2014

U.S. Cellular Reports First Quarter 2012 Results Smartphone penetration accelerates; strong growth in ARPU and profitability

CHICAGO, May 4, 2012 /PRNewswire/ -- 

Note: Comparisons are year over year unless otherwise noted.

1Q 2012 Highlights

  • Smartphones as a percent of total devices sold increased to 54.1 percent from 42.5 percent; smartphone customers increased to 34.4 percent of postpaid customers from 20.3 percent.
  • Postpaid ARPU (average revenue per customer) increased 5 percent to $54.00 from $51.21.
  • Service revenues increased 4 percent to $1,023.8 million.
  • Operating income increased 45 percent to $85.2 million.
  • Retail gross additions increased 7 percent to 273,000 from 256,000.
  • Postpaid churn increased to 1.6 percent from 1.4 percent.
  • Net loss of 34,000 retail customers, reflecting loss of 38,000 postpaid customers and gain of 4,000 prepaid customers; postpaid customers comprised 94 percent of retail customers.
  • Cell sites in service increased 3 percent to 7,875.

As previously announced, U.S. Cellular will hold a teleconference May 4, 2012 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations page of www.uscellular.com or www.teldta.com.

United States Cellular Corporation (NYSE: USM) reported service revenues of $1,023.8 million for the first quarter of 2012, up 4 percent versus $985.1 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $62.5 million and $0.73, respectively, for the first quarter of 2012, compared to $35.2 million and $0.41, respectively, in the comparable period one year ago.

"We generated increased revenues and improved profitability in the quarter," said Mary N. Dillon, U.S. Cellular president and CEO. "Our top priority remains to improve our net customer additions.  We're encouraged by the increase in retail gross additions, which we attribute to improved marketing awareness, strong in-store execution and the launch of 4G LTE service in several of our markets.  However, we experienced higher postpaid churn and therefore had a net loss of postpaid customers.

"On April 30, we announced that U.S. Cellular prepaid service and devices will soon be available through 415 Wal-Mart stores under the U Prepaid brand.  Gaining distribution in Wal-Mart gives us another significant opportunity to be where our customers want to shop, and we're evaluating additional ways to expand and enhance our distribution.

"Smartphone sales continue to drive higher data usage and average revenue per customer. At the end of the quarter, 34 percent of our postpaid customers had smartphones, and smartphones were 54 percent of our total devices sold. Despite the increase in smartphones sold, we were able to keep loss on equipment essentially stable. Those efforts, along with good expense control, contributed to a strong increase in operating income. To further support customer demand for data services, as well as to make smartphones accessible to a broader array of customers and budgets, we introduced a set of tiered data plans on May 1, and we're on track with our 4G LTE network rollout. Sales of both 4G devices introduced to date have been strong, and we plan to build on our offerings throughout the year, as we bring 4G speeds to at least 50 percent of our customers."

Guidance for year ending Dec. 31, 2012                             

Guidance for the year ending Dec. 31, 2012, as of May 4, 2012, is unchanged from the previous guidance provided on Feb. 24, 2012. 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 this guidance. 



2012 Estimated

Results (1)


Service revenues

$4,050-$4,150 million


Operating income

$200-$300 million


Depreciation, amortization and accretion expenses,



   and losses on asset disposals and exchanges 



   and impairment of assets (2)

Approx. $600 million


Adjusted OIBDA (2) (3)

$800-$900 million


Capital expenditures

Approx. $850 million



(1)

These estimates are based on U.S. Cellular's current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011.  New developments or changing conditions (such as customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges) could affect U.S. Cellular's plans and, therefore, its 2012 estimated results.   

(2)

The 2012 Estimated Results do not include any estimate for unrecognized net gains or losses related to disposals and exchanges of assets or losses on impairment of assets (since such transactions and their effects are uncertain).

(3)

Adjusted OIBDA is defined as operating income excluding the effects of depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals and exchanges (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows.  Adjusted OIBDA excludes the net gain or loss on asset disposals and exchanges (if any) and loss on impairment of assets (if any), in order to show operating results on a more comparable basis from period to period.  U.S. Cellular does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual and, accordingly, they may be incurred in the future.  U.S. Cellular believes this measure provides useful information to investors regarding U.S. Cellular's financial condition and results or operations because it highlights certain key cash and non-cash items and their impacts on cash flows from operating activities.

