EX-99.1 2 usm8kex991.htm EXHIBIT 99.1  

 

Exhibit 99.l   NEWS RELEASE

   

 

As previously announced, U.S. Cellular will hold a teleconference Feb. 25, 2015 at 9:30 a.m. CST.  Listen to the live call via the Events & Presentations page of investors.uscellular.com. 

 

FOR IMMEDIATE RELEASE

 

U.S. cellular reports fourth quarter 2014 results

Provides 2015 guidance

 

CHICAGO, (Feb. 25, 2015) — United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,008.7 million for the fourth quarter of 2014, versus $902.7 million for the same period one year ago. Net income (loss) attributable to U.S. Cellular shareholders and related diluted earnings (loss) per share were $(21.3) million and $(0.25) respectively, for the fourth quarter of 2014, compared to $1.6 million and $0.02, respectively, in the comparable period one year ago. 

 

“We accomplished our top priority in 2014 and grew our customer base,” said Kenneth R. Meyers, U.S. Cellular president and CEO.  “U.S. Cellular’s strong value proposition that offers a high-quality network and competitive devices, plans and pricing drove this result, along with customer service that is back to our normal high standards.

 

“We continued to invest in our network, bringing 4G LTE to 94 percent of our postpaid customers. And to ensure that the company can remain competitive and meet broadband demands, U.S. Cellular and its partners were successful in acquiring valuable spectrum in the most recent auction. 

 

“In 2015, we plan to build upon our 2014 accomplishments.  We will continue to invest in our network, further expanding our deployment of 4G LTE and testing new technologies such as Voice over LTE.  We also will remain very focused on growing our customer base and increasing revenue driven by smartphone adoption and data monetization, although a continuation of the current aggressive pricing environment could provide a headwind to these efforts.  Growing our top line while improving our cost structure should lead to improved profitability.”       

 

 

 

1

 

 

 

2015 Estimated Results

 

U.S. Cellular’s estimates of full-year 2015 results are shown below.  Such estimates represent U.S. Cellular’s view as of February 25, 2015.  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.

 

U.S. Cellular has changed one of the measures which it uses to present estimates of future operating results.  U.S. Cellular previously presented adjusted income before income taxes, 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); net Gain or loss on license sales and exchanges (if any); net Gain or loss on investments ( if any); and interest expense.  U.S. Cellular is now presenting Operating cash flow and Adjusted earnings before interest, taxes, depreciation, amortization and accretion (“Adjusted EBITDA”), as defined below, which it believes are measures which provide a comprehensive view of U.S Cellular’s recurring results of operations.

 

  

  

  

  

  

(Dollars in millions)

2015 Estimated Results

  

Actual Results for the Year Ended December 31, 2014

Total operating revenues

$4,000-$4,200

  

$3,893 

Operating cash flow (1)

$350-$450

  

$338 

Adjusted EBITDA (1)

$530-$630

  

$480 

Capital expenditures

$600 

  

$558 

 

(1)     Operating cash flow is defined as net income, adjusted for the items set forth in the reconciliation below.  Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation below.  Operating cash flow and Adjusted EBITDA exclude these items in order to show operating results on a more comparable basis from period to period. From time to time, U.S. Cellular may exclude other items from Operating cash flow and/or Adjusted EBITDA if such items help reflect operating results on a more comparable basis. U.S. Cellular does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future.  Operating cash flow and Adjusted EBITDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (“GAAP”) and should not be considered as alternatives to net income as indicators of the company’s operating performance or as alternatives to cash flows from operating activities, determined in accordance with GAAP, as indicators of cash flows or as measures of liquidity. U.S. Cellular believes Operating cash flow and Adjusted EBITDA are useful measures of U.S. Cellular’s operating results before significant recurring non-cash charges, gains and losses, and other items as indicated below. The following tables provide a reconciliation to Operating cash flow and Adjusted EBITDA for 2015 estimated results and year ended December 31, 2014 actual results:

 

 

 

2

 

 

 

  

  

2015 Estimated Results (2)

  

Actual Results for the Year Ended

December 31, 2014

(Dollars in millions)

  

  

  

Net income (loss) (GAAP)

N/A

  

($47)

Add back:

  

  

  

  

