U.S. Cellular Reports Third Quarter 2011 Results

Data drives ARPU growth; inbound roaming revenues increase; profitability improves

04 Nov, 2011, 08:07 ET from United States Cellular Corporation

CHICAGO, Nov. 4, 2011 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

3Q 2011 Highlights

  • Smartphones sold, as a percent of total devices sold, increased to 39.9 percent from 23.6 percent; smartphone customers increased to 26.2 percent of postpaid customers from 12.1 percent.
  • Postpaid ARPU (average revenue per unit) increased to $52.41 from $50.82.
  • Service revenues increased 5 percent to $1,036.6 million.
  • Operating income increased 66 percent to $101.6 million.
  • Net loss of 23,000 retail customers, reflecting loss of 34,000 postpaid customers and gain of 11,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
  • Cell sites in service increased 4 percent to 7,828.

As previously announced, U.S. Cellular will hold a teleconference Nov. 4, 2011 at 9:00 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 $1,036.6 million for the third quarter of 2011 versus $983.5 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $62.1 million and $0.73, respectively, for the third quarter of 2011, compared to $38.3 million and $0.44, 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, "and though our retail subscriber results remain disappointing, they did improve slightly compared to recent quarters. We are seeing increased awareness from our advertising, device launches and focused promotions, and we're building on that with targeted campaigns to add more new customers during the holiday period and beyond.

"Smartphones sales and adoption of data plans remain very strong, and we're continuing to control loss on equipment by balancing device costs and promotions. We again improved operating margins by increasing ARPU and roaming revenue, and controlling expenses.  Also during the quarter, we completed an exchange of licenses that will provide additional spectrum to meet anticipated future capacity and coverage requirements in several of our markets.    

"Along with our Belief Plans, which 2.8 million of our customers have now selected, we're offering a competitive device lineup for the holiday period, including the highly rated Motorola Electrify™, and several new smartphones at attractive price points from HTC. We'll complete our first 4G LTE markets in November, and offer 4G-enabled devices early in 2012."

Guidance for year ending Dec. 31, 2011

Guidance for the year ending Dec. 31, 2011, as of Nov. 4, 2011, is provided below, compared to the previous guidance provided on Aug. 8, 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)

$230-$305 million

$210-$285 million

Depreciation, amortization and accretion expenses,

  and losses on asset disposals and exchanges  

  and impairment of assets (3)

Approx. $590 million

Unchanged

Adjusted OIBDA (2) (4)

$820-$895 million

$800-$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 June 30, 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 and exchanges (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 operations, 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 Nov. 4, 2011 at 9:00 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 5.9 million customers in 26 states. The Chicago-based company employed approximately 8,900 people as of September 30, 2011. At the end of the third 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 Securities and Exchange Commission ("SEC"), which are incorporated by reference herein.

United States Cellular Corporation

Summary Operating Data (Unaudited)

Quarter Ended

9/30/2011

6/30/2011

3/31/2011

12/31/2010

9/30/2010

Total population

Consolidated markets (1)

91,965,000 

91,204,000 

91,090,000 

90,468,000 

90,468,000 

Consolidated operating markets (1)

46,888,000 

46,888,000 

46,774,000 

46,546,000 

46,546,000 

 Market penetration at end of period

Consolidated markets (2)

6.5%

6.5%

6.6%

6.7%

6.7%

Consolidated operating markets (2)

12.7%

12.7%

12.9%

13.0%

13.1%

All customers

Total at end of period

5,932,000 

5,968,000 

6,033,000 

6,072,000 

6,103,000 

Gross additions

299,000 

257,000 

293,000 

327,000 

338,000 

Net additions (losses)

(36,000)

(70,000)

(39,000)

(31,000)

(41,000)

Smartphones sold as a percent of total devices sold (3)

39.9%

39.6%

42.5%

39.6%

23.6%

Retail customers

Total at end of period

5,621,000 

5,644,000 

5,698,000 

5,729,000 

5,750,000 

Smartphone penetration (3) (4)

