U.S. Cellular Reports Second Quarter 2010 Results

Revises 2010 financial guidance

05 Aug, 2010, 07:58 ET from United States Cellular Corporation

CHICAGO, Aug. 5 /PRNewswire-FirstCall/ --

Note: Comparisons are year over year unless otherwise noted.

2Q 2010 Highlights

  • 7,000 retail net additions, reflecting a gain of 29,000 prepaid customers and a loss of 22,000 postpaid customers.
  • Service revenues were $972.6 million.
  • 33 percent increase in data revenues to $215.3 million, representing 22 percent of total service revenues.
  • Retail service ARPU (average revenue per unit) was $46.81 compared to $46.82.
  • Retail postpaid churn remained low at 1.4 percent; postpaid customers comprised 94 percent of retail customers.
  • Expanded 3G network to cover approximately 98 percent of customers.
  • 5 percent increase in cell sites in service to 7,416.
  • Repurchased 395,344 common shares for $16.2 million.

As previously announced, U.S. Cellular will hold a teleconference Aug. 5 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com or uscellular.com.

United States Cellular Corporation (NYSE: USM) reported service revenues of $972.6 million for the second quarter of 2010, versus $974.3 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $40.8 million and $0.47, respectively, for the second quarter of 2010, compared to $81.8 million and $0.94, respectively, in the comparable period one year ago.  

"We faced significant challenges from competition and the economy in the second quarter of 2010," said U.S. Cellular president and CEO Mary N. Dillon, who joined the company June 1. "Consequently, our performance results were mixed.  We achieved improvements in retail net additions and customer churn, and data revenues grew by 33 percent.  However, total service revenues and operating income were below our expectations.  We continue to feel the impact of lower voice revenues, reflecting industry competition as more customers choose value-priced plans, and investments in the major initiatives currently underway that will enable us to build a strong foundation for future growth.  As part of these initiatives, we recently implemented new programs that enable associates in our retail stores and customer care centers to better meet our customers' needs by offering more targeted service and product recommendations.

"Going forward, we plan to continue to drive data revenue growth with a strong smartphone portfolio that includes the Android™-powered phones our customers are asking for. We launched the Samsung Acclaim™ in early July, and we plan to offer the much-anticipated HTC Desire™ in August and the Samsung Galaxy S™ later this year. Now that we offer data services to the vast majority of customers across our fast and reliable 3G network, we expect sales of data-optimized devices—which were 24 percent of all devices sold in the quarter—to continue to grow rapidly.  And we're excited about giving our customers even more innovative programs like Battery Swap and Overage Protection that show we have our customers' backs.

"I'm honored to be leading a company that is so thoroughly unified around its commitment to ensuring positive experiences for its customers.  Although we face a number of challenges, we have a culture of success—the Dynamic Organization—that will enable us to overcome these challenges by leveraging our strengths.  U.S. Cellular's customers believe that we offer something better than our competitors, and we intend to prove that they can rely on us for service and communications experiences that are above and beyond what customers have come to expect from a wireless provider."

Guidance

Guidance for the year ending Dec. 31, 2010 as of Aug. 5, 2010 is provided below, compared to previous guidance provided on May 10, 2010. There can be no assurance that final results will not differ materially from this guidance.

Current guidance

Previous guidance

Service revenues

$3,925-$4,000 million

$3,975-$4,075 million

Adjusted OIBDA(1)

$800-$850 million

$850-$950 million

Operating income

$200-$250 million

$250- $350 million

Depreciation, amortization and accretion(2)

Approx. $600 million

Unchanged

Capital expenditures

Approx. $600 million

Unchanged

(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) The 2010 estimated results include estimated losses on disposals of assets, but does not include an estimate for losses on impairment of assets, since these cannot be predicted.

The foregoing guidance represents the views of management as of Aug. 5, 2010 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events or otherwise.

Conference call information

U.S. Cellular will hold a conference call on Aug. 5, 2010 at 9:30 a.m. CDT.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the 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, 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 approximately 6.1 million customers in 26 states. The Chicago-based company employed approximately 8,900 full-time equivalent associates as of June 30, 2010. At the end of the quarter, Telephone and Data Systems, Inc. owned 82 percent of U.S. Cellular.

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of the company to successfully manage and grow its markets; the economy; competition; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company; and the ability to obtain or maintain roaming arrangements with other carriers. 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.

