U.S. Cellular reports first quarter 2020 results
CHICAGO, April 30, 2020 /PRNewswire/ --
As previously announced, U.S. Cellular will hold a teleconference May 1, 2020, 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 $963 million for the first quarter of 2020, versus $966 million for the same period one year ago. Service revenues totaled $762 million up 3% over the same period a year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $71 million and $0.81, respectively, for the first quarter of 2020 compared to $54 million and $0.62, respectively, in the same period one year ago.
"Now, more than ever, wireless connectivity is an essential service, and U.S. Cellular is managing through these unprecedented times by focusing on our customers and our associates, while keeping our network strong," said Kenneth R. Meyers, U.S. Cellular President and CEO. "Our entire organization has risen to meet this crisis and the massively-changed business environment that has come with it. I thank all our associates, especially those serving our customers on the frontline, for their unwavering commitment to keeping our customers connected. At this time, the majority of our stores are open, with modified store hours, and we have implemented measures to increase social distancing by encouraging the use of our appointment scheduling tool and curbside service for bill payments and other transactions. Most of our customer care center employees have migrated to working remotely while maintaining the exceptional customer service U.S. Cellular is known for.
"We are focused on maintaining the performance of our network, with our engineers working to meet increased demand. We have seen both data consumption and voice traffic increase along the same lines as the rest of the wireless industry. At the same time, customers are consuming more wireless services at home during the day rather than during historical peak usage hours, which has helped balance use of the total network. We continue our network modernization program, adding capacity and speed, and continue to launch 5G services commercially, and VoLTE in remaining markets.
"Our financial results this quarter were solid, including a tax benefit resulting from the CARES Act, partially offset by an incremental allowance recorded to cover anticipated higher levels of bad debts. We expect there might be more near-term impacts from the pandemic, including Iower store traffic and new customer growth. Today's number one priority is to continue to adapt to meet the wireless needs of communities and customers we serve. At the same time, we are planning for the return to a more stable future environment and continuing to execute on our strategic priorities."
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 April 30, 2020 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, especially in light of the uncertainty created by the COVID-19 pandemic.
2020 Estimated Results
Previous
Current
(Dollars in millions)
Service revenues
$3,000-$3,100
Unchanged
Adjusted OIBDA(1)
$775-$900
$725-$850
Adjusted EBITDA(1)
$950-$1,075
$900-$1,025
Capital expenditures
$850-$950
Unchanged
The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2020 estimated results, actual results for the three months ended March 31, 2020, and actual results for the year ended December 31, 2019. 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.
Actual Results
2020 Estimated Three Months Ended Year Ended
Results March 31, 2020 December 31, 2019
(Dollars in millions)
Net income (GAAP) N/A $
72 $
133
Add back:
Income tax expense N/A 4 52
Income before income taxes
(GAAP)
$80-$205 $
76 $
185
Add back:
Interest expense 110 24 110
Depreciation, amortization
and accretion expense 690 177 702
EBITDA (Non-GAAP)(1)
$880-$1,005 $
277 $
997
Add back or deduct:
(Gain) loss on asset
disposals, net 20 4 19
(Gain) loss on sale of
business and other exit
costs, net (1)
Adjusted EBITDA (Non-
GAAP)(1)
$900-$1,025 $
281 $
1,015
Deduct:
Equity in earnings of
unconsolidated entities 165 45 166
Interest and dividend
income 10 4 17
Other, net 1
Adjusted OIBDA (Non-
GAAP)(1)
$725-$850 $
231 $
832
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 March 31, 2020, 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 May 1, 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/1145/34504
-- Access the call by phone at (833) 968-2187, conference ID: 1267888.
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 21 states. The Chicago-based company had 5,500 full- and part-time associates as of March 31, 2020. At the end of the first quarter of 2020, 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: the impact, duration and severity of the COVID-19 pandemic; 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.
The impact of the COVID-19 pandemic on U.S. Cellular's business is uncertain, but depending on its duration and severity it could have a material adverse effect on U.S. Cellular's business, financial condition or results of operations.