26.2%

23.0%

20.2%

16.6%

12.1%

Gross additions

284,000 

226,000 

256,000 

292,000 

301,000 

Net retail additions (losses) (5)

(23,000)

(58,000)

(31,000)

(21,000)

(25,000)

     Net postpaid additions (losses)

(34,000)

(41,000)

(22,000)

(10,000)

(25,000)

     Net prepaid additions (losses)

11,000 

(17,000)

(9,000)

(11,000)

Service revenue components (000s)

Retail service

$

871,199 

$

868,630 

$

864,602 

$

864,905 

$

865,766 

Inbound roaming

107,810 

82,760 

64,386 

67,545 

72,901 

Other

57,600 

50,640 

56,125 

59,464 

44,836 

Total service revenues (000s)

$

1,036,609 

$

1,002,030 

$

985,113 

$

991,914 

$

983,503 

Total ARPU (6)

$

58.09 

$

55.69 

$

54.29 

$

54.37 

$

53.53 

Billed ARPU (7)

$

48.82 

$

48.27 

$

47.65 

$

47.41 

$

47.12 

Postpaid ARPU (8)

$

52.41 

$

51.84 

$

51.21 

$

50.99 

$

50.82 

Postpaid churn rate (9)

1.5%

1.4%

1.4%

1.5%

1.6%

Capital expenditures (000s)

$

248,000 

$

162,100 

$

95,900 

$

203,400 

$

124,700 

Cell sites in service

7,828 

7,770 

7,663 

7,645 

7,524 

(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 September 30,

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

     Increase (Decrease)

2011 

2010 (1)

Amount

Percent

Operating revenues

Service

$

1,036,609 

$

983,503 

$

53,106 

5%

Equipment sales

73,830 

77,278 

(3,448)

(4%)

Total operating revenues

1,110,439 

1,060,781 

49,658 

5%

Operating expenses

System operations (excluding Depreciation,

amortization and accretion reported below)

241,852 

218,021 

23,831 

11%

Cost of equipment sold

193,491 

189,291 

4,200 

2%

Selling, general and administrative

441,512 

446,938 

(5,426)

(1%)

Depreciation, amortization and accretion

141,664 

143,191 

(1,527)

(1%)

(Gain) loss on asset disposals and exchanges, net

(9,700)

1,981 

(11,681)

>(100)%

Total operating expenses

1,008,819 

999,422 

9,397 

1%

Operating income

101,620 

61,359 

40,261 

66%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

21,929 

23,971 

(2,042)

(9%)

Interest and dividend income

869 

1,101 

(232)

(21%)

Interest expense

(11,522)

(15,956)

4,434 

28%

Other, net

(97)

(620)

523 

84%

Total investment and other income (expense)

11,179 

8,496 

2,683 

32%

Income before income taxes

112,799 

69,855 

42,944 

61%

Income tax expense

43,292 

25,639 

17,653 

69%

Net income

69,507 

44,216 

25,291 

57%

Less: Net income attributable to noncontrolling

interests, net of tax

(7,367)

(5,920)

(1,447)

(24%)

Net income attributable to U.S. Cellular shareholders

$

62,140 

$

38,296 

$

23,844 

62%

Basic weighted average shares outstanding

84,547 

85,992 

(1,445)

(2%)

Basic earnings per share attributable to

U.S. Cellular shareholders

$

0.73 

$

0.45 

$

0.28 

62%

Diluted weighted average shares outstanding

84,940 

86,428 

(1,488)

(2%)

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

0.73 

$

0.44 

$

0.29 

66%

(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)

2011 

2010 (1)

Amount

Percent

Operating revenues

Service

$

3,023,752 

$

2,921,087 

$

102,665 

4%

Equipment sales

219,961 

193,444 

26,517 

14%

Total operating revenues

3,243,713 

3,114,531 

129,182 

4%

Operating expenses

System operations (excluding Depreciation,

amortization and accretion reported below)