Income tax expense (benefit)

N/A

  

($12)

Income (loss) before income taxes (GAAP)

($10)-$90

  

($59)

Add back:

  

  

  

  

Interest expense

$85 

  

$57 

  

Depreciation, amortization and accretion expense

$545 

  

$606 

EBITDA

$620-$720

  

$605 

Add back:

  

  

  

  

(Gain) loss on sale of business and other exit costs, net

($105)

  

($33)

  

(Gain) loss on license sales and exchanges

 — 

  

($113)

  

(Gain) loss on asset disposals, net

$15 

  

$21 

Adjusted EBITDA (3)

$530-$630

  

$480 

Deduct:

  

  

  

  

Equity in earnings of unconsolidated entities

($130)

  

($130)

  

Interest and dividend income

($50)

  

($12)

Operating cash flow (4)

$350-$450

  

$338 

 

(2)     In providing 2015 Estimated Results, U.S. Cellular has not completed the above reconciliation to net income because it does not provide guidance for income taxes. U.S. Cellular believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance. Accordingly, a reconciliation to net income is not available without unreasonable effort.

(3)     Adjusted EBITDA (new measure) equals adjusted income before income taxes (previous measure) excluding gain or loss on asset disposals, net. See Adjusted EBITDA reconciliation for full year 2014, 2013, and 2012 on the company’s website at investors.uscellular.com. 

(4)     A reconciliation of Operating cash flow (Non-GAAP) to operating income (GAAP) for full year 2014, 2013, and 2012 actual results can be found on the company's website at investors.uscellular.com. 

 

 

 

3

 

 

 

Conference Call Information

U.S. Cellular will hold a conference call on Feb. 25, 2015 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=101572.  

§  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 6,600 full- and part-time associates as of Dec. 31, 2014. At the end of the fourth quarter of 2014, 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@tdsinc.com

 

Julie Mathews, Investor Relations Manager

312-592-5341

julie.mathews@tdsinc.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; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless 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.    

 

 

 

4

 

 

 

United States Cellular Corporation

Total Markets* Summary Operating Data (Unaudited)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

As of or for the Quarter Ended

12/31/2014

  

9/30/2014

  

6/30/2014

  

3/31/2014

  

12/31/2013

Retail Customers

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Postpaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 4,298,000 

  

  

 4,200,000 

  

  

 4,148,000 

  

  

 4,174,000 

  

  

 4,267,000 

  

  

Gross additions

  

 302,000 

  

  

 251,000 

  

  

 190,000 

  

  

 197,000 

  

  

 176,000 

  

  

Net additions (losses)

  

 98,000 

  

  

 52,000 

  

  

 (26,000) 

  

  

 (93,000) 

  

  

 (71,000) 

  

  

ARPU (1)

$

 56.51 

  

$

 56.37 

  

$

 56.82 

  

$

 57.59 

  

$

 53.53 

  

  

ARPA (2)

$

 136.13 

  

$

 132.99 

  

$

 131.95 

  

$

 132.03 

  

$

 121.21 

  

  

Churn rate (3)

  

1.6%

  

  

1.6%

  

  

1.7%

  

  

2.3%

  

  

1.9%

  

  

Smartphone penetration (4)

  

59.8%

  

  

57.9%

  

  

55.3%

  

  

53.1%

  

  

50.8%

  

Prepaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 348,000 

  

  

 350,000 

  

  

 352,000 

  

  

 356,000 

  

  

 343,000 

  

  

Gross additions

  

 60,000 

  

  

 64,000 

  

  

 65,000 

  

  

 85,000 

  

  

 63,000 

  

  

Net additions (losses)

  

 (2,000) 

  

  

 (2,000) 

  

  

 (4,000) 

  

  

 13,000 

  

  

 (26,000) 

  

  

ARPU (1)

$

 35.33 

  

$

 34.40 

  

$

 34.02 

  

$

 32.22 

  

$

 31.66 

  

  

Churn rate (3)

  

5.9%

  

  

6.3%

  

  

6.5%

  

  

6.9%

  

  

8.3%

Total customers at end of period

  

 4,760,000 

  

  

 4,674,000 

  

  

 4,653,000 

  

  

 4,684,000 

  

  

