U.S. Cellular reports fourth quarter and full year 2019 results
CHICAGO, Feb. 20, 2020 /PRNewswire/ --
As previously announced, U.S. Cellular will hold a teleconference on February 21, 2020 at 9:00 a.m. CST. Listen to the call live via the Events & Presentations page of investors.uscellular.com. U.S. Cellular intends to file its Form 10-K on February 25, 2020.
United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,052 million for the fourth quarter of 2019, versus $1,051 million for the same period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $18 million and $0.20, respectively, for the fourth quarter of 2019 compared to $21 million and $0.23, respectively, in the same period one year ago. U.S. Cellular reported Adjusted EBITDA of $222 for the fourth quarter of 2019 compared to $213 million in the same period one year ago.
U.S. Cellular reported total operating revenues of $4,022 million and $3,967 million for the years ended 2019 and 2018, respectively. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $127 million and $1.44, respectively, for the year ended 2019 compared to $150 million and $1.72, respectively, for the year ended 2018. U.S. Cellular reported Adjusted EBITDA of $1,015 million in 2019 compared to $963 million in 2018.
"In 2019 we made significant progress on our strategic imperatives," said Kenneth R. Meyers, U.S. Cellular President and CEO. "We increased revenues and Adjusted EBITDA, putting us in a strong position to proceed with our multi-year network modernization plan. This work will increase speeds and capacity and ready our network for 5G and the exciting opportunities this technology will bring. Additionally we successfully secured spectrum in two FCC auctions strategically positioning us for future 5G services.
"Customers' continued migration to higher priced service plans, growing smartphone penetration in our base and increased penetration of device protection services helped increase average revenue per user. We generated strong growth in roaming revenue, while at the same time driving down roaming expense through favorable agreements with major carriers.
"As we move into 2020, we will build upon many of the significant programs introduced last year including more compelling unlimited pricing, our new brand positioning "Bringing Fairness to Wireless", a new web platform with enhanced capabilities and significant network improvements. Leveraging these programs and others, we expect to enhance our customer experience, identify new and emerging revenue streams, reduce costs throughout the business and invest in our Associates and our future. This year, we will launch 5G services commercially in two of our markets and continue our VoLTE deployment. Additionally, we are excited that we recently launched commercial service in Sioux City, Iowa and Northern Wisconsin."
2020 Estimated Results
U.S. Cellular's current estimates of full-year 2020 results are shown below. Such estimates represent management's view as of February 20, 2020 and 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 estimates, future events or otherwise. There can be no assurance that final results will not differ materially from estimated results.
2020 Estimated Results Actual Results for the Year
Ended
December 31, 2019
(Dollars
in
millions)
Service
revenues
$3,000-$3,100 $
3,035
Adjusted
OIBDA(1)
$775-$900 $
832
Adjusted
EBITDA(1)
$950-$1,075 $
1,015
Capital
expenditures
$850-$950 $
710
The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2020 estimated results and actual results for the years ended December 31, 2019 and 2018. In providing 2020 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.
2020 Estimated Actual Results for Actual Results for
Results the Year Ended the Year Ended
December 31, 2019 December 31, 2018
(Dollars in millions)
Net income (GAAP) N/A $
133 $
164
Add back or deduct:
Income tax expense N/A 52 51
Income before income taxes
(GAAP)
$130-$255 $
185 $
215
Add back:
Interest expense 110 110 116
Depreciation, amortization and
accretion expense 690 702 640
EBITDA (Non-GAAP)(1)
$930-$1,055 $
997 $
971
Add back or deduct:
(Gain) loss on asset
disposals, net 20 19 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)
$950-$1,075 $
1,015 $
963
Deduct:
