U.S. Cellular reports first quarter 2014 results

As previously announced, U.S. Cellular will hold a teleconference May 2, 2014 at 9:30 a.m. CDT. Listen to the live call via the Events & Presentations pages of investors.teldta.com or investors.uscellular.com.

02 May, 2014, 07:59 ET from United States Cellular Corporation

CHICAGO, May 2, 2014 /PRNewswire/ -- United States Cellular Corporation (NYSE: USM) reported service revenues of $853.6 million for the first quarter of 2014, versus $996.3 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $19.5 million and $0.23 respectively, for the first quarter of 2014, compared to $4.9 million and $0.06, respectively, in the comparable period one year ago.

Year-over-year comparisons are affected by the divestiture transaction and the deconsolidation of certain partnerships, both in 2013.

"With our competitive range of plans and strong smartphone selection, including the iPhone, we have had success attracting new customers and increasing smartphone adoption and data use," said Kenneth R. Meyers, U.S. Cellular president and CEO. "This is reflected in higher gross customer additions and average revenue per customer. We're driving our smartphone penetration and data growth strategies by bringing 4G LTE access to 93 percent of our customers in 2014, and offering high-demand devices like the new Samsung Galaxy S5. Network quality is the foundation of our strategy to increase customer additions and build loyalty.

"We've made significant progress to return service levels to our normally high standards following the billing system conversion.  While churn is still elevated, we are currently seeing improvements in both voluntary and involuntary churn from peak levels back in 2013 and early 2014.  Additionally the new system has already enabled us to deliver more products and services that meet our customers' needs, like our Shared Connect Plans, new no contract Simple Connect Plans, and device installment contracts.

"The industry pricing environment is very dynamic at the present time.  However, we're confident that we have the right offerings  for our target customers and we'll continue to price them at competitive levels.  We have a strong financial foundation that will enable us to support our current initiatives and to continue to invest in our future by further expanding and enhancing our network and retail distribution."

2014 Estimated Results Capital expenditures for 2014 are expected to be approximately $640 million, down from $738 million in 2013.

Conference Call Information U.S. Cellular will hold a conference call on May 2, 2014 at 9:30 a.m. CDT.

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 4.7 million customers in 23 states. The Chicago-based company had 6,800 full- and part-time associates as of March 31, 2014. At the end of the first 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.

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; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of handset 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.   

 

United States Cellular Corporation

Total Markets* Summary Operating Data (Unaudited)

As of or for the Quarter Ended

3/31/2014

12/31/2013

9/30/2013

6/30/2013

3/31/2013

Retail Customers

Postpaid

Total at end of period

4,174,000

4,267,000

4,343,000

4,412,000

5,060,000

Gross additions

197,000

176,000

165,000

165,000

191,000

Net additions (losses)

(93,000)

(71,000)

(60,000)

(120,000)

(74,000)

ARPU (1)

$

57.59

$

53.53

$

54.64

$

54.18

$

54.85

Churn rate (2)

2.3%

1.9%

1.7%

2.0%

1.7%

Smartphone penetration (3) (4)

53.1%

50.8%

47.1%

45.5%

43.5%

Prepaid

Total at end of period

356,000

343,000

370,000

381,000

446,000

Gross additions

85,000

63,000

65,000

77,000

104,000

Net additions (losses)

13,000

(26,000)

(11,000)

(7,000)

23,000

ARPU (1)

$

32.22

$

31.66

$

28.72

$

31.69

$

33.31

Churn rate (2)

6.9%

8.3%

6.8%

6.8%

6.2%

Total customers at end of period

4,684,000

4,774,000

4,875,000

4,968,000

5,736,000

Billed ARPU (1)

$

53.93

$

50.25

$

50.92

$

50.60

$

51.13

Service revenue ARPU (1)

$

60.19

$

57.05

$

58.36

$

57.45

$

57.63

Smartphones sold as a percent of total

  devices sold

73.0%

79.6%

65.2%

66.0%

61.7%

Total population

Consolidated markets (5)

54,817,000

58,013,000

84,025,000

84,025,000

93,943,000

Consolidated operating markets (5)

31,729,000

31,759,000

31,822,000

31,822,000

47,440,000

Market penetration at end of period

Consolidated markets (6)

8.5%

8.2%

5.8%

5.9%

6.1%

Consolidated operating markets (6)

14.8%

15.0%

15.3%

15.6%

12.1%

Capital expenditures (000s)

$

89,581

$

208,135

$

242,459

$

168,497

$

118,410

Total cell sites in service

6,165

6,975

7,687

7,748

8,027

Owned towers

4,448

4,448

4,422

4,411

4,411

*

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 is not adjusted in prior periods for subsequent divestitures or deconsolidations.

