U.S. Cellular reports second quarter 2017 results
CHICAGO, Aug. 4, 2017 /PRNewswire/ -- United States Cellular Corporation (NYSE:USM) reported total operating revenues of $963 million for the second quarter of 2017, versus $992 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $12 million and $0.14, respectively, for the second quarter of 2017, compared to $27 million and $0.32, respectively, in the same period one year ago.
"We had a successful quarter building on our number one objective - protecting and growing our customer base," said Kenneth R. Meyers, U.S. Cellular president and CEO. "Our Total Plans, which include an unlimited data option, have been effective in both attracting new customers and meeting the needs of our current customers.
"Although the current pricing environment and the investments we made in growing our customer base impacted short-term profitability this quarter, we were able to minimize those impacts through our on-going cost management initiatives. Lower roaming rates, continued customer adoption of Equipment Installment Plans, and cost reduction initiatives drove a decrease in cash expenses even as data traffic increased 51% on a year-over-year basis.
"We are continually making enhancements to our already high-quality network to ensure it remains one of our primary competitive advantages. This quarter, our network team successfully completed our first commercial VoLTE launch in Iowa. VoLTE brings benefits such as simultaneous voice and data sessions to customers as well as additional opportunities for roaming revenues. We plan to continue commercial rollouts of VoLTE to additional markets in 2018."
2017 Estimated Results
U.S. Cellular's current estimates of full-year 2017 results are shown below. Such estimates represent management's view as of August 4, 2017. Such forward?looking statements should not be assumed to be current as of any future date. 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 such estimated results.
2017 Estimated Results
Current Previous
(Dollars in millions)
Total operating revenues
(1) $3,800-$4,000 Unchanged
Adjusted OIBDA (1)(2)(3) $550-$650 Unchanged
Adjusted EBITDA (2) $700-$800 Unchanged
Capital expenditures Approx. $500 Unchanged
The following table provides a reconciliation of Net Income to Adjusted OIBDA and Adjusted EBITDA for 2017 estimated results, actual results for the six months ended June 30, 2017, and actual results for the year ended December 31, 2016. In providing 2017 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
2017 Estimated Six Months Ended Year Ended
Results June 30, 2017 December 31,
2016
(Dollars in millions)
Net income (GAAP) N/A $40 $49
Add back:
Income tax
expense N/A 33 33
Income (loss) before income
taxes (GAAP) $ (30)-70 $73 $82
Add back:
Interest
expense 110 56 113
Depreciation,
amortization
and accretion
expense 620 307 618
EBITDA (Non-GAAP) $ 700-800 $436 $813
Add back (deduct):
(Gain) loss on
license sales
and exchanges,
net (20) (19) (19)
(Gain) loss on
assets
disposals, net 20 9 22
Adjusted EBITDA (Non-GAAP) (2) $ 700-800 $426 $816
Deduct:
Equity in
earnings of
unconsolidated
entities 140 66 140
Interest and
dividend
income (1) 10 5 6
Other, net - (1) 1
Adjusted OIBDA (Non-GAAP)
(1)(2)(3) $ 550-650 $356 $669
=== ======= ==== ====
Note: Totals may not foot due to rounding differences.
(1) Equipment installment
plan interest income
is reflected as a
component of Service
revenues consistent
with an accounting
policy change
effective January 1,
2017. All prior
period numbers have
been recast to
conform to this
accounting change.
(2) Adjusted EBITDA is
defined as net income
adjusted for the
items set forth in
the reconciliation
above. Adjusted
OIBDA is defined as
net income adjusted
for the items set
forth in the
reconciliation above.
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 Adjusted
EBITDA and Adjusted
OIBDA to the
corresponding GAAP
measure, Net income
or Income (loss)
before income taxes.
(3) A reconciliation of
Adjusted OIBDA (Non-
GAAP) to Operating
income (GAAP) for
June 30, 2017, actual
results 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 4, 2017 at 9:30 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/1145/21983.
-- Access the call by phone at 877/407-8029 (US/Canada), no pass code
required.
