U.S. Cellular reports third quarter 2019 results
CHICAGO, Oct. 31, 2019 /PRNewswire/ --
As previously announced, U.S. Cellular will hold a teleconference November 1, 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 $1,031 million for the third quarter of 2019, versus $1,001 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $23 million and $0.27, respectively, for the third quarter of 2019 compared to $36 million and $0.41, respectively, in the same period one year ago.
"I'm pleased with the progress we made this quarter," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We generated improved financial results and although subscriber activity was slow early in the quarter, we gained momentum and finished strong, achieving sequential improvement in postpaid handset net additions by delivering on our customer satisfaction strategy and implementing many of our strategic initiatives. Our efforts produced growth in revenue and Adjusted EBITDA. Continued popularity of our unlimited Total Plans drove increases in average revenue per user and increased inbound roaming contributed to growth in service revenue. I am pleased to see these trends as we head into the important holiday season.
"We recently completed a brand refresh and launched a new more modern look and a brand promise around 'Bringing Fairness to Wireless,' to reinforce the values that have always been part of U.S. Cellular. Another driver of customer satisfaction is our high-quality network, which is performing well even as data usage continues to increase. Our network modernization efforts are progressing as we ready our network for 5G, so that even customers with 4G devices have experienced better network quality and improved speeds. Additionally, we are on track to launch 5G service in Iowa and Wisconsin during the first quarter of 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 October 31, 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
$3,900-$4,100
$3,950-$4,050
Adjusted OIBDA(1)
$725-$875
$750-$850
Adjusted EBITDA(1)
$900-$1,050
$925-$1,025
Capital expenditures
$625-$725
Unchanged
The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2019 estimated results, actual results for the nine months ended September 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 Nine Months Ended Year Ended
Results September 30, 2019 December 31, 2018
(Dollars in millions)
Net income (GAAP) N/A $
115 $
164
Add back or deduct:
Income tax expense N/A 55 51
Income before income taxes
(GAAP)
$80-$180 $
170 $
215
Add back:
Interest expense 115 87 116
Depreciation, amortization
and accretion expense 710 524 640
EBITDA (Non-GAAP)(1)
$905-$1,005 $
781 $
971
Add back or deduct:
(Gain) loss on asset
disposals, net 20 13 10
(Gain) loss on sale of
business and other exit
costs, net (1)
(Gain) loss on license
sales and exchanges, net (18)
Adjusted EBITDA (Non-
GAAP)(1)
$925-$1,025 $
793 $
963
Deduct:
Equity in earnings of
unconsolidated entities 160 128 159
Interest and dividend
income 15 14 15
Other, net (1)
Adjusted OIBDA (Non-
GAAP)(1)
$750-$850 $
651 $
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 September 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 November 1, 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/1145/32152.
-- Access the call by phone at 877-273-7192 (US/Canada), conference ID:
4119859.
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 5,500 full- and part-time associates as of September 30, 2019. At the end of the third 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 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018
--- ---
Retail Connections
Postpaid
Total at end of period 4,395,000 4,414,000 4,440,000 4,472,000 4,466,000
Gross additions 163,000 137,000 137,000 179,000 172,000
Feature phones 3,000 5,000 4,000 4,000 3,000
Smartphones 121,000 97,000 98,000 132,000 130,000
Connected devices 39,000 35,000 35,000 43,000 39,000
Net additions (losses) (19,000) (26,000) (32,000) 6,000 (1,000)
Feature phones (11,000) (10,000) (13,000) (11,000) (14,000)
Smartphones 9,000 (1,000) (1,000) 31,000 29,000
Connected devices (17,000) (15,000) (18,000) (14,000) (16,000)
ARPU(1) $
46.16 $
45.90 $
45.44 $
45.58 $
45.31
ARPA(2) $
119.87 $
119.46 $
118.84 $
119.60 $
119.42
Churn rate(3) 1.38 1.23 1.26 1.29 1.29
% % % % %
Handsets 1.09 0.97 0.99 1.00 1.02
% % % % %
Connected devices 3.44 3.01 3.08 3.20 3.04
% % % % %
Prepaid
Total at end of period 510,000 500,000 503,000 516,000 528,000
Gross additions 70,000 61,000 61,000 66,000 80,000
Net additions (losses) 9,000 (2,000) (13,000) (12,000) 1,000
ARPU(1) $
34.35 $
34.43 $
33.44 $
32.80 $
32.09
Churn rate(3) 4.03 4.20 4.92 4.98 4.98
% % % % %
Total connections at end of period4 4,957,000 4,967,000 4,995,000 5,041,000 5,050,000
Market penetration at end of period
Consolidated operating population 31,310,000 31,310,000 31,310,000 31,469,000 31,469,000
Consolidated operating penetration5 16
% 16
% 16
% 16
% 16
%
Capital expenditures (millions) $
170 $
195 $
102 $
242 $
118
Total cell sites in service 6,554 6,535 6,506 6,531 6,506
Owned towers 4,123 4,116 4,106 4,129 4,119
(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
Nine Months Ended
September 30, September 30,
2019 2018 2019 vs. 2019 2018 2019 vs.