687,256 

638,677 

48,579 

8%

Cost of equipment sold

556,465 

512,361 

44,104 

9%

Selling, general and administrative

1,309,688 

1,321,720 

(12,032)

(1%)

Depreciation, amortization and accretion

431,581 

427,831 

3,750 

1%

(Gain) loss on asset disposals and exchanges, net

(5,741)

8,407 

(14,148)

>(100)%

Total operating expenses

2,979,249 

2,908,996 

70,253 

2%

Operating income

264,464 

205,535 

58,929 

29%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

65,289 

74,418 

(9,129)

(12%)

Interest and dividend income

2,466 

2,984 

(518)

(17%)

Gain on investment

13,373 

— 

13,373 

N/M

Interest expense

(51,905)

(48,918)

(2,987)

(6%)

Other, net

(47)

(213)

166 

78%

Total investment and other income (expense)

29,176 

28,271 

905 

3%

Income before income taxes

293,640 

233,806 

59,834 

26%

Income tax expense

102,771 

88,656 

14,115 

16%

Net income

190,869 

145,150 

45,719 

31%

Less: Net income attributable to noncontrolling

interests, net of tax

(18,629)

(16,858)

(1,771)

(11%)

Net income attributable to U.S. Cellular shareholders

$

172,240 

$

128,292 

$

43,948 

34%

Basic weighted average shares outstanding

84,984 

86,329 

(1,345)

(2%)

Basic earnings per share attributable to

U.S. Cellular shareholders

$

2.03 

$

1.49 

$

0.54 

36%

Diluted weighted average shares outstanding

85,448 

86,706 

(1,258)

(1%)

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

2.02 

$

1.48 

$

0.54 

36%

(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,

2011 

2010 (1)

Current assets

Cash and cash equivalents

$

504,952 

$

294,426 

Short-term investments

110,761 

146,586 

Accounts receivable from customers and others

434,334 

424,019 

Inventory

148,770 

112,279 

Income taxes receivable

35,121 

41,397 

Prepaid expenses

56,607 

53,356 

Net deferred income tax asset

26,757 

26,757 

Other current assets

10,693 

10,804 

1,327,995 

1,109,624 

Assets held for sale

60,829 

— 

Investments

Licenses

1,470,550 

1,452,101 

Goodwill

494,737 

494,737 

Customer lists, net

425 

759 

Investments in unconsolidated entities

160,374 

160,847 

Notes and interest receivable – long-term

3,959 

4,070 

Long-term investments

45,297 

46,033 

2,175,342 

2,158,547 

Property, plant and equipment, net

In service and under construction

6,778,852 

6,340,537 

Less: accumulated depreciation

4,124,358 

3,766,015 

2,654,494 

2,574,522 

Other assets and deferred charges

61,941 

50,367 

Total assets

$

6,280,601 

$

5,893,060 

(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 EQUITY

September 30,

December 31,

2011 

2010 (1)

Current liabilities

Current portion of long-term debt

$

101 

$

101 

Accounts payable

Affiliated

11,976 

10,791 

Trade

360,788 

281,601 

Customer deposits and deferred revenues

177,123 

146,428 

Accrued taxes

43,910 

39,299 

Accrued compensation

48,117 

65,952 

Other current liabilities

95,665 

121,823 

737,680 

665,995 

Liabilities held for sale

858 

— 

Deferred liabilities and credits

Net deferred income tax liability

742,343 

583,444 

Other deferred liabilities and credits

235,032 

234,855 

Long-term debt

880,411 

867,941 

Commitments and contingencies

Noncontrolling interests with mandatory redemption features

923 

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

1,382,826 

1,368,487 

Treasury shares

(153,011)

(105,616)

Retained earnings

2,294,562 

2,135,507 

Total U.S. Cellular shareholders' equity

3,612,451 

3,486,452 

Noncontrolling interests

70,903 

53,518 

Total equity

3,683,354 

3,539,970 

Total liabilities and equity

$

6,280,601 

$

5,893,060 

(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)

The following table presents U.S. Cellular's cash and cash equivalents and investments at September 30, 2011 and December 31, 2010.

