EX-99.1 2 usmq120198-kex991.htm EXHIBIT 99.1 Exhibit



Exhibit 99.1   NEWS RELEASE

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As previously announced, U.S. Cellular will hold a teleconference May 3, 2019, at 9:00 a.m. CDT.  Listen to the call live via the Events & Presentations page of investors.uscellular.com.
 
FOR IMMEDIATE RELEASE
U.S. Cellular reports first quarter 2019 results
 
CHICAGO (May 2, 2019) — United States Cellular Corporation (NYSE:USM) reported total operating revenues of $966 million for the first quarter of 2019, versus $942 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $54 million and $0.62, respectively, for the first quarter of 2019 compared to $45 million and $0.52, respectively, in the same period one year ago.
"U.S. Cellular had a solid start to 2019 as we improved customer results year over year and increased revenue and profitability," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We have begun our network modernization initiative to ready our network for 5G and to ensure our network continues to meet the growing expectations of our customers and remains a competitive advantage.
“Our postpaid handset gross additions were up modestly year over year in what has historically been a seasonally slow quarter and postpaid handset churn remained low. Greater adoption of our Unlimited Total Plans had a positive impact on customer satisfaction. I am particularly pleased with the year over year growth in average revenue per user, which increased $1.10 and was the major factor to the increase in service revenue. Our diligent focus on cost management combined with the revenue growth resulted in a meaningful increase in profitability this quarter."

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2019 Estimated Results

U.S. Cellular’s current estimates of full-year 2019 results are shown below.  Such estimates represent management’s view as of May 2, 2019.  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 estimated results.
 
2019 Estimated Results
 
Previous
Current
(Dollars in millions)
 
 
Total operating revenues
$4,100-$4,300
$4,000-$4,200*
Adjusted OIBDA (1)
$725-$875
Unchanged
Adjusted EBITDA (1)
$900-$1,050
Unchanged
Capital expenditures
$625-$725
Unchanged
*Change represents lower equipment sales revenues.
The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2019 estimated results, actual results for the three months ended March 31, 2019, and actual results for the year ended December 31, 2018.  In providing 2019 estimated results, U.S. Cellular has not completed the below reconciliation to Net income because it does not provide guidance for income taxes.  Although potentially significant, U.S. Cellular believes that the impact of income taxes cannot be reasonably predicted; therefore, U.S. Cellular is unable to provide such guidance.
 
 
 
Actual Results
 
2019 Estimated Results
 
Three Months Ended
March 31, 2019
 
Year Ended
December 31, 2018
(Dollars in millions)
 
 
 
 
 
Net income (GAAP)
N/A

 
$
58

 
$
164

Add back or deduct:
 

 
 

 
 

Income tax expense
N/A

 
27

 
51

Income before income taxes (GAAP)
$70-$220

 
$
85

 
$
215

Add back:
 

 
 

 
 

Interest expense
115

 
29

 
116

Depreciation, amortization and accretion expense
700

 
169

 
640

EBITDA (Non-GAAP) (1)
$885-$1,035

 
$
283

 
$
971

Add back or deduct:
 

 
 

 
 

(Gain) loss on asset disposals, net
15

 
2

 
10

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

 
(2
)
 

(Gain) loss on license sales and exchanges, net

 
(2
)
 
(18
)
Adjusted EBITDA (Non-GAAP) (1)
$900-$1,050

 
$
281

 
$
963

Deduct:
 

 
 

 
 

Equity in earnings of unconsolidated entities
155

 
44

 
159

Interest and dividend income
20

 
6

 
15

Other, net

 

 
(1
)
Adjusted OIBDA (Non-GAAP) (1)
$725-$875

 
$
231

 
$
790

(1)
EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above.  EBITDA, Adjusted EBITDA and Adjusted OIBDA 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 or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.  U.S. Cellular does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future.  Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate.  Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of U.S. Cellular’s operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of U.S. Cellular’s financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.  The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income (loss) before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for March 31, 2019, can be found on U.S. Cellular’s website at investors.uscellular.com.

