EX-99.1 2 ex991.htm EX-99.1 ex991.htm - Generated by SEC Publisher for SEC Filing

 

Exhibit 99.1

 

 

As previously announced, U.S. Cellular will hold a teleconference Nov. 4, 2010 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com or uscellular.com.

 

 

 

Contact:     Jane W. McCahon, Vice President, Corporate Relations

                    (312) 592-5379; jane.mccahon@teldta.com

 

                    Julie D. Mathews, Manager, Investor Relations

                    (312) 592-5341; julie.mathews@teldta.com

 

FOR RELEASE: IMMEDIATE

 

U.S. cellular Reports third QUARTER 2010 RESULTS

 

Note: Comparisons are year over year unless otherwise noted.

 

3Q 2010 Highlights

§       Service revenues were $983.5 million.

§       31 percent increase in data revenues to $228.9 million, representing 23 percent of total service revenues compared to 18 percent in 2009.

§       Retail service ARPU (average revenue per unit) increased to $47.12 from $46.97.

§       10 percent increase in diluted earnings per share attributable to U.S. Cellular shareholders.

§       A net loss of 25,000 retail postpaid customers and no change in  prepaid additions.

§       Retail postpaid churn improved to 1.6 percent from 1.7 percent; postpaid customers comprised 94 percent of retail customers.

§       5 percent increase in cell sites in service to 7,524.

§       Repurchased 446,668 common shares for $19.1 million.

 

CHICAGO – Nov. 4, 2010 – United States Cellular Corporation [NYSE:USM] reported service revenues of $983.5 million for the third quarter of 2010, versus $983.9 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $37.4 million and $0.43, respectively, for the third quarter of 2010, compared to $34.3 million and $0.39, respectively, in the comparable period one year ago.  

 

“Our third quarter results reflect a strong increase in data revenues driven by higher levels of smartphone penetration.  We also experienced renewed growth in roaming revenues and maintained our focus on cost control,” said Mary N. Dillon, U.S. Cellular president and CEO. “These results were obtained while our organization was also focused also on the execution of the October 1st launch of The Belief ProjectSM, our set of industry-first programs, including One and Done Contracts and the Belief Rewards loyalty program.

 

“Since the launch, we’ve seen higher-than-expected levels of customer migration to the new, bundled Belief Plans, and we’re confident that as customers experience all the benefits that are built into these plans, they will not only stay with us longer, but choose higher-value plans with additional features. As we build awareness in the wireless marketplace, we expect to see more customers switch from other carriers that don’t offer the same level of value, rewards and overall customer satisfaction. And, in conjunction with the launch of the Belief Project, we upgraded our web site to make it easier for new and existing customers to select the best plans and products for them and manage their accounts online, which should stimulate sales and reduce selling costs over time.

 

“We’ve also bolstered our smartphone lineup significantly over the past few months with three new Android™-powered phones, including the popular Samsung Acclaim™, HTC Desire™ and Samsung Mesmerize™, a Galaxy S™ smartphone. We believe that this strong combination of popular phones, value-packed plans and exclusive services will help us stand out among wireless carriers and improve our growth and profitability over time.”

   

 

 

Guidance

Guidance for the year ending Dec. 31, 2010 as of Nov. 4, 2010 is provided below, compared to the previous guidance provided on Aug. 5, 2010. There can be no assurance that final results will not differ materially from this guidance.

 

  

Current guidance

Previous guidance

Service revenues

$3,925-$3,975 million

$3,925-$4,000 million

Adjusted OIBDA (1)

$800-$850 million

Unchanged

Operating income (2)

$200-$250 million

Unchanged

Depreciation, amortization and accretion (2)

Approx. $600 million

Unchanged

Capital expenditures

Approx. $600 million

Unchanged

 

(1)    Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows.

(2)    The 2010 estimated results include estimated losses on disposals of assets, but does not include an estimate for losses on impairment of assets, since these cannot be predicted.

 

The 2010 benefits and expenses associated with the Belief Project were incorporated into U.S. Cellular’s 2010 financial guidance from the beginning of the year.

