EX-99.1 2 usmq120208-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 1, 2020, 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 2020 results
Caring for its customers and its associates

 
CHICAGO (April 30, 2020) — United States Cellular Corporation (NYSE:USM) reported total operating revenues of $963 million for the first quarter of 2020, versus $966 million for the same period one year ago. Service revenues totaled $762 million up 3% over the same period a year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $71 million and $0.81, respectively, for the first quarter of 2020 compared to $54 million and $0.62, respectively, in the same period one year ago.
“Now, more than ever, wireless connectivity is an essential service, and U.S. Cellular is managing through these unprecedented times by focusing on our customers and our associates, while keeping our network strong,” said Kenneth R. Meyers, U.S. Cellular President and CEO. “Our entire organization has risen to meet this crisis and the massively-changed business environment that has come with it. I thank all our associates, especially those serving our customers on the frontline, for their unwavering commitment to keeping our customers connected. At this time, the majority of our stores are open, with modified store hours, and we have implemented measures to increase social distancing by encouraging the use of our appointment scheduling tool and curbside service for bill payments and other transactions. Most of our customer care center employees have migrated to working remotely while maintaining the exceptional customer service U.S. Cellular is known for.
“We are focused on maintaining the performance of our network, with our engineers working to meet increased demand. We have seen both data consumption and voice traffic increase along the same lines as the rest of the wireless industry. At the same time, customers are consuming more wireless services at home during the day rather than during historical peak usage hours, which has helped balance use of the total network. We continue our network modernization program, adding capacity and speed, and continue to launch 5G services commercially, and VoLTE in remaining markets.
"Our financial results this quarter were solid, including a tax benefit resulting from the CARES Act, partially offset by an incremental allowance recorded to cover anticipated higher levels of bad debts. We expect there might be more near-term impacts from the pandemic, including Iower store traffic and new customer growth. Today's number one priority is to continue to adapt to meet the wireless needs of communities and customers we serve. At the same time, we are planning for the return to a more stable future environment and continuing to execute on our strategic priorities."

1


2020 Estimated Results
U.S. Cellular’s current estimates of full-year 2020 results are shown below. Such estimates represent management’s view as of April 30, 2020 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, especially in light of the uncertainty created by the COVID-19 pandemic.

 
2020 Estimated Results
 
Previous
Current
(Dollars in millions)
 
 
Service revenues
$3,000-$3,100
Unchanged
Adjusted OIBDA1
$775-$900
$725-$850
Adjusted EBITDA1
$950-$1,075
$900-$1,025
Capital expenditures
$850-$950
Unchanged

The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2020 estimated results, actual results for the three months ended March 31, 2020, and actual results for the year ended December 31, 2019. In providing 2020 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
 
2020 Estimated Results
 
Three Months Ended
March 31, 2020
 
Year Ended
December 31, 2019
(Dollars in millions)
 
 
 
 
 
Net income (GAAP)
N/A

 
$
72

 
$
133

Add back:
 

 
 

 
 

Income tax expense
N/A

 
4

 
52

Income before income taxes (GAAP)
$80-$205

 
$
76

 
$
185

Add back:
 

 
 

 
 

Interest expense
110

 
24

 
110

Depreciation, amortization and accretion expense
690

 
177

 
702

EBITDA (Non-GAAP)1
$880-$1,005

 
$
277

 
$
997

Add back or deduct:
 

 
 

 
 

(Gain) loss on asset disposals, net
20

 
4

 
19

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

 
—

 
(1
)
Adjusted EBITDA (Non-GAAP)1
$900-$1,025

 
$
281

 
$
1,015

Deduct:
 

 
 

 
 

Equity in earnings of unconsolidated entities
165

 
45

 
166

Interest and dividend income
10

 
4

 
17

Other, net
—

 
1

 
—

Adjusted OIBDA (Non-GAAP)1
$725-$850

 
$
231

 
$
832

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 March 31, 2020, 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 1, 2020 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/1145/34504
▪
Access the call by phone at (833) 968-2187, conference ID: 1267888.

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 4.9 million connections in 21 states. The Chicago-based company had 5,500 full- and part-time associates as of March 31, 2020. At the end of the first quarter of 2020, Telephone and Data Systems, Inc. owned 83 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: the impact, duration and severity of the COVID-19 pandemic; 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.   
 
The impact of the COVID-19 pandemic on U.S. Cellular's business is uncertain, but depending on its duration and severity it could have a material adverse effect on U.S. Cellular's business, financial condition or results of operations.

The impact of the recent global spread of COVID-19 on U.S. Cellular's future operations is uncertain. Public health emergencies, such as COVID-19, pose the risk that U.S. Cellular or its associates, agents, partners and suppliers may be unable to conduct business activities for an extended period of time and/or provide the level of service expected. U.S. Cellular's ability to attract customers, maintain adequate supply chain and execute on its business strategies and initiatives could be negatively impacted by this outbreak. Additionally, COVID-19 has caused and could continue to cause increased unemployment, economic downturn and credit market deterioration, all of which could negatively impact U.S. Cellular. The extent of the impact of COVID-19 on U.S. Cellular's business, financial condition and results of operations will depend on future circumstances, including the severity of the disease, the duration of the outbreak, actions taken by governmental authorities and other possible direct and indirect consequences, all of which are uncertain and cannot be predicted.

