U.S. Cellular reports second quarter 2018 results
CHICAGO, Aug. 3, 2018 /PRNewswire/ --
As previously announced, U.S. Cellular will hold a teleconference August 3, 2018, at 9:30 a.m. CDT. Listen to the live call via the Events & Presentations page of investors.uscellular.com.
United States Cellular Corporation (NYSE:USM) reported total operating revenues of $974 million for the second quarter of 2018, versus $963 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $49 million and $0.56, respectively, for the second quarter of 2018, compared to $12 million and $0.14, respectively, in the same period one year ago.
"I'm very pleased with the progress we made this quarter and in the first half of the year," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We generated improved financial results by delivering on our customer satisfaction strategy. Our efforts produced both revenue growth and improvements in our cost structure. Combined these factors drove a 25% increase in Adjusted EBITDA in the quarter. Also these results provided the confidence to raise our 2018 guidance.
"It's been a year since we launched our Total Plans, and they continue to be effective in attracting new customers and meeting the needs of our current customers. Both postpaid handset net additions and gross additions increased sequentially, and postpaid handset churn remained exceptionally low. Another driver of customer satisfaction is our high-quality network, which continues to perform well even as data usage increases significantly. Additionally, our network team completed commercial rollouts of VoLTE in our California, Oregon and Washington markets."
2018 Estimated Results
U.S. Cellular's current estimates of full-year 2018 results are shown below. Such estimates represent management's view as of August 3, 2018. 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.
2018 Estimated Results
Current
(1) Previous
(Dollars in millions)
Total operating revenues $3,925-$4,025 $3,850-$4,050
Adjusted OIBDA (2)(3) $700-$800 $625-$775
Adjusted EBITDA (2) $850-$950 $765-$915
Capital expenditures $500-$550 Unchanged
The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2018 estimated results, actual results for the six months ended June 30, 2018, and actual results for the year ended December 31, 2017. In providing 2018 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
2018 Estimated Six Months Ended Year Ended
Results (1) June 30, 2018 (1)
December 31,
2017
(Dollars in millions)
Net income (GAAP) N/A $107 $15
Add back or deduct:
Income tax
expense
(benefit) N/A 40 (287)
Income (loss) before income
taxes (GAAP) $ 110-210 $147 $(272)
Add back:
Interest
expense 110 58 113
Depreciation,
amortization
and accretion
expense 640 317 615
EBITDA (Non-GAAP) (2) $ 860-960 $522 $456
Add back or deduct:
Loss on
impairment of
goodwill - - 370
(Gain) loss on
asset
disposals, net 10 2 17
(Gain) loss on
sale of
business and
other exit
costs, net - - (1)
(Gain) loss on
license sales
and exchanges,
net (20) (17) (22)
Adjusted EBITDA (Non-GAAP) (2) $ 850-950 $507 $820
Deduct:
Equity in
earnings of
unconsolidated
entities 135 78 137
Interest and
dividend
income 15 7 8
Other, net - (1) -
Adjusted OIBDA (Non-GAAP)
(2)(3) $ 700-800 $423 $675
=== ======= ==== ====
Note: Totals may not foot due to rounding differences.
(1) As of January 1, 2018,
U.S. Cellular adopted
the new revenue
recognition standard,
ASC 606, using a
modified
retrospective
approach. Under this
method, the new
accounting standard
is applied only to
the most recent
period presented. As
a result, 2018
amounts include the
impacts of ASC 606,
but 2017 amounts
remain as previously
reported.
(2) 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 (loss)
before income taxes.
(3) Additional information
and reconciliations
related to Non-GAAP
financial measures
for June 30, 2018,
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 3, 2018 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/1145/26840.
-- Access the call by phone at 877-273-7192 (US/Canada), conference ID:
3387588.
