U.S. Cellular reports second quarter 2020 results
CHICAGO, Aug. 6, 2020 /PRNewswire/ --
As previously announced, U.S. Cellular will hold a teleconference August 7, 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 $973 million for the second quarter of 2020, which is equal to the same period one year ago. Service revenues totaled $753 million, which is down 1% compared to the same period a year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $68 million and $0.78, respectively, for the second quarter of 2020 compared to $31 million and $0.35, respectively, in the same period one year ago.
"My first month at U.S. Cellular has been full of learning and listening - a seamless and effective transition," said Laurent C. Therivel. "I want to thank Ken Meyers for providing sound advice and counsel. Over the past few weeks, I have traveled to various locations and met with many of our associates (in the safest manner possible). I am inspired by our customer-centric culture and high levels of engagement, and I'm inspired by the flexibility and resiliency our associates have displayed throughout this pandemic. It is clear to me that our competitive advantage rests on our focus on the customer and our high-quality network. Our network strength was recently recognized, with U.S. Cellular ranking #1 in the North Central Region in the J.D. Power 2020 Wireless Network Quality Performance Study - Volume 2, making this the 7th time since 2016 that U.S. Cellular has received an award. This recognition validates that our network modernization strategy is working.
"Many aspects of our second quarter performance were impacted by the pandemic yet we were able to generate very solid results. Churn was exceptionally low, offsetting less store traffic, and we saw an increase in smartphone connections. We continued our network investment programs, deploying 5G to additional markets and maintaining the quality of our network despite increasing demand for data. The leadership team and I will be looking across the organization to identify, evaluate and accelerate further growth opportunities. I am looking forward to our progress throughout the back half of 2020 and thank all our associates for their support."
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 August 6, 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)
$725-$850
Unchanged
Adjusted EBITDA(1)
$900-$1,025
Unchanged
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 six months ended June 30, 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 Six Months Ended Year Ended
Results June 30, 2020 December 31, 2019
(Dollars in millions)
Net income (GAAP) N/A $
141 $
133
Add back:
Income tax expense N/A 8 52
Income before income taxes
(GAAP)
$95-$220 $
149 $
185
Add back:
Interest expense 100 49 110
Depreciation, amortization
and accretion expense 685 354 702
EBITDA (Non-GAAP)(1)
$880-$1,005 $
552 $
997
Add back or deduct:
(Gain) loss on asset
disposals, net 20 8 19
(Gain) loss on sale of
business and other exit
costs, net (1)
Adjusted EBITDA (Non-
GAAP)(1)
$900-$1,025 $
560 $
1,015
Deduct:
Equity in earnings of
unconsolidated entities 165 89 166
Interest and dividend
income 10 5 17
Adjusted OIBDA (Non-
GAAP)(1)
$725-$850 $
466 $
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 June 30, 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 August 7, 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/1145/36390.
-- Access the call by phone at (833) 968-2187, conference ID: 3255207.
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 5,400 full- and part-time associates as of June 30, 2020. At the end of the second quarter of 2020, 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: 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; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; the state and federal regulatory environment; the ability to attract people of outstanding talent throughout all levels of the organization; conditions in the U.S. telecommunications industry; U.S. Cellular's smaller scale relative to larger competitors; changes in demand, consumer preferences, price competition, or churn rates; advances in technology; the value of assets and investments; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of U.S. Cellular's businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties; cyber-attacks or other breaches of network or information technology security; changes in facts and circumstances that could require U.S. Cellular to record adjustments to amounts reflected in the financial statements; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; pending and future litigation; potential conflicts of interests between TDS and U.S. Cellular. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under "Risk Factors" in the most recent filing of U.S. Cellular's Form 10-K, as updated by any U.S. Cellular Form 10-Q filed subsequent to such Form 10-K.
