EX-99.1 2 usmq320198-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 November 1, 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 third quarter 2019 results
Growth in revenues; 5G and network modernization initiatives progressing
 
CHICAGO (October 31, 2019) — United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,031 million for the third quarter of 2019, versus $1,001 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $23 million and $0.27, respectively, for the third quarter of 2019 compared to $36 million and $0.41, respectively, in the same period one year ago.
"I’m pleased with the progress we made this quarter," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We generated improved financial results and although subscriber activity was slow early in the quarter, we gained momentum and finished strong, achieving sequential improvement in postpaid handset net additions by delivering on our customer satisfaction strategy and implementing many of our strategic initiatives. Our efforts produced growth in revenue and Adjusted EBITDA. Continued popularity of our unlimited Total Plans drove increases in average revenue per user and increased inbound roaming contributed to growth in service revenue. I am pleased to see these trends as we head into the important holiday season.
"We recently completed a brand refresh and launched a new more modern look and a brand promise around 'Bringing Fairness to Wireless,' to reinforce the values that have always been part of U.S. Cellular. Another driver of customer satisfaction is our high-quality network, which is performing well even as data usage continues to increase. Our network modernization efforts are progressing as we ready our network for 5G, so that even customers with 4G devices have experienced better network quality and improved speeds. Additionally, we are on track to launch 5G service in Iowa and Wisconsin during the first quarter of 2020."

1


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 October 31, 2019 and should not be assumed to be current as of any future date. U.S. Cellular undertakes no duty to update such estimates, 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
$3,900-$4,100
$3,950-$4,050
Adjusted OIBDA1
$725-$875
$750-$850
Adjusted EBITDA1
$900-$1,050
$925-$1,025
Capital expenditures
$625-$725
Unchanged

The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2019 estimated results, actual results for the nine months ended September 30, 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
 
Nine Months Ended
September 30, 2019
 
Year Ended
December 31, 2018
(Dollars in millions)
 
 
 
 
 
Net income (GAAP)
N/A

 
$
115

 
$
164

Add back or deduct:
 

 
 

 
 

Income tax expense
N/A

 
55

 
51

Income before income taxes (GAAP)
$80-$180

 
$
170

 
$
215

Add back:
 

 
 

 
 

Interest expense
115

 
87

 
116

Depreciation, amortization and accretion expense
710

 
524

 
640

EBITDA (Non-GAAP)1
$905-$1,005

 
$
781

 
$
971

Add back or deduct:
 

 
 

 
 

(Gain) loss on asset disposals, net
20

 
13

 
10

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

 
(1
)
 
—

(Gain) loss on license sales and exchanges, net
—

 
—

 
(18
)
Adjusted EBITDA (Non-GAAP)1
$925-$1,025

 
$
793

 
$
963

Deduct:
 

 
 

 
 

Equity in earnings of unconsolidated entities
160

 
128

 
159

Interest and dividend income
15

 
14

 
15

Other, net
—

 
—

 
(1
)
Adjusted OIBDA (Non-GAAP)1
$750-$850

 
$
651

 
$
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 before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for September 30, 2019, can be found on U.S. Cellular’s website at investors.uscellular.com.

2


Conference Call Information
U.S. Cellular will hold a conference call on November 1, 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/1145/32152.
▪
Access the call by phone at 877-273-7192 (US/Canada), conference ID: 4119859.

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 September 30, 2019. At the end of the third 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

3


United States Cellular Corporation
Summary Operating Data (Unaudited)
As of or for the Quarter Ended
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
Retail Connections
 
 
 
 
 
 
 
 
 
Postpaid
 
 
 
 
 
 
 
 
 
Total at end of period
4,395,000

 
4,414,000

 
4,440,000

 
4,472,000

 
4,466,000

Gross additions
163,000

 
137,000

 
137,000

 
179,000

 
172,000

Feature phones
3,000

 
5,000

 
4,000

 
4,000

 
3,000

Smartphones
121,000

 
97,000

 
98,000

 
132,000

 
130,000

Connected devices
39,000

 
35,000

 
35,000

 
43,000

 
39,000

Net additions (losses)
(19,000
)
 
(26,000
)
 
(32,000
)
 
6,000

 
(1,000
)
Feature phones
(11,000
)
 
(10,000
)
 
(13,000
)
 
(11,000
)
 
(14,000
)
Smartphones
9,000

 
(1,000
)
 
(1,000
)
 
31,000

 
29,000

Connected devices
(17,000
)
 
(15,000
)
 
(18,000
)
 
(14,000
)
 
(16,000
)
ARPU1
$
46.16

 
$
45.90

 
$
45.44

 
$
45.58

 
$
45.31

ARPA2
$
119.87

 
$
119.46

 
$
118.84

 
$
119.60

 
$
119.42

Churn rate3
1.38
%
 
1.23
%
 
1.26
%
 
1.29
%
 
1.29
%
Handsets
1.09
%
 
0.97
%
 
0.99
%
 
1.00
%
 
1.02
%
Connected devices
3.44
%
 
3.01
%
 
3.08
%
 
3.20
%
 
3.04
%
Prepaid
 
 
 