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 5.1 million connections in 22 states. The Chicago-based company had 5,700 full- and part-time associates as of June 30, 2018. At the end of the second quarter of 2018, 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 6/30/2018(1) 3/31/2018(1) 12/31/2017 9/30/2017 6/30/2017
Retail Connections
Postpaid
Total at end of
period 4,468,000 4,481,000 4,518,000 4,513,000 4,478,000
Gross additions 146,000 129,000 177,000 191,000 174,000
Feature
phones 5,000 5,000 5,000 7,000 7,000
Smartphones 106,000 91,000 128,000 132,000 116,000
Connected
devices 35,000 33,000 44,000 52,000 51,000
Net additions
(losses) (13,000) (37,000) 5,000 35,000 23,000
Feature
phones (12,000) (15,000) (15,000) (15,000) (15,000)
Smartphones 17,000 (1,000) 33,000 44,000 34,000
Connected
devices (18,000) (21,000) (13,000) 6,000 4,000
ARPU (2) $44.74 $44.34 $44.12 $43.41 $44.60
ABPU (Non-GAAP)(3) $57.75 $57.10 $56.69 $54.71 $55.19
ARPA (4) $118.57 $118.22 $118.05 $116.36 $119.73
ABPA (Non-GAAP)(5) $153.03 $152.26 $151.68 $146.65 $148.15
Churn rate (6) 1.19% 1.23% 1.27% 1.16% 1.13%
Handsets 0.92% 0.97% 1.00% 0.96% 0.91%
Connected
devices 2.85% 2.79% 2.84% 2.33% 2.35%
Prepaid
Total at end of
period 527,000 525,000 519,000 515,000 484,000
Gross additions 78,000 88,000 83,000 102,000 73,000
Net additions 2,000 6,000 4,000 31,000 3,000
ARPU (2) $32.32 $31.78 $32.42 $33.12 $33.52
Churn rate (6) 4.83% 5.27% 5.09% 4.75% 4.93%
Total connections at end of period (7) 5,051,000 5,063,000 5,096,000 5,089,000 5,023,000
Market penetration at end of period
Consolidated operating
population 31,469,000 31,469,000 31,834,000 31,834,000 32,089,000
Consolidated operating
penetration (8) 16% 16% 16% 16% 16%
Capital expenditures (millions) $86 $70 $213 $112 $84
Total cell sites in service 6,478 6,473 6,460 6,436 6,421
Owned towers 4,105 4,099 4,080 4,051 4,044
(1) As of January 1,
2018, U.S.
Cellular
adopted the new
revenue
recognition
standard, ASC
606, using a
modified
retrospective
approach.
Under this
method, the new
accounting
standard is
applied only to
the most recent
period
presented. As
a result, 2018
amounts include
the impacts of
ASC 606, but
2017 amounts
remain as
previously
reported.
(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 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.
(4) 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.
(5) 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.
(6) 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.
(7) Includes
reseller and
other
connections.
(8) 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,
2018 (1) 2017 2018 vs. 2018 (1) 2017 2018 vs.
2017 2017
(Dollars and shares in millions, except per
share amounts)
Operating revenues
Service $741 $740 - $1,465 $1,486 (1)%
Equipment sales 233 223 5% 450 413 9%
Total operating revenues 974 963 1% 1,915 1,899 1%
--- --- ----- -----
Operating expenses
System
operations
(excluding
Depreciation,
amortization
and accretion
reported below) 187 189 (1)% 365 364 -
Cost of
equipment sold 240 260 (8)% 459 488 (6)%
Selling, general
and
administrative 342 351 (2)% 668 691 (3)%
Depreciation,
amortization
and accretion 159 155 3% 317 307 3%
(Gain) loss on
asset
disposals, net 1 5 (84)% 2 9 (75)%
(Gain) loss on
license sales
and exchanges,
net (11) (2) >(100)% (17) (19) 8%
Total operating expenses 918 958 (4)% 1,794 1,840 (2)%
--- --- ----- -----
Operating income 56 5 >100% 121 59 >100%
Investment and other income (expense)
Equity in
earnings of
unconsolidated
entities 40 33 20% 78 66 18%
Interest and
dividend income 3 2 63% 7 5 45%
Interest expense (29) (28) (2)% (58) (56) (3)%
Other, net - - >100% (1) (1) 14%
Total investment and other
income 14 7 >100% 26 14 85%
--- --- --- ---
Income before income taxes 70 12 >100% 147 73 >100%
Income tax
expense 18 - >100% 40 33 21%
Net income 52 12 >100% 107 40 >100%
Less: Net income
attributable to
noncontrolling
interests, net
of tax 3 - >100% 14 2 >100%
Net income attributable to U.S.