 4,774,000 

Billed ARPU (1)

$

 53.63 

  

$

 53.24 

  

$

 53.36 

  

$

 53.93 

  

$

 50.25 

Service revenue ARPU (1)

$

 60.10 

  

$

 60.92 

  

$

 60.32 

  

$

 60.19 

  

$

 57.05 

Smartphones sold as a percent of total

  handsets sold

  

86.5%

  

  

80.8%

  

  

79.0%

  

  

78.2%

  

  

84.5%

Total population

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (5)

  

 50,906,000 

  

  

 54,817,000 

  

  

 54,817,000 

  

  

 54,817,000 

  

  

 58,013,000 

  

  

Consolidated operating markets (5)

  

 31,729,000 

  

  

 31,729,000 

  

  

 31,729,000 

  

  

 31,729,000 

  

  

 31,759,000 

Market penetration at end of period

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (6)

  

9.4%

  

  

8.5%

  

  

8.5%

  

  

8.5%

  

  

8.2%

  

  

Consolidated operating markets (6)

  

15.0%

  

  

14.7%

  

  

14.7%

  

  

14.8%

  

  

15.0%

Capital expenditures (000s)

$

 181,655 

  

$

 142,452 

  

$

 143,927 

  

$

 89,581 

  

$

 208,135 

Total cell sites in service

  

 6,220 

  

  

 6,209 

  

  

 6,183 

  

  

 6,165 

  

  

 6,975 

Owned towers

  

 4,281 

  

  

 4,487 

  

  

 4,457 

  

  

 4,448 

  

  

 4,448 

 

*         Represents U.S. Cellular’s consolidated markets. These results include markets which U. S. Cellular currently consolidates, or previously consolidated in the periods presented, and are 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 and NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the period.

 

 

 

5

 

 

 

United States Cellular Corporation

Core* Markets Summary Operating Data (Unaudited)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

As of or for the Quarter Ended

12/31/2014

  

9/30/2014

  

6/30/2014

  

3/31/2014

  

12/31/2013

Retail Customers

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Postpaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 4,298,000 

  

  

 4,200,000 

  

  

 4,148,000 

  

  

 4,174,000 

  

  

 4,267,000 

  

  

Gross additions

  

 302,000 

  

  

 251,000 

  

  

 190,000 

  

  

 197,000 

  

  

 176,000 

  

  

Net additions (losses)

  

 98,000 

  

  

 52,000 

  

  

 (26,000) 

  

  

 (93,000) 

  

  

 (71,000) 

  

  

ARPU (1)

$

 56.51 

  

$

 56.37 

  

$

 56.82 

  

$

 57.59 

  

$

 53.53 

  

  

ARPA (2)

$

 136.13 

  

$

 132.99 

  

$

 131.95 

  

$

 132.03 

  

$

 121.21 

  

  

Churn rate (3)

  

1.6%

  

  

1.6%

  

  

1.7%

  

  

2.3%

  

  

1.9%

  

  

Smartphone penetration (4)

  

59.8%

  

  

57.9%

  

  

55.3%

  

  

53.1%

  

  

50.8%

  

Prepaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 348,000 

  

  

 350,000 

  

  

 352,000 

  

  

 356,000 

  

  

 343,000 

  

  

Gross additions

  

 60,000 

  

  

 64,000 

  

  

 65,000 

  

  

 85,000 

  

  

 63,000 

  

  

Net additions (losses)

  

 (2,000) 

  

  

 (2,000) 

  

  

 (4,000) 

  

  

 13,000 

  

  

 (26,000) 

  

  

ARPU (1)

$

 35.33 

  

$

 34.40 

  

$

 34.02 

  

$

 32.22 

  

$

 31.66 

  

  

Churn rate (3)

  

5.9%

  

  

6.3%

  

  

6.5%

  

  

6.9%

  

  

8.3%

Total customers at end of period

  

 4,760,000 

  

  

 4,674,000 

  

  

 4,653,000 

  

  

 4,684,000 

  

  

 4,774,000 

Billed ARPU (1)

$

 53.63 

  

$

 53.24 

  

$

 53.36 

  

$

 53.93 

  

$

 50.25 

Service revenue ARPU (1)

$

 60.10 

  

$

 60.92 

  