Conference call information

U.S. Cellular will hold a conference call on May 4, 2012 at 9:30 a.m. CDT.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Investor Relations page of www.uscellular.com. The call will be archived on the Conference Calls page of www.uscellular.com.

About U.S. Cellular

United States Cellular Corporation, the nation's seventh-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to approximately 5.8 million customers in 26 states. The Chicago-based company employed approximately 8,700 people as of March 31, 2012. At the end of the first quarter of 2012, Telephone and Data Systems, Inc. owned 84 percent of U.S. Cellular.

Visit www.uscellular.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.    

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 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; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per customer, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company. 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.

 United States Cellular Corporation

 Summary Operating Data (Unaudited)

















 Quarter Ended


3/31/2012



12/31/2011



9/30/2011



6/30/2011



3/31/2011

 Total population
















Consolidated markets (1)


92,684,000



91,965,000



91,965,000



91,204,000



91,090,000


Consolidated operating markets (1)


46,966,000



46,888,000



46,888,000



46,888,000



46,774,000

 Market penetration at end of period
















Consolidated markets (2)


6.3%



6.4%



6.5%



6.5%



6.6%


Consolidated operating markets (2)


12.4%



12.6%



12.7%



12.7%



12.9%

 All customers
















Total at end of period


5,837,000



5,891,000



5,932,000



5,968,000



6,033,000


Gross additions


285,000



306,000



299,000



257,000



293,000


Net additions (losses)


(49,000)



(41,000)



(36,000)



(70,000)



(39,000)


Smartphones sold as a percent of
















      total devices sold (3)


54.1%



52.5%



39.9%



39.6%



42.5%

 Retail customers
















Total at end of period


5,570,000



5,608,000



5,621,000



5,644,000



5,698,000


Smartphone penetration (3) (4)


34.4%



30.5%



26.2%



23.1%



20.3%


Gross additions


273,000



298,000



284,000



226,000



256,000


Net retail additions (losses) (5)


(34,000)



(13,000)



(23,000)



(58,000)



(31,000)


      Net postpaid additions (losses)


(38,000)



(20,000)



(34,000)



(41,000)



(22,000)


      Net prepaid additions (losses)


4,000



7,000



11,000



(17,000)



(9,000)

 Service revenue components (000s)
















Retail service

$

888,527


$

882,091


$

871,199


$

868,630


$

864,602


Inbound roaming


80,132



93,353



107,810



82,760



64,386


Other


55,161



54,601



57,600



50,640



56,125

 Total service revenues (000s)

$

1,023,820


$

1,030,045


$

1,036,609


$

1,002,030


$

985,113

 Total ARPU (6)


58.21


$

58.13


$

58.09


$

55.69


$

54.29

 Billed ARPU (7)


50.52


$

49.78


$

48.82


$

48.27


$

47.65

 Postpaid ARPU (8)

$

54.00


$

53.35


$

52.41


$

51.84


$

51.21

 Postpaid churn rate (9)


1.6%



1.6%



1.5%



1.4%



1.4%

 Capital expenditures (000s)

$

201,300


$

276,400


$

248,000


$

162,100


$

95,900

 Cell sites in service


7,875



7,882



7,828



7,770



7,663



(1)

Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.

(2)

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®.

(3)

Smartphones represent wireless devices which run on an Android™, BlackBerry®, or Windows Mobile® operating system, excluding tablets.

(4)

Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5)

Includes net postpaid additions (losses) and net prepaid additions (losses).

(6)

Total ARPU - Average monthly service revenue per customer includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.

(7)

Billed ARPU - Average monthly billed revenue per customer is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.

(8)

Postpaid ARPU - Average monthly revenue per postpaid customer is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.

(9)

Represents the percentage of the postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.



