U.S. Cellular Reports Third Quarter 2010 Results

Nov 04, 2010, 07:59 ET from United States Cellular Corporation

CHICAGO, Nov. 4, 2010 /PRNewswire-FirstCall/ --

Note: Comparisons are year over year unless otherwise noted.

3Q 2010 Highlights

  • Service revenues were $983.5 million.
  • 31 percent increase in data revenues to $228.9 million, representing 23 percent of total service revenues compared to 18 percent in 2009.
  • Retail service ARPU (average revenue per unit) increased to $47.12 from $46.97.
  • 10 percent increase in diluted earnings per share attributable to U.S. Cellular shareholders.
  • A net loss of 25,000 retail postpaid customers and no change in prepaid customers.
  • Retail postpaid churn improved to 1.6 percent from 1.7 percent; postpaid customers comprised 94 percent of retail customers.
  • 5 percent increase in cell sites in service to 7,524.
  • Repurchased 446,668 common shares for $19.1 million.

As previously announced, U.S. Cellular will hold a teleconference Nov. 4, 2010 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 $983.5 million for the third quarter of 2010, versus $983.9 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $37.4 million and $0.43, respectively, for the third quarter of 2010, compared to $34.3 million and $0.39, respectively, in the comparable period one year ago.  

"Our third quarter results reflect a strong increase in data revenues driven by higher levels of smartphone penetration.  We also experienced renewed growth in roaming revenues and maintained our focus on cost control," said Mary N. Dillon, U.S. Cellular president and CEO. "These results were obtained while our organization was also focused on the execution of the October 1st launch of The Belief Project(SM), our set of industry-first programs, including One and Done Contracts and the Belief Rewards loyalty program.

"Since the launch, we've seen higher-than-expected levels of customer migration to the new, bundled Belief Plans, and we're confident that as customers experience all the benefits that are built into these plans, they will not only stay with us longer, but choose higher-value plans with additional features. As we build awareness in the wireless marketplace, we expect to see more customers switch from other carriers that don't offer the same level of value, rewards and overall customer satisfaction. And, in conjunction with the launch of the Belief Project, we upgraded our web site to make it easier for new and existing customers to select the best plans and products for them and manage their accounts online, which should stimulate sales and reduce selling costs over time.

"We've also bolstered our smartphone lineup significantly over the past few months with three new Android™-powered phones, including the popular Samsung Acclaim™, HTC Desire™ and Samsung Mesmerize™, a Galaxy S™ smartphone. We believe that this strong combination of popular phones, value-packed plans and exclusive services will help us stand out among wireless carriers and improve our growth and profitability over time."

Guidance

Guidance for the year ending Dec. 31, 2010 as of Nov. 4, 2010 is provided below, compared to the previous guidance provided on Aug. 5, 2010. There can be no assurance that final results will not differ materially from this guidance.

Current guidance

Previous guidance

Service revenues

$3,925-$3,975 million

$3,925-$4,000 million

Adjusted OIBDA(1)

$800-$850 million

Unchanged

Operating income(2)

$200-$250 million

Unchanged

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 2010 benefits and expenses associated with the Belief Project were incorporated into U.S. Cellular's 2010 financial guidance from the beginning of the year.

The foregoing guidance represents the views of management as of Nov. 4, 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 Nov. 4, 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 8,800 full-time equivalent associates as of September 30, 2010. At the end of the quarter, Telephone and Data Systems, Inc. owned 83% 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

9/30/2010

6/30/2010

3/31/2010

12/31/2009

9/30/2009

Total population

Consolidated markets (1)

90,468,000

90,468,000

90,468,000

89,712,000

85,118,000

Consolidated operating markets (1)

46,546,000

46,546,000

46,546,000

46,306,000

46,306,000

Market penetration at end of period

Consolidated markets (2)

6.7%

6.8%

6.8%

6.8%

7.2%

Consolidated operating markets (2)

13.1%

13.2%

13.2%

13.3%

13.2%

All customers

Total at end of period

6,103,000

6,144,000

6,147,000

6,141,000

6,131,000

Gross additions

338,000

349,000

358,000

399,000

386,000

Net additions (losses)