$

 60.32 

  

$

 60.19 

  

$

 57.05 

Smartphones sold as a percent of total

  handsets sold

  

86.5%

  

  

80.8%

  

  

79.0%

  

  

78.2%

  

  

84.5%

Total population

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (5)

  

 50,906,000 

  

  

 54,817,000 

  

  

 54,817,000 

  

  

 54,817,000 

  

  

 58,013,000 

  

  

Consolidated operating markets (5)

  

 31,729,000 

  

  

 31,729,000 

  

  

 31,729,000 

  

  

 31,729,000 

  

  

 31,759,000 

Market penetration at end of period

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (6)

  

9.4%

  

  

8.5%

  

  

8.5%

  

  

8.5%

  

  

8.2%

  

  

Consolidated operating markets (6)

  

15.0%

  

  

14.7%

  

  

14.7%

  

  

14.8%

  

  

15.0%

Capital expenditures (000s)

$

 181,655 

  

$

 142,452 

  

$

 143,927 

  

$

 89,581 

  

$

 211,247 

Total cell sites in service

  

 6,220 

  

  

 6,209 

  

  

 6,183 

  

  

 6,165 

  

  

 6,161 

Owned towers

  

 3,951 

  

  

 3,922 

  

  

 3,892 

  

  

 3,883 

  

  

 3,883 

 

*      U.S. Cellular’s Core Markets excludes the results of the Divestiture Markets and NY1 and NY2 Partnerships 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 and NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the period.

 

(1)     Average Revenue Per User (“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 postpaid, prepaid and reseller service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)     Average Revenue Per Account (“ARPA”) metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts by the number of months in the period.

(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, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5)     The decrease in the population of consolidated markets is due primarily to the divestiture of the majority of the St. Louis area non-operating market license in March 2014, and certain non-operating licenses in North Carolina in December 2014. Total Population is used only to calculate market penetration of consolidated markets and consolidated 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 markets and consolidated operating markets, respectively, as estimated by Claritas.  The increase in consolidated markets penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (5) above.

 

 

 

6

 

 

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended December 31,

(Unaudited, dollars and shares in thousands, except per share amounts)

  

  

  

  

  

  

  

  

  

      Change

  

  

  

2014 

  

2013 

  

Amount

  

Percent

Operating revenues

  

  

  

  

  

  

  

  

  

  

  

Service

$

 849,788 

  

$

 825,128 

  

$

 24,660 

  

3%

  

Equipment sales

  

 158,956 

  

  

 77,596 

  

  

 81,360 

  

>100%

  

  

Total operating revenues

  

 1,008,744 

  

  

 902,724 

  

  

 106,020 

  

12%

  

  

  

  

  

  

  

  

  

  

  

  

  

Operating expenses

  

  

  

  

  

  

  

  

  

  

  

System operations (excluding Depreciation, amortization and accretion

  reported below)

  

 202,423 

  

  

 177,438 

  

  

 24,985 

  

14%

  

Cost of equipment sold

  

 342,355 

  

  

 346,847 

  

  

 (4,492) 

  

(1%)

  

Selling, general and administrative

  

 394,553 

  

  

 442,720 

  

  

 (48,167) 

  

(11%)

  

Depreciation, amortization and accretion

  

 140,955 

  

  

 210,371 

  

  

 (69,416) 

  

(33%)

  

(Gain) loss on asset disposals, net

  

 4,695 

  

  

 14,453 

  

  

 (9,758) 

  

(68%)

  

(Gain) loss on sale of business and other exit costs, net

  

 (5,136) 

  

  

 (3,140) 

  

  

 (1,996) 

  

(64%)

  

(Gain) loss on sale of license sales and exchanges

  

 (21,547) 

  

  

 (255,479) 

  

  

 233,932 

  

92%

  

  

Total operating expenses

  

 1,058,298 

  

  

 933,210 

  

  

 125,088 

  

13%

  

  

  

  

  

  

  

  

  

  

  

  

  

Operating loss

  

 (49,554) 

  

  

 (30,486) 

  

  

 (19,068) 

  

(63%)

  

  

  

  

  

  

  

  

  

  

  

  

  

Investment and other income (expense)

  

  

  

  

  

  

  

  

