UScellular reports fourth quarter and full year 2021 results

UScellular executing on strategic priorities; Provides guidance for 2022

News provided by

United States Cellular Corporation

Feb 17, 2022, 16:05 ET

CHICAGO, Feb. 17, 2022 /PRNewswire/ -- 

As previously announced, UScellular will hold a teleconference on February 18, 2022 at 9:00 a.m. CST. Listen to the call live via the Events & Presentations page of investors.uscellular.com.

United States Cellular Corporation (NYSE: USM) reported total operating revenues of $1,068 million for the fourth quarter of 2021, versus $1,073 million for the same period one year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $27 million and $0.31, respectively, for the fourth quarter of 2021 compared to $5 million and $0.06, respectively, in the same period one year ago.

UScellular reported total operating revenues of $4,122 million and $4,037 million for the years ended 2021 and 2020, respectively. Net income attributable to UScellular shareholders and related diluted earnings per share were $155 million and $1.77, respectively, for the year ended 2021 compared to $229 million and $2.62, respectively, for the year ended 2020.

"UScellular made meaningful progress toward our goals in 2021, as we delivered solid results through the end of the year," said Laurent Therivel, UScellular President and CEO. "We maintained cost discipline and generated positive momentum in the growth areas of our business, which include Business and Government, Prepaid, Fixed Wireless, and our tower portfolio.

"Our multi-year network modernization program continued, and we meaningfully improved our mid-band spectrum position, a key enabler of our 5G growth strategy.

"In 2022, UScellular's focus remains on executing our mission of connecting our customers to the people and things that matter most to them. We have a strong spectrum position, an outstanding network, robust distribution to both consumers and businesses, and an amazing team. We plan to use those capabilities to drive growth in our business, as well as long-term expansion of Return on Capital."

2022 Estimated Results

UScellular's current estimates of full-year 2022 results are shown below. Such estimates represent management's view as of February 17, 2022 and should not be assumed to be current as of any future date. UScellular undertakes no duty to update such estimates, whether as a result of new information, future events or otherwise. There can be no assurance that final results will not differ materially from estimated results.


2022 Estimated
Results


Actual Results for

the Year Ended

December 31, 2021

(Dollars in millions)




Service revenues

$3,100-$3,200


$3,115

Adjusted OIBDA1

$750-$900


$869

Adjusted EBITDA1

$925-$1,075


$1,054

Capital expenditures

$700-$800


$780

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. In providing 2022 estimated results, UScellular has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, UScellular believes that the impact of income taxes cannot be reasonably predicted; therefore, UScellular is unable to provide such guidance.


2022 Estimated
Results


Actual Results for

the Year Ended

December 31, 2021

(Dollars in millions)




Net income (GAAP)

N/A


$160

Add back:




Income tax expense

N/A


20

Income before income taxes (GAAP)

$90-$240


$180

Add back:




Interest expense

130


175

Depreciation, amortization and accretion expense

685


678

EBITDA (Non-GAAP)1

$905-$1,055


$1,033

Add back or deduct:




(Gain) loss on asset disposals, net

20


23

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

—


(2)

Adjusted EBITDA (Non-GAAP)1

$925-$1,075


$1,054

Deduct:




Equity in earnings of unconsolidated entities

170


179

Interest and dividend income

5


6

Adjusted OIBDA (Non-GAAP)1

$750-$900


$869



1

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. UScellular does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of UScellular's operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of UScellular's financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for December 31, 2021, can be found on UScellular's website at investors.uscellular.com.

Stock Repurchase
During the fourth quarter of 2021, UScellular repurchased 308,678 of its Common Shares for $10 million.

Conference Call Information
UScellular will hold a conference call on February 18, 2022 at 9:00 a.m. Central Time.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.uscellular.com. The call will be archived on the Events & Presentations page of investors.uscellular.com.

About UScellular
United States Cellular Corporation provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to customers with 5.0 million connections in 21 states. The Chicago-based company had 4,800 full- and part-time associates as of December 31, 2021. At the end of the fourth quarter of 2021, Telephone and Data Systems, Inc. owned 82 percent of UScellular. For more information about UScellular, visit uscellular.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: intense competition; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; changes in demand, consumer preferences and perceptions, price competition, or churn rates; advances in technology; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of UScellular's businesses; the ability of the company to successfully construct and manage its networks; uncertainties in UScellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on UScellular indebtedness or comply with the terms of debt covenants; conditions in the U.S. telecommunications industry; the value of assets and investments; potential conflicts of interests between TDS and UScellular; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; the impact, duration and severity of public health emergencies, such as the COVID-19 pandemic. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under "Risk Factors" in the most recent filing of UScellular's Form 10-K.

