U.S. Cellular reports fourth quarter and full year 2015 results

Significant improvements in operating and net income

Provides 2016 guidance

As previously announced, U.S. Cellular will hold a teleconference February 19, 2016 at 9:30 a.m. CST. Listen to the live call via the Events & Presentations page of investors.uscellular.com.

Feb 19, 2016, 08:02 ET from United States Cellular Corporation

CHICAGO, Feb. 19, 2016 /PRNewswire/ -- United States Cellular Corporation (NYSE: USM) reported total operating revenues of $987.0 million for the fourth quarter of 2015, versus $1,008.7 million for the same period one year ago. Net loss attributable to U.S. Cellular shareholders and related diluted earnings per share were $1.7 million and $0.02, respectively, for the fourth quarter of 2015, compared to $21.3 million and $0.25, respectively, in the comparable period one year ago. 

U.S. Cellular reported total operating revenues of $3,996.9 million and $3,892.7 million for the years ended 2015 and 2014, respectively.  Net income (loss) attributed to U.S. Cellular shareholders and related diluted earnings per share were $241.3 million and $2.84, respectively, for the year ended 2015, compared to $(42.8) million and $(0.51), respectively, for the year ended 2014.

"We achieved many of the strategic goals we set for 2015," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We successfully completed the rollout of our 4G LTE network, rebuilt customer loyalty as evidenced by historically low churn, and significantly improved our profitability.

"In addition, in an extremely competitive market, we were able to grow our customer base.  We're going to continue to focus on customer growth in 2016 by offering our high-quality network, competitively priced products and services, and outstanding customer service to provide the best value in wireless.

"Looking forward, we plan to build upon our strengths. We will continue to enhance our network with technologies such as Voice over LTE, and nationwide 4G LTE roaming. We also will remain focused on increasing revenue driven by net additions, smartphone adoption and data monetization."

2016 Estimated Results

U.S. Cellular's estimates of full-year 2016 results are shown below.  Such estimates represent management's view as of February 19, 2016.  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.

2016 Estimated Results

Actual Results for Year Ended

December 31, 2015

(Dollars in millions)

Total operating revenues

$3,900-$4,100

$

3,997

Operating cash flow (1)

$525-$650

$

675

Adjusted EBITDA (1)

$725-$850

$

852

Capital expenditures

Approx. $

500

$

533

 

The following table provides reconciliation to Operating Cash Flow and Adjusted EBITDA for 2016 estimated results, and actual results for the year ended December 31, 2015:

2016 Estimated Results (2)

Actual Results for the Year Ended December 31, 2015

(Dollars in millions)

Net income (loss) (GAAP)

N/A

$

247

Add back:

Income tax expense (benefit)

N/A

156

Income (loss) before income taxes (GAAP)

$

0-125

$

404

Add back:

Interest expense

105

86

Depreciation, amortization and accretion expense

600

606

EBITDA

$

705-830

$

1,096

Add back (deduct):

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

(114)

(Gain) loss on license sales and exchanges, net (4)

(147)

(Gain) loss on assets disposals, net

20

16

Adjusted EBITDA (1)

$

725-850

$

852

Deduct:

Equity in earnings of unconsolidated entities

(140)

(140)

Interest and dividend income; other income

(60)

(37)

Operating cash flow (1)(3)

$

525-650

$

675

Note: Totals may not foot due to rounding differences.

(1)

Operating cash flow is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) is defined as net income adjusted for the items set forth in the reconciliation above.  Operating cash flow and Adjusted EBITDA exclude these items in order to show operating results on a more comparable basis from period to period.  From time to time, U.S. Cellular may exclude other items from Operating cash flow and/or Adjusted EBITDA if such items help reflect operating results on a more comparable basis.  U.S. Cellular does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future.  Operating cash flow and Adjusted EBITDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States ("GAAP") and should not be considered as alternatives to net income as indicators of the company's operating performance or as alternatives to cash flows from operating activities, determined in accordance with GAAP, as indicators of cash flows or as measures of liquidity. U.S. Cellular believes Operating cash flow and Adjusted EBITDA are useful measures of U.S. Cellular's operating results before significant recurring non-cash charges, gains and losses, and other items as indicated above.

(2)

In providing 2016 Estimated Results, U.S. Cellular has not completed the above reconciliation to net income because it does not provide guidance for income taxes. U.S. Cellular believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance. Accordingly, a reconciliation to net income is not available without unreasonable effort.

(3)

A reconciliation of Operating cash flow (Non-GAAP) to Operating income (GAAP) for full year 2015, 2014 and 2013 actual results can be found on the Guidance and Reconciliation page of the company's website at investors.uscellular.com.