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 an 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 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019
--- ---
Retail Connections
Postpaid
Total at end of period 4,372,000 4,359,000 4,383,000 4,395,000 4,414,000
Gross additions 129,000 132,000 170,000 163,000 137,000
Feature phones 3,000 2,000 2,000 3,000 5,000
Smartphones 82,000 88,000 128,000 121,000 97,000
Connected devices 44,000 42,000 40,000 39,000 35,000
Net additions (losses) 12,000 (26,000) (12,000) (19,000) (26,000)
Feature phones (8,000) (10,000) (11,000) (11,000) (10,000)
Smartphones 11,000 (10,000) 13,000 9,000 (1,000)
Connected devices 9,000 (6,000) (14,000) (17,000) (15,000)
ARPU(1) $
46.24 $
47.23 $
46.57 $
46.16 $
45.90
ARPA(2) $
120.70 $
122.92 $
120.99 $
119.87 $
119.46
Churn rate(3) 0.89 1.21 1.38 1.38 1.23
% % % % %
Handsets 0.71 0.95 1.11 1.09 0.97
% % % % %
Connected devices 2.24 3.11 3.44 3.44 3.01
% % % % %
Prepaid
Total at end of period 496,000 494,000 506,000 510,000 500,000
Gross additions 62,000 57,000 63,000 70,000 61,000
Net additions (losses) 2,000 (12,000) (3,000) 9,000 (2,000)
ARPU(1) $
34.89 $
34.07 $
34.11 $
34.35 $
34.43
Churn rate(3) 4.05 4.67 4.40 4.03 4.20
% % % % %
Total connections at end of period4 4,919,000 4,903,000 4,941,000 4,957,000 4,967,000
Market penetration at end of period
Consolidated operating population 31,292,000 31,292,000 30,740,000 31,310,000 31,310,000
Consolidated operating penetration5 16
% 16
% 16
% 16
% 16
%
Capital expenditures (millions) $
168 $
236 $
243 $
170 $
195
Total cell sites in service 6,673 6,629 6,578 6,554 6,535
Owned towers 4,208 4,184 4,166 4,123 4,116
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
Six Months Ended
June 30, June 30,
2020 2019 2020 vs. 2020 2019 2020 vs.
2019 2019
(Dollars and shares in millions, except
per share amounts)
Operating revenues
Service $
753 $
757 (1)
%
% $
1,515 $
1,498 1
Equipment sales 220 216 2 422 441 (4)
%
%
Total operating revenues 973 973 - 1,937 1,939 -
Operating expenses
System operations
(excluding Depreciation, % %
amortization and accretion
reported below) 197 193 2 377 369 2
Cost of equipment sold 218 224 (3) 435 458 (5)
% %
Selling, general and 323 344 (6) 659 669 (2)
administrative
% %
Depreciation, amortization 178 177 1 354 345 3
and accretion % %
(Gain) loss on asset 4 5 (19)
disposals, net %
% 8 7 7
(Gain) loss on sale of
business and other exit
costs, net N/M (2) N/M
(Gain) loss on license
sales and exchanges, net N/M (2) N/M
Total operating expenses 920 943 (2) 1,833 1,844 (1)
% %
Operating income 53 30 74 104 95 9
% %
Investment and other income (expense)
Equity in earnings of 44 40 8 89 84 6
unconsolidated entities % %
Interest and dividend 1 5 (79) 5 11 (54)
income
% %
Interest expense (25) (29) 15 (49) (58) 17
% %
Other, net N/M (1) N/M
Total investment and other 20 16 31 45 36 27
income % %
Income before income taxes 73 46 60 149 131 14
% %
Income tax expense 4 14 (71) 8 41 (81)
% %
Net income 69 32 N/M 141 90 56
%
Less: Net income
attributable to %
noncontrolling interests, %
net of tax 1 1 42 2 4 (51)
Net income attributable to $
68 $
31 N/M $
139 $
86 62
U.S. Cellular shareholders %
Basic weighted average 86 87 (1) 86 87 (1)
shares outstanding
% %
Basic earnings per share
attributable to U.S. %
Cellular shareholders $
0.79 $
0.36 N/M $
1.62 $
0.99 63
Diluted weighted average 87 88 (1) 87 88 (1)
shares outstanding
% %
Diluted earnings per share
attributable to U.S. %
Cellular shareholders $
0.78 $
0.35 N/M $
1.59 $
0.97 64
N/M -Percentage change not
meaningful
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2020 2019
---