United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended March 31,

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

































      Increase (Decrease)


2012


2011


Amount


Percent

Operating revenues


















Service

$

1,023,820



$

985,113



$

38,707




4%




Equipment sales


68,301




71,979




(3,678)




(5%)





Total operating revenues


1,092,121




1,057,092




35,029




3%























Operating expenses


















System operations (excluding Depreciation,



















amortization and accretion reported below)


233,164




217,603




15,561




7%




Cost of equipment sold


187,036




194,360




(7,324)




(4%)




Selling, general and administrative


442,244




442,004




240




-




Depreciation, amortization and accretion


146,685




143,340




3,345




2%




(Gain) loss on asset disposals


(2,210)




1,037




(3,247)




>(100)%





Total operating expenses


1,006,919




998,344




8,575




1%























Operating income


85,202




58,748




26,454




45%























Investment and other income (expense)


















Equity in earnings of unconsolidated entities


21,614




20,891




723




3%




Interest and dividend income


1,043




849




194




23%




Interest expense


(13,411)




(15,186)




1,775




12%




Other, net


202




(125)




327




>100%






Total investment and other income (expense)


9,448




6,429




3,019




47%























Income before income taxes


94,650




65,177




29,473




45%




Income tax expense


25,638




24,747




891




4%























Net income


69,012




40,430




28,582




71%




Less: Net income attributable to noncontrolling



















interests, net of tax


(6,520)




(5,269)




(1,251)




(24%)



Net income attributable to U.S. Cellular shareholders

$

62,492



$

35,161



$

27,331




78%























Basic weighted average shares outstanding


84,570




85,484




(914)




(1%)



Basic earnings per share attributable to


















U.S. Cellular shareholders

$

0.74



$

0.41



$

0.33




80%























Diluted weighted average shares outstanding


85,133




86,101




(968)




(1%)



Diluted earnings per share attributable to


















U.S. Cellular shareholders

$

0.73



$

0.41



$

0.32




78%































































United States Cellular Corporation

Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)











ASSETS














March 31,


December 31,





2012


2011


Current assets








Cash and cash equivalents

$

511,078


$

424,155



Short-term investments


116,368



127,039



Accounts receivable from customers and other


397,567



441,821



Inventory


131,510



127,056



Income taxes receivable


70



74,791



Prepaid expenses


57,655



55,980



Net deferred income tax asset


31,905



31,905



Other current assets


11,149



10,096




1,257,302



1,292,843









Assets held for sale




49,647









Investments








Licenses


1,481,865



1,470,769



Goodwill


494,737



494,737



Customer lists, net


223



314



Investments in unconsolidated entities


154,431



138,096



Notes and interest receivable – long-term


81



1,921



Long-term investments


40,276



30,057




2,171,613



2,135,894









Property, plant and equipment, net








In service and under construction


7,126,220



7,008,449



Less: accumulated depreciation


4,278,794



4,218,147




2,847,426



2,790,302









Other assets and deferred charges


65,094



59,290









Total assets

$

6,341,435


$

6,327,976





























United States Cellular Corporation

Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)















LIABILITIES AND EQUITY





















March 31,


December 31,







2012


2011

Current liabilities









Current portion of long-term debt

$

127



$

127



Accounts payable










Affiliated


15,172




12,183




Trade


280,433




303,779



Customer deposits and deferred revenues


190,866




181,355



Accrued taxes


38,999




34,095



Accrued compensation


33,374




69,551



Other current liabilities


87,322




121,190




646,293




722,280










Liabilities held for sale


-




1,051










Deferred liabilities and credits









Net deferred income tax liability


812,929




799,190



Other deferred liabilities and credits


250,177




248,213










Long-term debt


880,486




880,320


















Noncontrolling interests with mandatory redemption features


1,064




1,005










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


1,392,845




1,387,341



Treasury shares


(152,220)




(152,817)



Retained earnings


2,359,589




2,297,363




Total U.S. Cellular shareholders' equity


3,688,288




3,619,961










Noncontrolling interests


62,198




55,956











Total equity


3,750,486




3,675,917










Total liabilities and equity

$

6,341,435



$

6,327,976




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 March 31, 2012 and December 31, 2011.






