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Conference Call Information
U.S. Cellular will hold a conference call on May 3, 2019 at 9:00 a.m. Central Time.
Access the live call on the Events & Presentations page of investors.uscellular.com or at https://www.webcaster4.com/Webcast/Page/1145/30427.
Access the call by phone at 877-273-7192 (US/Canada), conference ID: 7998799.
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 customers with 5.0 million connections in 21 states. The Chicago-based company had 5,500 full- and part-time associates as of March 31, 2019. At the end of the first quarter of 2019, Telephone and Data Systems, Inc. owned 82 percent of U.S. Cellular. For more information about U.S. Cellular, visit uscellular.com.
Contacts
Jane W. McCahon, Senior Vice President - Corporate Relations and Corporate Secretary of TDS
312-592-5379
jane.mccahon@tdsinc.com
 
Julie D. Mathews, IRC, Director - Investor Relations of TDS
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: intense competition; the ability to execute U.S. Cellular’s business strategy; uncertainties in U.S. Cellular’s future cash flows and liquidity and access to the capital markets; the ability to make payments on U.S. Cellular indebtedness or comply with the terms of debt covenants; impacts of any pending acquisitions/divestitures/exchanges of properties and/or licenses, 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 access to and pricing of unbundled network elements; 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 of U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; 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 services and products 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, which are incorporated by reference herein.   
 
For more information about U.S. Cellular, visit:
U.S. Cellular: www.uscellular.com

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United States Cellular Corporation
Summary Operating Data (Unaudited)
As of or for the Quarter Ended
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Retail Connections
 
 
 
 
 
 
 
 
 
Postpaid
 
 
 
 
 
 
 
 
 
Total at end of period
4,440,000

 
4,472,000

 
4,466,000

 
4,468,000

 
4,481,000

Gross additions
137,000

 
179,000

 
172,000

 
146,000

 
129,000

Feature phones
4,000

 
4,000

 
3,000

 
5,000

 
5,000

Smartphones
98,000

 
132,000

 
130,000

 
106,000

 
91,000

Connected devices
35,000

 
43,000

 
39,000

 
35,000

 
33,000

Net additions (losses)
(32,000
)
 
6,000

 
(1,000
)
 
(13,000
)
 
(37,000
)
Feature phones
(13,000
)
 
(11,000
)
 
(14,000
)
 
(12,000
)
 
(15,000
)
Smartphones
(1,000
)
 
31,000

 
29,000

 
17,000

 
(1,000
)
Connected devices
(18,000
)
 
(14,000
)
 
(16,000
)
 
(18,000
)
 
(21,000
)
ARPU (1)
$
45.44

 
$
45.58

 
$
45.31

 
$
44.74

 
$
44.34

ARPA (2)
$
118.84

 
$
119.60

 
$
119.42

 
$
118.57

 
$
118.22

Churn rate (3)
1.26
%
 
1.29
%
 
1.29
%
 
1.19
%
 
1.23
%
Handsets
0.99
%
 
1.00
%
 
1.02
%
 
0.92
%
 
0.97
%
Connected devices
3.08
%
 
3.20
%
 
3.04
%
 
2.85
%
 
2.79
%
Prepaid
 
 
 
 
 
 
 
 
 
Total at end of period
503,000

 
516,000

 
528,000

 
527,000

 
525,000

Gross additions
61,000

 
66,000

 
80,000

 
78,000

 
88,000

Net additions (losses)
(13,000
)
 
(12,000
)
 
1,000

 
2,000

 
6,000

ARPU (1)
$
33.44

 
$
32.80

 
$
32.09

 
$
32.32

 
$
31.78

Churn rate (3)
4.92
%
 
4.98
%
 
4.98
%
 
4.83
%
 
5.27
%
Total connections at end of period (4)
4,995,000

 
5,041,000

 
5,050,000

 
5,051,000

 
5,063,000

Market penetration at end of period
 
 
 
 
 
 
 
 
 
