UScellular reports third quarter 2020 results
CHICAGO, Nov. 5, 2020 /PRNewswire/ --
As previously announced, UScellular will hold a teleconference November 6, 2020, at 9:00 a.m. CST. 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 $1,027 million for the third quarter of 2020, versus $1,031 million for the same period one year ago. Service revenues totaled $775 million, versus $774 million for the same period a year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $85 million and $0.97, respectively, for the third quarter of 2020 compared to $23 million and $0.27, respectively, in the same period one year ago.
"Our strong financial performance this quarter is a testament to the value consumers ascribe to wireless services and UScellular's unwavering commitment to customer experience," said Laurent Therivel, UScellular President and CEO. "We generated impressive financial and subscriber results, as churn remained low and we saw growth in retail net additions through an increase in connected devices. We had higher ARPU which, combined with maintaining our operational and cost discipline throughout the quarter, helped to drive increases in profitability compared to the same period one year ago. This puts us in a strong position as we approach a very non-traditional holiday selling season and resulted in an increase in our expectations for full-year financial results.
"We are continuing our network modernization programs. On the 5G front, working with Qualcomm Technologies and Ericsson, we successfully completed an extended range 5G millimeter wave data session over a distance of more than 5 kilometers with speeds ranging from 100 Mbps near the edge to 1.8 Gbps closer to the cell site, significantly expanding the reach and speed from prior tests. This accomplishment will enhance our ability to connect communities with fiber-like speeds and better serve our rural customers, connecting them to education, healthcare and entertainment solutions.
"We also continued our ongoing efforts to enhance our brand relevance by refreshing our logo and brand identity with a modern new look. This is a powerful visual signal of how we're working to expand our brand and business appeal. I am looking forward to continued progress as we close out 2020 and want to thank all of our associates for their support and enthusiasm."
2020 Estimated Results
UScellular's current estimates of full-year 2020 results are shown below. Such estimates represent management's view as of November 5, 2020 and should not be assumed to be current as of any future date. UScellular 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.
2020 Estimated Results
Previous
Current
(Dollars in millions)
Service revenues
$3,000-$3,100
$3,025-$3,075
Adjusted OIBDA(1)
$725-$850
$800-$875
Adjusted EBITDA(1)
$900-$1,025
$975-$1,050
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 nine months ended September 30, 2020, and actual results for the year ended December 31, 2019. In providing 2020 estimated results, UScellular has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, UScellular believes that the impact of income taxes cannot be reasonably predicted; therefore, UScellular is unable to provide such guidance.
Actual Results
2020 Estimated Nine Months Ended Year Ended
Results
September 30, 2020 December 31, 2019
(Dollars in millions)
Net income (GAAP) N/A $
227 $
133
Add back:
Income tax expense N/A 11 52
Income before income taxes (GAAP)
$165-$240 $
238 $
185
Add back:
Interest expense 110 76 110
Depreciation, amortization and accretion expense 680 516 702
EBITDA (Non-GAAP)(1)
$955-$1,030 $
830 $
997
Add back or deduct:
(Gain) loss on asset disposals, net 20 14 19
(Gain) loss on sale of business and other exit costs, net (1)
(Gain) loss on investments (3)
Adjusted EBITDA (Non-GAAP)(1)
$975-$1,050 $
841 $
1,015
Deduct:
Equity in earnings of unconsolidated entities 170 137 166
Interest and dividend income 5 6 17
Adjusted OIBDA (Non-GAAP)(1)
$800-$875 $
698 $
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. UScellular 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 UScellular'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 UScellular'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, 2020, can be found on UScellular's
website at investors.uscellular.com.
Conference Call Information
UScellular will hold a conference call on November 6, 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/1145/38510.
-- Access the call by phone at (833) 968-2187, conference ID: 7289911.
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 UScellular
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 5,300 full- and part-time associates as of September 30, 2020. At the end of the third quarter of 2020, Telephone and Data Systems, Inc. owned 82 percent of UScellular. For more information about UScellular, 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 UScellular's business strategy; uncertainties in UScellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on UScellular 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; UScellular'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 UScellular'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 UScellular 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 UScellular. 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 UScellular's Form 10-K, as updated by any UScellular Form 10-Q filed subsequent to such Form 10-K.
The impact of the COVID-19 pandemic on UScellular's business is uncertain, but depending on its duration and severity it could have a material adverse effect on UScellular's business, financial condition or results of operations.