2018 2018
(Dollars and shares in millions, except per
share amounts)
Operating revenues
Service $
774 $
759 2 $
2,272 $
2,224 2
% %
Equipment sales 257 242 6 698 692 1
% %
Total operating revenues 1,031 1,001 3 2,970 2,916 2
% %
Operating expenses
System operations
(excluding Depreciation,
amortization and accretion %
reported below) 199 200 (1) 568 566 -
Cost of equipment sold 266 258 3 724 716 1
% %
Selling, general and 358 346 3 1,027 1,014 1
administrative % %
Depreciation, amortization 181 160 13 524 478 10
and accretion % %
(Gain) loss on asset 5 3 66
disposals, net % 13 5 N/M
(Gain) loss on sale of
business and other exit
costs, net - N/M (1) N/M
(Gain) loss on license 2 N/M (18) 98
sales and exchanges, net %
Total operating expenses 1,011 967 5 2,855 2,761 3
% %
Operating income 20 34 (40) 115 155 (26)
% %
Investment and other income (expense)
Equity in earnings of 44 42 5 128 120 7
unconsolidated entities % %
Interest and dividend 4 4 4 14 10 40
income % %
Interest expense (29) (29) 1
% (87) (87) -
Total investment and other 19 17 12 55 43 27
income % %
Income before income taxes 39 51 (23) 170 198 (14)
% %
Income tax expense 15 14 2 55 55 1
% %
Net income 24 37 (33) 115 143 (20)
% %
Less: Net income
attributable to %
noncontrolling interests, %
net of tax 1 1 29 6 14 (61)
Net income attributable to $
23 $
36 (34) $
109 $
129 (15)
U.S. Cellular shareholders
% %
Basic weighted average 86 86 1 87 85 1
shares outstanding % %
Basic earnings per share $
0.27 $
0.42 (35) $
1.26 $
1.51 (16)
attributable to U.S.
Cellular shareholders % %
Diluted weighted average 88 87 1 88 86 2
shares outstanding % %
Diluted earnings per share $
0.27 $
0.41 (35) $
1.24 $
1.49 (17)
attributable to U.S.