The impact of the recent global spread of COVID-19 on U.S. Cellular's future operations is uncertain. Public health emergencies, such as COVID-19, pose the risk that U.S. Cellular or its associates, agents, partners and suppliers may be unable to conduct business activities for an extended period of time and/or provide the level of service expected. U.S. Cellular's ability to attract customers, maintain adequate supply chain and execute on its business strategies and initiatives could be negatively impacted by this outbreak. Additionally, COVID-19 has caused and could continue to cause increased unemployment, economic downturn and credit market deterioration, all of which could negatively impact U.S. Cellular. The extent of the impact of COVID-19 on U.S. Cellular's business, financial condition and results of operations will depend on future circumstances, including the severity of the disease, the duration of the outbreak, actions taken by governmental authorities and other possible direct and indirect consequences, all of which are uncertain and cannot be predicted.
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 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019
--- ---
Retail Connections
Postpaid
Total at end of period 4,359,000 4,383,000 4,395,000 4,414,000 4,440,000
Gross additions 132,000 170,000 163,000 137,000 137,000
Feature phones 2,000 2,000 3,000 5,000 4,000
Smartphones 88,000 128,000 121,000 97,000 98,000
Connected devices 42,000 40,000 39,000 35,000 35,000
Net additions (losses) (26,000) (12,000) (19,000) (26,000) (32,000)
Feature phones (10,000) (11,000) (11,000) (10,000) (13,000)
Smartphones (10,000) 13,000 9,000 (1,000) (1,000)
Connected devices (6,000) (14,000) (17,000) (15,000) (18,000)
ARPU(1) $
47.23 $
46.57 $
46.16 $
45.90 $
45.44
ARPA(2) $
122.92 $
120.99 $
119.87 $
119.46 $
118.84
Churn rate(3) 1.21 1.38 1.38 1.23 1.26
% % % % %
Handsets 0.95 1.11 1.09 0.97 0.99
% % % % %
Connected devices 3.11 3.44 3.44 3.01 3.08
% % % % %
Prepaid
Total at end of period 494,000 506,000 510,000 500,000 503,000
Gross additions 57,000 63,000 70,000 61,000 61,000
Net additions (losses) (12,000) (3,000) 9,000 (2,000) (13,000)
ARPU(1) $
34.07 $
34.11 $
34.35 $
34.43 $
33.44
Churn rate(3) 4.67 4.40 4.03 4.20 4.92
% % % % %
Total connections at end of period4 4,903,000 4,941,000 4,957,000 4,967,000 4,995,000
Market penetration at end of period
Consolidated operating population 31,292,000 30,740,000 31,310,000 31,310,000 31,310,000
Consolidated operating penetration5 16
% 16
% 16
% 16
% 16
%
Capital expenditures (millions) $
236 $
243 $
170 $
195 $
102
Total cell sites in service 6,629 6,578 6,554 6,535 6,506
Owned towers 4,184 4,166 4,123 4,116 4,106
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
March 31,
2020 2019 2020 vs.
2019
---
(Dollars and shares in millions, except
per share amounts)
Operating revenues
Service $
762 $
741 3
%
Equipment sales 201 225 (10)
%
Total operating revenues 963 966 -
Operating expenses
System operations
(excluding Depreciation,
amortization and accretion %
reported below) 180 176 2
Cost of equipment sold 217 233 (7)
%
Selling, general and 335 326 3
administrative
%
Depreciation, amortization 177 169 5
and accretion
%
(Gain) loss on asset 4 2 72
disposals, net
%
(Gain) loss on sale of
business and other exit
costs, net - (2) N/M
(Gain) loss on license
sales and exchanges, net - (2) N/M
Total operating expenses 913 902 1
%
Operating income 50 64 (22)
%
Investment and other income (expense)
Equity in earnings of 45 44 3
unconsolidated entities
%
Interest and dividend 4 6 (33)
income
%
Interest expense (24) (29) 19
%
Other, net 1 (86)
%
Total investment and other 26 21 23
income
%
Income before income taxes 76 85 (11)
%
Income tax expense 4 27 (86)
%
Net income 72 58 24
%
Less: Net income
attributable to
noncontrolling interests, %
net of tax 1 4 (69)
Net income attributable to $
71 $
54 30
U.S. Cellular shareholders
%
Basic weighted average
shares outstanding 86 86 -
Basic earnings per share $
0.82 $
0.63 30
attributable to U.S.
