U.S. Cellular Reports Fourth Quarter 2012 Results And 2013 Financial Guidance

CHICAGO, Feb. 26, 2013 /PRNewswire/ --

As previously announced, U.S. Cellular will hold a teleconference Feb. 26, 2013 at 9:30 a.m. CST. Listen to the live call via the Conference Calls page of www.teldta.com or www.uscellular.com.

United States Cellular Corporation (NYSE: USM) reported service revenues of $1,008.9 million for the fourth quarter of 2012, versus $1,030.0 million for the comparable period one year ago. Net loss attributable to U.S. Cellular shareholders was $39.6 million, or $0.47 per diluted share, for the fourth quarter of 2012. In the fourth quarter of 2011, net income attributable to U.S. Cellular shareholders was $2.8 million, or $0.03 per diluted share.

As previously announced on Nov. 7, 2012, U.S. Cellular reached a definitive agreement to sell its Chicago, St. Louis, central Illinois and three other markets (the "Divestiture Markets") to subsidiaries of Sprint Nextel Corporation (NYSE: S) for $480 million (the "Divestiture Transaction").  The transaction is subject to regulatory approvals and is expected to close in mid-2013.  In the fourth quarter of 2012, U.S. Cellular's operating income was reduced by $44.5 million due to divestiture-related costs, including a $10.7 million write-down of assets, $12.6 million in employee-related costs, including severance, and $20 million in accelerated depreciation, amortization and accretion. 

The table below provides pro forma performance highlights for U.S. Cellular's Total Consolidated Markets, Divestiture Markets, and Core Markets for the fourth quarter of 2012.  Core Markets are the markets that U.S. Cellular will continue to own upon completion of the Divestiture Transaction. 

($ in millions except ARPU)

Total Consolidated
Markets


Divestiture Markets
(1)


Core Markets (1)

Postpaid gross additions


241,000



23,000



218,000

Postpaid churn


1.83%



3.35%



1.67%

Postpaid net additions (losses)


(41,000)



(25,000)



(16,000)

Prepaid net additions (losses)


37,000



(1,000)



38,000

Service revenues (1)


$1,008.9



$101.4



$907.5

Postpaid ARPU (1)


$54.56



$60.91



$53.92



(1)

Total Consolidated Markets amounts represent GAAP financial measures and Divestiture Markets and Core Markets amounts represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Divestiture Markets and Core Markets may be useful to investors and other users of its financial information.

The following table highlights the performance of the Core Markets for the fourth quarter of 2012 and 2011.








%

($ in millions except ARPU)

Q4 2012


Q4 2011


Change

Postpaid gross additions


218,000



209,000



4%

Postpaid churn


1.67%



1.48%



(13%)

Postpaid net additions (losses)


(16,000)



(2,000)



(>100%)

Prepaid net additions


38,000



6,000



>100%

Retail net additions


22,000



4,000



>100%

Service revenues (1)


$907.5



$917.5



(1%)

Postpaid ARPU (1)


$53.92



$52.62



2%

Smartphones sold as % of total devices


62.9%



52.6%



20%

4G/LTE smartphones as % of total smartphones sold


75%



0%



>100%

Capital expenditures (1)


$241



$253



(5%)

Cell sites in service


6,292



6,154



2%

Owned towers


3,847



3,755



2%



(1)

The Core Markets amounts for Q4 2012 and Q4 2011 represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Core Markets may be useful to investors and other users of its financial information.

"Our aggressive sales and marketing strategies in the fourth quarter drove a strong increase in smartphone penetration, and encouraged more customers in more markets to migrate to 4G LTE," said Mary N. Dillon, U.S. Cellular president and CEO. "The announcement of the Divestiture Transaction resulted in an anticipated increase in postpaid churn and lower net additions in the Divestiture Markets. In our Core Markets, however, we had positive net retail additions in the quarter.  The improved results were driven by prepaid additions, as postpaid additions continued to be negatively impacted by elevated churn.

"Smartphones were 63 percent of the devices we sold in our Core Markets during the quarter, and the number of 4G LTE smartphones sold nearly doubled from the third quarter.   Although revenue from customers increased, overall service revenues declined due to reduced regulatory support revenues and lower roaming revenues as a result of lower negotiated rates.  The lower negotiated rates also had a positive effect on roaming expense.  Profitability was impacted by the lower service revenues and higher subsidies for 4G LTE smartphones in particular. As customers migrate to the more efficient 4G LTE network, we expect longer-term benefits, including growth in ARPU and lower capital expenditures for our legacy networks."