Equity in earnings of
unconsolidated entities 160 166 159
Interest and dividend income 15 17 15
Other, net (1)
Adjusted OIBDA (Non-GAAP)(1)
$775-$900 $
832 $
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 December 31, 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 February 21, 2020 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/1145/33161
-- Access the call by phone at 877-273-7192 (US/Canada), conference ID:
2677654
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 4.9 million connections in 20 states. The Chicago-based company had 5,500 full- and part-time associates as of December 31, 2019. At the end of the fourth 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 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018
--- ---
Retail Connections
Postpaid
Total at end of period 4,383,000 4,395,000 4,414,000 4,440,000 4,472,000
Gross additions 170,000 163,000 137,000 137,000 179,000
Feature phones 2,000 3,000 5,000 4,000 4,000
Smartphones 128,000 121,000 97,000 98,000 132,000
Connected devices 40,000 39,000 35,000 35,000 43,000
Net additions (losses) (12,000) (19,000) (26,000) (32,000) 6,000
Feature phones (11,000) (11,000) (10,000) (13,000) (11,000)
Smartphones 13,000 9,000 (1,000) (1,000) 31,000
Connected devices (14,000) (17,000) (15,000) (18,000) (14,000)
ARPU(1) $
46.57 $
46.16 $
45.90 $
45.44 $
45.58
ARPA(2) $
120.99 $
119.87 $
119.46 $
118.84 $
119.60
Churn rate(3) 1.38 1.38 1.23 1.26 1.29
% % % % %
Handsets 1.11 1.09 0.97 0.99 1.00
% % % % %
Connected devices 3.44 3.44 3.01 3.08 3.20
% % % % %
Prepaid
Total at end of period 506,000 510,000 500,000 503,000 516,000
Gross additions 63,000 70,000 61,000 61,000 66,000
Net additions (losses) (3,000) 9,000 (2,000) (13,000) (12,000)
ARPU(1) $
34.11 $
34.35 $
34.43 $
33.44 $
32.80
Churn rate(3) 4.40 4.03 4.20 4.92 4.98
% % % % %
Total connections at end of period4 4,941,000 4,957,000 4,967,000 4,995,000 5,041,000
Market penetration at end of period
Consolidated operating population 30,740,000 31,310,000 31,310,000 31,310,000 31,469,000
Consolidated operating penetration5 16
% 16
% 16
% 16
% 16
%
Capital expenditures (millions) $
243 $
170 $
195 $
102 $
242
Total cell sites in service 6,578 6,554 6,535 6,506 6,531
Owned towers 4,166 4,123 4,116 4,106 4,129
Due to rounding, the sum of
quarterly results may not equal
the total for the year.
(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
Year Ended
December 31,
December 31,
2019 2018 2019 vs. 2019 2018 2019 vs.
2018 2018
---
(Dollars and shares in millions, except
per share amounts)
Operating revenues
Service $
763 $
754 1 $
3,035 $
2,978 2
% %
Equipment sales 289 297 (3)
% 987 989 -
Total operating revenues 1,052 1,051 - 4,022 3,967 1
%
Operating expenses
System operations
(excluding Depreciation,
amortization and accretion %
reported below) 188 193 (2) 756 758 -
Cost of equipment sold 305 315 (3)
% 1,028 1,031 -
Selling, general and 378 373 1 1,406 1,388 1
administrative % %
Depreciation, amortization 178 162 10 702 640 10
and accretion % %
(Gain) loss on asset 6 5 18 19 10 80
disposals, net % %
(Gain) loss on sale of
business and other exit
costs, net - N/M (1) N/M
(Gain) loss on license - N/M (18) 98
sales and exchanges, net %
Total operating expenses 1,055 1,048 1 3,910 3,809 3
% %
Operating income (loss) (3) 3 N/M 112 158 (29)
%
Investment and other income (expense)
Equity in earnings of 38 39 (2)
unconsolidated entities %
% 166 159 5
Interest and dividend 3 4 (38)
income %
% 17 15 17
Interest expense (23) (29) 20 (110) (116) 5
% %
Other, net - (98)
% (1) N/M
Total investment and other 18 14 22 73 57 26
income % %
Income before income taxes 15 17 (15) 185 215 (14)
% %
Income tax expense (3) (4) 12 52 51 2
(benefit) % %
Net income 18 21 (15) 133 164 (19)
% %
Less: Net income
attributable to
noncontrolling interests, % %
net of tax - (38) 6 14 (60)
Net income attributable to $
18 $
21 (14) $
127 $
150 (15)
U.S. Cellular shareholders
% %
Basic weighted average 86 86 - 86 86 1
shares outstanding %
Basic earnings per share $
0.21 $
0.24 (14) $
1.47 $
1.75 (16)
attributable to U.S.
Cellular shareholders % %
Diluted weighted average 88 88 - 88 87 1
shares outstanding %
Diluted earnings per share $
0.20 $
0.23 (14) $
1.44 $
1.72 (16)
attributable to U.S.