  

  

  

Equity in earnings of unconsolidated entities

  

 23,598 

  

  

 32,152 

  

  

 (8,554) 

  

(27%)

  

Interest and dividend income

  

 6,119 

  

  

 994 

  

  

 5,125 

  

>100%

  

Gain (loss) on investments

  

 —  

  

  

 29 

  

  

 (29) 

  

N/M

  

Interest expense

  

 (14,674) 

  

  

 (11,570) 

  

  

 (3,104) 

  

(27%)

  

Other, net

  

 (121) 

  

  

 135 

  

  

 (256) 

  

>(100%)

  

  

Total investment and other income (expense)

  

 14,922 

  

  

 21,740 

  

  

 (6,818) 

  

(31%)

  

  

  

  

  

  

  

  

  

  

  

  

  

Loss before income taxes

  

 (34,632) 

  

  

 (8,746) 

  

  

 (25,886) 

  

>(100%)

  

Income tax expense (benefit)

  

 (12,528) 

  

  

 (8,484) 

  

  

 (4,044) 

  

(48%)

Net loss

  

 (22,104) 

  

  

 (262) 

  

  

 (21,842) 

  

>(100%)

  

Less: Net income (loss) attributable to noncontrolling interests, net of tax

  

 (764) 

  

  

 (1,854) 

  

  

 1,090 

  

59%

Net income (loss) attributable to U.S. Cellular shareholders

$

 (21,340) 

  

$

 1,592 

  

$

 (22,932) 

  

>(100%)

  

  

  

  

  

  

  

  

  

  

  

  

Basic weighted average shares outstanding

  

 84,066 

  

  

 84,181 

  

  

 (115) 

  

—

Basic earnings (loss) per share attributable to U.S. Cellular shareholders

$

 (0.25) 

  

$

 0.02 

  

$

 (0.27) 

  

>(100%)

  

  

  

  

  

  

  

  

  

  

  

  

  

Diluted weighted average shares outstanding

  

 84,066 

  

  

 85,033 

  

  

 (967) 

  

(1%)

Diluted earnings (loss) per share attributable to U.S. Cellular shareholders

$

 (0.25) 

  

$

 0.02 

  

$

 (0.27) 

  

>(100%)

 

 

 

7

 

 

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Twelve Months Ended December 31,

(Unaudited, dollars and shares in thousands, except per share amounts)

  

  

  

  

  

  

  

  

  

      Change

  

  

  

2014 

  

2013 

  

Amount

  

Percent

Operating revenues

  

  

  

  

  

  

  

  

  

  

  

Service

$

 3,397,937 

  

$

 3,594,773 

  

$

 (196,836) 

  

(5%)

  

Equipment sales

  

 494,810 

  

  

 324,063 

  

  

 170,747 

  

53%

  

  

Total operating revenues

  

 3,892,747 

  

  

 3,918,836 

  

  

 (26,089) 

  

(1%)

  

  

  

  

  

  

  

  

  

  

  

  

  

Operating expenses

  

  

  

  

  

  

  

  

  

  

  

System operations (excluding Depreciation, amortization and accretion

  reported below)

  

 769,911 

  

  

 763,435 

  

  

 6,476 

  

1%

  

Cost of equipment sold

  

 1,192,669 

  

  

 999,000 

  

  

 193,669 

  

19%

  

Selling, general and administrative

  

 1,591,914 

  

  

 1,677,395 

  

  

 (85,481) 

  

(5%)

  

Depreciation, amortization and accretion

  

 605,997 

  

  

 803,781 

  

  

 (197,784) 

  

(25%)

  

(Gain) loss on asset disposals, net

  

 21,469 

  

  

 30,606 

  

  

 (9,137) 

  

(30%)

  

(Gain) loss on sale of business and other exit costs, net

  

 (32,830) 

  

  

 (246,767) 

  

  

 213,937 

  

87%

  

(Gain) loss on license sales and exchanges

  

 (112,993) 

  

  

 (255,479) 

  

  

 142,486 

  

56%

  

  

Total operating expenses

  

 4,036,137 

  

  

 3,771,971 

  

  

 264,166 

  

7%

  

  

  

  

  

  

  

  

  

  

  

  

  

Operating income (loss)

