U.S. Cellular Reports Second Quarter 2011 Results Higher revenue and profits driven by data growth, lower churn and higher roaming revenues; gross additions disappointing

CHICAGO, Aug. 8, 2011 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

2Q 2011 Highlights

  • Smartphones sold, as a percent of total devices sold, increased to 39.6 percent from 15.8 percent.
  • Service revenues were $1,002.0 million, up 3 percent.
  • Postpaid ARPU (average revenue per unit) increased to $51.84 from $50.55.
  • Postpaid churn improved to 1.38 percent from 1.43 percent.
  • Operating income increased 61 percent to $102.4 million.
  • Net loss of 58,000 retail customers, reflecting loss of 41,000 postpaid customers and 17,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
  • Cell sites in service increased 5 percent to 7,770, of which 4,400 are owned towers.
  • Repurchased 918,942 common shares for $45.0 million.

As previously announced, U.S. Cellular will hold a teleconference Aug. 8, 2011 at 7:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations page of uscellular.com or www.teldta.com.

United States Cellular Corporation (NYSE :USM) reported service revenues of $1,002.0 million for the second quarter of 2011, versus $972.6 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $73.9 million and $0.87, respectively, for the second quarter of 2011, compared to $40.8 million and $0.47, respectively, in the comparable period one year ago.  

"We continued to increase postpaid ARPU and maintain a low churn rate," said Mary N. Dillon, U.S. Cellular president and CEO, "although our subscriber results continue to reflect the intense competitive environment and the weak economy.  This remains our greatest challenge. Our new advertising and marketing strategies are starting to increase awareness among potential switchers, and we're working hard to break through to our target customers and leverage that awareness to improve gross additions.

"Smartphones sales continued to be strong, and we also saw an increase in sales of data plans for feature phones in the quarter. By balancing device subsidies among a wider range of both feature phones and smartphones, we were able to better control our loss on equipment. Overall, operating margins improved in the quarter due to higher ARPU, increased roaming revenue and good expense control, with fewer gross additions contributing to lower sales and marketing expenses.

"We now have 2.3 million customers on our Belief Plans, and we're complementing those plans with some very exciting phones and devices. This quarter we added the new HTC 7 Pro(TM) with Windows Phone 7®, the new Android(TM)-powered HTC Merge™ Global Ready smartphone, and the Motorola Xoom™ tablet. And we have more feature-packed phones, smartphones and tablets on the way.  We're also excited about our coming launch of 4G."

Second quarter transactions

U.S. Cellular paid $24.6 million in cash to purchase the remaining interest in a wireless business in which it previously held a non-controlling interest.  As a result, the company recorded a $13.4 million pre-tax gain on investments.

Additionally, U.S. Cellular sold $342 million of 6.95 percent senior notes and redeemed $330 million of its 7.5 percent senior notes.  The redemption required U.S. Cellular to write off $8.2 million of previously capitalized debt issuance costs related to the 7.5 percent senior notes.  The $8.2 million was recorded in interest expense.

Guidance for year ending Dec. 31, 2011

Guidance for the year ending Dec. 31, 2011, as of Aug. 8, 2011, is provided below, compared to the previous guidance provided on May 6, 2011. 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 this guidance.  




Current Estimates


Previous Estimates (1)


Service revenues

$4,000-$4,100 million


Unchanged


Operating income (3) (4)

$210-$285 million


$185-$285 million


Depreciation, amortization and accretion expenses, and





  losses on asset disposals and impairment of assets (3)

Approx. $590 million


Unchanged


Adjusted OIBDA (2) (4)

$800-$875 million


$775-$875 million


Capital expenditures (4)

$750-$800 million


Unchanged




(1)

The 2011 Estimated Results as disclosed in U.S. Cellular's Quarterly Report on Form 10-Q for the period ended March 31, 2011.

(2)

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.

(3)

The 2011 Estimated Results do not include any estimate for losses on impairment of assets since these cannot be predicted.

(4)

This guidance is based on U.S. Cellular's current plans, which include a multi-year deployment of Long-term Evolution ("LTE") technology commencing in 2011.  As customer demand for data services increases, and competitive conditions in the wireless industry evolve, such as the rate of deployment of LTE technology by other carriers, the timing of U.S. Cellular's deployment of LTE and the timing of other capital expenditures could change.  These factors could affect U.S. Cellular's estimated capital expenditures and operating expenses in 2011.