March 31,


December 31,




2012


2011












Cash and cash equivalents


$

511,078


$

424,155












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









Government-backed securities (3)



$

116,368


$

127,039












Amounts included in long-term investments (1)(4)









Government-backed securities (3)



$

40,276


$

30,057



(1)

Designated as held-to-maturity investments and recorded at amortized cost on the Consolidated Balance Sheet.

(2)

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

(3)

Includes U.S. treasuries and corporate notes guaranteed under the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program.

(4)

At March 31, 2012, maturities range between 15 and 24 months from the balance sheet date.



United States Cellular Corporation

Consolidated Statement of Cash Flows

Three Months Ended March 31,

(Unaudited, dollars in thousands)

























2012



2011

Cash flows from operating activities








Net income

$

69,012



$

40,430


Add (deduct) adjustments to reconcile net income to net









cash flows from operating activities










Depreciation, amortization and accretion


146,685




143,340




Bad debts expense


13,850




13,507




Stock-based compensation expense


5,391




5,792




Deferred income taxes, net


6,283




44,413




Equity in earnings of unconsolidated entities


(21,614)




(20,891)




Distributions from unconsolidated entities


2,822




8,323




(Gain) loss on asset disposals, net


(2,210)




1,037




Noncash interest expense


451




463




Other operating activities


449




601


Changes in assets and liabilities from operations










Accounts receivable


36,621




4,950




Inventory


(4,410)




3,461




Accounts payable - trade


(17,689)




53,713




Accounts payable - affiliate


2,989




(2,041)




Customer deposits and deferred revenues


9,512




10,245




Accrued taxes


79,765




11,829




Accrued interest


9,167




9,205




Other assets and liabilities


(80,107)




(70,669)



256,967




257,708








Cash flows from investing activities








Cash used for additions to property, plant and equipment


(209,160)




(121,041)


Cash paid for acquisitions and licenses


(11,096)




-


Cash received for divestitures


49,786




-


Cash paid for investments


(10,000)




-


Cash received for investments


10,000




35,000


Other investing activities


296




2,200



(170,174)




(83,841)








Cash flows from financing activities








Common shares reissued for benefit plans, net of tax payments


357




1,305


Common shares repurchased


-




(17,357)


Distributions to noncontrolling interests


(218)




(186)


Other financing activities


(9)




17



130




(16,221)















Net increase in cash and cash equivalents


86,923




157,646








Cash and cash equivalents








Beginning of period


424,155




276,915


End of period

$

511,078



$

434,561



United States Cellular Corporation

Financial Measures and Reconciliations

Three Months Ended March 31,

(Unaudited, dollars in thousands)







Three Months Ended March 31,



2012


2011














Service revenues


$

1,023,820



$

985,113















Operating income



85,202




58,748



Add:











Depreciation, amortization and accretion



146,685




143,340




Loss on impairment of intangible assets



-




-




(Gain) loss on asset disposals



(2,210)




1,037





Adjusted OIBDA (1)


$

229,677



$

203,125

















Adjusted OIBDA margin (2)



22.4

%



20.6

%











2012


2011














Cash flows from operating activities


$

256,967



$

257,708



Deduct:











Cash used for additions to property, plant and equipment



209,160




121,041





Free cash flow (3)


$

47,807



$

136,667




(1)

Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization, and accretion (OIBDA); the net gain or loss on asset disposals and exchanges (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow.  This measure should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and exchanges and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period.  U.S. Cellular does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.

(2)

Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues. Equipment revenues are excluded from the denominator of the calculation since equipment is generally sold at a net loss, and such net loss is included in adjusted OIBDA as a cost of earning service revenues for purposes of assessing business results.  U.S. Cellular believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular's business results.  Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin. U.S. Cellular believes this measure provides useful information to investors regarding U.S. Cellular's financial condition and results of operations because it highlights certain key cash and non-cash items and their impacts on cash flows from operating activities.

(3)

Free cash flow is defined as cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure. U.S. Cellular believes that free cash flow as reported by U.S. Cellular may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

SOURCE United States Cellular Corporation



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