  

 (143,390) 

  

  

 146,865 

  

  

 (290,255) 

  

>(100%)

  

  

  

  

  

  

  

  

  

  

  

  

  

Investment and other income (expense)

  

  

  

  

  

  

  

  

  

  

  

Equity in earnings of unconsolidated entities

  

 129,764 

  

  

 131,949 

  

  

 (2,185) 

  

(2%)

  

Interest and dividend income

  

 12,148 

  

  

 3,961 

  

  

 8,187 

  

>100%

  

Gain (loss) on investments

  

 —  

  

  

 18,556 

  

  

 (18,556) 

  

N/M

  

Interest expense

  

 (57,386) 

  

  

 (43,963) 

  

  

 (13,423) 

  

(31%)

  

Other, net

  

 160 

  

  

 288 

  

  

 (128) 

  

(44%)

  

  

Total investment and other income (expense)

  

 84,686 

  

  

 110,791 

  

  

 (26,105) 

  

(24%)

  

  

  

  

  

  

  

  

  

  

  

  

  

Income (loss) before income taxes

  

 (58,704) 

  

  

 257,656 

  

  

 (316,360) 

  

>(100%)

  

Income tax expense (benefit)

  

 (11,782) 

  

  

 113,134 

  

  

 (124,916) 

  

>(100%)

Net income (loss)

  

 (46,922) 

  

  

 144,522 

  

  

 (191,444) 

  

>(100%)

  

Less: Net income (loss) attributable to noncontrolling interests, net of tax

  

 (4,110) 

  

  

 4,484 

  

  

 (8,594) 

  

>(100%)

Net income (loss) attributable to U.S. Cellular shareholders

$

 (42,812) 

  

$

 140,038 

  

$

 (182,850) 

  

>(100%)

  

  

  

  

  

  

  

  

  

  

  

  

Basic weighted average shares outstanding

  

 84,213 

  

  

 83,968 

  

  

 245 

  

—

Basic earnings (loss) per share attributable to U.S. Cellular shareholders

$

 (0.51) 

  

$

 1.67 

  

$

 (2.18) 

  

>(100%)

  

  

  

  

  

  

  

  

  

  

  

  

  

Diluted weighted average shares outstanding

  

 84,213 

  

  

 84,730 

  

  

 (517) 

  

(1%)

Diluted earnings (loss) per share attributable to U.S. Cellular shareholders

$

 (0.51) 

  

$

 1.65 

  

$

 (2.16) 

  

>(100%)

  

  

  

  

  

  

  

  

  

  

  

  

  

Special dividend per share to U.S. Cellular shareholders

$

 —  

  

$

 5.75 

  

$

 (5.75) 

  

N/M

 

 

 

8

 

 

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

  

  

  

  

  

  

  

ASSETS

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

December 31,

  

December 31,

  

  

2014 

  

2013 

Current assets

  

  

  

  

  

  

Cash and cash equivalents

$

 211,513 

  

$

 342,065 

  

Short-term investments

  

 —  

  

  

 50,104 

  

Accounts receivable from customers and others

  

 556,958 

  

  

 586,595 

  

Inventory, net

  

 267,068 

  

  

 238,188 

  

Prepaid expenses

  

 59,744 

  

  

 65,596 

  

Net deferred income tax asset

  

 93,058 

  

  

 99,105 

  

Other current assets

  

 90,834 

  

  

 19,538 

  

  

  

 1,279,175 

  

  

 1,401,191 

  

  

  

  

  

  

  

Assets held for sale

  

 107,055 

  

  

 16,027 

  

  

  

  

  

  

  

Investments

  

  

  

  

  

  

Licenses

  

 1,443,438 

  

  

 1,401,126 

  

Goodwill

  

 370,151 

  

  

 387,524 

  

Investments in unconsolidated entities

  

 283,014 

  

  

 265,585 

  

  

  

 2,096,603 

  

  

 2,054,235 

  

  

  

  

  

  

  

Property, plant and equipment

  

  

  

  

  

  

In service and under construction

  

 7,458,740 

  

  

 7,717,512 

  

Less: Accumulated depreciation

  

 4,730,523 

  

  

 4,860,992 

  

  

  

 2,728,217 

  

  