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 million connections in 23 states. The Chicago-based company had 6,100 full- and part-time associates as of June 30, 2017. At the end of the second quarter of 2017, Telephone and Data Systems, Inc. owned 83 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 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016
Retail Connections
Postpaid
Total at end of
period 4,478,000 4,455,000 4,482,000 4,484,000 4,490,000
Gross additions 174,000 146,000 187,000 174,000 197,000
Feature
phones 7,000 7,000 7,000 10,000 8,000
Smartphones 116,000 88,000 109,000 105,000 107,000
Connected
devices 51,000 51,000 71,000 59,000 82,000
Net additions
(losses) 23,000 (27,000) (2,000) (6,000) 36,000
Feature
phones (15,000) (19,000) (21,000) (20,000) (21,000)
Smartphones 34,000 (9,000) (4,000) (7,000) 8,000
Connected
devices 4,000 1,000 23,000 21,000 49,000
ARPU (1) $44.60 $45.42 $45.19 $47.08 $47.37
ABPU (Non-GAAP)(2) $55.19 $55.82 $55.43 $56.79 $56.09
ARPA (3) $119.73 $121.88 $120.67 $125.31 $124.91
ABPA (Non-GAAP)(4) $148.15 $149.78 $148.02 $151.16 $147.90
Churn rate (5) 1.13% 1.29% 1.41% 1.34% 1.20%
Handsets 0.91% 1.08% 1.23% 1.22% 1.10%
Connected
devices 2.35% 2.55% 2.49% 2.04% 1.84%
Prepaid
Total at end of
period 484,000 480,000 484,000 480,000 413,000
Gross additions 73,000 78,000 83,000 132,000 73,000
Net additions
(losses) 3,000 (4,000) 4,000 67,000 14,000
ARPU (1) $33.52 $33.66 $33.25 $34.39 $34.58
Churn rate (5) 4.93% 5.69% 5.44% 4.84% 4.86%
Total connections at end of period (6) 5,023,000 4,996,000 5,031,000 5,030,000 4,973,000
Market penetration at end of period
Consolidated operating
population 32,089,000 32,089,000 31,994,000 31,994,000 31,994,000
Consolidated operating
penetration (7) 16% 16% 16% 16% 16%
Capital expenditures (millions) $84 $61 $171 $103 $93
Total cell sites in service 6,421 6,417 6,415 6,374 6,324
Owned towers 4,044 4,041 4,040 4,015 3,988
(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 Billings Per
User (ABPU) - non-
GAAP metric is
calculated by
dividing total
postpaid service
revenues plus
equipment
installment plan
billings by the
average number of
postpaid
connections and by
the number of
months in the
period. Refer to
the end of this
release for a
reconciliation of
this metric to its
most comparable
GAAP metric.
(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) Average Billings Per
Account (ABPA) -
non-GAAP metric is
calculated by
dividing total
postpaid service
revenues plus
equipment
installment plan
billings by the
average number of
postpaid accounts
and by the number
of months in the
period. Refer to
the end of this
release for a
reconciliation of
this metric to its
most comparable
GAAP metric.
(5) 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.
(6) Includes reseller
and other
connections.
(7) 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 June 30,
2017 2016 2017 vs. 2016
Increase (Decrease)
(Dollars and shares in millions, except per share
amounts)
Operating revenues
Service(1) $740 $774 $(34) (4)%
Equipment sales 223 218 5 2%
Total operating revenues(1) 963 992 (29) (3)%
--- --- ---
Operating expenses
System
operations
(excluding
Depreciation,
amortization
and accretion
reported
below) 189 193 (4) (2)%
Cost of
equipment sold 260 262 (2) (1)%
Selling,
general and
administrative 351 357 (6) (2)%
Depreciation,
amortization
and accretion 155 154 1 -
(Gain) loss on
asset
disposals, net 5 5 - 6%
(Gain) loss on
license sales
and exchanges,
net (2) (9) 7 81%
Total operating expenses 958 962 (4) (1)%
--- --- ---
Operating income(1) 5 30 (25) (82)%
Investment and other income (expense)
Equity in
earnings of
unconsolidated
entities 33 37 (4) (9)%
Interest and
dividend
income(1) 2 2 - 29%
Interest
expense (28) (28) - (1)%
Other, net - (1) 1 (56)%
Total investment and other
income(1) 7 10 (3) (32)%
--- --- ---
Income before income taxes 12 40 (28) (70)%
Income tax
expense - 13 (13) (97)%
Net income 12 27 (15) (57)%
Less: Net
income
attributable
to
noncontrolling
interests, net
of tax - - - >100%
Net income attributable to U.S.
Cellular shareholders $12 $27 $(15) (58)%
=== === ====
Basic weighted average shares outstanding 85 85 - -
Basic earnings per share attributable
to U.S. Cellular shareholders $0.14 $0.32 $(0.18) (56)%
===== ===== ======
Diluted weighted average shares outstanding 86 85 1 -
Diluted earnings per share attributable
to U.S. Cellular shareholders $0.14 $0.32 $(0.18) (56)%
===== ===== ======
(1) Equipment installment plan interest income is reflected as a component of
Service revenues consistent with an accounting policy change effective
January 1, 2017. All prior period numbers have been recast to conform to
this accounting change.
