U.S. Cellular Reports Fourth Quarter 2010 Results

Provides financial guidance for 2011

Feb 24, 2011, 08:05 ET from United States Cellular Corporation

CHICAGO, Feb. 24, 2011 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

Fourth Quarter Highlights

  • Service revenues were $992 million.
  • Retail service ARPU (average revenue per unit) increased to $47.41 from $47.07.
  • Net retail customer losses of 10,000 postpaid and 11,000 prepaid.
  • Retail postpaid churn improved to 1.5 percent from 1.6 percent; postpaid customers comprised 95 percent of retail customers.
  • 5 percent increase in cell sites in service to 7,645.
  • Nearly 1.2 million customers adopted Belief Plans.

As previously announced, U.S. Cellular will hold a teleconference Feb. 24, 2011 at 9:30 a.m. CST.  Listen to the live call via the Conference Calls page of www.teldta.com or uscellular.com.

United States Cellular Corporation (NYSE: USM) reported service revenues of $991.9 million for the fourth quarter of 2010, versus $985.4 million for the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $6.8 million and $0.08, respectively, for the fourth quarter of 2010; compared to $6.6 million and $0.08, respectively, for the comparable period in 2009.

For the twelve months ended Dec. 31, 2010, U.S. Cellular reported service revenues of $3,913.0 million, compared to $3,927.1 million in 2009.  Net income attributable to U.S. Cellular shareholders for 2010 and related diluted earnings per share, were $132.3 million and $1.53, respectively.  In 2009, net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $206.7 million and $2.37 respectively. Fourth quarter and full year 2009 results were impacted by a $14.0 million (pre-tax), or $0.10 diluted loss per share, charge for impairment of licenses.

"U.S. Cellular had many significant accomplishments during the fourth quarter, but our financial performance was impacted by strong competitive pressures and the actions we took to protect our customer base, as well as spending on our enablement initiatives," said Mary Dillon, U.S. Cellular president and CEO.

"We ended 2010 with nearly 1.2 million new and existing customers on our Belief Plans, demonstrating the value our customers place on this innovative program to enhance overall customer satisfaction. During the fourth quarter, we increased average revenue per customer and customer loyalty.  In addition, demand for smartphones was quite strong.  Smartphone sales represented 40 percent of all devices sold during the quarter and will be a big factor in helping to drive revenue growth in the future, although there was a negative impact on near-term profitability. Smartphone owners currently make up just 17 percent of our postpaid base, so we have significant room for growth in this area. We have a very competitive selection of phones and devices, like the Samsung Galaxy series, and we're evolving our network to provide a fast, high-quality 4G experience.

"Our customers know that we offer the best experience in wireless, as validated by numerous third-party awards, including being named a J.D. Power and Associates 2011 Customer Service Champion, and we're working hard to spread the word. We are confident that we have the right strategies in place to help us compete effectively."

Fourth Quarter Treasury Activity

U.S. Cellular entered into a new $300 million revolving credit facility that is due to expire in Dec. 2015.  

Guidance for year ending Dec. 31, 2011

This guidance represents the views of management as of Feb. 24, 2011, and should not be assumed to be accurate as of any other date.  There can be no assurance that final results will not differ materially from this guidance.  U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.

2011 

2010 

Estimated Results

Actual Results

Service revenues

$4,000 - $4,100 million

$3,913.0 million

Adjusted OIBDA (1) (3)

$775 - $875 million

$783.1 million

Operating income (3)

$185 - $285 million

$195.4 million

Depreciation, amortization and accretion expenses, and

  losses on asset disposals and impairment of assets (2)

Approx. $590 million

$587.8 million

Capital expenditures (3)

Approx. $650 million

$583.1 million

(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 (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.

(2)

2010 Actual Results include losses on asset disposals and no losses on impairment of assets. The 2011 Estimated Results include only the estimate for Depreciation, amortization and accretion expenses and losses on disposals of assets, and do not include any estimate for losses on impairment of assets (since these cannot be predicted).

(3)

This guidance is based on U.S. Cellular's current plans.  New developments or changing competitive conditions in the wireless industry, such as the rate of deployment of 4G Long-term Evolution ("LTE") technology by other carriers, could affect U.S. Cellular's LTE deployment plans and, as a result, its capital expenditures and operating expenses.

Conference call information

U.S. Cellular will hold a conference call on Feb. 24, 2011 at 9:30 a.m. CST.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls 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 sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to 6.1 million customers in 26 states. The Chicago-based company had 9,000 full-time equivalent associates as of Dec. 31, 2010. For more information about U.S. Cellular, visit www.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: The ability of the company to successfully grow its markets; changes in the overall economy, competition, the state and federal telecommunications regulatory environment, and the value of assets and investments; adverse changes in the ratings afforded the company's debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to possible future restatements; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices and 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 used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.

