EX-99.1 2 usmex991.htm EXHIBIT 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.

 

 

1

 

 

 

 

 

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 

 

 

2

 

 

 

 

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. 

 

 

3

 

 

 

 

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 

 

 

9

 

 

 

 

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.

 

 

10

 

 

 

 

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 

 

 

11

 

 

 

 

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.

 

 

 

12