Refer to U.S. Cellular's Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three months ended March 31, 2013, as if the transactions had occurred at the beginning of the period.

 

 

 

United States Cellular Corporation

Core* Markets Summary Operating Data (Unaudited)

As of or for the Quarter Ended

3/31/2014

12/31/2013

9/30/2013

6/30/2013

3/31/2013

Retail Customers

Postpaid

Total at end of period

4,174,000

4,267,000

4,343,000

4,412,000

4,463,000

Gross additions

197,000

176,000

165,000

165,000

176,000

Net additions (losses)

(93,000)

(71,000)

(60,000)

(53,000)

(33,000)

ARPU (1)

$

57.59

$

53.53

$

54.64

$

54.44

$

54.21

Churn rate (2)

2.3%

1.9%

1.7%

1.6%

1.6%

Smartphone penetration (3) (4)

53.1%

50.8%

47.1%

45.5%

43.0%

Prepaid

Total at end of period

356,000

343,000

370,000

381,000

373,000

Gross additions

85,000

63,000

65,000

76,000

91,000

Net additions (losses)

13,000

(26,000)

(11,000)

8,000

31,000

ARPU (1)

$

32.22

$

31.66

$

28.72

$

31.65

$

32.92

Churn rate (2)

6.9%

8.3%

6.8%

6.0%

5.6%

Total customers at end of period

4,684,000

4,774,000

4,875,000

4,968,000

5,005,000

Billed ARPU (1)

$

53.93

$

50.25

$

50.92

$

50.98

$

50.93

Service revenue ARPU (1)

$

60.19

$

57.05

$

58.36

$

57.88

$

57.14

Smartphones sold as a percent of total

  devices sold

73.0%

79.6%

65.2%

66.1%

62.1%

Total population

Consolidated markets (5)

54,817,000

58,013,000

84,025,000

84,025,000

84,025,000

Consolidated operating markets (5)

31,729,000

31,759,000

31,822,000

31,822,000

31,822,000

Market penetration at end of period

Consolidated markets (6)

8.5%

8.2%

5.8%

5.9%

6.0%

Consolidated operating markets (6)

14.8%

15.0%

15.3%

15.6%

15.7%

Capital expenditures (000s)

$

89,581

$

211,247

$

239,332

$

171,166

$

107,907

Total cell sites in service

6,165

6,161

6,127

6,113

6,113

Owned towers

3,883

3,883

3,857

3,846

3,846

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 May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three months ended March 31, 2013, as if the transactions had occurred at the beginning of the period.

(1)

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 retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)

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.

(3)

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

(4)

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

(5)

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.

 

 

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended March 31,

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

      Change

2014

2013

Amount

Percent

Operating revenues

Service

$

853,613

$

996,349

$

(142,736)

(14%)

Equipment sales

72,198

85,397

(13,199)

(15%)

Total operating revenues

925,811

1,081,746

(155,935)

(14%)

Operating expenses

System operations (excluding Depreciation, amortization and accretion

  reported below)

180,607

216,299

(35,692)

(17%)

Cost of equipment sold

270,474

241,691

28,783

12%

Selling, general and administrative

395,564

420,080

(24,516)

(6%)

Depreciation, amortization and accretion

167,753

189,845

(22,092)

(12%)

(Gain) loss on asset disposals, net

1,934

5,434

(3,500)

(64%)

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

(6,900)

6,931

(13,831)

>(100%)

(Gain) loss on license sales and exchanges

(91,446)

(91,446)

N/M

Total operating expenses

917,986

1,080,280

(162,294)

(15%)

Operating income

7,825

1,466

6,359

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

37,075

26,835

10,240

38%

Interest and dividend income

884

903

(19)

(2%)

Interest expense

(14,862)

(10,910)

(3,952)

(36%)

Other, net

86

(215)

301

>(100%)

Total investment and other income

23,183

16,613

6,570

40%

Income before income taxes

31,008

18,079

12,929

72%

Income tax expense

12,604

7,369

5,235

71%

Net income

18,404

10,710

7,694

72%

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

(1,078)

5,796

(6,874)

>(100%)

Net income attributable to U.S. Cellular shareholders

$

19,482

$

4,914

$

14,568

>100%

Basic weighted average shares outstanding

84,213

83,838

375

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

$

0.23

$

0.06

$

0.17

>100%

Diluted weighted average shares outstanding

85,065

84,588

477

1%

Diluted earnings per share attributable to U.S. Cellular shareholders

$

0.23

$

0.06

$

0.17

>100%

 