For more information about UScellular, visit: www.uscellular.com

United States Cellular Corporation

Summary Operating Data (Unaudited)


As of or for the Quarter Ended

12/31/2021


9/30/2021


6/30/2021


3/31/2021


12/31/2020

Retail Connections










Postpaid










Total at end of period

4,380,000


4,391,000


4,399,000


4,406,000


4,412,000

Gross additions

165,000


145,000


141,000


143,000


171,000

Feature phones

3,000


2,000


3,000


3,000


2,000

Smartphones

122,000


103,000


98,000


101,000


117,000

Connected devices

40,000


40,000


40,000


39,000


52,000

Net additions (losses)

(12,000)


(8,000)


(6,000)


(6,000)


11,000

Feature phones

(7,000)


(7,000)


(7,000)


(9,000)


(9,000)

Smartphones

5,000


2,000


6,000


6,000


12,000

Connected devices

(10,000)


(3,000)


(5,000)


(3,000)


8,000

ARPU1,2

$ 48.62


$ 48.12


$ 47.74


$ 47.65


$ 47.51

ARPA1,3

$ 127.14


$ 125.99


$ 125.25


$ 125.25


$ 124.87

Churn rate4

1.35 %


1.15 %


1.11 %


1.12 %


1.21 %

Handsets

1.10 %


0.95 %


0.88 %


0.92 %


1.01 %

Connected devices

3.08 %


2.59 %


2.69 %


2.53 %


2.64 %

Prepaid










Total at end of period

513,000


518,000


507,000


496,000


499,000

Gross additions

63,000


74,000


65,000


62,000


56,000

Net additions (losses)

(5,000)


11,000


10,000


(3,000)


(8,000)

ARPU2

$ 34.53


$ 35.05


$ 35.64


$ 35.25


$ 35.15

Churn rate4

4.39 %


4.09 %


3.66 %


4.37 %


4.24 %

Total connections at end of period5

4,973,000


4,972,000


4,967,000


4,961,000


4,968,000

Market penetration at end of period










Consolidated operating population

32,127,000


31,865,000


31,493,000


31,493,000


31,314,000

Consolidated operating penetration6

15 %


16 %


16 %


16 %


16 %

Capital expenditures (millions)

$ 321


$ 185


$ 148


$ 125


$ 320

Total cell sites in service

6,898


6,857


6,819


6,802


6,797

Owned towers

4,301


4,274


4,278


4,270


4,271


Due to rounding, the sum of quarterly results may not equal the total for the year.

1

Q3 2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue related to an out-of-period error recorded in the third quarter.

2

Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:


•       Postpaid ARPU consists of total postpaid service revenues and postpaid connections.


•       Prepaid ARPU consists of total prepaid service revenues and prepaid connections.

3

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

4

Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.

5

Includes reseller and other connections.

6

Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total estimated population of consolidated operating markets.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)






Three Months Ended

December 31,


Year Ended

December 31,


2021


2020


2021 vs.
2020


2021


2020


2021 vs.
2020

(Dollars and shares in millions, except per share amounts)












Operating revenues












Service

$ 782


$ 776


1 %


$ 3,115


$ 3,067


2 %

Equipment sales

286


297


(4) %


1,007


970


4 %

Total operating revenues

1,068


1,073


–


4,122


4,037


2 %













Operating expenses












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

196


202


(3) %


790


782


1 %

Cost of equipment sold

332


319


4 %


1,118


1,011


11 %

Selling, general and administrative

359


374


(4) %


1,345


1,368


(2) %

Depreciation, amortization and accretion

169


168


1 %


678


683


(1) %

(Gain) loss on asset disposals, net

8


11


(28) %


23


25


(9) %

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

(1)


—


N/M


(2)


—


N/M

(Gain) loss on license sales and exchanges, net

—


(5)


N/M


—


(5)


N/M

Total operating expenses

1,063


1,069


–


3,952


3,864


2 %













Operating income

5


4


7 %


170


173


(2) %













Investment and other income (expense)












Equity in earnings of unconsolidated entities

43


42


1 %


179


179


–

Interest and dividend income

1


2


(23) %


6


8


(27) %

Gain (loss) on investments

—


(1)


N/M


—


2


N/M

Interest expense

(32)


(35)


12 %


(175)


(112)


(55) %

Total investment and other income

12


8


70 %


10


77


(87) %













Income before income taxes

17


12


46 %


180


250


(28) %

Income tax expense (benefit)

(11)