(4)

In February 2016, U.S. Cellular entered into multiple agreements to exchange licenses.  Agreements are subject to regulatory approval and other customary closing conditions, and are expected to close in 2016.  Upon closing of the transactions, U.S. Cellular expects to record a gain.  A reasonable estimate of the gains is unavailable at the time of this filing.

 

Conference Call Information  U.S. Cellular will hold a conference call on February 19, 2016 at 9:30 a.m. Central Time.

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 4.9 million customers in 23 states. The Chicago-based company had 6,400 full- and part-time associates as of December 31, 2015. At the end of the fourth quarter of 2015, 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: intense competition; the ability to execute U.S. Cellular's business strategy; uncertainties in U.S. Cellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on U.S. Cellular indebtedness or comply with the terms of debt covenants; impacts of any pending acquisitions/divestitures/exchanges of properties and/or licenses,  including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the overall economy; 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 U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; pending and future litigation; changes in income tax rates, laws, regulations or rulings; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of 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.   

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

 

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

12/31/2015

9/30/2015

6/30/2015

3/31/2015

12/31/2014

Retail Customers

Postpaid

Total at end of period

4,409,000

4,341,000

4,324,000

4,307,000

4,298,000

Gross additions

240,000

200,000

191,000

200,000

302,000

Net additions (losses)

68,000

17,000

17,000

9,000

98,000

ARPU (1)(11)

$

51.46

$

58.12

$

53.62

$

54.87

$

56.51

ABPU (2)(11)

$

58.57

$

63.88

$

58.08

$

58.50

$

59.13

ARPA (3)(11)

$

131.96

$

147.00

$

133.85

$

134.94

$

136.13

ABPA (4)(11)

$

150.19

$

161.57

$

144.99

$

143.86

$

142.44

Churn rate (5)

1.3%

1.4%

1.3%

1.5%

1.6%

Smartphone penetration (6)

74%

72%

69%

67%

65%

Prepaid

Total at end of period

387,000

380,000

368,000

360,000

348,000

Gross additions

69,000

71,000

65,000

73,000

60,000

Net additions (losses)

7,000

12,000

8,000

12,000

(2,000)

ARPU (1)(11)

$

35.54

$

35.64

$

35.98

$

35.72

$

35.33

Churn rate (5)

5.4%

5.2%

5.2%

5.8%

5.9%

Total customers at end of period

4,876,000

4,807,000

4,779,000

4,775,000

4,760,000

Billed ARPU (1)(11)

$

49.40

$

55.42

$

51.29

$

52.29

$

53.63

Service revenue ARPU (1)(11)

$

55.31

$

62.31

$

57.55

$

58.01

$

60.10

Smartphones sold as a percent of total handsets sold

91%

87%

87%

86%

87%

Total population

Consolidated markets (7)(10)

50,520,000

50,313,000

52,809,000

52,822,000

58,840,000

Consolidated operating markets (7)

31,967,000

31,814,000

31,814,000

31,814,000

31,729,000

Market penetration at end of period

Consolidated markets (8)

10%

10%

9%

9%

8%

Consolidated operating markets (8)

15%

15%

15%

15%

15%

Capital expenditures (000s)

$

198,111

$

134,816

$

133,666

$

66,460

$

181,655

Total cell sites in service

6,297

6,246

6,223

6,219

6,220

Owned towers (9)

3,978

3,957

3,940

3,936

4,280

(1)

Average Revenue Per User ("ARPU") are metrics 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 postpaid, prepaid and reseller service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)

Average Billing Per User ("ABPU") metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid customers by the number of months in the period.

(3)

Average Revenue Per Account ("ARPA") metric is calculated by dividing total postpaid service revenue by the average number of postpaid accounts by the number of months in the period.

(4)

Average Billing Per Account ("ABPA") metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts by the number of months in the period.

(5)

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.

(6)

Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(7)

During the third quarter of 2015 U.S. Cellular reassessed population statistics with respect to markets which U.S. Cellular consolidates and revised its calculations to more accurately calculate such population statistics.  As a result, prior period population data and corresponding market penetration ratios were revised for markets that U.S. Cellular currently consolidates, or previously consolidated in the periods presented.  The decrease in the population of Consolidated markets is due primarily to the license exchange transactions of certain non-operating licenses in Illinois and Indiana in March 2015. Total Population is used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively.  See footnote (8) below.

(8)

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.

(9)

During the quarter ended March 31, 2015, U.S. Cellular sold 359 towers in divested markets.

(10)

As licenses awarded in Auction 97 have not yet been granted, population statistics related to such licenses have not been included in population data.

(11)

The quarter ended September 30, 2015 results include the recognition of $58 million in revenue due to the termination of the awards program.