 
 
 
 
 
 
Total at end of period
510,000

 
500,000

 
503,000

 
516,000

 
528,000

Gross additions
70,000

 
61,000

 
61,000

 
66,000

 
80,000

Net additions (losses)
9,000

 
(2,000
)
 
(13,000
)
 
(12,000
)
 
1,000

ARPU1
$
34.35

 
$
34.43

 
$
33.44

 
$
32.80

 
$
32.09

Churn rate3
4.03
%
 
4.20
%
 
4.92
%
 
4.98
%
 
4.98
%
Total connections at end of period4
4,957,000

 
4,967,000

 
4,995,000

 
5,041,000

 
5,050,000

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

 
31,310,000

 
31,310,000

 
31,469,000

 
31,469,000

Consolidated operating penetration5
16
%
 
16
%
 
16
%
 
16
%
 
16
%
Capital expenditures (millions)
$
170

 
$
195

 
$
102

 
$
242

 
$
118

Total cell sites in service
6,554

 
6,535

 
6,506

 
6,531

 
6,506

Owned towers
4,123

 
4,116

 
4,106

 
4,129

 
4,119

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
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019 vs. 2018
 
2019
 
2018
 
2019 vs. 2018
(Dollars and shares in millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

 
 

 
 

 
 

 
 

 
 

Service
$
774

 
$
759

 
2
 %
 
$
2,272

 
$
2,224

 
2
 %
Equipment sales
257

 
242

 
6
 %
 
698

 
692

 
1
 %
Total operating revenues
1,031


1,001


3
 %

2,970


2,916

 
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 

 
 

 
 

 
 

 
 

 
 

System operations (excluding Depreciation, amortization and accretion reported below)
199

 
200

 
(1
)%
 
568

 
566

 
–

Cost of equipment sold
266

 
258

 
3
 %
 
724

 
716

 
1
 %
Selling, general and administrative
358

 
346

 
3
 %
 
1,027

 
1,014

 
1
 %
Depreciation, amortization and accretion
181

 
160

 
13
 %
 
524

 
478

 
10
 %
(Gain) loss on asset disposals, net
5

 
3

 
66
 %
 
13

 
5

 
N/M

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

 
—

 
N/M

 
(1
)
 
—

 
N/M

(Gain) loss on license sales and exchanges, net
2

 
—

 
N/M

 
—

 
(18
)
 
98
 %
Total operating expenses
1,011

 
967


5
 %
 
2,855

 
2,761

 
3
 %
 


 


 
 
 


 


 
 
Operating income
20

 
34


(40
)%

115


155

 
(26
)%
 
 
 
 
 
 
 
 
 
 
 
 
Investment and other income (expense)
 

 
 

 
 

 
 

 
 

 
 

Equity in earnings of unconsolidated entities
44

 
42

 
5
 %
 
128

 
120

 
7
 %
Interest and dividend income
4

 
4

 
4
 %
 
14

 
10

 
40
 %
Interest expense
(29
)
 
(29
)
 
1
 %
 
(87
)
 
(87
)
 
–

Total investment and other income
19

 
17

 
12
 %
 
55

 
43

 
27
 %
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
39

 
51

 
(23
)%
 
170

 
198

 
(14
)%
Income tax expense
15

 
14

 
2
 %
 
55

 
55

 
1
 %
Net income
24

 
37

 
(33
)%
 
115

 
143

 
(20
)%
Less: Net income attributable to noncontrolling interests, net of tax
1

 
1

 
29
 %
 
6

 
14

 
(61
)%
Net income attributable to U.S. Cellular shareholders
$
23

 
$
36

 
(34
)%
 
$
109

 
$
129

 
(15
)%
 
 
 
 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
86

 
86

 
1
 %
 
87

 
85

 
1
 %
Basic earnings per share attributable to U.S. Cellular shareholders
$
0.27

 
$
0.42

 
(35
)%
 
$
1.26

 
$
1.51

 
(16
)%



 


 
 
 


 


 
 
Diluted weighted average shares outstanding
88

 
87

 
1
 %
 
88

 
86

 
2
 %
Diluted earnings per share attributable to U.S. Cellular shareholders
$
0.27

 
$
0.41

 
(35
)%
 
$
1.24

 
$
1.49

 
(17
)%
N/M - Percentage change not meaningful


5


United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
 
Nine Months Ended
September 30,
 
2019
 
2018
(Dollars in millions)
 
 
 
Cash flows from operating activities
 
 
 
Net income
$
115

 
$
143

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

 
 

Depreciation, amortization and accretion
524

 
478

Bad debts expense
77

 
67

Stock-based compensation expense
32

 
26

Deferred income taxes, net
(34
)
 
(4
)
Equity in earnings of unconsolidated entities
(128
)
 
(120
)
Distributions from unconsolidated entities
99

 
90

(Gain) loss on asset disposals, net
13

 
5

(Gain) loss on sale of business and other exit costs, net
(1
)
 
—

(Gain) loss on license sales and exchanges, net
—

 
(18
)
Other operating activities
3

 
2

Changes in assets and liabilities from operations
 
 
 