(41,000)

(3,000)

6,000

10,000

(24,000)

Retail customers

Total at end of period

5,750,000

5,775,000

5,768,000

5,744,000

5,705,000

Gross additions

301,000

307,000

305,000

354,000

351,000

Net retail additions (losses) (3)

(25,000)

7,000

24,000

39,000

(6,000)

Net postpaid additions (losses)

(25,000)

(22,000)

(9,000)

26,000

8,000

Net prepaid additions (losses)

29,000

33,000

13,000

(14,000)

Service revenues components (000s)

Voice and other retail service

$

636,912

$

648,565

$

663,759

$

677,107

$

690,576

Data service (6)

228,854

215,271

201,280

189,759

174,286

Total retail service

$

865,766

$

863,836

$

865,039

$

866,866

$

864,862

Inbound roaming

72,901

60,902

51,942

61,728

68,767

Other

44,836

47,838

48,027

56,814

50,289

Total service revenues (000s)

$

983,503

$

972,576

$

965,008

$

985,408

$

983,918

Divided by average customers (000s)

6,124

6,151

6,137

6,139

6,138

Divided by three months in each quarter

3

3

3

3

3

Average monthly revenue per unit (4)

$

53.53

$

52.71

$

52.41

$

53.51

$

53.43

Voice and other retail service (4)

$

34.66

$

35.14

$

36.05

$

36.77

$

37.51

Data service (4) (6)

$

12.46

$

11.67

$

10.93

$

10.30

$

9.46

Total retail service (4)

$

47.12

$

46.81

$

46.98

$

47.07

$

46.97

Inbound roaming (4)

$

3.97

$

3.30

$

2.82

$

3.35

$

3.73

Other (4)

$

2.44

$

2.60

$

2.61

$

3.09

$

2.73

Postpaid churn rate (5)

1.6%

1.4%

1.4%

1.6%

1.7%

Capital expenditures (000s)

$

124,700

$

133,500

$

121,500

$

189,000

$

128,900

Cell sites in service

7,524

7,416

7,310

7,279

7,161

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

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

(6) Effective for the fourth quarter of 2010, revenues from data products and services will no longer be separately disclosed as the determination of such revenues is increasingly dependent on allocations of bundled service prices to multiple bundled elements.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

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

     Increase (Decrease)

2010 

2009 (1)

Amount

Percent

Operating revenues

Service

$

983,503

$

983,918

$

(415)

Equipment sales

77,278

73,377

3,901

5%

Total operating revenues

1,060,781

1,057,295

3,486

Operating expenses

System operations (excluding Depreciation,

amortization and accretion reported below)

218,021

205,611

12,410

6%

Cost of equipment sold

189,291

189,354

(63)

Selling, general and administrative

446,938

454,645

(7,707)

(2%)

Depreciation, amortization and accretion

144,717

146,052

(1,335)

(1%)

Loss on asset disposals, net

1,981

2,085

(104)

(5%)

Total operating expenses

1,000,948

997,747

3,201

Operating income

59,833

59,548

285

Investment and other income (expense)

Equity in earnings of unconsolidated entities

23,971

23,126

845

4%

Interest and dividend income

1,101

1,420

(319)

(22%)

Interest expense

(15,956)

(19,782)

3,826

19%

Other, net

(620)

905

(1,525)

    > (100)%

Total investment and other income

8,496

5,669

2,827

50%

Income before income taxes

68,329

65,217

3,112

5%

Income tax expense

25,051

25,279

(228)

(1%)

Net income

43,278

39,938

3,340

8%

Less: Net income attributable to noncontrolling

interests, net of tax

(5,920)

(5,606)

(314)

(6%)

Net income attributable to U.S. Cellular shareholders

$

37,358

$

34,332

$

3,026

9%

Basic weighted average shares outstanding

85,992

86,848

(856)

(1%)

Basic earnings per share attributable to

U.S. Cellular shareholders

$

0.43

$

0.40

$

0.03

7%

Diluted weighted average shares outstanding

86,428

87,128

(700)