Conference call information

U.S. Cellular will hold a conference call on Aug. 8, 2011 at 7:30 a.m. CDT.


Before the call, certain financial and statistical information to be discussed during the call will be posted to the Investor Relations 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 six million customers in 26 states. The Chicago-based company employed approximately 9,000 people as of June 30, 2011. At the end of the second quarter, Telephone and Data Systems, Inc. owned 84 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 ability to obtain or maintain roaming arrangements with other carriers; 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 (Unaudited)

















Quarter Ended


6/30/2011



3/31/2011



12/31/2010



9/30/2010



6/30/2010

Total population
















Consolidated markets (1)


91,204,000



91,090,000



90,468,000



90,468,000



90,468,000


Consolidated operating markets (1)


46,888,000



46,774,000



46,546,000



46,546,000



46,546,000

Market penetration at end of period
















Consolidated markets (2)


6.5%



6.6%



6.7%



6.7%



6.8%


Consolidated operating markets (2)


12.7%



12.9%



13.0%



13.1%



13.2%

All customers
















Total at end of period


5,968,000



6,033,000



6,072,000



6,103,000



6,144,000


Gross additions


257,000



293,000



327,000



338,000



349,000


Net additions (losses)


(70,000)



(39,000)



(31,000)



(41,000)



(3,000)


Smartphones sold as a percent of
















     total devices sold (3)


39.6%



42.5%



39.6%



23.6%



15.8%

Retail customers
















Total at end of period


5,644,000



5,698,000



5,729,000



5,750,000



5,775,000


Smartphone penetration (3) (4)


23.0%



20.2%



16.6%



12.0%



10.1%


Gross additions


226,000



256,000



292,000



301,000



307,000


Net retail additions (losses) (5)


(58,000)



(31,000)



(21,000)



(25,000)



7,000


     Net postpaid additions (losses)


(41,000)



(22,000)



(10,000)



(25,000)



(22,000)


     Net prepaid additions (losses)


(17,000)



(9,000)



(11,000)



---



29,000

Service revenue components (000s)
















Retail service

$

868,630


$

864,602


$

864,905


$

865,766


$

863,836


Inbound roaming


82,760



64,386



67,545



72,901



60,902


Other


50,640



56,125



59,464



44,836



47,838

Total service revenues (000s)

$

1,002,030


$

985,113


$

991,914


$

983,503


$

972,576

Total ARPU (6)

$

55.69


$

54.29


$

54.37


$

53.53


$

52.71

Billed ARPU (7)

$

48.27


$

47.65


$

47.41


$

47.12


$

46.81

Postpaid ARPU (8)

$

51.84


$

51.21


$

50.99


$

50.82


$

50.55

Postpaid churn rate (9)


1.4%



1.4%



1.5%



1.6%



1.4%

Capital expenditures (000s)

$

162,100


$

95,900


$

203,400


$

124,700


$

133,500

Cell sites in service


7,770



7,663



7,645



7,524



7,416




(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 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)

Includes net postpaid additions (losses) and net prepaid additions (losses).

(6)

Total ARPU - Average monthly service revenue per customer 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 customer 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 customer 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 retail 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 June 30,

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































Increase (Decrease)






2011



2010



Amount


Percent


Operating revenues
















Service

$

1,002,030



$

972,576



$

29,454



3%



Equipment sales


74,152




57,317




16,835



29%




Total operating revenues


1,076,182




1,029,893




46,289



4%


Operating expenses
















System operations (excluding Depreciation,

















amortization and accretion reported below)


227,801




213,542




14,259



7%



Cost of equipment sold


168,614




161,965




6,649



4%



Selling, general and administrative


426,172




445,177




(19,005)



(4%)



Depreciation, amortization and accretion


148,283




144,455




3,828



3%



Loss on asset disposals, net


2,922




1,250




1,672



>100%




Total operating expenses


973,792




966,389




7,403



1%




















Operating income


102,390




63,504




38,886



61%




















Investment and other income (expense)
















Equity in earnings of unconsolidated entities


22,469




25,753




(3,284)



(13%)



Interest and dividend income


748




862




(114)



(13%)



Gain on investment


13,373







13,373



N/M



Interest expense


(25,197)




(16,438)




(8,759)



(53%)



Other, net


175




472




(297)



(63%)






















Total investment and other income (expense)