United States Cellular Corporation
Consolidated Statement of Operations Highlights
(Unaudited)
Six Months Ended June 30,
2017 2016 2017 vs. 2016
Increase (Decrease)
(Dollars and shares in millions, except per
share amounts)
Operating revenues
Service(1) $1,486 $1,545 $(59) (4)%
Equipment sales 413 417 (4) (1)%
Total operating revenues(1) 1,899 1,962 (63) (3)%
----- ----- ---
Operating expenses
System
operations
(excluding
Depreciation,
amortization
and accretion
reported
below) 364 376 (12) (3)%
Cost of
equipment sold 488 518 (30) (6)%
Selling,
general and
administrative 691 719 (28) (4)%
Depreciation,
amortization
and accretion 307 307 - -
(Gain) loss on
asset
disposals, net 9 10 (1) (12)%
(Gain) loss on
license sales
and exchanges,
net (19) (9) (10) >(100)%
Total operating expenses 1,840 1,921 (81) (4)%
----- ----- ---
Operating income(1) 59 41 18 45%
Investment and other income (expense)
Equity in
earnings of
unconsolidated
entities 66 72 (6) (8)%
Interest and
dividend
income(1) 5 3 2 38%
Interest
expense (56) (56) - (1)%
Other, net (1) - (1) (23)%
Total investment and other
income(1) 14 19 (5) (27)%
--- --- ---
Income before income taxes 73 60 13 22%
Income tax
expense 33 23 10 43%
Net income 40 37 3 8%
Less: Net
income
attributable
to
noncontrolling
interests, net
of tax 2 1 1 >100%
Net income attributable to U.S.
Cellular shareholders $38 $36 $2 5%
=== === ===
Basic weighted average shares outstanding 85 85 - -
Basic earnings per share
attributable to U.S. Cellular
shareholders $0.45 $0.43 $0.02 5%
===== ===== =====
Diluted weighted average shares outstanding 86 85 1 1%
Diluted earnings per share
attributable to U.S. Cellular
shareholders $0.44 $0.43 $0.01 2%
===== ===== =====
(1) Equipment
installment
plan
interest
income is
reflected
as a
component
of Service
revenues
consistent
with an
accounting
policy
change
effective
January 1,
2017. All
prior
period
numbers
have been
recast to
conform to
this
accounting
change.
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2017 2016
(Dollars in millions)
Cash flows from operating activities
Net income $40 $37
Add (deduct)
adjustments to
reconcile net income
to net cash flows
from operating
activities
Depreciation,
amortization
and accretion 307 307
Bad debts
expense 47 44
Stock-based
compensation
expense 14 12
Deferred
income taxes,
net (27) 7
Equity in
earnings of
unconsolidated
entities (66) (72)
Distributions
from
unconsolidated
entities 65 30
(Gain) loss on
asset
disposals,
net 9 10
(Gain) loss on
license sales
and
exchanges,
net (19) (9)
Noncash
interest
expense 1 1
Other
operating
activities - (2)
Changes in assets and
liabilities from
operations
Accounts
receivable (5) 9
Equipment
installment
plans
receivable (107) (94)
Inventory (2) (27)
Accounts
payable (53) 35
Customer
deposits and
deferred
revenues (6) (18)
Accrued taxes 45 41
Accrued
interest - (1)
Other assets
and
liabilities (23) (49)
Net cash provided by
operating activities 220 261
Cash flows from investing activities
Cash paid for
additions to
property, plant and
equipment (155) (177)
Cash paid for licenses (189) (46)
Cash received from
divestitures and
exchanges 17 17
Federal Communications
Commission deposit - (143)
Other investing
activities - (1)
Net cash used in investing
activities (327) (350)
Cash flows from financing activities
Repayment of long-
term debt (6) (6)
Common shares reissued
for benefit plans,
net of tax payments - 3
Common shares
repurchased - (2)
Payment of debt
issuance costs - (2)
Distributions to
noncontrolling
interests (2) (1)
Other financing
activities 1 3
Net cash used in financing
activities (7) (5)
Net decrease in cash and cash equivalents (114) (94)
Cash and cash equivalents
Beginning of period 586 715
End of period $472 $621
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
June 30, December
31,
2017 2016
(Dollars in millions)
Current assets
Cash and cash
equivalents $472 $586
Accounts
receivable
from
customers and
others, net 732 727