 

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

ASSETS

March 31,

December 31,

2014

2013

Current assets

Cash and cash equivalents

$

398,541

$

342,065

Short-term investments

40,056

50,104

Accounts receivable from customers and others

484,471

586,595

Inventory, net

218,882

238,188

Prepaid expenses

65,510

65,596

Net deferred income tax asset

99,105

99,105

Other current assets

19,702

19,538

1,326,267

1,401,191

Assets held for sale

16,027

Investments

Licenses

1,425,945

1,401,126

Goodwill

387,524

387,524

Investments in unconsolidated entities

289,842

265,585

2,103,311

2,054,235

Property, plant and equipment

In service and under construction

7,715,292

7,717,512

Less: Accumulated depreciation

4,939,072

4,860,992

2,776,220

2,856,520

Other assets and deferred charges

132,536

117,735

Total assets

$

6,338,334

$

6,445,708

 

 

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY

March 31,

December 31,

2014

2013

Current liabilities

Current portion of long-term debt

$

166

$

166

Accounts payable

Affiliated

9,266

11,243

Trade

347,459

405,583

Customer deposits and deferred revenues

255,230

256,740

Accrued taxes

58,574

73,820

Accrued compensation

35,930

66,566

Other current liabilities

161,446

192,055

868,071

1,006,173

Deferred liabilities and credits

Net deferred income tax liability

830,960

836,297

Other deferred liabilities and credits

330,467

315,073

Long-term debt

878,127

878,032

Noncontrolling interests with redemption features

543

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

1,429,148

1,424,729

Treasury shares

(165,577)

(164,692)

Retained earnings

2,061,561

2,043,095

Total U.S. Cellular shareholders' equity

3,413,206

3,391,206

Noncontrolling interests

16,960

18,391

Total equity

3,430,166

3,409,597

Total liabilities and equity

$

6,338,334

$

6,445,708

 

 

 

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, 2014 and December 31, 2013.

March 31,

December 31,

2014

2013

Cash and cash equivalents

$

398,541

$

342,065

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

U.S. Treasury Notes

40,056

50,104

Total cash and cash equivalents and investments

$

438,597

$

392,169

(1)

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

(2)

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

 

 

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

Three Months Ended March 31,

(Unaudited, dollars in thousands)

2014

2013

Cash flows from operating activities

Net income

$

18,404

$

10,710

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

  operating activities

Depreciation, amortization and accretion

167,753

189,845

Bad debts expense

20,492

16,910

Stock-based compensation expense

4,955

5,036

Deferred income taxes, net

(4,817)

7,048

Equity in earnings of unconsolidated entities

(37,075)

(26,835)

Distributions from unconsolidated entities

12,818

5,836

(Gain) loss on asset disposals, net

1,934

5,434

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

(6,900)

6,931

(Gain) loss on license sales and exchanges

(91,446)

Noncash interest expense

269

262

Other operating activities

47

250

Changes in assets and liabilities from operations

Accounts receivable

81,980

33,611

Inventory

19,306

16,750

Accounts payable - trade

(38,245)

4,644

Accounts payable - affiliate

(2,312)

(1,933)

Customer deposits and deferred revenues

(1,510)

8,862

Accrued taxes

(15,403)

6,175

Accrued interest

9,182

9,201

Other assets and liabilities

(75,896)

(75,122)

63,536

223,615

Cash flows from investing activities

Cash used for additions to property, plant and equipment

(109,498)

(151,024)

Cash paid for acquisitions and licenses

(9,135)

(14,150)

Cash received from divestitures

103,042

Cash received for investments

10,000

Other investing activities

584

3,654

(5,007)

(161,520)

Cash flows from financing activities

Repayment of long-term debt

(23)

(61)

Common shares reissued for benefit plans, net of tax payments

316

123

Common shares repurchased

(2,000)

(18,425)

Distributions to noncontrolling interests

(346)

(2,396)

Other financing activities

2

(2,053)

(20,757)

Net increase in cash and cash equivalents

56,476

41,338

Cash and cash equivalents

Beginning of period

342,065

378,358

End of period

$

398,541

$

419,696

 

 

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

Three months ended March 31,

2014

2013

Cash flows from operating activities

$

63,536

$

223,615

Deduct:

Cash used for additions to property, plant and equipment

109,498

151,024

Free cash flow (1)

$

(45,962)

$

72,591

(1)

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 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, after Cash used for additions to property, plant and equipment.

 

SOURCE United States Cellular Corporation



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