Cellular shareholders %
Diluted weighted average 88 88 (1)
shares outstanding
%
Diluted earnings per share $
0.81 $
0.62 31
attributable to U.S.
Cellular shareholders %
N/M -Percentage change not
meaningful
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
2020 2019
---
(Dollars in millions)
Cash flows from operating activities
Net income $
72 $
58
Add (deduct) adjustments to reconcile net income
to net cash flows from operating activities
Depreciation, amortization and
accretion 177 169
Bad debts expense 33 24
Stock-based compensation expense 7 9
Deferred income taxes, net 52 17
Equity in earnings of
unconsolidated entities (45) (44)
Distributions from unconsolidated
entities 24 18
(Gain) loss on asset disposals,
net 4 2
(Gain) loss on sale of business
and other exit costs, net (2)
(Gain) loss on license sales and
exchanges, net (2)
Other operating activities 1
Changes in assets and liabilities from
operations
Accounts receivable 55 31
Equipment installment plans
receivable 23 (10)
Inventory (50) (15)
Accounts payable 97 56
Customer deposits and deferred
revenues (10) 7
Accrued taxes (49) 11
Accrued interest 9 9
Other assets and liabilities (57) (52)
Net cash provided by operating
activities 342 287
Cash flows from investing activities
Cash paid for additions to
property, plant and equipment (315) (107)
Cash paid for licenses (26) (1)
Cash received from investments 2
Cash paid for investments (1) (1)
Cash received from divestitures
and exchanges 31
Advance payments for license
acquisitions (135)
Other investing activities (1)
Net cash used in investing
activities (342) (212)
Cash flows from financing activities
Repayment of long-term debt (2) (5)
Repurchase of Common Shares (21)
Distributions to noncontrolling
interests (1) (1)
Net cash used in financing
activities (24) (6)
Net increase (decrease) in cash,
cash equivalents and restricted
cash (24) 69
Cash, cash equivalents and restricted cash
Beginning of period 291 583
End of period $
267 $
652
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
March 31, 2020 December 31, 2019
---
(Dollars in millions)
Current assets
Cash and cash equivalents $
258 $
285
Accounts receivable, net 930 1,010
Inventory, net 212 162
Prepaid expenses 58 50
Income taxes receivable 96 46
Other current assets 22 20
Total current assets 1,576 1,573
Licenses 2,502 2,471
Investments in
unconsolidated entities 469 447
Property, plant and
equipment, net 2,268 2,207
Operating lease right-
of-use assets 902 900
Other assets and deferred
charges 534 566
Total assets $
8,251 $
8,164
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
March 31, 2020 December 31, 2019
---
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt $
6 $
8
Accounts payable 328 304
Customer deposits and deferred revenues 139 148
Accrued taxes 27 30
Accrued compensation 47 76
Short-term operating lease liabilities 109 105
Other current liabilities 66 79
Total current liabilities 722 750
Deferred liabilities and credits
Deferred income tax liability, net 559 507
Long-term operating lease liabilities 865 865
Other deferred liabilities and credits 327 319
Long-term debt, net 1,503 1,502
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 1,636 1,629
Treasury shares (92) (70)
Retained earnings 2,620 2,550
Total U.S. Cellular shareholders' equity 4,252 4,197
Noncontrolling interests 12 13
Total equity 4,264 4,210
Total liabilities and equity $
8,251 $
8,164
United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
Three Months Ended
March 31,
2020 2019
---
(Dollars in
millions)
Cash flows from operating activities (GAAP) $
342 $
287
Less: Cash paid for additions to property, plant and equipment 315 107
Free cash flow (Non-GAAP)(1) $
27 $
180
(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.
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SOURCE United States Cellular Corporation
