U.S. Cellular reports second quarter 2019 results
CHICAGO, Aug. 1, 2019 /PRNewswire/ --
As previously announced, U.S. Cellular will hold a teleconference August 2, 2019, at 9:00 a.m. CDT. 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 $973 million for the second quarter of 2019, versus $974 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share declined to $31 million and $0.35, respectively, for the second quarter of 2019 compared to $49 million and $0.56, respectively, in the same period one year ago.
"Our number one focus is to strengthen our customer base," said Kenneth R. Meyers, U.S. Cellular president and CEO. "In the quarter, we delivered on our customer satisfaction strategy and postpaid handset churn remained low. However, phone sales came in below expectations as customers continue to hold their phones longer and gross additions declined. We have aggressive plans and strategies in place to attract new customers in the second half of the year. Service revenues continue to meet our expectation and show the positive impact of higher ARPU which helped to increase Adjusted EBITDA 3.4 percent to $257 million.
"We continue to believe excellent customer service coupled with an outstanding network is what differentiates us from our competitors. U.S. Cellular was once again recognized for highest wireless network quality in the North Central Region by the J. D. Power 2019 U.S. Wireless Network Quality Performance Study - Vol. 2. Our deployment of Voice over LTE continues with plans to deploy VoLTE in our New England and Mid-Atlantic markets in the third quarter. I am also very excited about the progress on our 5G and network modernization initiatives. We are making significant investments to bring LTE advanced capabilities to our customers that will improve coverage and capacity and support future 5G deployments. In addition, we acquired new licenses during the FCC's recent millimeter wave auctions, giving us access to high frequency spectrum required to deliver high speed and low latency capabilities of 5G to our current and future customers. Together, the millimeter wave spectrum we acquired provides at least 300 MHz of spectrum in markets that serve 97% of our customer base. We expect to begin commercial launch of 5G services in 2020."
2019 Estimated Results
U.S. Cellular's current estimates of full-year 2019 results are shown below. Such estimates represent management's view as of August 1, 2019 and should not be assumed to be current as of any future date. U.S. Cellular 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.
2019 Estimated Results
Previous
Current
(Dollars in millions)
Total operating revenues
$4,000-$4,200
$3,900-$4,100*
Adjusted OIBDA (1)
$725-$875
Unchanged
Adjusted EBITDA (1)
$900-$1,050
Unchanged
Capital expenditures
$625-$725
Unchanged
* Change represents lower
equipment sales revenues.
The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2019 estimated results, actual results for the six months ended June 30, 2019, and actual results for the year ended December 31, 2018. In providing 2019 estimated results, U.S. Cellular has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, U.S. Cellular believes that the impact of income taxes cannot be reasonably predicted; therefore, U.S. Cellular is unable to provide such guidance.
Actual Results
2019 Estimated Six Months Ended Year Ended
Results June 30, 2019 December 31, 2018
(Dollars in millions)
Net income (GAAP) N/A $
90 $
164
Add back or deduct:
Income tax expense N/A 41 51
Income before income taxes
(GAAP)
$70-$220 $
131 $
215
Add back:
Interest expense 115 58 116
Depreciation, amortization
and accretion expense 700 345 640
EBITDA (Non-GAAP) (1)
$885-$1,035 $
534 $
971
Add back or deduct:
(Gain) loss on asset
disposals, net 15 7 10
(Gain) loss on sale of
business and other exit
costs, net (2)
(Gain) loss on license
sales and exchanges, net (2) (18)
Adjusted EBITDA (Non-GAAP)
(1)
$900-$1,050 $
537 $
963
Deduct:
Equity in earnings of
unconsolidated entities 155 84 159
Interest and dividend
income 20 11 15
Other, net (1) (1)
Adjusted OIBDA (Non-GAAP)
(1)
$725-$875 $
443 $
790
(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. U.S. Cellular 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 U.S. Cellular'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 U.S. Cellular'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 June 30, 2019, can be found on U.S. Cellular's
website at investors.uscellular.com.
Conference Call Information
U.S. Cellular will hold a conference call on August 2, 2019 at 9:00 a.m. Central Time.
-- Access the live call on the Events & Presentations page of
investors.uscellular.com or at
https://www.webcaster4.com/Webcast/Page/1145/31221
-- Access the call by phone at 877-273-7192 (US/Canada), conference ID:
1458138.
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 U.S. Cellular
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 5,600 full- and part-time associates as of June 30, 2019. At the end of the second quarter of 2019, Telephone and Data Systems, Inc. owned 82 percent of U.S. Cellular. For more information about U.S. Cellular, 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 execute U.S. Cellular's business strategy; uncertainties in U.S. Cellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on U.S. Cellular indebtedness or comply with the terms of debt covenants; impacts of any pending acquisitions/divestitures/exchanges of properties and/or licenses, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings of U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; pending and future litigation; changes in income tax rates, laws, regulations or rulings; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of services and products offered by U.S. Cellular. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by U.S. Cellular to furnish this press release to the Securities and Exchange Commission, which are incorporated by reference herein.