(1%)

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

0.43

$

0.39

$

0.04

10%

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

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

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

     Increase (Decrease)

2010 

2009 (1)

Amount

Percent

Operating revenues

Service

$

2,921,087

$

2,941,720

$

(20,633)

(1%)

Equipment sales

193,444

212,062

(18,618)

(9%)

Total operating revenues

3,114,531

3,153,782

(39,251)

(1%)

Operating expenses

System operations (excluding Depreciation,

     amortization and accretion reported below)

638,677

600,308

38,369

6%

Cost of equipment sold

512,361

531,110

(18,749)

(4%)

Selling, general and administrative

1,321,720

1,274,261

47,459

4%

Depreciation, amortization and accretion

432,405

422,707

9,698

2%

Loss on asset disposals, net

8,407

8,641

(234)

(3%)

Total operating expenses

2,913,570

2,837,027

76,543

3%

Operating income

200,961

316,755

(115,794)

(37%)

Investment and other income (expense)

Equity in earnings of unconsolidated entities

74,418

73,247

1,171

2%

Interest and dividend income

2,984

2,648

336

13%

Interest expense

(48,918)

(59,065)

10,147

17%

Other, net

(213)

1,183

(1,396)

Total investment and other income

28,271

18,013

10,258

57%

Income before income taxes

229,232

334,768

(105,536)

(32%)

Income tax expense

86,894

117,026

(30,132)

(26%)

Net income

142,338

217,742

(75,404)

(35%)

Less: Net income attributable to noncontrolling

interests, net of tax

(16,858)

(17,583)

725

4%

Net income attributable to U.S. Cellular shareholders

$

125,480

$

200,159

$

(74,679)

(37%)

Basic weighted average shares outstanding

86,329

87,011

(682)

(1%)

Basic earnings per share attributable to

U.S. Cellular shareholders

$

1.45

$

2.30

$

(0.85)

(37%)

Diluted weighted average shares outstanding

86,706

87,216

(510)

(1%)

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

1.45

$

2.29

$

(0.84)

(37%)

(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

September 30,

December 31,

2010 

2009 (1)

Current assets

Cash and cash equivalents

$

269,292

$

294,411

Short-term investments

120,771

330

Accounts receivable from customers and others

415,107

425,057

Inventory

119,882

152,556

Prepaid income taxes

32,086

717

Prepaid expenses

70,759

63,463

Net deferred income tax asset

21,570

21,570

Other current assets

49,111

51,013

1,098,578

1,009,117

Investments

Licenses

1,445,501

1,435,000

Goodwill

494,737

494,737

Customer lists

869

4,083

Investments in unconsolidated entities

177,075

161,481

Notes and interest receivable – long-term

4,107

4,214

Long-term investments

46,156

2,168,445

2,099,515

Property, plant and equipment

In service and under construction

6,203,085

5,884,307

Less: accumulated depreciation

3,649,212

3,282,969

2,553,873

2,601,338

Other assets and deferred charges

38,195

38,776

Total assets

$

5,859,091

$

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

September 30,

December 31,

2010 

2009 (1)

Current liabilities

Current portion of long-term debt

$

91

$

76

Accounts payable

Affiliated

6,291

14,732

Trade

245,542

296,288

Customer deposits and deferred revenues

142,220

140,248

Accrued taxes

78,686

57,507

Accrued compensation

57,207

62,242

Other current liabilities

88,216

92,884

618,253

663,977

Deferred liabilities and credits

Net deferred income tax liability

559,746

513,994

Other deferred liabilities and credits

269,333

262,412

Long-term debt

867,790

867,522

Commitments and contingencies

Noncontrolling interests with mandatory redemption features

791

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

1,364,266

1,356,322

Treasury shares

(97,109)

(69,616)

Retained earnings

2,126,825

2,013,633

Total U.S. Cellular shareholders' equity

3,482,056

3,388,413

Noncontrolling interests

61,122

51,701

Total equity

3,543,178

3,440,114

Total liabilities and equity

$

5,859,091

$

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 third quarter of 2010, U.S. Cellular elected to use a portion of its cash balance to directly purchase government-backed securities, specifically U.S. treasury securities and securities insured by the Federal Deposit Insurance Corporation ("FDIC").  The maturity dates of such direct investments were staggered in order to maintain cash balances and liquidity at targeted levels.  U.S. Cellular also continues to invest in certificates of deposit that are insured by the FDIC.  The following table presents U.S. Cellular's cash and cash equivalents; and investments in government-backed securities and certificates of deposit at September 30, 2010 and December 31, 2009.