"We are moving forward rapidly on our strategies to differentiate our outstanding customer experience even further from our competitors. We're integrating and enhancing all of our channels to provide seamless shopping, and looking for more opportunities to expand distribution and be where our customers want to shop. As we continue to invest in our future through expanded 4G LTE access and devices, as well as the implementation of our new billing and operational system, we're also simplifying our operations and processes to increase efficiency and reduce complexity and cost.

"As we move through the regulatory approval process for the Divestiture Transaction, we're maintaining high-quality service and support for our customers in these markets, helping many of our associates to transition to new roles at U.S. Cellular, and preparing for a smooth transition later in 2013."

2013 ESTIMATES

U.S. Cellular's estimates of full-year 2013 results are shown below.  Such estimates represent U.S. Cellular's views as of the date of filing of U.S. Cellular's Form 10-K for the year ended December 31, 2012.  Such forward‑looking statements should not be assumed to be current as of any future date.  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 such estimated results.

U.S. Cellular has changed the measures which it uses to present estimates of operating results.  U.S. Cellular previously presented Adjusted OIBDA, defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets; and the net gain or loss on asset disposals and exchanges.  U.S. Cellular believes Adjusted income before income taxes, as defined below, is a measure which provides a more comprehensive and meaningful view of U.S. Cellular's recurring results of operations.  




2013 Estimated Results (1)












Core
Markets (2)


Divestiture
Markets (2)(3)


U.S. Cellular
Consolidated (2)(3)

(Dollars in millions)







Service revenues


$3,600 - $3,700


$165 - $185


$3,765 - $3,885

Adjusted income before income taxes (4)


$765 - $865


$15 - $35


$780 - $900

Capital expenditures


Approx. $600



Approx. $600



(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, but not limited to, regulatory developments, customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges) could affect U.S. Cellular's plans and, therefore, its 2013 estimated results.



(2)

The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets.  As used herein, "Core Markets" represents U.S. Cellular's total Consolidated Markets excluding the Divestiture Markets.  The Core Markets and Divestiture Markets amounts represent non-GAAP financial measures.  U.S. Cellular believes that the Core Markets and Divestiture Markets amounts may be useful to investors and other users of its financial information in evaluating the pro forma results for the Core Markets.



(3)

These estimates assume the Divestiture Transaction closes July 1, 2013.  Actual effects could vary significantly from these estimates as a result of a change in the expected timing of the Divestiture Transaction.



(4)

Adjusted income before income taxes is a non-GAAP financial measure defined as income before:  Income taxes, Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs, and Interest expense. Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity.  U.S. Cellular believes Adjusted income before income taxes is a meaningful measure of U.S. Cellular's operating results before significant recurring non-cash charges, discrete gains and losses and financing charges (Interest expense). The following tables provide a reconciliation of Income before income taxes to Adjusted income before income taxes for 2013 Estimated Results and 2012, 2011and 2010 actual results:




















2013 Estimated Results
















Core
Markets (2)



Divestiture
Markets (2)(3)



U.S. Cellular
Consolidated (2)(3)


(Dollars in millions)










Income before income taxes (5)


$165-$265



($180)-($160)



($15)-$105


Depreciation, amortization and

  accretion expense (6)


Approx. $545



Approx. $195



Approx. $740


Interest expense


Approx. $55





Approx. $55


Adjusted income before income taxes


$765 - $865



$15 - $35



$780 - $900



























U.S. Cellular Consolidated Actual Results













Year Ended December 31,


2012



2011



2010


(Dollars in millions)










Income before income taxes

$

205.1


$

312.8


$

241.1


Depreciation, amortization and

  accretion expense (6)


608.6



573.6



571.0


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


21.0



-



-


Interest expense


42.4



65.6



61.6


Adjusted income before income taxes

$

877.1


$

952.0


$

873.7












(5)

This amount does not include any estimate for (Gain) loss on sale of business and other exit costs, net, as the timing of such amount is not readily estimable.












(6)

The 2013 estimated amounts for depreciation, amortization and accretion expense in the Divestiture Markets include approximately $120 million of incremental accelerated depreciation resulting from the Divestiture Transaction.  The 2012 actual results include $20.1 million of incremental accelerated depreciation resulting from the Divestiture Transaction.