The impact of the global spread of COVID-19 on UScellular's future operations is uncertain. Public health emergencies, such as COVID-19, pose the risk that UScellular 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. UScellular'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 UScellular. The extent of the impact of COVID-19 on UScellular'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 UScellular, visit: www.uscellular.com
United States Cellular Corporation
Summary Operating Data (Unaudited)
As of or for the Quarter Ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019
--- ---
Retail Connections
Postpaid
Total at end of period 4,401,000 4,372,000 4,359,000 4,383,000 4,395,000
Gross additions 168,000 129,000 132,000 170,000 163,000
Feature phones 4,000 3,000 2,000 2,000 3,000
Smartphones 98,000 82,000 88,000 128,000 121,000
Connected devices 66,000 44,000 42,000 40,000 39,000
Net additions (losses) 28,000 12,000 (26,000) (12,000) (19,000)
Feature phones (8,000) (8,000) (10,000) (11,000) (11,000)
Smartphones 8,000 11,000 (10,000) 13,000 9,000
Connected devices 28,000 9,000 (6,000) (14,000) (17,000)
ARPU(1) $
47.10 $
46.24 $
47.23 $
46.57 $
46.16
ARPA(2) $
123.27 $
120.70 $
122.92 $
120.99 $
119.87
Churn rate(3) 1.06 0.89 1.21 1.38 1.38
% % % % %
Handsets 0.88 0.71 0.95 1.11 1.09
% % % % %
Connected devices 2.35 2.24 3.11 3.44 3.44
% % % % %
Prepaid
Total at end of period 506,000 496,000 494,000 506,000 510,000
Gross additions 65,000 62,000 57,000 63,000 70,000
Net additions (losses) 11,000 2,000 (12,000) (3,000) 9,000
ARPU(1) $
35.45 $
34.89 $
34.07 $
34.11 $
34.35
Churn rate(3) 3.59 4.05 4.67 4.40 4.03
% % % % %
Total connections at end of period4 4,962,000 4,919,000 4,903,000 4,941,000 4,957,000
Market penetration at end of period
Consolidated operating population 31,314,000 31,292,000 31,292,000 30,740,000 31,310,000
Consolidated operating penetration5 16
% 16
% 16
% 16
% 16
%
Capital expenditures (millions) $
216 $
168 $
236 $
243 $
170
Total cell sites in service 6,758 6,673 6,629 6,578 6,554
Owned towers 4,246 4,208 4,184 4,166 4,123
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,
---
2020 2019 2020 2020 2019 2020
vs. 2019 vs. 2019
---
(Dollars and shares in millions, except per share amounts)
Operating revenues
Service $
775 $
774
- $
2,290 $
2,272 1
%
Equipment sales 252 257 (2) 674 698 (3)
% %
Total operating revenues 1,027 1,031
- 2,964 2,970
-
Operating expenses
System operations (excluding Depreciation, amortization and accretion reported below) 203 199 2 580 568 2
% %
Cost of equipment sold 257 266 (4) 692 724 (4)
% %
Selling, general and administrative 335 358 (6) 994 1,027 (3)
% %
Depreciation, amortization and accretion 161 181 (11) 516 524 (2)
% %
(Gain) loss on asset disposals, net 6 5 15 14 13 10
% %
(Gain) loss on sale of business and other exit costs, net - N/M (1) N/M
(Gain) loss on license sales and exchanges, net - 2 N/M N/M
Total operating expenses 962 1,011 (5) 2,796 2,855 (2)
% %
Operating income 65 20 N/M 168 115 46
%
Investment and other income (expense)
Equity in earnings of unconsolidated entities 48 44 10 137 128 7
% %
Interest and dividend income 2 4 (59) 6 14 (55)
% %
Gain (loss) on investments 3 N/M 3 N/M
Interest expense (29) (29)
- (76) (87) 11
%
Total investment and other income 24 19 27 70 55 27
% %
Income before income taxes 89 39 N/M 238 170 40
%
Income tax expense 4 15 (78) 11 55 (80)
% %
Net income 85 24 N/M 227 115 98
%
Less: Net income attributable to noncontrolling interests, net of tax - 1 (28) 3 6 (47)
% %
Net income attributable to UScellular shareholders $
85 $
23 N/M $
224 $
109 N/M
Basic weighted average shares outstanding 86 86 (1) 86 87 (1)
% %
Basic earnings per share attributable to UScellular shareholders $
0.98 $
0.27 N/M $
2.60 $
1.26 N/M
Diluted weighted average shares outstanding 88 88 (1) 87 88 (1)
% %
Diluted earnings per share attributable to UScellular shareholders $
0.97 $
0.27 N/M $
2.56 $
1.24 N/M
N/M - Percentage change not meaningful