For more information about U.S. Cellular, visit www.uscellular.com.

UNITED STATES CELLULAR CORPORATION

SUMMARY OPERATING DATA (UNAUDITED)

Quarter Ended

12/31/2010

9/30/2010

6/30/2010

3/31/2010

12/31/2009

Total population

Consolidated markets(1)

90,468,000

90,468,000

90,468,000

90,468,000

89,712,000

Consolidated operating markets(1)

46,546,000

46,546,000

46,546,000

46,546,000

46,306,000

Market penetration at end of period

Consolidated markets(2)

6.7%

6.7%

6.8%

6.8%

6.8%

Consolidated operating markets(2)

13.0%

13.1%

13.2%

13.2%

13.3%

All customers

Total at end of period

6,072,000

6,103,000

6,144,000

6,147,000

6,141,000

Gross additions

327,000

338,000

349,000

358,000

399,000

Net additions (losses)

(31,000)

(41,000)

(3,000)

6,000

10,000

Smartphones sold as a percent of

     total devices sold(3)

39.6%

23.6%

15.8%

16.6%

14.7%

Retail customers

Total at end of period

5,729,000

5,750,000

5,775,000

5,768,000

5,744,000

Smartphone penetration (3) (4)

16.6%

12.0%

10.1%

8.9%

7.5%

Gross additions

292,000

301,000

307,000

305,000

354,000

Net retail additions (losses)(5)

(21,000)

(25,000)

7,000

24,000

39,000

     Net postpaid additions (losses)

(10,000)

(25,000)

(22,000)

(9,000)

26,000

     Net prepaid additions (losses)

(11,000)

---

29,000

33,000

13,000

Service revenue components (000s)

Retail service

$

864,905

$

865,766

$

863,836

$

865,039

$

866,866

Inbound roaming

67,545

72,901

60,902

51,942

61,728

Other

59,464

44,836

47,838

48,027

56,814

Total service revenues (000s)

$

991,914

$

983,503

$

972,576

$

965,008

$

985,408

Divided by average customers (000s)

6,081

6,124

6,151

6,137

6,139

Divided by three months in each quarter

3

3

3

3

3

Total average monthly revenue per unit(6)

$

54.37

$

53.53

$

52.71

$

52.41

$

53.51

Components of average monthly revenue per customer by revenue type

Retail service(6)

$

47.41

$

47.12

$

46.81

$

46.98

$

47.07

Inbound roaming(6)

$

3.70

$

3.97

$

3.30

$

2.82

$

3.35

Other(6)

$

3.26

$

2.44

$

2.60

$

2.61

$

3.09

Retail postpaid churn rate(7)

1.5%

1.6%

1.4%

1.4%

1.6%

Capital expenditures (000s)

$

203,400

$

124,700

$

133,500

$

121,500

$

189,000

Cell sites in service

7,645

7,524

7,416

7,310

7,279

(1)

Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).

(2)

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 a Blackberry, Windows Mobile, or Android operating system.

(4)

Smartphone penetration is calculated by dividing postpaid customers on smartphone service plans by total postpaid customers.

(5)

Calculated by adding net postpaid additions (losses) and net prepaid additions (losses).

(6)

Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.

(7)

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

UNITED STATES CELLULAR CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS

Three Months Ended December 31,

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

Increase (Decrease)

2010

2009

Amount

Percent

Operating revenues

Service

$

991,914

$

985,408

$

6,506

1%

Equipment sales

71,236

74,690

(3,454)

(5%)

Total operating revenues

1,063,150

1,060,098

3,052

Operating expenses

System operations (excluding Depreciation, amortization

and accretion reported below)

216,254

202,546

13,708

7%

Cost of equipment sold

230,620

211,883

18,737

9%

Selling, general and administrative

474,904

473,143

1,761

Depreciation, amortization and accretion

144,649

146,807

(2,158)

(1%)

Loss on impairment of intangible assets

---

14,000

(14,000)

N/M

Loss on asset disposals, net

2,310

7,528

(5,218)

(69%)

Total operating expenses

1,068,737

1,055,907

12,830

1%

Operating income (loss)

(5,587)

4,191

(9,778)

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

22,900

23,553

(653)

(3%)

Interest and dividend income

824

949

(125)

(13%)

Interest expense

(12,637)

(19,134)

6,497

34%

Other, net

285

259

26

10%

Total investment and other income (expense)

11,372

5,627

5,745

>100%

Income before income taxes

5,785

9,818

(4,033)

(41%)

Income tax (benefit)

(7,285)

(940)

(6,345)

>100%

Net income

13,070

10,758

2,312

21%

Less:  Net (income) attributable to noncontrolling interests,

net of tax

(6,226)

(4,185)

(2,041)

(49%)