Conference Call Information

U.S. Cellular will hold a conference call on Feb. 26, 2013 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 uscellular.com. The call will be archived on the Conference Calls page of 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 5.8 million customers in 26 states. The Chicago-based company had 8,100 full- and part-time associates as of Dec. 31, 2012. At the end of the year, 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 the Divestiture Transaction including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transaction and the financial impacts of such transaction; 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 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; and 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 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.   

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

United States Cellular Corporation

Total Markets Summary Operating Data (Unaudited)

















Quarter Ended


12/31/2012



9/30/2012



6/30/2012



3/31/2012



12/31/2011

Total population
















Consolidated markets (1)


93,244,000



92,996,000



92,684,000



92,684,000



91,965,000


Consolidated operating markets (1)


46,966,000



46,966,000



46,966,000



46,966,000



46,888,000

Market penetration at end of period
















Consolidated markets (2)


6.2%



6.2%



6.3%



6.3%



6.4%


Consolidated operating markets (2)


12.3%



12.4%



12.3%



12.4%



12.6%

All customers
















Total at end of period


5,798,000



5,808,000



5,799,000



5,837,000



5,891,000


Gross additions


363,000



364,000



290,000



285,000



306,000


Net additions (losses)


(10,000)



9,000



(38,000)



(49,000)



(41,000)


Smartphones sold as a percent

  of total devices sold (3)


62.9%



53.0%



51.9%



54.1%



52.5%

Retail customers
















Total at end of period


5,557,000



5,561,000



5,542,000



5,570,000



5,608,000


Postpaid smartphone penetration (3) (4)


41.8%



38.6%



36.8%



34.4%



30.5%


Gross additions


348,000



350,000



277,000



273,000



298,000


Net retail additions (losses) (5)


(4,000)



19,000



(28,000)



(34,000)



(13,000)


      Net postpaid additions (losses)


(41,000)



(38,000)



(48,000)



(38,000)



(20,000)


      Net prepaid additions (losses)


37,000



57,000



20,000



4,000



7,000

Service revenue components (000s)
















Retail service

$

886,014


$

884,219


$

889,219


$

888,527


$

882,091


Inbound roaming


76,090



106,132



86,363



80,132



93,353


Other


46,820



46,019



54,160



55,161



54,601

Total service revenues (000s)

$

1,008,924


$

1,036,370


$

1,029,742


$

1,023,820


$

1,030,045

Total ARPU (6)

$

58.00


$

59.57


$

59.05


$

58.21


$

58.13

Billed ARPU (7)

$

50.94


$

50.83


$

50.99


$

50.52


$

49.78

Postpaid ARPU (8)

$

54.56


$

54.34


$

54.42


$

54.00


$

53.35

Postpaid churn rate (9)


1.8%



1.7%



1.6%



1.6%



1.6%

Capital expenditures (000s)

$

253,100


$

199,100


$

183,200


$

201,300


$

276,400

Cell sites in service


8,028



7,984



7,932



7,875



7,882



(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 user 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 user 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 user 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 December 31,

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











      Increase (Decrease)




2012


2011


Amount


Percent

Operating revenues












Service

$

1,008,924


$

1,030,045


$

(21,121)


(2%)


Equipment sales


106,282



69,588



36,694


53%



Total operating revenues


1,115,206



1,099,633



15,573


1%














Operating expenses












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


221,169



242,123



(20,954)


(9%)


Cost of equipment sold


309,182



228,085



81,097


36%


Selling, general and administrative


449,110



467,265



(18,155)


(4%)


Depreciation, amortization and accretion


169,242



141,976



27,266


19%


Loss on asset disposals and exchanges, net


2,121



3,868



(1,747)


(45%)


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


25,170



-



25,170


N/M



Total operating expenses


1,175,994



1,083,317



92,677


9%














Operating income (loss)


(60,788)



16,316



(77,104)


>(100%)














Investment and other income (expense)












Equity in earnings of unconsolidated entities


18,780



18,277



503


3%


Interest and dividend income


821



929



(108)


(12%)


Gain (loss) on investment


10



(2,000)



2,010


>(100%)


Interest expense


(7,121)



(13,709)



6,588


48%


Other, net


327



(631)



958


>(100%)



Total investment and other income (expense)


12,817



2,866



9,951


>100%














Income (loss) before income taxes


(47,971)



19,182



(67,153)


>(100%)


Income tax expense (benefit)


(18,647)



