(12,152)	>(100%)
Net income (loss) attributable to U.S. Cellular shareholders			$	1,592	$	(39,622)	$	41,214	>(100%)
Basic weighted average shares outstanding				84,181		84,568		(387)	(1%)
Basic earnings (loss) per share attributable to U.S. Cellular shareholders			$	0.02	$	(0.47)	$	0.49	>(100%)
Diluted weighted average shares outstanding				85,033		84,568		465	1%
Diluted earnings (loss) per share attributable to U.S. Cellular shareholders			$	0.02	$	(0.47)	$	0.49	>(100%)

6

United States Cellular Corporation
Consolidated Statement of Operations Highlights
Twelve Months Ended December 31,
(Unaudited, dollars and shares in thousands, except per share amounts)
							Increase (Decrease)
			2013		2012		Amount		Percent
Operating revenues
	Service		$	3,594,773	$	4,098,856	$	(504,083)	(12%)
	Equipment sales			324,063		353,228		(29,165)	(8%)
		Total operating revenues		3,918,836		4,452,084		(533,248)	(12%)
Operating expenses
	System operations (excluding Depreciation, amortization and accretion   reported below)			763,435		946,805		(183,370)	(19%)
	Cost of equipment sold			999,000		935,947		63,053	7%
	Selling, general and administrative			1,677,395		1,764,933		(87,538)	(5%)
	Depreciation, amortization and accretion			803,781		608,633		195,148	32%
	(Gain) loss on asset disposals, net			30,606		18,088		12,518	69%
	(Gain) loss on sale of business and other exit costs, net			(246,767)		21,022		(267,789)	>(100%)
	(Gain) loss on license sales and exchanges			(255,479)		—		(255,479)	N/M
		Total operating expenses		3,771,971		4,295,428		(523,457)	(12%)
Operating income				146,865		156,656		(9,791)	(6%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities			131,949		90,364		41,585	46%
	Interest and dividend income			3,961		3,644		317	9%
	Gain (loss) on investment			18,556		(3,718)		22,274	>(100%)
	Interest expense			(43,963)		(42,393)		(1,570)	(4%)
	Other, net			288		500		(212)	(42%)
		Total investment and other income		110,791		48,397		62,394	>100%
Income before income taxes				257,656		205,053		52,603	26%
	Income tax expense			113,134		63,977		49,157	77%
Net income				144,522		141,076		3,446	2%
	Less: Net income attributable to noncontrolling interests, net of tax			4,484		30,070		(25,586)	(85%)
Net income attributable to U.S. Cellular shareholders			$	140,038	$	111,006	$	29,032	26%
Basic weighted average shares outstanding				83,968		84,645		(677)	(1%)
Basic earnings per share attributable to U.S. Cellular shareholders			$	1.67	$	1.31	$	0.36	27%
Diluted weighted average shares outstanding				84,730		85,230		(500)	(1%)
Diluted earnings per share attributable to U.S. Cellular shareholders			$	1.65	$	1.30	$	0.35	27%

7

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
ASSETS
		December 31,		December 31,
		2013		2012
Current assets
	Cash and cash equivalents	$	342,065	$	378,358
	Short-term investments		50,104		100,676
	Accounts receivable from customers and others		586,595		445,220
	Inventory		238,188		155,886
	Income taxes receivable		—		1,612
	Prepaid expenses		65,596		62,560
	Net deferred income tax asset		99,105		35,419
	Other current assets		19,538		16,745
			1,401,191		1,196,476
Assets held for sale			16,027		216,763
Investments
	Licenses		1,401,126		1,456,794
	Goodwill		387,524		421,743
	Investments in unconsolidated entities		265,585		144,531
	Long-term investments		—		50,305
			2,054,235		2,073,373
Property, plant and equipment
	In service and under construction		7,717,512		7,478,428
	Less: Accumulated depreciation		4,860,992		4,455,840
			2,856,520		3,022,588
Other assets and deferred charges			117,735		78,250
Total assets		$	6,445,708	$	6,587,450

8

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
			December 31,		December 31,
			2013		2012
Current liabilities
	Current portion of long-term debt		$	166	$	92
	Accounts payable
		Affiliated		11,243		10,725
		Trade		405,583		310,936
	Customer deposits and deferred revenues			256,740		192,113
	Accrued taxes			73,820		35,834
	Accrued compensation			66,566		90,418
	Other current liabilities			192,055		114,881
				1,006,173		754,999
Liabilities held for sale				—		19,594
Deferred liabilities and credits
	Net deferred income tax liability			836,297		849,818
	Other deferred liabilities and credits			315,073		288,441
Long-term debt				878,032		878,858
Noncontrolling interests with redemption features				536		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			1,424,729		1,412,453
	Treasury shares			(164,692)		(165,724)
	Retained earnings			2,043,095		2,399,052
		Total U.S. Cellular shareholders' equity		3,391,206		3,733,855
Noncontrolling interests				18,391		61,392
	Total equity			3,409,597		3,795,247
Total liabilities and equity			$	6,445,708	$	6,587,450

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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 December 31, 2013 and December 31, 2012.