For more information about U.S. Cellular, visit:
U.S. Cellular: www.uscellular.com
United States Cellular Corporation
Summary Operating Data (Unaudited)
As of or for the Quarter Ended 6/30/2019 3/31/2019 12/31/2018 9/30/2018 6/30/2018
--- ---
Retail Connections
Postpaid
Total at end of period 4,414,000 4,440,000 4,472,000 4,466,000 4,468,000
Gross additions 137,000 137,000 179,000 172,000 146,000
Feature phones 5,000 4,000 4,000 3,000 5,000
Smartphones 97,000 98,000 132,000 130,000 106,000
Connected devices 35,000 35,000 43,000 39,000 35,000
Net additions (losses) (26,000) (32,000) 6,000 (1,000) (13,000)
Feature phones (10,000) (13,000) (11,000) (14,000) (12,000)
Smartphones (1,000) (1,000) 31,000 29,000 17,000
Connected devices (15,000) (18,000) (14,000) (16,000) (18,000)
ARPU (1) $
45.90 $
45.44 $
45.58 $
45.31 $
44.74
ARPA (2) $
119.46 $
118.84 $
119.60 $
119.42 $
118.57
Churn rate (3) 1.23 1.26 1.29 1.29 1.19
% % % % %
Handsets 0.97 0.99 1.00 1.02 0.92
% % % % %
Connected devices 3.01 3.08 3.20 3.04 2.85
% % % % %
Prepaid
Total at end of period 500,000 503,000 516,000 528,000 527,000
Gross additions 61,000 61,000 66,000 80,000 78,000
Net additions (losses) (2,000) (13,000) (12,000) 1,000 2,000
ARPU (1) $
34.43 $
33.44 $
32.80 $
32.09 $
32.32
Churn rate (3) 4.20 4.92 4.98 4.98 4.83
% % % % %
Total connections at end of period
(4) 4,967,000 4,995,000 5,041,000 5,050,000 5,051,000
Market penetration at end of period
Consolidated operating population 31,310,000 31,310,000 31,469,000 31,469,000 31,469,000
Consolidated operating penetration 16
(5)
% 16
% 16
% 16
% 16
%
Capital expenditures (millions) $
195 $
102 $
242 $
118 $
86
Total cell sites in service 6,535 6,506 6,531 6,506 6,478
Owned towers 4,116 4,106 4,129 4,119 4,105
(1) 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.
(2) 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.
(3) 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.
(4) Includes reseller and other
connections.
(5) Market penetration is calculated
by dividing the number of
wireless connections at the end
of the period by the total
population of consolidated
operating markets as estimated
by Nielsen.
United States Cellular Corporation
Consolidated Statement of Operations Highlights
(Unaudited)
Three Months Ended
Six Months Ended
June 30, June 30,
2019 2018 2019 vs. 2019 2018 2019 vs.
2018 2018
---
(Dollars and shares in millions, except
per share amounts)
Operating revenues
Service $
757 $
741 2 $
1,498 $
1,465 2
% %
Equipment sales 216 233 (7) 441 450 (2)
% %
Total operating revenues 973 974 - 1,939 1,915 1
%
Operating expenses
System operations
(excluding Depreciation, % %
amortization and accretion
reported below) 193 187 3 369 365 1
Cost of equipment sold 224 240 (6)
% 458 459 -
Selling, general and 344 342 1
administrative % 669 668 -
Depreciation, amortization 177 159 11 345 317 8
and accretion % %
(Gain) loss on asset
disposals, net 5 1 N/M 7 2 N/M
(Gain) loss on sale of
business and other exit
costs, net - N/M (2) N/M
(Gain) loss on license - (11) N/M (2) (17) 88
sales and exchanges, net %
Total operating expenses 943 918 3 1,844 1,794 3
% %
Operating income 30 56 (45) 95 121 (21)
% %
Investment and other income (expense)
Equity in earnings of 40 40 1 84 78 8
unconsolidated entities % %
Interest and dividend 5 3 63 11 7 60
income % %
Interest expense (29) (29) 1
% (58) (58) -
Other, net - N/M (1) (1) N/M
Total investment and other 16 14 10 36 26 36
income % %
Income before income taxes 46 70 (34) 131 147 (11)
% %
Income tax expense 14 18 (24)
% 41 40 -
Net income 32 52 (38) 90 107 (15)
% %
Less: Net income
attributable to
noncontrolling interests, % %
net of tax 1 3 (76) 4 14 (66)
Net income attributable to $
31 $
49 (35) $
86 $
93 (8)
U.S. Cellular shareholders
% %
Basic weighted average 87 86 1 87 85 1
shares outstanding % %
Basic earnings per share $
0.36 $
0.57 (36) $
0.99 $
1.09 (9)
attributable to U.S.
Cellular shareholders % %
Diluted weighted average 88 86 2 88 86 2
shares outstanding % %
Diluted earnings per share $
0.35 $
0.56 (37) $
0.97 $
1.08 (10)
attributable to U.S.