(Dollars in millions)
Cash flows from operating activities
Net income $
141 $
90
Add (deduct) adjustments to reconcile net income
to net cash flows from operating activities
Depreciation, amortization and
accretion 354 345
Bad debts expense 45 48
Stock-based compensation expense 17 25
Deferred income taxes, net 106 27
Equity in earnings of
unconsolidated entities (89) (84)
Distributions from unconsolidated
entities 90 76
(Gain) loss on asset disposals,
net 8 7
(Gain) loss on sale of business
and other exit costs, net - (2)
(Gain) loss on license sales and
exchanges, net - (2)
Other operating activities - 2
Changes in assets and liabilities from
operations
Accounts receivable 23 3
Equipment installment plans
receivable 22 (11)
Inventory 17 (4)
Accounts payable 55 (7)
Customer deposits and deferred
revenues (10) 8
Accrued taxes (67) 3
Other assets and liabilities (20) (48)
Net cash provided by operating
activities 692 476
Cash flows from investing activities
Cash paid for additions to
property, plant and equipment (471) (282)
Cash paid for licenses (144) (255)
Cash received from investments 1 11
Cash paid for investments (1) (11)
Cash received from divestitures
and exchanges 1 32
Advance payments for license
acquisitions (16)
Other investing activities (1) (1)
Net cash used in investing
activities (631) (506)
Cash flows from financing activities
Issuance of long-term debt 125
Repayment of long-term debt (4) (10)
Common Shares reissued for benefit
plans, net of tax payments (8) (8)
Repurchase of Common Shares (23)
Payment of debt issuance costs (4)
Distributions to noncontrolling
interests (1) (2)
Other financing activities (1) (1)
Net cash provided by (used in)
financing activities 84 (21)
Net increase (decrease) in cash,
cash equivalents and restricted
cash 145 (51)
Cash, cash equivalents and restricted cash
Beginning of period 291 583
End of period $
436 $
532
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
June 30, 2020 December 31, 2019
---
(Dollars in millions)
Current assets
Cash and cash equivalents $
418 $
285
Accounts receivable, net 954 1,010
Inventory, net 145 162
Prepaid expenses 50 50
Income taxes receivable 122 46
Other current assets 29 20
Total current assets 1,718 1,573
Licenses 2,621 2,471
Investments in
unconsolidated entities 445 447
Property, plant and
equipment, net 2,258 2,207
Operating lease right-
of-use assets 914 900
Other assets and deferred
charges 544 566
Total assets $
8,500 $
8,164
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
June 30, 2020 December 31, 2019
---
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt $
4 $
8
Accounts payable 294 304
Customer deposits and deferred revenues 139 148
Accrued taxes 30 30
Accrued compensation 53 76
Short-term operating lease liabilities 112 105
Other current liabilities 65 79
Total current liabilities 697 750
Deferred liabilities and credits
Deferred income tax liability, net 613 507
Long-term operating lease liabilities 874 865
Other deferred liabilities and credits 346 319
Long-term debt, net 1,625 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 1,646 1,629
Treasury shares (70) (70)
Retained earnings 2,657 2,550
Total U.S. Cellular shareholders' equity 4,321 4,197
Noncontrolling interests 13 13
Total equity 4,334 4,210
Total liabilities and equity $
8,500 $
8,164
United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
---
(Dollars in millions)
Cash flows
from
operating
activities
(GAAP) $
350 $
189 $
692 $
476
Less: Cash
paid for
additions
to
property,
plant and
equipment 156 175 471 282
Free cash
flow (Non-
GAAP)(1) $
194 $
14 $
221 $
194
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