United States Cellular Corporation

Summary Operating Data

Quarter Ended

6/30/2010

3/31/2010

12/31/2009

9/30/2009

6/30/2009

Total population

Consolidated markets (1)

90,468,000

90,468,000

89,712,000

85,118,000

83,726,000

Consolidated operating markets (1)

46,546,000

46,546,000

46,306,000

46,306,000

46,306,000

Market penetration at end of period

Consolidated markets (2)

6.8%

6.8%

6.8%

7.2%

7.4%

Consolidated operating markets (2)

13.2%

13.2%

13.3%

13.2%

13.3%

All customers

Total at end of period

6,144,000

6,147,000

6,141,000

6,131,000

6,155,000

Gross additions

349,000

358,000

399,000

386,000

317,000

Net additions (losses)

(3,000)

6,000

10,000

(24,000)

(88,000)

Retail customers

Total at end of period

5,775,000

5,768,000

5,744,000

5,705,000

5,711,000

Gross additions

307,000

305,000

354,000

351,000

286,000

Net retail additions (losses) (3)

7,000

24,000

39,000

(6,000)

(59,000)

Net postpaid additions (losses)

(22,000)

(9,000)

26,000

8,000

(32,000)

Net prepaid additions (losses)

29,000

33,000

13,000

(14,000)

(27,000)

Service revenues components (000s)

Voice and other retail service

$

648,565

$

663,759

$

677,107

$

690,576

$

708,847

Data service

215,271

201,280

189,759

174,286

161,955

Total retail service

$

863,836

$

865,039

$

866,866

$

864,862

$

870,802

Inbound roaming

60,902

51,942

61,728

68,767

62,223

Other

47,838

48,027

56,814

50,289

41,323

Total service revenues (000s) (4)

$

972,576

$

965,008

$

985,408

$

983,918

$

974,348

Divided by average customers (000s)

6,151

6,137

6,139

6,138

6,199

Divided by three months in each quarter

3

3

3

3

3

Average monthly revenue per unit (5)

$

52.71

$

52.41

$

53.51

$

53.43

$

52.39

Voice and other retail service (5)

$

35.14

$

36.05

$

36.77

$

37.51

$

38.11

Data service (5)

$

11.67

$

10.93

$

10.30

$

9.46

$

8.71

Total retail service (5)

$

46.81

$

46.98

$

47.07

$

46.97

$

46.82

Inbound roaming (5)

$

3.30

$

2.82

$

3.35

$

3.73

$

3.35

Other (5)

$

2.60

$

2.61

$

3.09

$

2.73

$

2.22

Postpaid churn rate (6)

1.4%

1.4%

1.6%

1.7%

1.7%

Capital expenditures (000s)

$

133,500

$

121,500

$

189,000

$

128,900

$

91,200

Cell sites in service

7,416

7,310

7,279

7,161

7,043

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

(4) U.S. Cellular adjusted previously reported service revenues for the three months ended March 31, 2010 and all quarterly periods in 2009.  Previously reported service revenues for the quarterly period ended March 31, 2010 and for the quarterly periods ended December 31, September 30, and June 30, 2009 (as reported in U.S. Cellular's Form 8-K filed on May 10, 2010 for all such periods), were $965.2 million, $984.9 million, $983.4 million and $974.1 million, respectively. 

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

(6) Calculated by dividing the total postpaid customer disconnects during the quarter by the average postpaid customer base for the quarter.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended June 30,

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

     Increase (Decrease)

2010 

2009 (1)

Amount

Percent

Operating revenues

Service

$

972,576

$

974,348

$

(1,772)

Equipment sales

57,317

67,795

(10,478)

(15%)

Total operating revenues

1,029,893

1,042,143

(12,250)

(1%)

Operating expenses

System operations (excluding Depreciation,

amortization and accretion reported below)

213,542

194,709

18,833

10%

Cost of equipment sold

161,965

156,055

5,910

4%

Selling, general and administrative

445,177

411,153

34,024

8%

Depreciation, amortization and accretion

144,455

138,777

5,678

4%

Loss on asset disposals, net

1,250

2,611

(1,361)

(52%)

Total operating expenses

966,389

903,305

63,084

7%

Operating income

63,504

138,838

(75,334)

(54%)

Investment and other income (expense)

Equity in earnings of unconsolidated entities

25,753

24,794

959

4%

Interest and dividend income

862

751

111

15%

Interest expense

(16,438)

(19,856)

3,418

17%

Other, net

472

(2)

474

>100%

Total investment and other income

(expense)

10,649

5,687

4,962

87%

Income before income taxes

74,153

144,525

(70,372)

(49%)

Income tax expense

28,181

56,788

(28,607)

(50%)

Net income

45,972

87,737

(41,765)

(48%)

Less: Net income attributable to noncontrolling

interests, net of tax

(5,219)

(5,969)