Cellular shareholders % %
N/M -Percentage change not
meaningful
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2019 2018
---
(Dollars in millions)
Cash flows from operating activities
Net income $
90 $
107
Add (deduct) adjustments to reconcile net income
to net cash flows from operating activities
Depreciation, amortization and
accretion 345 317
Bad debts expense 48 40
Stock-based compensation expense 25 17
Deferred income taxes, net 27 9
Equity in earnings of
unconsolidated entities (84) (78)
Distributions from unconsolidated
entities 76 70
(Gain) loss on asset disposals,
net 7 2
(Gain) loss on sale of business
and other exit costs, net (2)
(Gain) loss on license sales and
exchanges, net (2) (17)
Other operating activities 2 2
Changes in assets and liabilities from
operations
Accounts receivable 3 43
Equipment installment plans
receivable (11) (47)
Inventory (4) (3)
Accounts payable (7) (35)
Customer deposits and deferred
revenues 8 (23)
Accrued taxes 3 6
Other assets and liabilities (48) (45)
Net cash provided by operating
activities 476 365
Cash flows from investing activities
Cash paid for additions to
property, plant and equipment (282) (173)
Cash paid for licenses (255) (2)
Cash received from investments 11 50
Cash paid for investments (11)
Cash received from divestitures
and exchanges 32 21
Other investing activities (1) 3
Net cash used in investing
activities (506) (101)
Cash flows from financing activities
Repayment of long-term debt (10) (10)
Common Shares reissued for benefit
plans, net of tax payments (8)
Distributions to noncontrolling
interests (2) (4)
Other financing activities (1) (5)
Net cash used in financing
activities (21) (19)
Net increase (decrease) in cash,
cash equivalents and restricted
cash (51) 245
Cash, cash equivalents and restricted cash
Beginning of period 583 352
End of period $
532 $
597
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
June 30, 2019 December 31,
2018
(1)
---
(Dollars in millions)
Current assets
Cash and cash equivalents $
528 $
580
Short-term investments 18 17
Accounts receivable 959 976
Inventory, net 146 142
Prepaid expenses 48 63
Other current assets 36 34
Total current assets 1,735 1,812
Assets held for sale - 54
Licenses 2,469 2,186
Investments in
unconsolidated entities 450 441
Property, plant and
equipment, net 2,154 2,202
Operating lease right-
of-use assets 888
Other assets and deferred
charges 527 579
Total assets $
8,223 $
7,274
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
June 30, 2019
(1) December 31, 2018
---
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt $
19 $
19
Accounts payable 321 313
Customer deposits and deferred revenues 164 157
Accrued taxes 32 30
Accrued compensation 45 78
Short-term operating lease liabilities 101
Other current liabilities 65 94
Total current liabilities 747 691
Liabilities held for sale - 1
Deferred liabilities and credits
Deferred income tax liability, net 538 510
Long-term operating lease liabilities 858
Other deferred liabilities and credits 299 389
Long-term debt, net 1,596 1,605
Noncontrolling interests with redemption
features 10 11
Equity
U.S. Cellular shareholders' equity
Series A Common and Common Shares, par value
$1 per share 88 88
Additional paid-in capital 1,615 1,590
Treasury shares (50) (65)
Retained earnings 2,509 2,444
Total U.S. Cellular shareholders' equity 4,162 4,057
Noncontrolling interests 13 10
Total equity 4,175 4,067
Total liabilities and equity $
8,223 $
7,274
(1) As of January 1, 2019, U.S.
Cellular adopted the new
lease accounting standard,
ASC 842. Under this method,
the new accounting standard
is applied only to the most
recent period presented. As
a result, 2019 amounts
include the impacts of ASC
842, but 2018 amounts
remain as previously
reported.
United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
---
(Dollars in millions)
Cash flows
from
operating
activities
(GAAP) $
189 $
178 $
476 $
365
Less: Cash
paid for
additions
to
property,
plant and
equipment 175 98 282 173
Free cash
flow (Non-
GAAP) (1) $
14 $
80 $
194 $
192
(1) Free cash flow is a non-GAAP
financial measure which U.S.
Cellular 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.
EBITDA, Adjusted EBITDA and Adjusted OIBDA
The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net Income and Operating income.
Three Months Ended
June 30,
2019 2018
(Dollars in
millions)
Net income (GAAP) $
32 $
52
Add back:
Income tax expense 14 18
Interest expense 29 29
Depreciation,
amortization and
accretion 177 159
EBITDA (Non-GAAP) 252 258
Add back or
deduct:
(Gain) loss on
asset disposals,
net 5 1
(Gain) loss on
license sales and
exchanges, net (11)
Adjusted EBITDA
(Non-GAAP) 257 248
Deduct:
Equity in earnings
of unconsolidated
entities 40 40
Interest and
dividend income 5 3
Adjusted OIBDA
(Non-GAAP) 212 205
Deduct:
Depreciation,
amortization and
accretion 177 159
(Gain) loss on
asset disposals,
net 5 1
(Gain) loss on
license sales and
exchanges, net (11)
Operating income
(GAAP) $
30 $
56
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SOURCE United States Cellular Corporation