 2,856,520 

  

  

  

  

  

  

  

Other assets and deferred charges

  

 276,218 

  

  

 117,735 

  

  

  

  

  

  

  

Total assets

$

 6,487,268 

  

$

 6,445,708 

 

 

 

9

 

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

  

  

  

  

  

  

  

  

LIABILITIES AND EQUITY

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

December 31,

  

December 31,

  

  

  

2014 

  

2013 

Current liabilities

  

  

  

  

  

  

Current portion of long-term debt

$

 46 

  

$

 166 

  

Accounts payable

  

  

  

  

  

  

  

Affiliated

  

 9,774 

  

  

 11,243 

  

  

Trade

  

 306,845 

  

  

 405,583 

  

Customer deposits and deferred revenues

  

 287,562 

  

  

 256,740 

  

Accrued taxes

  

 36,652 

  

  

 73,820 

  

Accrued compensation

  

 66,162 

  

  

 66,566 

  

Other current liabilities

  

 149,853 

  

  

 192,055 

  

  

  

  

 856,894 

  

  

 1,006,173 

  

  

  

  

  

  

  

  

Liabilities held for sale

  

 20,934 

  

  

 —  

  

  

  

  

  

  

  

  

Deferred liabilities and credits

  

  

  

  

  

  

Net deferred income tax liability

  

 859,867 

  

  

 836,297 

  

Other deferred liabilities and credits

  

 284,002 

  

  

 315,073 

  

  

  

  

  

  

  

  

Long-term debt

  

 1,151,819 

  

  

 878,032 

  

  

  

  

  

  

  

  

Noncontrolling interests with redemption features

  

 1,150 

  

  

 536 

  

  

  

  

  

  

  

  

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

  

 1,472,558 

  

  

 1,424,729 

  

Treasury shares

  

 (169,139) 

  

  

 (164,692) 

  

Retained earnings

  

 1,910,498 

  

  

 2,043,095 

  

  

Total U.S. Cellular shareholders' equity

  

 3,301,991 

  

  

 3,391,206 

  

  

  

  

  

  

  

  

Noncontrolling interests

  

 10,611 

  

  

 18,391 

  

  

  

  

  

  

  

  

  

Total equity

  

 3,312,602 

  

  

 3,409,597 

  

  

  

  

  

  

  

  

Total liabilities and equity

$

 6,487,268 

  

$

 6,445,708 

 

 

 

10

 

 

 

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, 2014 and December 31, 2013.

 

  

  

December 31,

  

December 31,

  

2014 

  

2013 

  

  

  

  

  

  

  

Cash and cash equivalents

$

211,513 

  

$

342,065 

  

  

  

  

  

  

  

Amounts included in short-term investments (1)(2)

  

  

  

  

  

  

U.S. Treasury Notes

  

 —  

  

  

50,104 

  

  

  

  

  

  

  

Total cash and cash equivalents and investments

$

211,513 

  

$

392,169 

 

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

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

 

 

 

11

 

 

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)

  

  

  

  

  

  

2014 

  

2013 

Cash flows from operating activities

  

  

  

  

  

  

Net income (loss)

$

 (46,922) 

  

$

 144,522 

  

Add (deduct) adjustments to reconcile net income to cash flows from

  operating activities

  

  

  

  

  

  

  

  

Depreciation, amortization and accretion

  

 605,997 

  

  

 803,781 

  

  

  

Bad debts expense

  

 101,282 

  

  

 98,864 

  

  

  

Stock-based compensation expense

  

 22,383 

  

  

 15,844 

  

  

  

Deferred income taxes, net

  

 57,604 

  

  

 (75,348) 

  

  

  

Equity in earnings of unconsolidated entities

  

 (129,764) 

  

  

 (131,949) 

  

  

  

Distributions from unconsolidated entities

  

 112,336 

  

  

 125,660 

  

  

  

(Gain) loss on asset disposals, net

  

 21,469 

  

  

 30,606 

  

  

  

(Gain) loss on sale of business and other exit costs, net

  

 (32,830) 

  

  

 (246,767) 

  

  

  

(Gain) loss on license sales and exchanges

  

 (112,993) 

  

  

 (255,479) 

  

  

  

(Gain) loss on investments

  