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
3/31/2020
 
12/31/2019
 
9/30/2019
 
6/30/2019
 
3/31/2019
Retail Connections
 
 
 
 
 
 
 
 
 
Postpaid
 
 
 
 
 
 
 
 
 
Total at end of period
4,359,000

 
4,383,000

 
4,395,000

 
4,414,000

 
4,440,000

Gross additions
132,000

 
170,000

 
163,000

 
137,000

 
137,000

Feature phones
2,000

 
2,000

 
3,000

 
5,000

 
4,000

Smartphones
88,000

 
128,000

 
121,000

 
97,000

 
98,000

Connected devices
42,000

 
40,000

 
39,000

 
35,000

 
35,000

Net additions (losses)
(26,000
)
 
(12,000
)
 
(19,000
)
 
(26,000
)
 
(32,000
)
Feature phones
(10,000
)
 
(11,000
)
 
(11,000
)
 
(10,000
)
 
(13,000
)
Smartphones
(10,000
)
 
13,000

 
9,000

 
(1,000
)
 
(1,000
)
Connected devices
(6,000
)
 
(14,000
)
 
(17,000
)
 
(15,000
)
 
(18,000
)
ARPU1
$
47.23

 
$
46.57

 
$
46.16

 
$
45.90

 
$
45.44

ARPA2
$
122.92

 
$
120.99

 
$
119.87

 
$
119.46

 
$
118.84

Churn rate3
1.21
%
 
1.38
%
 
1.38
%
 
1.23
%
 
1.26
%
Handsets
0.95
%
 
1.11
%
 
1.09
%
 
0.97
%
 
0.99
%
Connected devices
3.11
%
 
3.44
%
 
3.44
%
 
3.01
%
 
3.08
%
Prepaid
 
 
 
 
 
 
 
 
 
Total at end of period
494,000

 
506,000

 
510,000

 
500,000

 
503,000

Gross additions
57,000

 
63,000

 
70,000

 
61,000

 
61,000

Net additions (losses)
(12,000
)
 
(3,000
)
 
9,000

 
(2,000
)
 
(13,000
)
ARPU1
$
34.07

 
$
34.11

 
$
34.35

 
$
34.43

 
$
33.44

Churn rate3
4.67
%
 
4.40
%
 
4.03
%
 
4.20
%
 
4.92
%
Total connections at end of period4
4,903,000

 
4,941,000

 
4,957,000

 
4,967,000

 
4,995,000

Market penetration at end of period
 
 
 
 
 
 
 
 
 
Consolidated operating population
31,292,000

 
30,740,000

 
31,310,000

 
31,310,000

 
31,310,000

Consolidated operating penetration5
16
%
 
16
%
 
16
%
 
16
%
 
16
%
Capital expenditures (millions)
$
236

 
$
243

 
$
170

 
$
195

 
$
102

Total cell sites in service
6,629

 
6,578

 
6,554

 
6,535

 
6,506

Owned towers
4,184

 
4,166

 
4,123

 
4,116

 
4,106

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,
 
2020
 
2019
 
2020 vs. 2019
(Dollars and shares in millions, except per share amounts)
 
 
 
 
 
Operating revenues
 

 
 

 
 

Service
$
762

 
$
741

 
3
 %
Equipment sales
201

 
225

 
(10
)%
Total operating revenues
963


966


–

 
 
 
 
 
 
Operating expenses
 

 
 

 
 

System operations (excluding Depreciation, amortization and accretion reported below)
180

 
176

 
2
 %
Cost of equipment sold
217

 
233

 
(7
)%
Selling, general and administrative
335

 
326

 
3
 %
Depreciation, amortization and accretion
177

 
169

 
5
 %
(Gain) loss on asset disposals, net
4

 
2

 
72
 %
(Gain) loss on sale of business and other exit costs, net
—

 
(2
)
 
N/M

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

 
(2
)
 
N/M

Total operating expenses
913

 
902


1
 %
 


 


 
 
Operating income
50

 
64


(22
)%
 
 
 
 
 
 
Investment and other income (expense)
 

 
 

 
 

Equity in earnings of unconsolidated entities
45

 
44

 
3
 %
Interest and dividend income
4

 
6

 
(33
)%
Interest expense
(24
)
 
(29
)
 
19
 %
Other, net
1

 
—

 
(86
)%
Total investment and other income
26

 
21

 
23
 %
 
 
 
 
 
 
Income before income taxes
76

 
85

 
(11
)%
Income tax expense
4

 
27

 
(86
)%
Net income
72

 
58

 
24
 %
Less: Net income attributable to noncontrolling interests, net of tax
1

 
4

 
(69
)%
Net income attributable to U.S. Cellular shareholders
$
71

 
$
54

 
30
 %
 
 
 