750

13%

Net income attributable to U.S. Cellular shareholders

$

40,753

$

81,768

$

(41,015)

(50%)

Basic weighted average shares outstanding

86,425

86,992

(567)

(1%)

Basic earnings per share attributable to

U.S. Cellular shareholders

$

0.47

$

0.94

$

(0.47)

(50%)

Diluted weighted average shares outstanding

86,787

87,177

(390)

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

0.47

$

0.94

$

(0.47)

(50%)

(1) Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Six Months Ended June 30,

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

Increase (Decrease)

2010 

2009 (1)

Amount

Percent

Operating revenues

Service

$

1,937,584

$

1,957,802

$

(20,218)

(1%)

Equipment sales

116,166

138,685

(22,519)

(16%)

Total operating revenues

2,053,750

2,096,487

(42,737)

(2%)

Operating expenses

System operations (excluding Depreciation,

     amortization and accretion reported below)

420,656

394,697

25,959

7%

Cost of equipment sold

323,070

341,756

(18,686)

(5%)

Selling, general and administrative

874,782

819,616

55,166

7%

Depreciation, amortization and accretion

287,688

276,655

11,033

4%

Loss on asset disposals, net

6,426

6,556

(130)

(2%)

Total operating expenses

1,912,622

1,839,280

73,342

4%

Operating income

141,128

257,207

(116,079)

(45%)

Investment and other income (expense)

Equity in earnings of unconsolidated entities

50,447

50,121

326

1%

Interest and dividend income

1,883

1,228

655

53%

Interest expense

(32,962)

(39,283)

6,321

16%

Other, net

407

278

129

46%

Total investment and other income (expense)

19,775

12,344

7,431

60%

Income before income taxes

160,903

269,551

(108,648)

(40%)

Income tax expense

61,843

91,747

(29,904)

(33%)

Net income

99,060

177,804

(78,744)

(44%)

Less: Net income attributable to noncontrolling

interests, net of tax

(10,938)

(11,977)

1,039

9%

Net income attributable to U.S. Cellular shareholders

$

88,122

$

165,827

$

(77,705)

(47%)

Basic weighted average shares outstanding

86,500

87,093

(593)

(1%)

Basic earnings per share attributable to

U.S. Cellular shareholders

$

1.02

$

1.90

$

(0.88)

(46%)

Diluted weighted average shares outstanding

86,873

87,308

(435)

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

1.01

$

1.90

$

(0.89)

(47%)

(1) Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

ASSETS

June 30,

December 31,

2010 

2009 (1)

Current assets

Cash and cash equivalents

$

232,853

$

294,411

Short-term investments

135,798

330

Accounts receivable from customers and other

411,450

425,057

Inventory

120,304

152,556

Prepaid income taxes

717

Prepaid expenses

65,219

63,463

Net deferred income tax asset

21,570

21,570

Other current assets

48,662

51,013

1,035,856

1,009,117

Investments

Licenses

1,445,501

1,435,000

Goodwill

494,737

494,737

Customer lists

1,701

4,083

Investments in unconsolidated entities

163,518

161,481

Notes and interest receivable – long-term

4,143

4,214

Long-term investments

40,987

2,150,587

2,099,515

Property, plant and equipment

In service and under construction

6,096,533

5,884,307

Less: accumulated depreciation

3,525,193

3,282,969

2,571,340

2,601,338

Other assets and deferred charges

37,865

38,776

Total assets

$

5,795,648

$

5,748,746

(1) Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

LIABILITIES AND SHAREHOLDERS' EQUITY

June 30,

December 31,

2010 

2009 (1)

Current liabilities

Current portion of long-term debt

$

86

$

76

Accounts payable

Affiliated

11,714

14,732

Trade

262,279

296,288

Customer deposits and deferred revenues

144,101

140,248

Accrued taxes

90,802

57,507

Accrued compensation

45,086

62,242

Other current liabilities

80,322

92,884

634,390

663,977

Deferred liabilities and credits

Net deferred income tax liability

497,797

513,994

Other deferred liabilities and credits

273,467

262,412

Long-term debt

867,880

867,522

Commitments and contingencies

Noncontrolling interests with mandatory redemption features

746

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

1,364,129

1,356,322

Treasury shares

(80,107)

(69,616)

Retained earnings

2,090,966

2,013,633

Total U.S. Cellular shareholders' equity

3,463,062

3,388,413

Noncontrolling interests

58,306

51,701

Total equity

3,521,368

3,440,114

Total liabilities and equity

$

5,795,648

$

5,748,746

(1) Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

United States Cellular Corporation

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)

In an effort to improve investment returns, during the second quarter of 2010, U.S. Cellular elected to use a portion of its cash balance to directly purchase U.S. treasury securities and securities insured by the Federal Deposit Insurance Corporation ("FDIC"), as opposed to investing in money market funds.  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 U.S. treasury securities, commercial paper and certificates of deposit at June 30, 2010 and December 31, 2009.