September 30,

December 31,

2010 

2009 

Cash and cash equivalents

$

269,292

$

294,411

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

Government-backed securities (3)

120,521

Certificates of deposit

250

330

$

120,771

$

330

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

Government-backed securities (3)

$

46,156

$

(1) Designated as held-to-maturity investments and are recorded at amortized cost on the Consolidated Balance Sheet.

(2) Maturities are less than twelve months from the respective balance sheet dates.

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

(4) Maturities range between 14 and 25 months from the balance sheet date.

United States Cellular Corporation

Consolidated Statement of Cash Flows

Nine Months Ended September 30,

(Unaudited, dollars in thousands)

2010 

2009 (1)

Cash flows from operating activities

Net income

$

142,338

$

217,742

Add (deduct) adjustments to reconcile net income to net

cash flows from operating activities

Depreciation, amortization and accretion

432,405

422,707

Bad debts expense

56,244

73,100

Stock-based compensation expense

13,539

13,000

Deferred income taxes, net

50,180

44,486

Equity in earnings of unconsolidated entities

(74,418)

(73,247)

Distributions from unconsolidated entities

59,149

51,306

Loss on asset disposals, net

8,407

8,641

Other operating activities

106

1,824

Changes in assets and liabilities from operations

Accounts receivable

(46,293)

(106,380)

Inventory

32,673

(4,509)

Accounts payable - trade

(50,720)

(13,432)

Accounts payable - affiliate

(8,440)

(980)

Customer deposits and deferred revenues

1,972

(6,185)

Accrued taxes

(19,491)

68,695

Accrued interest

9,295

9,787

Other assets and liabilities

(22,933)

(68,861)

584,013

637,694

Cash flows from investing activities

Additions to property, plant and equipment

(379,692)

(357,770)

Cash paid for acquisitions and licenses

(10,501)

(12,527)

Cash paid for investments

(190,250)

(275)

Cash received for investments

25,330

Other investing activities

656

1,682

(554,457)

(368,890)

Cash flows from financing activities

Common shares reissued for benefit plans, net of tax payments

738

(119)

Common shares repurchased

(40,520)

(24,283)

Payment of debt issuance costs

(4,416)

Distributions to noncontrolling interests

(5,828)

(5,855)

Other financing activities

(9,065)

(233)

(54,675)

(34,906)

Net increase (decrease) in cash and cash equivalents

(25,119)

233,898

Cash and cash equivalents

Beginning of period

294,411

170,996

End of period

$

269,292

$

404,894

(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 September 30,

Nine Months Ended September 30,

2010

2009 (5)

2010

2009 (5)

Service revenues

$

983,503

$

983,918

$

2,921,087

$

2,941,720

Operating income

59,833

59,548

200,961

316,755

Add:

Depreciation, amortization and accretion

144,717

146,052

432,405

422,707

Loss on asset disposals

1,981

2,085

8,407

8,641

Adjusted OIBDA (1)(4)

$

206,531

$

207,685

$

641,773

$

748,103

Adjusted OIBDA margin (2)

21.0%

21.1%

22.0%

25.4%

2010

2009

2010

2009

Cash flows from operating activities

$

180,307

$

264,571

$

584,013

$

637,694

Deduct:

Capital expenditures

124,688

128,868

379,692

357,770

Free cash flow (3)

$

55,619

$

135,703

$

204,321

$

279,924

(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.  Such Form 8-K contains revisions to the December 31, 2009 Consolidated Balance Sheet, originally filed on February 25, 2010 in TDS' Annual Report on Form 10-K.  Also, in accordance with SAB 108, the Consolidated Balance Sheet, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the following comparative periods have been revised as follows:  