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended December 31,

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

      Change

2015

2014

Amount

Percent

Operating revenues

Service

$

801,887

$

849,788

$

(47,901)

(6)%

Equipment sales

185,148

158,956

26,192

16%

Total operating revenues

987,035

1,008,744

(21,709)

(2)%

Operating expenses

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

189,107

202,423

(13,316)

(7)%

Cost of equipment sold

273,582

342,355

(68,773)

(20)%

Selling, general and administrative

387,206

394,553

(7,347)

(2)%

Depreciation, amortization and accretion

156,420

140,955

15,465

11%

(Gain) loss on asset disposals, net

4,045

4,695

(650)

(14)%

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

270

(5,136)

5,406

>100%

(Gain) loss on license sales and exchanges, net

(21,547)

21,547

N/M

Total operating expenses

1,010,630

1,058,298

(47,668)

(5)%

Operating income (loss)

(23,595)

(49,554)

25,959

52%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

30,354

23,598

6,756

29%

Interest and dividend income

10,498

6,119

4,379

72%

Interest expense

(24,955)

(14,674)

(10,281)

(70)%

Other, net

192

(121)

313

>100%

Total investment and other income

16,089

14,922

1,167

8%

Income (loss) before income taxes

(7,506)

(34,632)

27,126

78%

Income tax expense (benefit)

(4,880)

(12,528)

7,648

61%

Net income (loss)

(2,626)

(22,104)

19,478

88%

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

(963)

(764)

(199)

(26)%

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

$

(1,663)

$

(21,340)

$

19,677

92%

Basic weighted average shares outstanding

84,320

84,066

254

-

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

$

(0.02)

$

(0.25)

$

0.23

92%

Diluted weighted average shares outstanding

84,320

84,066

254

-

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

$

(0.02)

$

(0.25)

$

0.23

92%

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Twelve Months Ended December 31,

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

Change

2015

2014

Amount

Percent

Operating revenues

Service

$

3,350,431

$

3,397,937

$

(47,506)

(1)%

Equipment sales

646,422

494,810

151,612

31%

Total operating revenues

3,996,853

3,892,747

104,106

3%

Operating expenses

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

775,042

769,911

5,131

1%

Cost of equipment sold

1,052,810

1,192,669

(139,859)

(12)%

Selling, general and administrative

1,493,730

1,591,914

(98,184)

(6)%

Depreciation, amortization and accretion

606,455

605,997

458

-

(Gain) loss on asset disposals, net

16,313

21,469

(5,156)

(24)%

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

(113,555)

(32,830)

(80,725)

>(100)%

(Gain) loss on license sales and exchanges, net

(146,884)

(112,993)

(33,891)

(30)%

Total operating expenses

3,683,911

4,036,137

(352,226)

(9)%

Operating income (loss)

312,942

(143,390)

456,332

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

140,083

129,764

10,319

8%

Interest and dividend income

36,332

12,148

24,184

>100%

Interest expense

(86,194)

(57,386)

(28,808)

(50)%

Other, net

466

160

306

>100%

Total investment and other income

90,687

84,686

6,001

7%

Income (loss) before income taxes

403,629

(58,704)

462,333

>100%

Income tax expense (benefit)

156,334

(11,782)

168,116

>100%

Net income (loss)

247,295

(46,922)

294,217

>100%

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

5,948

(4,110)

10,058

>100%

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

$

241,347

$

(42,812)

$

284,159

>100%

Basic weighted average shares outstanding

84,248

84,213

35

-

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

$

2.86

$

(0.51)

$

3.37

>100%

Diluted weighted average shares outstanding

84,891

84,213

678

1%

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

$

2.84

$

(0.51)

$

3.35

>100%

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

ASSETS

December 31,

December 31,

2015

2014

Current assets

Cash and cash equivalents

$

715,376

$

211,513

Accounts receivable from customers and others, net

672,219

556,958

Inventory, net

149,307

267,068

Prepaid expenses

80,794

59,744

Net deferred income tax asset

93,058

Other current assets

53,946

90,834

1,671,642

1,279,175

Assets held for sale

107,055

Licenses

1,834,212

1,443,438

Goodwill

369,596

370,151

Investments in unconsolidated entities

363,383

283,014

Property, plant and equipment

In service and under construction

7,668,736

7,458,740

Less: Accumulated depreciation

5,019,803

4,730,523

          Property, plant and equipment, net

2,648,933

2,728,217

Other assets and deferred charges (1)

172,212

251,259

Total assets

$

7,059,978

$

6,462,309

(1)

U.S. Cellular reclassified unamortized debt issuance costs of $25.0 million as of December 31, 2014 from Other assets and deferred charges to Long-term debt, net due to early adoption of ASU 2015-03.