11,307



(29,954)


>(100%)














Net income (loss)


(29,324)



7,875



(37,199)


>(100%)


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


(10,298)



(5,074)



(5,224)


>100%

Net income (loss) attributable to U.S. Cellular shareholders

$

(39,622)


$

2,801


$

(42,423)


>(100%)













Basic weighted average shares outstanding


84,568



84,559



9


-

Basic earnings (loss) per share attributable to U.S. Cellular shareholders

$

(0.47)


$

0.03


$

(0.50)


>(100%)














Diluted weighted average shares outstanding


84,568



85,005



(437)


(1%)

Diluted earnings (loss) per share attributable to U.S. Cellular shareholders

$

(0.47)


$

0.03


$

(0.50)


>(100%)







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)





2012


2011


Amount


Percent


Operating revenues













Service

$

4,098,856


$

4,053,797


$

45,059


1%



Equipment sales


353,228



289,549



63,679


22%




Total operating revenues


4,452,084



4,343,346



108,738


3%
















Operating expenses













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


946,805



929,379



17,426


2%



Cost of equipment sold


935,947



791,802



144,145


18%



Selling, general and administrative


1,764,933



1,769,701



(4,768)


-



Depreciation, amortization and accretion


608,633



573,557



35,076


6%



(Gain) loss on asset disposals and exchanges, net


18,088



(1,873)



19,961


>(100%)



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


21,022



-



21,022


N/M




Total operating expenses


4,295,428



4,062,566



232,862


6%
















Operating income


156,656



280,780



(124,124)


(44%)
















Investment and other income (expense)













Equity in earnings of unconsolidated entities


90,364



83,566



6,798


8%



Interest and dividend income


3,644



3,395



249


7%



Gain (loss) on investment


(3,718)



11,373



(15,091)


>(100%)



Interest expense


(42,393)



(65,614)



23,221


35%



Other, net


500



(678)



1,178


>(100%)




Total investment and other income (expense)


48,397



32,042



16,355


51%
















Income before income taxes


205,053



312,822



(107,769)


(34%)



Income tax expense


63,977



114,078



(50,101)


(44%)
















Net income


141,076



198,744



(57,668)


(29%)



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


(30,070)



(23,703)



(6,367)


(27%)


Net income attributable to U.S. Cellular shareholders

$

111,006


$

175,041


$

(64,035)


(37%)















Basic weighted average shares outstanding


84,645



84,877



(232)


-


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

$

1.31


$

2.06


$

(0.75)


(36%)
















Diluted weighted average shares outstanding


85,067



85,335



(268)


-


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

$

1.30


$

2.05


$

(0.75)


(37%)








United States Cellular Corporation


Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)










ASSETS




















 December 31,


 December 31,




2012


2011


Current assets








Cash and cash equivalents

$

378,358


$

424,155



Short-term investments


100,676



127,039



Accounts receivable from customers and others


445,220



441,821



Inventory


155,886



127,056



Income taxes receivable


1,612



74,791



Prepaid expenses


62,560



55,980



Net deferred income tax asset


35,419



31,905



Other current assets


16,745



10,096





1,196,476



1,292,843










Assets held for sale


216,763



49,647










Investments








Licenses


1,456,794



1,470,769



Goodwill


421,743



494,737



Customer lists, net


102



314



Investments in unconsolidated entities


144,531



138,096



Notes and interest receivable—long-term


-



1,921



Long-term investments


50,305



30,057





2,073,475



2,135,894










Property, plant and equipment








In service and under construction


7,478,428



7,008,449



Less: accumulated depreciation


4,455,840



4,218,147





3,022,588



2,790,302










Other assets and deferred charges


78,148



59,290










Total assets

$

6,587,450


$

6,327,976








United States Cellular Corporation


Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)











LIABILITIES AND EQUITY























 December 31,


 December 31,





2012


2011


Current liabilities








Current portion of long-term debt

$

92


$

127



Accounts payable









Affiliated


10,725



12,183




Trade


310,936



303,779



Customer deposits and deferred revenues


192,113



181,355



Accrued taxes


35,834



34,095



Accrued compensation


90,418



69,551



Other current liabilities


114,881



121,190






754,999



722,280











Liabilities held for sale


19,594



1,051











Deferred liabilities and credits








Net deferred income tax liability


849,818



799,190



Other deferred liabilities and credits


288,441



248,213











Long-term debt


878,858



880,320











Noncontrolling interests with redemption features


493



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


1,412,453



1,387,341



Treasury shares


(165,724)



(152,817)



Retained earnings


2,399,052



2,297,363




Total U.S. Cellular shareholders' equity


3,733,855



3,619,961











Noncontrolling interests


61,392



55,956












Total equity


3,795,247



3,675,917











Total liabilities and equity

$

6,587,450


$

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 December 31, 2012 and December 31, 2011.