 
 
 
Basic weighted average shares outstanding
86

 
86

 
–

Basic earnings per share attributable to U.S. Cellular shareholders
$
0.82

 
$
0.63

 
30
 %



 


 
 
Diluted weighted average shares outstanding
88

 
88

 
(1
)%
Diluted earnings per share attributable to U.S. Cellular shareholders
$
0.81

 
$
0.62

 
31
 %
N/M - Percentage change not meaningful


5


United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
(Dollars in millions)
 
 
 
Cash flows from operating activities
 
 
 
Net income
$
72

 
$
58

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

 
 

Depreciation, amortization and accretion
177

 
169

Bad debts expense
33

 
24

Stock-based compensation expense
7

 
9

Deferred income taxes, net
52

 
17

Equity in earnings of unconsolidated entities
(45
)
 
(44
)
Distributions from unconsolidated entities
24

 
18

(Gain) loss on asset disposals, net
4

 
2

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

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

 
(2
)
Other operating activities
—

 
1

Changes in assets and liabilities from operations
 
 
 
Accounts receivable
55

 
31

Equipment installment plans receivable
23

 
(10
)
Inventory
(50
)
 
(15
)
Accounts payable
97

 
56

Customer deposits and deferred revenues
(10
)
 
7

Accrued taxes
(49
)
 
11

Accrued interest
9

 
9

Other assets and liabilities
(57
)
 
(52
)
Net cash provided by operating activities
342

 
287

 
 
 
 
Cash flows from investing activities
 
 
 
Cash paid for additions to property, plant and equipment
(315
)
 
(107
)
Cash paid for licenses
(26
)
 
(1
)
Cash received from investments
—

 
2

Cash paid for investments
(1
)
 
(1
)
Cash received from divestitures and exchanges
—

 
31

Advance payments for license acquisitions
—

 
(135
)
Other investing activities
—

 
(1
)
Net cash used in investing activities
(342
)
 
(212
)
 
 
 
 
Cash flows from financing activities
 
 
 
Repayment of long-term debt
(2
)
 
(5
)
Repurchase of Common Shares
(21
)
 
—

Distributions to noncontrolling interests
(1
)
 
(1
)
Net cash used in financing activities
(24
)
 
(6
)
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
(24
)
 
69

 
 
 
 
Cash, cash equivalents and restricted cash
 
 
 
Beginning of period
291

 
583

End of period
$
267

 
$
652



6


United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
 
ASSETS
 
 
 
 
 
March 31, 2020
 
December 31, 2019
(Dollars in millions)
 
 
 
Current assets
 

 
 

Cash and cash equivalents
$
258

 
$
285

Accounts receivable, net
930

 
1,010

Inventory, net
212

 
162

Prepaid expenses
58

 
50

Income taxes receivable
96

 
46

Other current assets
22

 
20

Total current assets
1,576

 
1,573

 
 
 
 
Licenses
2,502

 
2,471

 
 
 
 
Investments in unconsolidated entities
469

 
447

 
 
 
 
Property, plant and equipment, net
2,268

 
2,207

 
 
 
 
Operating lease right-of-use assets
902

 
900

 
 
 
 
Other assets and deferred charges
534

 
566

 
 
 
 
Total assets
$
8,251

 
$
8,164



7


United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
 
LIABILITIES AND EQUITY
 
 
 
 
 
March 31, 2020
 
December 31, 2019
(Dollars in millions, except per share amounts)
 
 
 
Current liabilities
 

 
 

Current portion of long-term debt
$
6

 
$
8

Accounts payable
328

 
304

Customer deposits and deferred revenues
139

 
148

Accrued taxes
27

 
30

Accrued compensation
47

 
76

Short-term operating lease liabilities
109

 
105

Other current liabilities
66

 
79

Total current liabilities
722

 
750

 
 
 
 
Deferred liabilities and credits
 

 
 

Deferred income tax liability, net
559

 
507

Long-term operating lease liabilities
865

 
865

Other deferred liabilities and credits
327

 
319

 
 
 
 
Long-term debt, net
1,503

 
1,502

 
 
 
 
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
1,636

 
1,629

Treasury shares
(92
)
 
(70
)
Retained earnings
2,620

 
2,550

Total U.S. Cellular shareholders’ equity
4,252

 
4,197

 
 
 
 
Noncontrolling interests
12

 
13

 
 
 
 
Total equity
4,264

 
4,210

 
 
 
 
Total liabilities and equity
$
8,251

 
$
8,164



8


United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
 
Three Months Ended
March 31,
 
2020
 
2019
(Dollars in millions)
 
 
 
Cash flows from operating activities (GAAP)
$
342

 
$
287

Less: Cash paid for additions to property, plant and equipment
315

 
107

Free cash flow (Non-GAAP)1
$
27

 
$
180

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