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2020 2019
---
(Dollars in millions)
Cash flows from operating activities
Net income $
227 $
115
Add (deduct) adjustments to reconcile net income
to net cash flows from operating activities
Depreciation, amortization and
accretion 516 524
Bad debts expense 52 77
Stock-based compensation expense 25 32
Deferred income taxes, net 158 (34)
Equity in earnings of unconsolidated
entities (137) (128)
Distributions from unconsolidated
entities 118 99
(Gain) loss on asset disposals, net 14 13
(Gain) loss on sale of business and
other exit costs, net - (1)
(Gain) loss on investments (3)
Other operating activities 1 3
Changes in assets and liabilities from operations
Accounts receivable 31 (35)
Equipment installment plans
receivable 13 (42)
Inventory 5 3
Accounts payable 77 (4)
Customer deposits and deferred
revenues (23) (1)
Accrued taxes (102) 81
Accrued interest 14 9
Other assets and liabilities (36) (24)
Net cash provided by operating
activities 950 687
Cash flows from investing activities
Cash paid for additions to property,
plant and equipment (690) (439)
Cash paid for licenses (169) (257)
Cash received from investments 1 29
Cash paid for investments (1) (11)
Cash received from divestitures and
exchanges 1 32
Other investing activities 3 (1)
Net cash used in investing
activities (855) (647)
Cash flows from financing activities
Issuance of long-term debt 625
Repayment of long-term debt (6) (14)
Common Shares reissued for benefit
plans, net of tax payments (12) (8)
Repurchase of Common Shares (23) (21)
Payment of debt issuance costs (20) (1)
Distributions to noncontrolling
interests (2) (3)
Other financing activities - (1)
Net cash provided by (used in)
financing activities 562 (48)
Net increase (decrease) in cash,
cash equivalents and restricted
cash 657 (8)
Cash, cash equivalents and restricted cash
Beginning of period 291 583
End of period $
948 $
575
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
September 30, 2020 December 31, 2019
---
(Dollars in millions)
Current assets
Cash and cash equivalents $
931 $
285
Accounts receivable, net 945 1,010
Inventory, net 157 162
Prepaid expenses 54 50
Income taxes receivable 174 46
Other current assets 28 20
Total current assets 2,289 1,573
Assets held for sale 19
Licenses 2,628 2,471
Investments in unconsolidated entities 467 447
Property, plant and equipment, net 2,322 2,207
Operating lease right-of-use assets 919 900
Other assets and deferred charges 536 566
Total assets $
9,180 $
8,164
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
September 30, 2020 December 31, 2019
---
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt $
2 $
8
Accounts payable 313 304
Customer deposits and deferred revenues 126 148
Accrued taxes 44 30
Accrued compensation 63 76
Short-term operating lease liabilities 113 105
Other current liabilities 69 79
Total current liabilities 730 750
Deferred liabilities and credits
Deferred income tax liability, net 665 507
Long-term operating lease liabilities 877 865
Other deferred liabilities and credits 364 319
Long-term debt, net 2,108 1,502
Noncontrolling interests with redemption features 10 11
Equity
UScellular shareholders' equity
Series A Common and Common Shares, par value $1.00 per share 88 88
Additional paid-in capital 1,654 1,629
Treasury shares (67) (70)
Retained earnings 2,736 2,550
Total UScellular shareholders' equity 4,411 4,197
Noncontrolling interests 15 13
Total equity 4,426 4,210
Total liabilities and equity $
9,180 $
8,164
United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
Three Months Ended Nine Months Ended
September 30, September 30,
---
2020 2019 2020 2019
---
(Dollars in millions)
Cash flows from operating activities (GAAP) $
257 $
211 $
950 $
687
Less: Cash paid for additions to property, plant and equipment 219 157 690 439
Free cash flow (Non-GAAP)(1) $
38 $
54 $
260 $
248
1 Free cash flow is a non-GAAP
financial measure which
UScellular 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