Cellular shareholders % %
N/M -Percentage change not
meaningful
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2019 2018
---
(Dollars in millions)
Cash flows from operating activities
Net income $
115 $
143
Add (deduct) adjustments to reconcile net income
to net cash flows from operating activities
Depreciation, amortization and
accretion 524 478
Bad debts expense 77 67
Stock-based compensation expense 32 26
Deferred income taxes, net (34) (4)
Equity in earnings of
unconsolidated entities (128) (120)
Distributions from unconsolidated
entities 99 90
(Gain) loss on asset disposals,
net 13 5
(Gain) loss on sale of business
and other exit costs, net (1)
(Gain) loss on license sales and
exchanges, net - (18)
Other operating activities 3 2
Changes in assets and liabilities from
operations
Accounts receivable (35) (1)
Equipment installment plans
receivable (42) (88)
Inventory 3 15
Accounts payable (4) 21
Customer deposits and deferred
revenues (1) (5)
Accrued taxes 81 1
Accrued interest 9 9
Other assets and liabilities (24) (21)
Net cash provided by operating
activities 687 600
Cash flows from investing activities
Cash paid for additions to
property, plant and equipment (439) (277)
Cash paid for licenses (257) (2)
Cash received from investments 29 50
Cash paid for investments (11)
Cash received from divestitures
and exchanges 32 23
Other investing activities (1) 3
Net cash used in investing
activities (647) (203)
Cash flows from financing activities
Repayment of long-term debt (14) (14)
Common Shares reissued for benefit
plans, net of tax payments (8) 7
Repurchase of Common Shares (21)
Distributions to noncontrolling
interests (3) (5)
Other financing activities (2) (5)
Net cash used in financing
activities (48) (17)
Net increase (decrease) in cash,
cash equivalents and restricted
cash (8) 380
Cash, cash equivalents and restricted cash
Beginning of period 583 352
End of period $
575 $
732
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
September 30, 2019
(1) December 31, 2018
---
(Dollars in millions)
Current assets
Cash and cash equivalents $
570 $
580
Short-term investments - 17
Accounts receivable 993 976
Inventory, net 139 142
Prepaid expenses 49 63
Other current assets 19 34
Total current assets 1,770 1,812
Assets held for sale 9 54
Licenses 2,461 2,186
Investments in
unconsolidated entities 471 441
Property, plant and
equipment, net 2,144 2,202
Operating lease right-
of-use assets 897
Other assets and deferred
charges 539 579
Total assets $
8,291 $
7,274
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
September 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 337 313
Customer deposits and deferred revenues 155 157
Accrued taxes 88 30
Accrued compensation 68 78
Short-term operating lease liabilities 104
Other current liabilities 78 94
Total current liabilities 849 691
Liabilities held for sale 1 1
Deferred liabilities and credits
Deferred income tax liability, net 477 510
Long-term operating lease liabilities 864
Other deferred liabilities and credits 312 389
Long-term debt, net 1,592 1,605
Noncontrolling interests with redemption
features 11 11
Equity
U.S. Cellular shareholders' equity
Series A Common and Common Shares, par value
$1 per share 88 88
Additional paid-in capital 1,622 1,590
Treasury shares (70) (65)
Retained earnings 2,532 2,444
Total U.S. Cellular shareholders' equity 4,172 4,057
Noncontrolling interests 13 10
Total equity 4,185 4,067
Total liabilities and equity $
8,291 $
7,274
1 As of January 1, 2019, U.S.
Cellular adopted the new lease
accounting standard, ASC 842,
using a modified retrospective
method. 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 Nine Months Ended
September 30,
September 30,
2019 2018 2019 2018
---
(Dollars in millions)
Cash flows
from
operating
activities
(GAAP) $
211 $
235 $
687 $
600
Less: Cash
paid for
additions
to
property,
plant and
equipment 157 103 439 277
Free cash
flow (Non-
GAAP)(1) $
54 $
132 $
248 $
323
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
September 30,
2019 2018
(Dollars in
millions)
Net income (GAAP) $
24 $
37
Add back:
Income tax expense 15 14
Interest expense 29 29
Depreciation,
amortization and
accretion 181 160
EBITDA (Non-GAAP) 249 240
Add back or
deduct:
(Gain) loss on
asset disposals,
net 5 3
(Gain) loss on
license sales and
exchanges, net 2
Adjusted EBITDA
(Non-GAAP) 256 243
Deduct:
Equity in earnings
of unconsolidated
entities 44 42
Interest and
dividend income 4 4
Adjusted OIBDA
(Non-GAAP) 208 197
Deduct:
Depreciation,
amortization and
accretion 181 160
(Gain) loss on
asset disposals,
net 5 3
(Gain) loss on
license sales and
exchanges, net 2
Operating income
(GAAP) $
20 $
34
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SOURCE United States Cellular Corporation