 — 

  

  

 (18,556) 

  

  

  

Noncash interest expense

  

 1,155 

  

  

 1,059 

  

  

  

Other operating activities

  

 26 

  

  

 646 

  

Changes in assets and liabilities from operations

  

  

  

  

  

  

  

  

Accounts receivable

  

 12,547 

  

  

 (291,168) 

  

  

  

Equipment installment plans receivable

  

 (188,829) 

  

  

 (591) 

  

  

  

Inventory

  

 (28,878) 

  

  

 (82,422) 

  

  

  

Accounts payable - trade

  

 (95,587) 

  

  

 85,199 

  

  

  

Accounts payable - affiliate

  

 (2,590) 

  

  

 147 

  

  

  

Customer deposits and deferred revenues

  

 33,524 

  

  

 66,344 

  

  

  

Accrued taxes

  

 (99,483) 

  

  

 30,037 

  

  

  

Accrued interest

  

 1,307 

  

  

 273 

  

  

  

Other assets and liabilities

  

 (59,412) 

  

  

 (9,805) 

  

  

  

  

  

 172,342 

  

  

 290,897 

  

  

  

  

  

  

  

  

  

Cash flows from investing activities

  

  

  

  

  

  

Cash used for additions to property, plant and equipment

  

 (605,083) 

  

  

 (717,862) 

  

Cash paid for acquisitions and licenses

  

 (38,150) 

  

  

 (16,540) 

  

Cash received from divestitures

  

 179,842 

  

  

 811,120 

  

Cash received for investments

  

 50,000 

  

  

 100,000 

  

Federal Communications Commission deposit

  

 (60,000) 

  

  

 — 

  

Other investing activities

  

 2,619 

  

  

(3,969)

  

  

  

  

  

 (470,772) 

  

  

 172,749 

  

  

  

  

  

  

  

  

  

Cash flows from financing activities

  

  

  

  

  

  

Issuance of long-term debt

  

 275,000 

  

  

 — 

  

Repayment of borrowing under revolving credit facility

  

 (150,000) 

  

  

 — 

  

Borrowing under revolving credit facility

  

 150,000 

  

  

 — 

  

Common shares reissued for benefit plans, net of tax payments

  

 830 

  

  

 5,784 

  

Common shares repurchased

  

 (18,943) 

  

  

 (18,544) 

  

Payment of debt issuance costs

  

 (9,644) 

  

  

 (23) 

  

Acquisition of licenses in common control transaction

  

 (76,298) 

  

  

 —  

  

Dividends paid

  

 —  

  

  

 (482,270) 

  

Distributions to noncontrolling interests

  

 (3,056) 

  

  

 (3,766) 

  

Payments to acquire additional interest in subsidiaries

  

 —  

  

  

 (1,005) 

  

Other financing activities

  

 (11) 

  

  

 (115) 

  

  

  

  

  

 167,878 

  

  

 (499,939) 

  

  

  

  

  

  

  

  

  

Net decrease in cash and cash equivalents

  

 (130,552) 

  

  

 (36,293) 

  

  

  

  

  

  

  

  

  

Cash and cash equivalents

  

  

  

  

  

  

Beginning of period

  

 342,065 

  

  

 378,358 

  

End of period

$

 211,513 

  

$

 342,065 

 

 

 

12

 

 

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Three Months Ended

  

Twelve Months Ended

  

  

  

  

December 31,

  

December 31,

  

  

  

2014 

  

  

2013 

  

  

2014 

  

  

2013 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Cash flows from operating activities

  

$

 (158,289) 

  

$

 (5,336) 

  

$

 172,342 

  

$

 290,897 

  

Add: Sprint Cost Reimbursement

  

  

 19,085 

  

  

 9,429 

  

  

 71,097 

  

  

 10,560 

  

Less: Cash used for additions to property,

   plant and equipment

  

  

 180,309 

  

  

 195,682 

  

  

 605,083 

  

  

 717,862 

  

  

Adjusted free cash flow (1)

  

$

 (319,513) 

  

$

 (191,589) 

  

$

 (361,644) 

  

$

 (416,405) 

 

(1)     Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash used for additions to property, plant and equipment. Adjusted 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 (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment.

 

 

 

13