Consolidated operating population
31,310,000

 
31,469,000

 
31,469,000

 
31,469,000

 
31,469,000

Consolidated operating penetration (5)
16
%
 
16
%
 
16
%
 
16
%
 
16
%
Capital expenditures (millions)
$
102

 
$
242

 
$
118

 
$
86

 
$
70

Total cell sites in service
6,537

 
6,531

 
6,506

 
6,478

 
6,473

Owned towers
4,106

 
4,129

 
4,119

 
4,105

 
4,099

(1)
Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period.  These revenue bases and connection populations are shown below:
Postpaid ARPU consists of total postpaid service revenues and postpaid connections.
Prepaid ARPU consists of total prepaid service revenues and prepaid connections.
(2)
Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
(3)
Churn rate represents the percentage of the connections that disconnect service each month.  These rates represent the average monthly churn rate for each respective period.
(4)
Includes reseller and other connections.
(5)
Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.

4



United States Cellular Corporation
Consolidated Statement of Operations Highlights
(Unaudited)
 
 
 
Three Months Ended
March 31,
 
2019
 
2018
 
2019 vs. 2018
(Dollars and shares in millions, except per share amounts)
 
 
 
 
 
Operating revenues
 

 
 

 
 

Service
$
741

 
$
724

 
2
 %
Equipment sales
225

 
218

 
3
 %
Total operating revenues
966


942


3
 %
 
 
 
 
 
 
Operating expenses
 

 
 

 
 

System operations (excluding Depreciation, amortization and accretion reported below)
176

 
179

 
(1
)%
Cost of equipment sold
233

 
219

 
7
 %
Selling, general and administrative
326

 
326

 

Depreciation, amortization and accretion
169

 
159

 
6
 %
(Gain) loss on asset disposals, net
2

 
1

 
55
 %
(Gain) loss on sale of business and other exit costs, net
(2
)
 

 
N/M

(Gain) loss on license sales and exchanges, net
(2
)
 
(7
)
 
69
 %
Total operating expenses
902

 
877


3
 %
 


 


 
 
Operating income
64

 
65


(1
)%
 
 
 
 
 
 
Investment and other income (expense)
 

 
 

 
 

Equity in earnings of unconsolidated entities
44

 
38

 
16
 %
Interest and dividend income
6

 
4

 
59
 %
Interest expense
(29
)
 
(29
)
 

Other, net

 
(1
)
 
92
 %
Total investment and other income
21

 
12

 
65
 %
 
 
 
 
 
 
Income before income taxes
85

 
77

 
10
 %
Income tax expense
27

 
22

 
20
 %
Net income
58

 
55

 
6
 %
Less: Net income attributable to noncontrolling interests, net of tax
4

 
10

 
(64
)%
Net income attributable to U.S. Cellular shareholders
$
54

 
$
45

 
22
 %
 
 
 
 
 
 
Basic weighted average shares outstanding
86

 
85

 
1
 %
Basic earnings per share attributable to U.S. Cellular shareholders
$
0.63

 
$
0.52

 
20
 %



 


 
 
Diluted weighted average shares outstanding
88

 
86

 
2
 %
Diluted earnings per share attributable to U.S. Cellular shareholders
$
0.62

 
$
0.52

 
19
 %
N/M - Percentage change not meaningful


5



United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
(Dollars in millions)
 
 
 
Cash flows from operating activities
 
 
 
Net income
$
58

 
$
55

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

 
 

Depreciation, amortization and accretion
169

 
159

Bad debts expense
24

 
19

Stock-based compensation expense
9

 
8

Deferred income taxes, net
17

 
15

Equity in earnings of unconsolidated entities
(44
)
 
(38
)
Distributions from unconsolidated entities
18

 
17

(Gain) loss on asset disposals, net
2

 
1

(Gain) loss on sale of business and other exit costs, net
(2
)
 

(Gain) loss on license sales and exchanges, net
(2
)
 
(7
)
Noncash interest
1

 
1

Changes in assets and liabilities from operations
 
 
 
Accounts receivable
31

 
69

Equipment installment plans receivable
(10
)
 
(17
)
Inventory
(15
)
 
(2
)
Accounts payable
56

 
(30
)
Customer deposits and deferred revenues
7

 
(26
)
Accrued taxes
11

 
5

Accrued interest
9

 
9

Other assets and liabilities
(52
)
 