June 30,

December 31,

2010 

2009 

Cash and cash equivalents

$

232,853

$

294,411

Amounts included in short-term investments

U.S. treasuries

110,451

Certificates of deposit (1)

104

330

Commercial paper (2)

25,243

$

135,798

$

330

Amounts included in long-term investments (3)

U.S. treasuries

10,071

Commercial paper (2)

30,916

$

40,987

$

(1) U.S. Cellular's investments in certificates of deposits are insured by the FDIC.

(2) U.S. Cellular's investments in commercial paper are insured by the FDIC under its Temporary Liquidity Guarantee Program.

(3) U.S. Cellular's long-term investments have maturity dates between July 2011 and December 2012.

United States Cellular Corporation

Consolidated Statement of Cash Flows

Six Months Ended June 30,

(Unaudited, dollars in thousands)

2010 

2009 (1)

Cash flows from operating activities

Net income

$

99,060

$

177,804

Add (deduct) adjustments to reconcile net income to net

cash flows from operating activities

Depreciation, amortization and accretion

287,688

276,655

Bad debts expense

36,605

39,028

Stock-based compensation expense

9,012

7,974

Deferred income taxes, net

(9,935)

19,084

Equity in earnings of unconsolidated entities

(50,447)

(50,121)

Distributions from unconsolidated entities

48,491

12,997

Loss on asset disposals, net

6,426

6,556

Other operating activities

(464)

1,209

Changes in assets and liabilities from operations

Accounts receivable

(22,995)

(68,923)

Inventory

32,252

(10,391)

Accounts payable - trade

(34,009)

(41,378)

Accounts payable - affiliate

(3,017)

4,137

Customer deposits and deferred revenues

3,854

(5,699)

Accrued taxes

27,744

71,041

Accrued interest

121

450

Other assets and liabilities

(26,680)

(67,300)

403,706

373,123

Cash flows from investing activities

Additions to property, plant and equipment

(255,004)

(228,902)

Cash paid for acquisitions and licenses

(10,501)

(12,327)

Cash paid for investments

(175,000)

(275)

Other investing activities

889

1,432

(439,616)

(240,072)

Cash flows from financing activities

Common shares reissued for benefit plans, net of tax payments

144

(405)

Common shares repurchased

(21,423)

(19,332)

Payment of debt issuance costs

(4,309)

Distributions to noncontrolling interests

(4,314)

(4,060)

Other financing activities

(55)

(21)

(25,648)

(28,127)

Net increase (decrease) in cash and cash equivalents

(61,558)

104,924

Cash and cash equivalents

Beginning of period

294,411

170,996

End of period

$

232,853

$

275,920

(1) Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

Three Months Ended June 30

Six Months Ended June 30

2010 

2009 (5)

2010 

2009 (5)

Service revenues

$

972,576

$

974,348

$

1,937,584

$

1,957,802

Operating income

63,504

138,838

141,128

257,207

Add:

Depreciation, amortization and accretion

144,455

138,777

287,688

276,655

Loss on asset disposals

1,250

2,611

6,426

6,556

Adjusted OIBDA (1)(4)

$

209,209

$

280,226

$

435,242

$

540,418

Adjusted OIBDA margin (2)

21.5%

28.8%

22.5%

27.6%

2010

2009

2010

2009

Cash flows from operating activities

$

251,454

$

187,561

$

403,706

$

373,123

Deduct:

Capital expenditures

133,490

91,161

255,004

228,902

Free cash flow (3)

$

117,964

$

96,400

$

148,702

$

144,221

(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) 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 equipment subsidy is effectively a cost 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.

(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.

(4) 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.

(5) Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

Revision of Prior Period Amounts

In preparing its financial statements for the three months ended March 31, 2010, U.S. Cellular discovered certain errors related to accounting for operating revenues and sales tax liabilities. The quantification of these errors was subsequently refined during the second quarter of 2010. These errors resulted in the overstatement of operating revenues and understatement of sales tax liabilities for the years ended December 31, 2009, 2008, 2007, and the three months ended March 31, 2010. In addition to recording these adjustments, U.S. Cellular recorded other adjustments to prior-period amounts to correct other immaterial items. In accordance with SEC Staff Accounting Bulletin Nos. 99 and 108 ("SAB 99 and SAB 108"), U.S. Cellular evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports was not required. However, if the adjustments to correct the cumulative errors had been recorded in the first or second quarter of 2010, U.S. Cellular believes the impact would have been significant to those respective periods and would impact comparisons to prior periods. As permitted by SAB 108, U.S. Cellular revised in the current filing its comparative consolidated financial statements for these immaterial amounts. In addition, on August 5, 2010, U.S. Cellular filed a Current Report on Form 8-K (Items 8.01 and 9.01) with the SEC to revise financial statements and other financial information previously included in its Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the period ended March 31, 2010.