Inventory, net 141 138
Prepaid
expenses 80 84
Other current
assets 15 23
Total current assets 1,440 1,558
Assets held for sale 4 8
Licenses 2,226 1,886
Goodwill 370 370
Investments in
unconsolidated entities 414 413
Property, plant and
equipment
In service and
under
construction 7,702 7,712
Less:
Accumulated
depreciation
and
amortization 5,398 5,242
Property, plant and
equipment, net 2,304 2,470
Other assets and
deferred charges 319 405
--- ---
Total assets $7,077 $7,110
====== ======
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
June 30, December
31,
2017 2016
(Dollars and shares in millions, except per
share amounts)
Current liabilities
Current portion
of long-term
debt $11 $11
Accounts payable
Affiliated 8 12
Trade 250 309
Customer deposits
and deferred
revenues 183 190
Accrued taxes 79 39
Accrued
compensation 46 73
Other current
liabilities 74 84
Total current liabilities 651 718
Deferred liabilities and credits
Deferred income
tax liability,
net 799 826
Other deferred
liabilities and
credits 316 302
Long-term debt, net 1,613 1,618
Noncontrolling interests with redemption
features 1 1
Equity
U.S. Cellular shareholders' equity
Series A Common
and Common
Shares, par
value $1 per
share 88 88
Additional paid-
in capital 1,536 1,522
Treasury shares (121) (136)
Retained earnings 2,183 2,160
Total U.S. Cellular shareholders'
equity 3,686 3,634
Noncontrolling interests 11 11
--- ---
Total equity 3,697 3,645
Total liabilities and equity $7,077 $7,110
====== ======
United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
(Dollars in millions)
Cash flows from operating
activities (GAAP) $159 $98 $220 $261
Less: Cash paid for additions to
property, plant and equipment 67 75 155 177
--- --- --- ---
Free cash flow (Non-
GAAP) (1) $92 $23 $65 $84
=== === === ===
(1) Management uses Free cash flow as a liquidity measure and it is
defined as Cash flows from operating activities less Cash paid for
additions to property, plant and equipment. 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.
Postpaid ABPU and Postpaid ABPA
U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment sales resulting from the increased adoption of equipment installment plans. Postpaid ABPU and Postpaid ABPA, as previously defined, are non-GAAP financial measures which U.S. Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment sales revenues received from customers.
For the
Quarter
Ended 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016
(Dollars
and
connection
counts
in
millions)
Calculation
of
Postpaid
ARPU
-----------
Postpaid
service
revenues $597 $608 $607 $635 $636
Average
number
of
postpaid
connections 4.47 4.46 4.48 4.49 4.48
Number
of
months
in
period 3 3 3 3 3
Postpaid
ARPU (GAAP
metric) $44.60 $45.42 $45.19 $47.08 $47.37
=========
Calculation
of
Postpaid
ABPU
-----------
Postpaid
service
revenues $597 $608 $607 $635 $636
Equipment
installment
plan
billings 142 139 138 131 118
--- --- --- --- ---
Total
billings to
postpaid
connections $739 $747 $745 $766 $754
Average
number
of
postpaid
connections 4.47 4.46 4.48 4.49 4.48
Number
of
months
in
period 3 3 3 3 3
Postpaid
ABPU (Non-
GAAP
metric) $55.19 $55.82 $55.43 $56.79 $56.09
=========
Calculation
of
Postpaid
ARPA
-----------
Postpaid
service
revenues $597 $608 $607 $635 $636
Average
number
of
postpaid
accounts 1.66 1.66 1.68 1.69 1.70
Number
of
months
in
period 3 3 3 3 3
Postpaid
ARPA (GAAP
metric) $119.73 $121.88 $120.67 $125.31 $124.91
=========
Calculation
of
Postpaid
ABPA
-----------
Postpaid
service
revenues $597 $608 $607 $635 $636
Equipment
installment
plan
billings 142 139 138 131 118
--- --- --- --- ---
Total
billings to
postpaid
accounts $739 $747 $745 $766 $754
Average
number
of
postpaid
accounts 1.66 1.66 1.68 1.69 1.70
Number
of
months
in
period 3 3 3 3 3
Postpaid
ABPA (Non-
GAAP
metric) $148.15 $149.78 $148.02 $151.16 $147.90
=========
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SOURCE United States Cellular Corporation