11,568




10,649




919



9%




















Income before income taxes


113,958




74,153




39,805



54%



Income tax expense


34,077




28,181




5,896



21%




















Net income


79,881




45,972




33,909



74%



Less: Net income attributable to noncontrolling

















interests, net of tax


(5,993)




(5,219)




(774)



(15%)


Net income attributable to U.S. Cellular shareholders

$

73,888



$

40,753



$

33,135



81%


















Basic weighted average shares outstanding


84,930




86,425




(1,495)



(2%)


Basic earnings per share attributable to
















U.S. Cellular shareholders

$

0.87



$

0.47



$

0.40



85%




















Diluted weighted average shares outstanding


85,397




86,787




(1,390)



(2%)


Diluted earnings per share attributable to
















U.S. Cellular shareholders

$

0.87



$

0.47



$

0.40



85%






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)






2011



2010



Amount


Percent


Operating revenues
















Service

$

1,987,143



$

1,937,584



$

49,559



3%



Equipment sales


146,131




116,166




29,965



26%




Total operating revenues


2,133,274




2,053,750




79,524



4%


Operating expenses
















System operations (excluding Depreciation,

















amortization and accretion reported below)


445,404




420,656




24,748



6%



Cost of equipment sold


362,974




323,070




39,904



12%



Selling, general and administrative


868,176




874,782




(6,606)



(1%)



Depreciation, amortization and accretion


293,328




287,688




5,640



2%



Loss on asset disposals, net


3,959




6,426




(2,467)



(38%)




Total operating expenses


1,973,841




1,912,622




61,219



3%




















Operating income


159,433




141,128




18,305



13%




















Investment and other income (expense)
















Equity in earnings of unconsolidated entities


43,360




50,447




(7,087)



(14%)



Interest and dividend income


1,597




1,883




(286)



(15%)



Gain on investment


13,373







13,373



N/M



Interest expense


(40,383)




(32,962)




(7,421)



(23%)



Other, net


50




407




(357)



(88%)






















Total investment and other income (expense)


17,997




19,775




(1,778)



(9%)




















Income before income taxes


177,430




160,903




16,527



10%



Income tax expense


58,169




61,843




(3,674)



(6%)




















Net income


119,261




99,060




20,201



20%



Less: Net income attributable to noncontrolling

















interests, net of tax


(11,262)




(10,938)




(324)



(3%)


Net income attributable to U.S. Cellular shareholders

$

107,999



$

88,122



$

19,877



23%


















Basic weighted average shares outstanding


85,206




86,500




(1,294)



(1%)


Basic earnings per share attributable to
















U.S. Cellular shareholders

$

1.27



$

1.02



$

0.25



25%




















Diluted weighted average shares outstanding


85,739




86,873




(1,134)



(1%)


Diluted earnings per share attributable to
















U.S. Cellular shareholders

$

1.26



$

1.01



$

0.25



25%






United States Cellular Corporation

Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)











ASSETS













June 30,



December 31,




2011



2010


Current assets









Cash and cash equivalents

$

428,625



$

294,426



Short-term investments


96,085




146,586



Accounts receivable from customers and others


430,447




424,019



Inventory


160,783




112,279



Income taxes receivable


32,106




41,397



Prepaid expenses


64,208




53,356



Net deferred income tax asset


37,582




26,757



Other current assets


11,099




10,804





1,260,935




1,109,624











Assets held for sale


53,910














Investments









Licenses


1,454,901




1,452,101



Goodwill


494,737




494,737



Customer lists


536




759



Investments in unconsolidated entities


142,377




160,847



Notes and interest receivable – long-term


3,997




4,070



Long-term investments


40,326




46,033





2,136,874




2,158,547











Property, plant and equipment









In service and under construction


6,598,300




6,382,581



Less: accumulated depreciation


4,016,255




3,767,509





2,582,045




2,615,072











Other assets and deferred charges


56,152




50,367











Total assets

$

6,089,916



$

5,933,610






United States Cellular Corporation

Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)