September 30,

December 31,

2011 

2010 

Cash and cash equivalents

$

504,952 

$

294,426 

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

Government-backed securities (3)

110,761 

146,336 

Certificates of deposit

250 

$

110,761 

$

146,586 

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

Government-backed securities (3)

$

45,297 

$

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 September 30, 2011, maturities range between 13 and 23 months from the balance sheet date.

United States Cellular Corporation

Consolidated Statement of Cash Flows

Nine Months Ended September 30,

(Unaudited, dollars in thousands)

2011 

2010 (1)

Cash flows from operating activities

Net income

$

190,869 

$

145,150 

Add (deduct) adjustments to reconcile net income to net

cash flows from operating activities

Depreciation, amortization and accretion

431,581 

427,831 

Bad debts expense

44,718 

56,244 

Stock-based compensation expense

15,475 

13,539 

Deferred income taxes, net

145,687 

51,942 

Equity in earnings of unconsolidated entities

(65,289)

(74,418)

Distributions from unconsolidated entities

52,037 

59,149 

(Gain) loss on asset disposals and exchanges, net

(5,741)

8,407 

Gain on investment

(13,373)

— 

Noncash interest expense

9,582 

1,846 

Other operating activities

1,143 

(1,740)

Changes in assets and liabilities from operations

Accounts receivable

(57,564)

(46,293)

Inventory

(36,326)

32,673 

Accounts payable - trade

79,031 

(50,720)

Accounts payable - affiliate

1,185 

(8,440)

Customer deposits and deferred revenues

30,695 

1,972 

Accrued taxes

9,679 

(19,491)

Accrued interest

9,283 

9,295 

Other assets and liabilities

(65,048)

(22,933)

777,624 

584,013 

Cash flows from investing activities

Additions to property, plant and equipment

(506,082)

(379,692)

Cash paid for acquisitions and licenses

(23,773)

(10,501)

Cash paid for investments

(50,000)

(190,250)

Cash received for investments

85,250 

25,330 

Other investing activities

(210)

656 

(494,815)

(554,457)

Cash flows from financing activities

Repayment of long-term debt

(330,106)

(307)

Issuance of long-term debt

342,000 

— 

Common shares reissued for benefit plans, net of tax payments

1,755 

738 

Common shares repurchased

(62,294)

(40,520)

Payment of debt issuance costs

(11,394)

— 

Distributions to noncontrolling interests

(1,176)

(5,828)

Other financing activities

169 

(8,758)

(61,046)

(54,675)

Cash classified as held for sale

(11,237)

— 

Net increase (decrease) in cash and cash equivalents

210,526 

(25,119)

Cash and cash equivalents

Beginning of period

294,426 

294,411 

End of period

$

504,952 

$

269,292 

(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,

2011 

2010 (4)

2011 

2010 (4)

Service revenues

$

1,036,609 

$

983,503 

$

3,023,752 

$

2,921,087 

Operating income

101,620 

61,359 

264,464 

205,535 

Add:

Depreciation, amortization and accretion

141,664 

143,191 

431,581 

427,831 

Loss on impairment of intangible assets

— 

— 

— 

— 

Gain (loss) on asset disposals and exchanges

(9,700)

1,981 

(5,741)

8,407 

Adjusted OIBDA (1)

$

233,584 

$

206,531 

$

690,304 

$

641,773 

Adjusted OIBDA margin (2)

22.5%

21.0%

22.8%

22.0%

2011 

2010 (4)

2011 

2010 (4)

Cash flows from operating activities

$

354,192 

$

180,307 

$

777,624 

$

584,013 

Deduct:

Capital expenditures

248,042 

124,688 

506,082 

379,692 

Free cash flow (3)

$

106,150 

$

55,619 

$

271,542 

$

204,321 

(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 and exchanges (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 exchanges 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.