Cellular shareholders % %
N/M -Percentage change not
meaningful
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Year Ended December 31, 2019 2018
--- ---
(Dollars in millions)
Cash flows from operating activities
Net income $
133 $
164
Add (deduct) adjustments to reconcile net income
to net cash flows from operating activities
Depreciation, amortization and
accretion 702 640
Bad debts expense 107 95
Stock-based compensation expense 41 37
Deferred income taxes, net (4) (3)
Equity in earnings of
unconsolidated entities (166) (159)
Distributions from unconsolidated
entities 161 152
(Gain) loss on asset disposals,
net 19 10
(Gain) loss on sale of business
and other exit costs, net (1)
(Gain) loss on license sales and
exchanges, net (18)
Other operating activities 4 3
Changes in assets and liabilities from
operations
Accounts receivable (46) (39)
Equipment installment plans
receivable (97) (149)
Inventory (20) (4)
Accounts payable (69) 3
Customer deposits and deferred
revenues (8) 7
Accrued taxes (23) (39)
Other assets and liabilities (9) 9
Net cash provided by operating
activities 724 709
Cash flows from investing activities
Cash paid for additions to
property, plant and equipment (650) (512)
Cash paid for licenses (266) (8)
Cash received from investments 29 50
Cash paid for investments (11) (17)
Cash received from divestitures
and exchanges 41 24
Other investing activities (7) (1)
Net cash used in investing
activities (864) (464)
Cash flows from financing activities
Repayment of long-term debt (116) (19)
Common Shares reissued for benefit
plans, net of tax payments (9) 18
Repurchase of Common Shares (21)
Distributions to noncontrolling
interests (4) (6)
Other financing activities (2) (7)
Net cash used in financing
activities (152) (14)
Net increase (decrease) in cash,
cash equivalents and restricted
cash (292) 231
Cash, cash equivalents and restricted cash
Beginning of period 583 352
End of period $
291 $
583
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
December 31, 2019(1) 2018
--- ---
(Dollars in millions)
Current assets
Cash and cash equivalents $
285 $
580
Short-term investments - 17
Accounts receivable 1,010 976
Inventory, net 162 142
Prepaid expenses 50 63
Income taxes receivable 46 15
Other current assets 20 19
Total current assets 1,573 1,812
Assets held for sale - 54
Licenses 2,471 2,186
Investments in
unconsolidated entities 447 441
Property, plant and
equipment, net 2,207 2,202
Operating lease right-
of-use assets 900
Other assets and deferred
charges 566 579
Total assets $
8,164 $
7,274
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
December 31, 2019(1) 2018
--- ---
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt $
8 $
19
Accounts payable 304 313
Customer deposits and deferred revenues 148 157
Accrued taxes 30 30
Accrued compensation 76 78
Short-term operating lease liabilities 105
Other current liabilities 79 94
Total current liabilities 750 691
Liabilities held for sale - 1
Deferred liabilities and credits
Deferred income tax liability, net 507 510
Long-term operating lease liabilities 865
Other deferred liabilities and credits 319 389
Long-term debt, net 1,502 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 1,629 1,590
Treasury shares (70) (65)
Retained earnings 2,550 2,444
Total U.S. Cellular shareholders' equity 4,197 4,057
Noncontrolling interests 13 10
Total equity 4,210 4,067
Total liabilities and equity $
8,164 $
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 Year Ended
December 31,
December 31,
2019 2018 2019 2018
---
(Dollars in millions)
Cash flows
from
operating
activities
(GAAP) $
37 $
108 $
724 $
709
Less: Cash
paid for
additions
to
property,
plant and
equipment 210 235 650 512
Free cash
flow (Non-
GAAP)(1) $
(173) $
(127) $
74 $
197
(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 Income before income taxes.
Three Months Ended
December 31,
2019 2018
(Dollars
in
millions)
Net
income
(GAAP) $
18 $
21
Add back
or
deduct:
Income
tax
benefit (3) (4)
Income
before
income
taxes
(GAAP) 15 17
Add
back:
Interest
expense 23 29
Depreciation,
amortization
and
accretion
expense 178 162
EBITDA
(Non-
GAAP) 216 208
Add back
or
deduct:
(Gain)
loss on
asset
disposals,
net 6 5
Adjusted
EBITDA
(Non-
GAAP) 222 213
Deduct:
Equity
in
earnings
of
unconsolidated
entities 38 39
Interest
and
dividend
income 3 4
Adjusted
OIBDA
(Non-
GAAP) $
181 $
170
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SOURCE United States Cellular Corporation