Net income attributable to U.S. Cellular shareholders

$

6,844

$

6,573

$

271

4%

Basic weighted average shares outstanding

85,668

86,719

(1,051)

(1%)

Basic earnings per share attributable to  

U.S. Cellular shareholders

$

0.08

$

0.08

$

---

Diluted weighted average shares outstanding

86,190

87,087

(897)

(1%)

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

0.08

$

0.08

$

---

N/M – Percentage change not meaningful

UNITED STATES CELLULAR CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS

Twelve Months Ended December 31,

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

     Increase (Decrease)

2010 

2009 

Amount

Percent

Operating revenues

Service

$

3,913,001

$

3,927,128

$

(14,127)

Equipment sales

264,680

286,752

(22,072)

(8%)

Total operating revenues

4,177,681

4,213,880

(36,199)

(1%)

Operating expenses

System operations (excluding Depreciation, amortization

and accretion reported below)

854,931

802,854

52,077

6%

Cost of equipment sold

742,981

742,993

(12)

Selling, general and administrative

1,796,624

1,747,404

49,220

3%

Depreciation, amortization and accretion

577,054

569,514

7,540

1%

Loss on impairment of intangible assets

---

14,000

(14,000)

N/M

Loss on asset disposals, net

10,717

16,169

(5,452)

(34%)

Total operating expenses

3,982,307

3,892,934

89,373

2%

Operating income

195,374

320,946

(125,572)

(39%)

Investment and other income (expense)

Equity in earnings of unconsolidated entities

97,318

96,800

518

1%

Interest and dividend income

3,808

3,597

211

6%

Interest expense

(61,555)

(78,199)

16,644

21%

Other, net

72

1,442

(1,370)

(95%)

Total investment and other income (expense)

39,643

23,640

16,003

68%

Income before income taxes

235,017

344,586

(109,569)

(32%)

Income tax expense

79,609

116,086

(36,477)

(31%)

Net income

155,408

228,500

(73,092)

(32%)

Less: Net (income) attributable to noncontrolling interests,

net of tax

(23,084)

(21,768)

(1,316)

(6%)

Net income attributable to U.S. Cellular shareholders

$

132,324

$

206,732

$

(74,408)

(36%)

Basic weighted average shares outstanding

86,128

86,946

(818)

(1%)

Basic earnings per share attributable to

U.S. Cellular shareholders

$

1.54

$

2.38

$

(0.84)

(35%)

Diluted weighted average shares outstanding

86,518

87,168

(650)

(1%)

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

1.53

$

2.37

$

(0.84)

(35%)

N/M – Percentage change not meaningful

UNITED STATES CELLULAR CORPORATION

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Unaudited, dollars in thousands)

ASSETS

December 31,

December 31,

2010 

2009 

Current assets

Cash and cash equivalents

$

294,426

$

294,411

Short-term investments

146,586

330

Accounts receivable from customers and other

424,019

425,057

Inventory

112,279

152,556

Prepaid income taxes

41,397

717

Prepaid expenses

53,356

63,463

Net deferred income tax asset

26,757

21,570

Other current assets

10,804

51,013

1,109,624

1,009,117

Investments

Licenses

1,452,101

1,435,000

Goodwill

494,737

494,737

Customer lists, net

759

4,083

Investments in unconsolidated entities

160,847

161,481

Notes and interest receivable--long-term

4,070

4,214

Long-term investments

46,033

---

2,158,547

2,099,515

Property, plant and equipment

In service and under construction

6,382,581

5,884,307

Less: accumulated depreciation

3,767,509

3,282,969

2,615,072

2,601,338

Other assets and deferred charges

50,367

38,776

Total assets

$

5,933,610

$

5,748,746

UNITED STATES CELLULAR CORPORATION

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY

December 31,

December 31,

2010 

2009 

Current liabilities

Current portion of long-term debt

$

101

$

76

Accounts payable

Affiliated

10,791

14,732

Trade

281,601

296,288

Customer deposits and deferred revenues

146,428

140,248

Accrued taxes

39,299

57,507

Accrued compensation

65,952

62,242

Other current liabilities

121,823

92,884

665,995

663,977

Deferred liabilities and credits

Net deferred income tax liability

579,769

513,994

Other deferred liabilities and credits

284,949

262,412

864,718

776,406

Long-term debt

867,941

867,522

Commitments and contingencies

Noncontrolling interests with redemption features

855

727

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

1,368,487

1,356,322

Treasury Shares

(105,616)

(69,616)

Retained earnings

2,129,638

2,013,633

Total U.S. Cellular shareholders equity

3,480,583

3,388,413

Noncontrolling interests

53,518

51,701

Total equity

3,534,101

3,440,114

Total liabilities and equity

$

5,933,610

$

5,748,746

United States Cellular Corporation

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)

In an effort to improve investment returns, during 2010, U.S. Cellular elected to use a portion of its cash balance to directly purchase government-backed securities, specifically U.S. treasury securities and securities insured by the Federal Deposit Insurance Corporation ("FDIC").  The maturity dates of such direct investments were staggered in order to maintain cash balances and liquidity at targeted levels.  U.S. Cellular also continues to invest in certificates of deposit that are insured by the FDIC.  The following table presents U.S. Cellular's cash and cash equivalents; and investments in government-backed securities and certificates of deposit at December 31, 2010 and December 31, 2009.