Accounts receivable
(35
)
 
(1
)
Equipment installment plans receivable
(42
)
 
(88
)
Inventory
3

 
15

Accounts payable
(4
)
 
21

Customer deposits and deferred revenues
(1
)
 
(5
)
Accrued taxes
81

 
1

Accrued interest
9

 
9

Other assets and liabilities
(24
)
 
(21
)
Net cash provided by operating activities
687

 
600

 
 
 
 
Cash flows from investing activities
 
 
 
Cash paid for additions to property, plant and equipment
(439
)
 
(277
)
Cash paid for licenses
(257
)
 
(2
)
Cash received from investments
29

 
50

Cash paid for investments
(11
)
 
—

Cash received from divestitures and exchanges
32

 
23

Other investing activities
(1
)
 
3

Net cash used in investing activities
(647
)
 
(203
)
 
 
 
 
Cash flows from financing activities
 
 
 
Repayment of long-term debt
(14
)
 
(14
)
Common Shares reissued for benefit plans, net of tax payments
(8
)
 
7

Repurchase of Common Shares
(21
)
 
—

Distributions to noncontrolling interests
(3
)
 
(5
)
Other financing activities
(2
)
 
(5
)
Net cash used in financing activities
(48
)
 
(17
)
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
(8
)
 
380

 
 
 
 
Cash, cash equivalents and restricted cash
 
 
 
Beginning of period
583

 
352

End of period
$
575

 
$
732



6


United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
 
ASSETS
 
September 30, 20191
 
December 31, 2018
(Dollars in millions)
 
 
 
Current assets
 

 
 

Cash and cash equivalents
$
570

 
$
580

Short-term investments
—

 
17

Accounts receivable
993

 
976

Inventory, net
139

 
142

Prepaid expenses
49

 
63

Other current assets
19

 
34

Total current assets
1,770

 
1,812

 
 
 
 
Assets held for sale
9

 
54

 
 
 
 
Licenses
2,461

 
2,186

 
 
 
 
Investments in unconsolidated entities
471

 
441

 
 
 
 
Property, plant and equipment, net
2,144

 
2,202

 
 
 
 
Operating lease right-of-use assets
897

 
—

 
 
 
 
Other assets and deferred charges
539

 
579

 
 
 
 
Total assets
$
8,291

 
$
7,274



7


United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
 
LIABILITIES AND EQUITY
 
September 30, 20191
 
December 31, 2018
(Dollars in millions, except per share amounts)
 
 
 
Current liabilities
 

 
 

Current portion of long-term debt
$
19

 
$
19

Accounts payable
337

 
313

Customer deposits and deferred revenues
155

 
157

Accrued taxes
88

 
30

Accrued compensation
68

 
78

Short-term operating lease liabilities
104

 
—

Other current liabilities
78

 
94

Total current liabilities
849

 
691

 
 
 
 
Liabilities held for sale
1

 
1

 
 
 
 
Deferred liabilities and credits
 

 
 

Deferred income tax liability, net
477

 
510

Long-term operating lease liabilities
864

 
—

Other deferred liabilities and credits
312

 
389

 
 
 
 
Long-term debt, net
1,592

 
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
1,622

 
1,590

Treasury shares
(70
)
 
(65
)
Retained earnings
2,532

 
2,444

Total U.S. Cellular shareholders’ equity
4,172

 
4,057

 
 
 
 
Noncontrolling interests
13

 
10

 
 
 
 
Total equity
4,185

 
4,067

 
 
 
 
Total liabilities and equity
$
8,291

 
$
7,274


1 
As of January 1, 2019, U.S. Cellular adopted the new lease accounting standard, ASC 842, using a modified retrospective method. 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
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
(Dollars in millions)
 
 
 
 
 
 
 
Cash flows from operating activities (GAAP)
$
211

 
$
235

 
$
687

 
$
600

Less: Cash paid for additions to property, plant and equipment
157

 
103

 
439

 
277

Free cash flow (Non-GAAP)1
$
54

 
$
132

 
$
248

 
$
323

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.

EBITDA, Adjusted EBITDA and Adjusted OIBDA
The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income and Operating income.
 
Three Months Ended
September 30,
 
2019
 
2018
(Dollars in millions)
 
 
 
Net income (GAAP)
$
24

 
$
37

Add back:
 
 
 
Income tax expense
15

 
14

Interest expense
29

 
29

Depreciation, amortization and accretion
181

 
160

EBITDA (Non-GAAP)
249

 
240

Add back or deduct:
 
 
 
(Gain) loss on asset disposals, net
5

 
3

(Gain) loss on license sales and exchanges, net
2

 
—

Adjusted EBITDA (Non-GAAP)
256

 
243

Deduct:
 
 
 
Equity in earnings of unconsolidated entities
44

 
42

Interest and dividend income
4

 
4

Adjusted OIBDA (Non-GAAP)
208

 
197

Deduct:
 
 
 
Depreciation, amortization and accretion
181

 
160

(Gain) loss on asset disposals, net
5

 
3

(Gain) loss on license sales and exchanges, net
2

 
—

Operating income (GAAP)
$
20

 
$
34




9