LIABILITIES AND EQUITY















June 30,



December 31,





2011



2010


Current liabilities









Current portion of long-term debt

$

101



$

101



Accounts payable










Affiliated


15,894




10,791




Trade


290,308




281,601



Customer deposits and deferred revenues


168,803




146,428



Accrued taxes


41,421




39,299



Accrued compensation


48,551




65,952



Other current liabilities


79,726




121,823






644,804




665,995












Liabilities held for sale


871















Deferred liabilities and credits









Net deferred income tax liability


684,472




579,769



Other deferred liabilities and credits


277,543




284,949












Long-term debt


880,300




867,941












Commitments and contingencies


















Noncontrolling interests with mandatory redemption features


863




855












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


1,378,166




1,368,487



Treasury shares


(153,525)




(105,616)



Retained earnings


2,224,453




2,129,638




Total U.S. Cellular shareholders' equity


3,537,168




3,480,583












Noncontrolling interests


63,895




53,518













Total equity


3,601,063




3,534,101












Total liabilities and equity

$

6,089,916



$

5,933,610





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 June 30, 2011 and December 31, 2010.









June 30,


December 31,




2011


2010












Cash and cash equivalents


$

428,625


$

294,426


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









Government-backed securities (3)




95,835



146,336



Certificates of deposit




250



250






$

96,085


$

146,586


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









Government-backed securities (3)



$

40,326


$

46,033




(1)

Designated as held-to-maturity investments and 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 Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program.

(4)

At June 30, 2011, maturities range between 12 and 24 months from the balance sheet date.




United States Cellular Corporation

Consolidated Statement of Cash Flows

Six Months Ended June 30,

(Unaudited, dollars in thousands)

























2011



2010

Cash flows from operating activities








Net income

$

119,261



$

99,060


Add (deduct) adjustments to reconcile net income to net









cash flows from operating activities










Depreciation, amortization and accretion


293,328




287,688




Bad debts expense


27,677




36,605




Stock-based compensation expense


10,798




9,012




Deferred income taxes, net


80,371




(9,935)




Equity in earnings of unconsolidated entities


(43,360)




(50,447)




Distributions from unconsolidated entities


47,143




48,491




Loss on asset disposals, net


3,959




6,426




Gain on investment


(13,373)







Noncash interest expense


9,152




1,231




Other operating activities


1,044




(1,695)


Changes in assets and liabilities from operations










Accounts receivable


(35,907)




(22,995)




Inventory


(48,504)




32,252




Accounts payable - trade


8,588




(34,009)




Accounts payable - affiliate


5,102




(3,017)




Customer deposits and deferred revenues


22,376




3,854




Accrued taxes


10,215




27,744




Accrued interest


111




121




Other assets and liabilities


(74,549)




(26,680)



423,432




403,706








Cash flows from investing activities








Additions to property, plant and equipment


(258,040)




(255,004)


Cash paid for acquisitions and licenses


(22,167)




(10,501)


Cash paid for investments


(20,000)




(175,000)


Cash received for investments


75,000




226


Other investing activities


2,691




663



(222,516)




(439,616)








Cash flows from financing activities








Repayment of long-term debt


(330,043)




(32)


Issuance of long-term debt


342,000





Common shares reissued for benefit plans, net of tax payments


1,264




144


Common shares repurchased


(62,308)




(21,423)


Payment of debt issuance costs


(11,229)





Distributions to noncontrolling interests


(877)




(4,314)


Other financing activities


163




(23)



(61,030)




(25,648)








Cash classified as held for sale


(5,687)











Net increase (decrease) in cash and cash equivalents


134,199




(61,558)








Cash and cash equivalents








Beginning of period


294,426




294,411


End of period

$

428,625



$

232,853





United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)






















Three Months Ended June 30,



Six Months Ended June 30,





2011



2010




2011



2010





















Service revenues


$

1,002,030


$

972,576



$

1,987,143


$

1,937,584





















Operating income



102,390



63,504




159,433



141,128



Add:

















Depreciation, amortization and accretion



148,283



144,455




293,328



287,688




Loss on impairment of intangible assets













Loss on asset disposals



2,922



1,250




3,959



6,426





Adjusted OIBDA (1)


$

253,595


$

209,209



$

456,720


$

435,242























Adjusted OIBDA margin (2)



25.3%



21.5%




23.0%



22.5%






































2011



2010




2011



2010





















Cash flows from operating activities


$

221,610


$

251,454



$

423,432


$

403,706



Deduct:

















Capital expenditures



162,107



133,490




258,040



255,004





Free cash flow (3)


$

59,503


$

117,964



$

165,392


$

148,702




(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 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 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 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



RELATED LINKS
http://www.uscellular.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.