Cellular shareholders $49 $12 >100% $93 $38 >100%
=== === === ===
Basic weighted average shares outstanding 86 85 1% 85 85 -
Basic earnings per share
attributable to U.S. Cellular
shareholders $0.57 $0.14 >100% $1.09 $0.45 >100%
===== ===== ===== =====
Diluted weighted average shares outstanding 86 86 1% 86 86 1%
Diluted earnings per share
attributable to U.S. Cellular
shareholders $0.56 $0.14 >100% $1.08 $0.44 >100%
===== ===== ===== =====
(1) As of January
1, 2018,
U.S.
Cellular
adopted the
new revenue
recognition
standard,
ASC 606,
using a
modified
retrospective
approach.
Under this
method, the
new
accounting
standard is
applied only
to the most
recent
period
presented.
As a result,
2018 amounts
include the
impacts of
ASC 606, but
2017 amounts
remain as
previously
reported.
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended June 30, 2018 (1) 2017
(Dollars in millions)
Cash flows from operating activities
Net income $107 $40
Add (deduct)
adjustments to
reconcile net income
to net cash flows
from operating
activities
Depreciation,
amortization
and accretion 317 307
Bad debts
expense 40 47
Stock-based
compensation
expense 17 14
Deferred income
taxes, net 9 (27)
Equity in
earnings of
unconsolidated
entities (78) (66)
Distributions
from
unconsolidated
entities 70 65
(Gain) loss on
asset
disposals, net 2 9
(Gain) loss on
license sales
and exchanges,
net (17) (19)
Noncash
interest 2 1
Changes in assets and
liabilities from
operations
Accounts
receivable 43 (5)
Equipment
installment
plans
receivable (47) (107)
Inventory (3) (2)
Accounts
payable (35) (53)
Customer
deposits and
deferred
revenues (23) (6)
Accrued taxes 6 45
Other assets
and
liabilities (45) (23)
---
Net cash provided by
operating activities 365 220
Cash flows from investing activities
Cash paid for
additions to
property, plant and
equipment (173) (155)
Cash paid for licenses (2) (189)
Cash received for
investments 50 -
Cash received from
divestitures and
exchanges 21 17
Other investing
activities 3 -
Net cash used in investing
activities (101) (327)
Cash flows from financing activities
Repayment of long-
term debt (10) (6)
Payment of debt
issuance costs (1) -
Distributions to
noncontrolling
interests (4) (2)
Other financing
activities (4) 1
Net cash used in financing
activities (19) (7)
Net increase (decrease) in cash, cash equivalents and
restricted cash 245 (114)
Cash, cash equivalents and restricted cash
Beginning of period 352 586
End of period $597 $472
(1) As of January
1, 2018,
U.S.
Cellular
adopted the
new revenue
recognition
standard,
ASC 606,
using a
modified
retrospective
approach.
Under this
method, the
new
accounting
standard is
applied only
to the most
recent
period
presented.
As a result,
2018 amounts
include the
impacts of
ASC 606, but
2017 amounts
remain as
previously
reported.