December 31,

December 31,

2010 

2009 

Cash and cash equivalents

$

294,426

$

294,411

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

Government-backed securities (3)

146,336

Certificates of deposit

250

330

$

146,586

$

330

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

Government-backed securities (3)

$

46,033

$

(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.

(3)

Includes U.S. treasuries and corporate notes guaranteed under the FDIC's Temporary Liquidity Guarantee Program.

(4)

Maturities range between 14 and 24 months from the balance sheet date.

UNITED STATES CELLULAR CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)

2010 

2009 

Cash flows from operating activities

Net income

$

155,408 

$

228,500 

Add (deduct) adjustments to reconcile net income

to net cash flows from operating activities

Depreciation, amortization and accretion

577,054 

569,514 

Bad debts expense

76,292 

107,991 

Stock-based compensation expense

18,044 

16,362 

Deferred income taxes, net

71,378 

45,496 

Equity in earnings of unconsolidated entities

(97,318)

(96,800)

Distributions from unconsolidated entities

100,359 

91,105 

Loss on impairment of intangible assets

— 

14,000 

Loss on asset disposals, net

10,717 

16,169 

Noncash interest expense

2,540 

2,442 

Excess tax benefit from stock awards

(114)

(24)

Other operating activities

(2,369)

— 

Changes in assets and liabilities from operations

Accounts receivable

(75,252)

(114,646)

Inventory

40,277 

(35,992)

Accounts payable - trade

(14,660)

47,503 

Accounts payable - affiliate

(3,940)

5,119 

Customer deposits and deferred revenues

6,180 

(9,921)

Accrued taxes

(70,057)

48,218 

Accrued interest

204 

(2,121)

Other assets and liabilities

79,546 

(51,107)

874,289 

881,808 

Cash flows from investing activities

Additions to property, plant and equipment

(583,134)

(546,758)

Cash received from divestitures

50 

Cash paid for acquisitions and licenses

(17,101)

(16,027)

Cash paid for investments

(250,250)

(450)

Cash received for investments

60,330 

120 

Other investing activities

(953)

1,614 

(791,108)

(561,451)

Cash flows from financing activities

Repayment of long-term debt

(316)

(140,236)

Common shares reissued for benefit plans, net of tax payments

509 

(82)

Common shares repurchased

(52,827)

(33,585)

Excess tax benefit from stock awards

114 

24 

Payment of debt issuance costs

(2,229)

(4,421)

Distributions to noncontrolling interests

(19,631)

(18,426)

Payments to acquire additional interest in subsidiaries

(8,786)

(285)

Other financing activities

69 

(83,166)

(196,942)

Net increase in cash and cash equivalents

15 

123,415 

Cash and cash equivalents

Beginning of period

294,411 

170,996 

End of period

$

294,426 

$

294,411 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

Three Months Ended December 31,

Twelve Months Ended December 31,

2010 

2009 

2010 

2009 

Service revenues

$

991,914 

$

985,408 

$

3,913,001 

$

3,927,128 

Operating income (loss)

(5,587)

4,191 

195,374 

320,946 

Add:

Depreciation, amortization and accretion

144,649 

146,807 

577,054 

569,514 

Loss on impairment of intangible asset

— 

14,000 

— 

14,000 

Loss on asset disposals

2,310 

7,528 

10,717 

16,169 

Adjusted OIBDA (1)

$

141,372 

$

172,526 

$

783,145 

$

920,629 

Adjusted OIBDA margin (2)

14.3%

17.5%

20.0%

23.4%

2010 

2009 

2010 

2009 

Cash flows from operating activities

$

290,276 

$

244,114 

$

874,289 

$

881,808 

Deduct:

Capital expenditures

203,442 

188,988 

583,134 

546,758 

Free cash flow (3)

$

86,834 

$

55,126 

$

291,155 

$

335,050 

(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 (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 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 negative margin, and the net equipment subsidy is effectively a cost for purposes of assessing business results and is already reflected in adjusted OIBDA.  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.

(3)

Free cash flow is defined as cash flows from operating activities minus capital expenditures. Free cash flow is a non-GAAP financial measure.  U.S. Cellular believes that free cash flow as reported by U.S. Cellular is 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



RELATED LINKS

http://www.uscellular.com