5


N/M


20


17


26 %

Net income

28


7


N/M


160


233


(31) %

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

1


2


(4) %


5


4


14 %

Net income attributable to UScellular shareholders

$ 27


$ 5


N/M


$ 155


$ 229


(32) %













Basic weighted average shares outstanding

86


86


–


86


86


–

Basic earnings per share attributable to UScellular shareholders

$0.31


$0.06


N/M


$ 1.80


$ 2.66


(33) %













Diluted weighted average shares outstanding

87


88


(1) %


87


87


–

Diluted earnings per share attributable to UScellular shareholders

$0.31


$0.06


N/M


$ 1.77


$ 2.62


(32) %


N/M - Percentage change not meaningful

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)





Year Ended December 31,

2021


2020

(Dollars in millions)




Cash flows from operating activities




Net income

$ 160


$ 233

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




Depreciation, amortization and accretion

678


683

Bad debts expense

56


72

Stock-based compensation expense

27


32

Deferred income taxes, net

41


130

Equity in earnings of unconsolidated entities

(179)


(179)

Distributions from unconsolidated entities

176


189

(Gain) loss on asset disposals, net

23


25

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

(2)


—

(Gain) loss on license sales and exchanges, net

—


(5)

(Gain) loss on investments

—


(2)

Other operating activities

33


2

Changes in assets and liabilities from operations




Accounts receivable

(27)


(8)

Equipment installment plans receivable

(116)


(54)

Inventory

(27)


16

Accounts payable

(57)


145

Customer deposits and deferred revenues

40


2

Accrued taxes

(41)


(57)

Other assets and liabilities

17


13

Net cash provided by operating activities

802


1,237





Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(724)


(989)

Cash paid for licenses

(1,302)


(171)

Cash received from investments

3


1

Cash paid for investments

—


(3)

Cash received from divestitures and exchanges

3


26

Advance payments for license acquisitions

(20)


(30)

Other investing activities

4


3

Net cash used in investing activities

(2,036)


(1,163)





Cash flows from financing activities




Issuance of long-term debt

1,342


1,125

Repayment of long-term debt

(1,118)


(108)

Common Shares reissued for benefit plans, net of tax payments

(16)


(11)

Repurchase of Common Shares

(31)


(23)

Payment of debt issuance costs

(22)


(38)

Distributions to noncontrolling interests

(3)


(6)

Payments to acquire additional interest in subsidiaries

—


(11)

Other financing activities

(10)


(2)

Net cash provided by financing activities

142


926





Net increase (decrease) in cash, cash equivalents and restricted cash

(1,092)


1,000





Cash, cash equivalents and restricted cash




Beginning of period

1,291


291

End of period

$ 199


$ 1,291

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS





December 31,

2021


2020

(Dollars in millions)




Current assets




Cash and cash equivalents

$ 156


$ 1,271

Short-term investments

—


3

Accounts receivable, net

1,046


998

Inventory, net

173


146

Prepaid expenses

58


51

Income taxes receivable

123


125

Other current assets

49


29

Total current assets

1,605


2,623





Assets held for sale

18


2





Licenses

4,088


2,629





Investments in unconsolidated entities

439


435





Property, plant and equipment, net

2,606


2,466





Operating lease right-of-use assets

959


924





Other assets and deferred charges

626


602





Total assets

$ 10,341


$ 9,681

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY





December 31,

2021


2020

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$ 3


$ 2

Accounts payable

360


387

Customer deposits and deferred revenues

191


151

Accrued taxes

33


48

Accrued compensation

83


82

Short-term operating lease liabilities

129


116

Other current liabilities

104


85

Total current liabilities

903


871





Liabilities held for sale

—


1





Deferred liabilities and credits




Deferred income tax liability, net

674


633

Long-term operating lease liabilities

889


875

Other deferred liabilities and credits

573


376





Long-term debt, net

2,728


2,489





Noncontrolling interests with redemption features

11


10





Equity




UScellular shareholders' equity




Series A Common and Common Shares, par value $1.00 per share

88


88

Additional paid-in capital

1,678


1,651

Treasury shares

(68)


(67)

Retained earnings

2,849


2,739

Total UScellular shareholders' equity

4,547


4,411





Noncontrolling interests

16


15





Total equity

4,563


4,426





Total liabilities and equity

$ 10,341


$ 9,681

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow



Three Months Ended

December 31,


Year Ended

December 31,


2021


2020


2021


2020

(Dollars in millions)








Cash flows from operating activities (GAAP)

$ 135


$ 288


$ 802


$ 1,237

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

268


299


724


989

Free cash flow (Non-GAAP)1

$ (133)


$ 11)


$ 78


$ 248



1

Free cash flow is a non-GAAP financial measure which UScellular believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

SOURCE United States Cellular Corporation