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
June 30, December 31,
2018 (1) 2017
(Dollars in millions)
Current assets
Cash and cash
equivalents $596 $352
Short-term
investments - 50
Accounts
receivable 875 843
Inventory,
net 141 138
Prepaid
expenses 63 79
Other current
assets 34 21
Total current assets 1,709 1,483
Assets held for sale 1 10
Licenses 2,231 2,223
Investments in
unconsolidated
entities 439 415
Property, plant and
equipment, net 2,159 2,320
Other assets and
deferred charges 536 390
--- ---
Total assets $7,075 $6,841
====== ======
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
June 30, December
31,
2018 (1) 2017
(Dollars in millions, except per share amounts)
Current liabilities
Current portion
of long-term
debt $18 $18
Accounts payable 257 310
Customer deposits
and deferred
revenues 127 185
Accrued taxes 58 56
Accrued
compensation 48 74
Other current
liabilities 82 90
Total current liabilities 590 733
Deferred liabilities and credits
Deferred income
tax liability,
net 522 461
Other deferred
liabilities and
credits 367 337
Long-term debt, net 1,614 1,622
Noncontrolling interests with redemption
features 11 1
Equity
U.S. Cellular shareholders' equity
Series A Common
and Common
Shares, par
value $1 per
share 88 88
Additional paid-
in capital 1,569 1,552
Treasury shares (99) (120)
Retained earnings 2,402 2,157
Total U.S. Cellular shareholders'
equity 3,960 3,677
Noncontrolling interests 11 10
--- ---
Total equity 3,971 3,687
Total liabilities and equity $7,075 $6,841
====== ======
(1) As of January
1, 2018,
U.S.
Cellular
adopted the
new revenue
recognition
standard,
ASC 606,
using a
modified
retrospective
approach.
Under this
method, the
new
accounting
standard is
applied only
to the most
recent
period
presented.
As a result,
2018 amounts
include the
impacts of
ASC 606, but
2017 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,
2018 2017 2018 2017
(Dollars in millions)
Cash flows from
operating activities
(GAAP) $178 $159 $365 $220
Less: Cash paid for additions
to property, plant and
equipment 98 67 173 155
--- --- --- ---
Free cash flow (Non-GAAP)
(1) $80 $92 $192 $65
=== === ===
(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 herein, 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 6/30/2018(1) 3/31/2018(1) 12/31/2017 9/30/2017 6/30/2017
--------------------- ------------ ------------ ---------- --------- ---------
(Dollars and connection
counts in millions)
Calculation of Postpaid
ARPU
-----------------------
Postpaid service
revenues $600 $598 $598 $586 $597
Average number of
postpaid connections 4.47 4.50 4.52 4.50 4.47
Number of months in
period 3 3 3 3 3
--- --- --- --- ---
Postpaid ARPU (GAAP metric) $44.74 $44.34 $44.12 $43.41 $44.60
===
Calculation of Postpaid
ABPU
-----------------------
Postpaid service
revenues $600 $598 $598 $586 $597
Equipment installment
plan billings 174 172 170 152 142
--- --- --- --- ---
Total billings to postpaid
connections $774 $770 $768 $738 $739
Average number of
postpaid connections 4.47 4.50 4.52 4.50 4.47
Number of months in
period 3 3 3 3 3
--- --- --- --- ---
Postpaid ABPU (Non-GAAP metric) $57.75 $57.10 $56.69 $54.71 $55.19
===
Calculation of Postpaid
ARPA
-----------------------
Postpaid service
revenues $600 $598 $598 $586 $597
Average number of
postpaid accounts 1.69 1.69 1.69 1.68 1.66
Number of months in
period 3 3 3 3 3
--- --- --- --- ---
Postpaid ARPA (GAAP
metric) $118.57 $118.22 $118.05 $116.36 $119.73
======= ======= ======= ======= =======
Calculation of Postpaid
ABPA
-----------------------
Postpaid service
revenues $600 $598 $598 $586 $597
Equipment installment
plan billings 174 172 170 152 142
--- --- --- --- ---
Total billings to postpaid
accounts $774 $770 $768 $738 $739
Average number of
postpaid accounts 1.69 1.69 1.69 1.68 1.66
Number of months in
period 3 3 3 3 3
--- --- --- --- ---
Postpaid ABPA (Non-GAAP metric) $153.03 $152.26 $151.68 $146.65 $148.15
===
(1) As of January
1, 2018,
U.S.
Cellular
adopted the
new revenue
recognition
standard,
ASC 606,
using a
modified
retrospective
approach.
Under this
method, the
new
accounting
standard is
applied only
to the most
recent
period
presented.
As a result,
2018 amounts
include the
impacts of
ASC 606, but
2017 amounts
remain as
previously
reported.
View original content:http://www.prnewswire.com/news-releases/us-cellular-reports-second-quarter-2018-results-300691718.html
SOURCE United States Cellular Corporation