The Consolidated Balance Sheet at December 31, 2009 was revised to reflect the cumulative effect of these errors, which resulted in a decrease to retained earnings of $15.9 million.  Also, in accordance with SAB 108, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows have been revised as follows:  

Consolidated Balance Sheet — December 31, 2009

As previously

(Dollars in thousands)

reported (1)

Adjustment

Revised

Accounts receivable from customers and other

$

421,528

$

3,529

$

425,057

Total current assets

1,005,588

3,529

1,009,117

Total assets

5,745,217

3,529

5,748,746

Customer deposits and deferred revenues

143,760

(3,512)

140,248

Accrued taxes

34,583

22,924

57,507

Total current liabilities

644,565

19,412

663,977

Retained earnings

2,029,516

(15,883)

2,013,633

Total U.S. Cellular shareholders' equity

3,404,296

(15,883)

3,388,413

Total equity

3,455,997

(15,883)

3,440,114

Total liabilities and equity

5,745,217

3,529

5,748,746

Consolidated Statement of Operations — Three Months Ended June 30, 2009

As previously

(Dollars in thousands, except per share amounts)

reported (2)

Adjustment

Revised

Service revenues

$

974,755

$

(407)

$

974,348

Total operating revenues

1,042,550

(407)

1,042,143

System operations expenses (excluding Depreciation amortization and accretion)

194,806

(97)

194,709

Selling, general and administrative expenses

410,070

1,083

411,153

Depreciation, amortization and accretion

138,614

163

138,777

Loss on asset disposals, net

2,086

525

2,611

Total operating expenses

901,631

1,674

903,305

Operating income

140,919

(2,081)

138,838

Interest expense

(19,387)

(469)

(19,856)

Total investment and other income (expense)

6,156

(469)

5,687

Income before income taxes

147,075

(2,550)

144,525

Income tax expense

57,748

(960)

56,788

Net income

89,327

(1,590)

87,737

Net income attributable to U.S. Cellular shareholders

83,358

(1,590)

81,768

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

0.96

(0.02)

0.94

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

0.96

(0.02)

0.94

Consolidated Statement of Operations — Six Months Ended June 30, 2009

As previously

(Dollars in thousands, except per share amounts)

reported (2)

Adjustment

Revised

Service revenues

$

1,956,629

$

1,173

$

1,957,802

Total operating revenues

2,095,314

1,173

2,096,487

System operations expenses (excluding Depreciation, amortization and accretion)

394,809

(112)

394,697

Selling, general and administrative expenses

822,518

(2,902)

819,616

Depreciation, amortization and accretion

276,265

390

276,655

Loss on asset disposals, net

4,277

2,279

6,556

Total operating expenses

1,839,625

(345)

1,839,280

Operating income

255,689

1,518

257,207

Interest expense

(38,409)

(874)

(39,283)

Total investment and other income (expense)

13,218

(874)

12,344

Income before income taxes

268,907

644

269,551

Income tax expense

88,980

2,767

91,747

Net income

179,927

(2,123)

177,804

Net income attributable to U.S. Cellular shareholders

167,950

(2,123)

165,827

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

1.93

(0.03)

1.90

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

1.92

(0.02)

1.90

Consolidated Statement of Cash Flows — Six Months Ended June 30, 2009

As previously

(Dollars in thousands)

reported (2)

Adjustment

Revised

Net income

$

179,927

$

(2,123)

$

177,804

Depreciation, amortization and accretion

276,265

390

276,655

Deferred income taxes, net

19,604

(520)

19,084

Loss on asset disposals, net

4,277

2,279

6,556

Change in accounts receivable

(63,510)

(5,413)

(68,923)

Change in customer deposits and deferred revenues

(5,372)

(327)

(5,699)

Change in accrued taxes

64,851

6,190

71,041

Change in other assets and liabilities

(66,824)

(476)

(67,300)

Cash flows from operating activities

373,123

373,123

(1) In Annual Report on Form 10-K for the year ended December 31, 2009 filed on February 25, 2010.

(2) In Quarterly Report on Form 10-Q for the period ended June 30, 2009 filed on August 6, 2009.

SOURCE United States Cellular Corporation



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