December 31,


December 31,


2012


2011








Cash and cash equivalents

$

378,358


$

424,155








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







Government-backed securities (3)


100,676



127,039








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







Government-backed securities (3)


50,305



30,057








Total cash and cash equivalents and investments

$

529,339


$

581,251



(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. treasury securities and corporate notes guaranteed under the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program.

(4)

Maturities range between 14 and 23 months from the balance sheet date.







United States Cellular Corporation


Consolidated Statement of Cash Flows


Twelve Months Ended December 31,


(Unaudited, dollars in thousands)









2012


2011


Cash flows from operating activities








Net income

$

141,076


$

198,744



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










Depreciation, amortization and accretion


608,633



573,557





Bad debts expense


67,372



62,157





Stock-based compensation expense


21,466



20,183





Deferred income taxes, net


49,244



203,264





Equity in earnings of unconsolidated entities


(90,364)



(83,566)





Distributions from unconsolidated entities


84,417



91,768





(Gain) loss on asset disposals and exchanges, net


18,088



(1,873)





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


21,022



-





(Gain) loss on investment


3,718



(11,373)





Noncash interest expense


(1,822)



10,040





Other operating activities


546



102



Changes in assets and liabilities from operations










Accounts receivable


(64,816)



(82,175)





Inventory


(28,786)



(14,640)





Accounts payable - trade


(4,977)



28,410





Accounts payable - affiliate


(1,458)



1,392





Customer deposits and deferred revenues


30,353



34,927





Accrued taxes


73,064



(39,984)





Accrued interest


167



225





Other assets and liabilities


(27,652)



(3,296)







899,291



987,862












Cash flows from investing activities








Cash used for additions to property, plant and equipment


(826,400)



(771,798)



Cash paid for acquisitions and licenses


(122,690)



(23,773)



Cash paid for investments


(120,000)



(110,000)



Cash received for divestitures


49,932



-



Cash received for investments


125,000



145,250



Other investing activities


(2,453)



718







(896,611)



(759,603)












Cash flows from financing activities








Repayment of long-term debt


(145)



(330,338)



Issuance of long-term debt


-



342,000



Common shares reissued for benefit plans, net of tax payments


(2,205)



1,935



Common shares repurchased


(20,045)



(62,294)



Payment of debt issuance costs


(514)



(11,400)



Distributions to noncontrolling interests


(22,970)



(21,094)



Payments to acquire additional interest in subsidiaries


(3,167)



-



Other financing activities


569



172







(48,477)



(81,019)












Net increase (decrease) in cash and cash equivalents


(45,797)



147,240












Cash and cash equivalents








Beginning of period


424,155



276,915



End of period

$

378,358


$

424,155








United States Cellular Corporation


Financial Measures and Reconciliations


(Unaudited, dollars in thousands)



















Three Months Ended December 31,


Twelve Months Ended December 31,





2012



2011



2012



2011


















Service revenues


$

1,008,924


$

1,030,045


$

4,098,856


$

4,053,797


















Operating income (loss)



(60,788)



16,316



156,656



280,780


Add:















Depreciation, amortization and accretion



169,242



141,976



608,633



573,557



Loss on impairment of assets



-



-



-



-



(Gain) loss on asset disposals and exchanges, net



2,121



3,868



18,088



(1,873)



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



25,170



-



21,022



-




Adjusted OIBDA (1)


$

135,745


$

162,160


$

804,399


$

852,464




















Adjusted OIBDA margin (2)



13.5%



15.7%



19.6%



21.0%























2012



2011



2012



2011


Cash flows from operating activities


$

290,857


$

249,041


$

899,291


$

987,862


Deduct:














Cash used for additions to property, plant and

  equipment



214,969



309,471



826,400



771,798




Free cash flow (3)


$

75,888


$

(60,430)


$

72,891


$

216,064




(1)

Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets (if any); the net gain or loss on asset disposals and exchanges (if any); and the net gain or loss on sale of business and other exit costs (if any).

(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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