(4) 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 nine months ended September 30, 2011, U.S. Cellular discovered certain errors related to accounting for asset retirement obligations and asset retirement costs. These errors resulted in the overstatement of Total operating expenses, Property, plant and equipment, net and Other deferred liabilities and credits in the first and second quarter 2011 interim financial statements and in the 2010, 2009 and 2008 annual periods reported in the Company's December 31, 2010 financial statements.   The beginning retained earnings balance presented in the December 31, 2010 annual financial statements was also understated as a result of these errors. 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, amendments of previously filed reports were not required. However, if the adjustments to correct the cumulative errors had been recorded in the third quarter 2011, U.S. Cellular believes the impact would have been significant to the third quarter results and would have impacted comparisons to prior periods. As permitted by SAB 108, revisions for these immaterial amounts to previously reported annual and quarterly results are reflected in the financial information herein and will be reflected in future filings containing such financial information.  

The Consolidated Balance Sheet at December 31, 2010 was revised to reflect the cumulative effect of these errors which resulted in an increase to Retained earnings of $5.9 million.  In accordance with SAB 108, the Consolidated Balance Sheet, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows have been revised as follows:

Consolidated Balance Sheet -- December 31, 2010

As previously

(Dollars in thousands)

reported (1)

Adjustment

Revised

Property, plant and equipment, net

$

2,615,072 

$

(40,550)

$

2,574,522 

Total assets

5,933,610 

(40,550)

5,893,060 

Net deferred income tax liability

579,769 

3,675 

583,444 

Other deferred liabilities and credits

284,949 

(50,094)

234,855 

Retained earnings

2,129,638 

5,869 

2,135,507 

Total U.S. Cellular shareholders' equity

3,480,583 

5,869 

3,486,452 

Total equity

3,534,101 

5,869 

3,539,970 

Total liabilities and equity

5,933,610 

(40,550)

5,893,060 

Consolidated Statement of Operations -- Three Months Ended September 30, 2010

As previously

(Dollars in thousands)

reported (2)

Adjustment

Revised

Depreciation, amortization and accretion

$

144,717 

$

(1,526)

$

143,191 

Total operating expenses

1,000,948 

(1,526)

999,422 

Operating income

59,833 

1,526 

61,359 

Income before income taxes

68,329 

1,526 

69,855 

Income tax expense

25,051 

588 

25,639 

Net income

43,278 

938 

44,216 

Net income attributable to U.S. Cellular shareholders

37,358 

938 

38,296 

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

0.43 

0.02 

0.45 

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

0.43 

0.01 

0.44 

Consolidated Statement of Operations -- Nine Months Ended September 30, 2010

As previously

(Dollars in thousands)

reported (2)

Adjustment

Revised

Depreciation, amortization and accretion

$

432,405 

$

(4,574)

$

427,831 

Total operating expenses

2,913,570 

(4,574)

2,908,996 

Operating income

200,961 

4,574 

205,535 

Income before income taxes

229,232 

4,574 

233,806 

Income tax expense

86,894 

1,762 

88,656 

Net income

142,338 

2,812 

145,150 

Net income attributable to U.S. Cellular shareholders

125,480 

2,812 

128,292 

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

1.45 

0.04 

1.49 

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

1.45 

0.03 

1.48 

Consolidated Statement of Cash Flows -- Nine Months Ended September 30, 2010

As previously

(Dollars in thousands)

reported (2)

Adjustment

Revised

Net income

$

142,338 

$

2,812 

$

145,150 

Depreciation, amortization and accretion

432,405 

(4,574)

427,831 

Deferred income taxes, net

50,180 

1,762 

51,942 

Cash flows from operating activities

584,013 

— 

584,013 

(1) In Annual Report on Form 10-K for the year ended December 31, 2010, filed on February 25, 2011.

(2) In Quarterly Report on Form 10-Q for the period ended September 30, 2010, filed on November 4, 2010.

SOURCE United States Cellular Corporation



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