		December 31,		December 31,
		2013		2012
Cash and cash equivalents		$	342,065	$	378,358
Amounts included in short-term investments (1)(2)
	U.S. Treasury Notes		50,104		100,676
Amounts included in long-term investments (1)
	U.S. Treasury Notes		—		50,305
Total cash and cash equivalents and investments		$	392,169	$	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.

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United States Cellular Corporation
Consolidated Statement of Cash Flows
Twelve Months Ended December 31,
(Unaudited, dollars in thousands)
			2013		2012
Cash flows from operating activities
	Net income		$	144,522	$	141,076
	Add (deduct) adjustments to reconcile net income to net cash flows from   operating activities
		Depreciation, amortization and accretion		803,781		608,633
		Bad debts expense		98,864		67,372
		Stock-based compensation expense		15,844		21,466
		Deferred income taxes, net		(75,348)		49,244
		Equity in earnings of unconsolidated entities		(131,949)		(90,364)
		Distributions from unconsolidated entities		125,660		84,417
		(Gain) loss on asset disposals, net		30,606		18,088
		(Gain) loss on sale of business and other exit costs, net		(246,767)		21,022
		(Gain) loss on license sales and exchanges		(255,479)		—
		(Gain) loss on investments		(18,556)		3,718
		Noncash interest expense		1,059		(1,822)
		Other operating activities		646		546
	Changes in assets and liabilities from operations
		Accounts receivable		(291,759)		(64,816)
		Inventory		(82,422)		(28,786)
		Accounts payable - trade		85,199		(4,977)
		Accounts payable - affiliate		147		(1,458)
		Customer deposits and deferred revenues		66,344		30,353
		Accrued taxes		30,037		73,064
		Accrued interest		273		167
		Other assets and liabilities		(9,805)		(27,652)
				290,897		899,291
Cash flows from investing activities
	Cash used for additions to property, plant and equipment			(717,862)		(826,400)
	Cash paid for acquisitions and licenses			(16,540)		(122,690)
	Cash received from divestitures			811,120		49,932
	Cash paid for investments			—		(120,000)
	Cash received for investments			100,000		125,000
	Other investing activities			(3,969)		(2,453)
				172,749		(896,611)
Cash flows from financing activities
	Repayment of long-term debt			(414)		(145)
	Common shares reissued for benefit plans, net of tax payments			5,784		(2,205)
	Common shares repurchased			(18,544)		(20,045)
	Payment of debt issuance costs			(23)		(514)
	Dividends paid			(482,270)		—
	Distributions to noncontrolling interests			(3,766)		(22,970)
	Payments to acquire additional interest in subsidiaries			(1,005)		(3,167)
	Other financing activities			299		569
				(499,939)		(48,477)
Net decrease in cash and cash equivalents				(36,293)		(45,797)
Cash and cash equivalents
	Beginning of period			378,358		424,155
	End of period		$	342,065	$	378,358

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United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
			Three Months Ended				Twelve Months Ended
			December 31,				December 31,
				2013		2012		2013		2012
	Cash flows from operating activities		$	(5,336)	$	290,532	$	290,897	$	899,291
	Deduct:
	Cash used for additions to property, plant   and equipment			195,682		214,969		717,862		826,400
		Free cash flow (1)	$	(201,018)	$	75,563	$	(426,965)	$	72,891

(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 which U.S. Cellular believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after Cash used for additions to property, plant and equipment.

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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.

·Changes in roaming practices or other factors could cause U.S. Cellular's roaming revenues to decline from current levels and/or impact U.S. Cellular's ability to service its customers in geographic areas where U.S. Cellular does not have its own network, 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.

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·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.

·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.

·Performance under device purchase agreements could have a material adverse impact on U.S. Cellular's business, financial condition or results of operations.

·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 licenses, goodwill and/or physical assets.

·Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges 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 and third-party national retailers. If U.S. Cellular’s relationships with these agents or third-party national retailers are seriously harmed, its business, financial condition or results of operations could be adversely affected.

·U.S. Cellular’s investments in unproven technologies 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, support and other systems and infrastructure could have an adverse effect on its operations.

·Financial difficulties (including bankruptcy proceedings) or other operational difficulties 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.

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·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 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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