(50
)
Net cash provided by operating activities
287

 
188

 
 
 
 
Cash flows from investing activities
 
 
 
Cash paid for additions to property, plant and equipment
(107
)
 
(76
)
Cash paid for licenses
(1
)
 
(1
)
Cash received from investments
2

 
50

Cash paid for investments
(1
)
 

Cash received from divestitures and exchanges
31

 
4

Advance payments for license acquisitions
(135
)
 

Other investing activities
(1
)
 

Net cash used in investing activities
(212
)
 
(23
)
 
 
 
 
Cash flows from financing activities
 
 
 
Repayment of long-term debt
(5
)
 
(5
)
Common shares reissued for benefit plans, net of tax payments

 
2

Distributions to noncontrolling interests
(1
)
 

Other financing activities

 
(4
)
Net cash used in financing activities
(6
)
 
(7
)
 
 
 
 
Net increase in cash, cash equivalents and restricted cash
69

 
158

 
 
 
 
Cash, cash equivalents and restricted cash
 
 
 
Beginning of period
583

 
352

End of period
$
652

 
$
510



6



United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
 
ASSETS
 
March 31, 2019 (1)
 
December 31, 2018
(Dollars in millions)
 
 
 
Current assets
 

 
 

Cash and cash equivalents
$
648

 
$
580

Short-term investments
17

 
17

Accounts receivable
941

 
976

Inventory, net
157

 
142

Prepaid expenses
47

 
63

Other current assets
29

 
34

Total current assets
1,839

 
1,812

 
 
 
 
Assets held for sale

 
54

 
 
 
 
Licenses
2,213

 
2,186

 
 
 
 
Investments in unconsolidated entities
468

 
441

 
 
 
 
Property, plant and equipment, net
2,137

 
2,202

 
 
 
 
Operating lease right-of-use assets
888

 

 
 
 
 
Other assets and deferred charges
684

 
579

 
 
 
 
Total assets
$
8,229

 
$
7,274



7



United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
 
LIABILITIES AND EQUITY
 
March 31, 2019 (1)
 
December 31, 2018
(Dollars in millions, except per share amounts)
 
 
 
Current liabilities
 

 
 

Current portion of long-term debt
$
19

 
$
19

Accounts payable
364

 
313

Customer deposits and deferred revenues
164

 
157

Accrued taxes
34

 
30

Accrued compensation
42

 
78

Short-term operating lease liabilities
99

 

Other current liabilities
80

 
94

Total current liabilities
802

 
691

 
 
 
 
Liabilities held for sale

 
1

 
 
 
 
Deferred liabilities and credits
 

 
 

Deferred income tax liability, net
527

 
510

Long-term operating lease liabilities
858

 

Other deferred liabilities and credits
296

 
389

 
 
 
 
Long-term debt, net
1,601

 
1,605

 
 
 
 
Noncontrolling interests with redemption features
11

 
11

 
 
 
 
Equity
 

 
 

U.S. Cellular shareholders’ equity
 

 
 

Series A Common and Common Shares, par value $1 per share
88

 
88

Additional paid-in capital
1,599

 
1,590

Treasury shares
(63
)
 
(65
)
Retained earnings
2,497

 
2,444

Total U.S. Cellular shareholders’ equity
4,121

 
4,057

 
 
 
 
Noncontrolling interests
13

 
10

 
 
 
 
Total equity
4,134

 
4,067

 
 
 
 
Total liabilities and equity
$
8,229

 
$
7,274


(1)
As of January 1, 2019, U.S. Cellular adopted the new lease accounting standard, ASC 842. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2019 amounts include the impacts of ASC 842, but 2018 amounts remain as previously reported.

8



United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
 
Three Months Ended
March 31,
 
2019
 
2018
(Dollars in millions)
 
 
 
Cash flows from operating activities (GAAP)
$
287

 
$
188

Less: Cash paid for additions to property, plant and equipment
107

 
76

Free cash flow (Non-GAAP) (1)
$
180

 
$
112


(1)
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 liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.





9