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY

December 31,

December 31,

2015

2014

Current liabilities

Current portion of long-term debt

$

11,313

$

46

Accounts payable

Affiliated

10,170

9,774

Trade

274,807

306,845

Customer deposits and deferred revenues

250,983

287,562

Accrued taxes

28,448

36,652

Accrued compensation

67,770

66,162

Other current liabilities

104,447

149,853

747,938

856,894

Liabilities held for sale

20,934

Deferred liabilities and credits

Net deferred income tax liability

820,731

859,867

Other deferred liabilities and credits

290,949

284,002

Long-term debt, net (1)

1,628,507

1,126,860

Noncontrolling interests with redemption features

1,097

1,150

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

1,496,453

1,472,558

Treasury shares

(156,535)

(169,139)

Retained earnings

2,132,521

1,910,498

Total U.S. Cellular shareholders' equity

3,560,513

3,301,991

Noncontrolling interests

10,243

10,611

Total equity

3,570,756

3,312,602

Total liabilities and equity

$

7,059,978

$

6,462,309

(1)

U.S. Cellular reclassified unamortized debt issuance costs of $25.0 million as of December 31, 2014 from Other assets and deferred charges to Long-term debt, net due to early adoption of ASU 2015-03.

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)

2015

2014

Cash flows from operating activities

Net income (loss)

$

247,295

$

(46,922)

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

Depreciation, amortization and accretion

606,455

605,997

Bad debts expense

105,745

101,282

Stock-based compensation expense

24,748

22,383

Deferred income taxes, net

55,306

57,604

Equity in earnings of unconsolidated entities

(140,083)

(129,764)

Distributions from unconsolidated entities

60,041

112,336

(Gain) loss on asset disposals, net

16,313

21,469

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

(113,555)

(32,830)

(Gain) loss on license sales and exchanges, net

(146,884)

(112,993)

Noncash interest expense

1,621

1,155

Other operating activities

(400)

26

Changes in assets and liabilities from operations

Accounts receivable

(95,730)

12,547

Equipment installment plans receivable

(133,734)

(188,829)

Inventory

117,764

(28,878)

Accounts payable

4,931

(98,177)

Customer deposits and deferred revenues

(36,612)

33,524

Accrued taxes

33,569

(99,483)

Accrued interest

4,047

1,307

Other assets and liabilities

(55,723)

(59,412)

   Net cash provided by operating activities

555,114

172,342

Cash flows from investing activities

Cash used for additions to property, plant and equipment

(580,593)

(605,083)

Cash paid for acquisitions and licenses

(285,807)

(38,150)

Cash received from divestitures and exchanges

316,729

179,842

Cash received for investments

50,000

Federal Communications Commission deposit

(60,000)

Other investing activities

1,003

2,619

   Net cash used in investing activities

(548,668)

(470,772)

Cash flows from financing activities

Issuance of long-term debt

525,000

275,000

Repayment of borrowing under revolving credit facility

(150,000)

Borrowing under revolving credit facility

150,000

Common shares reissued for benefit plans, net of tax payments

2,167

830

Common shares repurchased

(6,188)

(18,943)

Payment of debt issuance costs

(13,005)

(9,644)

Acquisition of towers in common control transaction

(2,437)

(76,298)

Distributions to noncontrolling interests

(6,369)

(3,056)

Payments to acquire additional interest in subsidiaries

(2,108)

Other financing activities

357

(11)

   Net cash provided by financing activities

497,417

167,878

Net increase (decrease) in cash and cash equivalents

503,863

(130,552)

Cash and cash equivalents

Beginning of period

211,513

342,065

End of period

$

715,376

$

211,513

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2015

2014

2015

2014

Cash flows from operating activities

$

(341)

$

(158,289)

$

555,114

$

172,342

Less: Cash used for additions to property, plant and equipment

173,997

180,309

580,593

605,083

Free cash flow

(174,338)

(338,598)

(25,479)

(432,741)

Add: Sprint Cost Reimbursement

2,378

19,085

29,974

71,097

Adjusted free cash flow (1) 

$

(171,960)

$

(319,513)

$

4,495

$

(361,644)

(1)

Free cash flow is defined as Cash flows from operating activities less Cash used for additions to property, plant and equipment.  Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash used for additions to property, plant and equipment.  Sprint decommissioning and Sprint Cost Reimbursement are further defined and discussed in our Annual Report on Form 10-K for the year ended December 31, 2015.  Free cash flow and Adjusted free cash flow are non-GAAP financial measures 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 (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment.

 

 

SOURCE United States Cellular Corporation



RELATED LINKS

http://www.uscellular.com