Consolidated Balance Sheet — September 30, 2009

As previously

(Dollars in thousands)

reported (1)

Adjustment

Revised

Accounts receivable - Due from customers

$

338,852

$

3,817

$

342,669

Prepaid expenses

63,020

8,413

71,433

Total current assets

1,114,320

12,230

1,126,550

Total assets

5,841,825

12,230

5,854,055

Customer deposits and deferred revenues

146,224

(2,241)

143,983

Accrued taxes

56,500

23,193

79,693

Total current liabilities

615,967

20,952

636,919

Other deferred liabilities and credits

250,762

1,314

252,076

Total deferred liabilities and credits

769,007

1,314

770,321

Retained earnings

2,020,710

(10,036)

2,010,674

Total U.S. Cellular shareholders' equity

3,398,416

(10,036)

3,388,380

Total equity

3,458,591

(10,036)

3,448,555

Total liabilities and equity

5,841,825

12,230

5,854,055

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

As previously

(Dollars in thousands, except per share amounts)

reported (1)

Adjustment

Revised

Service revenues

$

984,923

$

(1,005)

$

983,918

Total operating revenues

1,058,300

(1,005)

1,057,295

System operations expenses (excluding Depreciation,

  amortization and accretion)

205,458

153

205,611

Selling, general and administrative expenses

454,839

(194)

454,645

Depreciation, amortization and accretion

147,586

(1,534)

146,052

Loss on asset disposals, net

3,371

(1,286)

2,085

Total operating expenses

1,000,608

(2,861)

997,747

Operating income

57,692

1,856

59,548

Interest expense

(19,358)

(424)

(19,782)

Total investment and other income (expense)

6,093

(424)

5,669

Income before income taxes

63,785

1,432

65,217

Income tax expense

22,541

2,738

25,279

Net income

41,244

(1,306)

39,938

Net income attributable to U.S. Cellular shareholders

35,638

(1,306)

34,332

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

0.41

(0.01)

0.40

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

0.41

(0.02)

0.39

Consolidated Statement of Operations — Nine Months Ended September 30, 2009

As previously

(Dollars in thousands, except per share amounts)

reported (1)

Adjustment

Revised

Service revenues

$

2,941,552

$

168

$

2,941,720

Total operating revenues

3,153,614

168

3,153,782

System operations expenses (excluding Depreciation,

  amortization and accretion)

600,267

41

600,308

Selling, general and administrative expenses

1,277,357

(3,096)

1,274,261

Depreciation, amortization and accretion

423,851

(1,144)

422,707

Loss on asset disposals, net

7,648

993

8,641

Total operating expenses

2,840,233

(3,206)

2,837,027

Operating income

313,381

3,374

316,755

Interest expense

(57,767)

(1,298)

(59,065)

Total investment and other income (expense)

19,311

(1,298)

18,013

Income before income taxes

332,692

2,076

334,768

Income tax expense

111,521

5,505

117,026

Net income

221,171

(3,429)

217,742

Net income attributable to U.S. Cellular shareholders

203,588

(3,429)

200,159

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

2.34

(0.04)

2.30

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

2.33

(0.04)

2.29

Consolidated Statement of Cash Flows — Nine Months Ended September 30, 2009

As previously

(Dollars in thousands)

reported (1)

Adjustment

Revised

Net income

$

221,171

$

(3,429)

$

217,742

Depreciation, amortization and accretion

423,851

(1,144)

422,707

Deferred income taxes, net

44,429

57

44,486

Loss on asset disposals, net

7,648

993

8,641

Change in accounts receivable

(101,263)

(5,117)

(106,380)

Change in customer deposits and deferred revenues

(4,858)

(1,327)

(6,185)

Change in accrued taxes

58,139

10,556

68,695

Change in other assets and liabilities

(68,272)

(589)

(68,861)

Cash flows from operating activities

637,694

637,694

(1) In Quarterly Report on Form 10-Q for the period ended September 30, 2009 filed on November 5, 2009.

SOURCE United States Cellular Corporation



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