 

The foregoing guidance represents the views of management as of Nov. 4, 2010 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events or otherwise.

 

Conference call information

U.S. Cellular will hold a conference call on Nov. 4, 2010 at 9:30 a.m. CDT.

§        Access the live call on the Conference Calls page of uscellular.com at http://www.videonewswire.com/event.asp?id=74003.

§        Access the call by phone at 877/407-8029 (US/Canada) no pass code required.  

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of uscellular.com. The call will be archived on the Conference Calls page of uscellular.com.

 

About U.S. Cellular

United States Cellular Corporation, the nation’s sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to approximately 6.1 million customers in 26 states. The Chicago-based company employed approximately 8,800 full-time equivalent associates as of September 30, 2010. At the end of the quarter, Telephone and Data Systems, Inc. owned 83% of U.S. Cellular.

 

Visit uscellular.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.        

 

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 ability of the company to successfully manage and grow its markets; the economy; competition; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company; and the ability to obtain or maintain roaming arrangements with other carriers. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.

 

2

 

 

 

 

United States Cellular Corporation

Summary Operating Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

9/30/2010

6/30/2010

3/31/2010

12/31/2009

9/30/2009

Total population

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated markets (1)

 

 

 90,468,000

 

 

 90,468,000

 

 

 90,468,000

 

 

 89,712,000

 

 

 85,118,000

 

 

Consolidated operating markets (1)

 

 

 46,546,000

 

 

 46,546,000

 

 

 46,546,000

 

 

 46,306,000

 

 

 46,306,000

 

Market penetration at end of period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated markets (2)

 

 

6.7

%

 

6.8

%

 

6.8

%

 

6.8

%

 

7.2

%

 

Consolidated operating markets (2)

 

 

13.1

%

 

13.2

%

 

13.2

%

 

13.3

%

 

13.2

%

All customers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at end of period

 

 

6,103,000

 

 

6,144,000

 

 

6,147,000

 

 

6,141,000

 

 

6,131,000

 

 

Gross additions

 

 

338,000

 

 

349,000

 

 

358,000

 

 

399,000

 

 

386,000

 

 

Net additions (losses)

 

 

(41,000

)

 

(3,000

)

 

6,000

 

 

10,000

 

 

(24,000

)

Retail customers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at end of period

 

 

 5,750,000

 

 

 5,775,000

 

 

 5,768,000

 

 

 5,744,000

 

 

 5,705,000

 

 

Gross additions

 

 

 301,000

 

 

 307,000

 

 

 305,000

 

 

 354,000

 

 

 351,000

 

 

Net retail additions (losses) (3)

 

 

 (25,000

)

 

 7,000

 

 

 24,000

 

 

 39,000

 

 

 (6,000

)

 

  

Net postpaid additions (losses)

 

 

 (25,000

)

 

 (22,000

)

 

 (9,000

)

 

 26,000

 

 

 8,000

 

 

  

Net prepaid additions (losses)

 

 

 —

 

 

 29,000

 

 

 33,000

 

 

 13,000

 

 

 (14,000

)

Service revenues components (000s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice and other retail service

 

$

 636,912

 

$

 648,565

 

$

 663,759

 

$

 677,107

 

$

 690,576

 

 

Data service (6)

 

 

228,854

 

 

 215,271

 

 

 201,280

 

 

 189,759

 

 

 174,286

 

 

Total retail service

 

$

865,766

 

$

 863,836

 

$

 865,039

 

$

 866,866

 

$

 864,862

 

 

Inbound roaming

 

 

72,901

 

 

 60,902

 

 

 51,942

 

 

 61,728

 

 

 68,767

 

 

Other

 

 

44,836

 

 

 47,838

 

 

 48,027

 

 

 56,814

 

 

 50,289

 

Total service revenues (000s)

 

$

 983,503

 

$

 972,576

 

$

 965,008

 

$

 985,408

 

$

 983,918

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Divided by average customers (000s)

 

 

6,124

 

 

6,151

 

 

6,137

 

 

6,139

 

 

6,138

 

 

Divided by three months in each quarter

 

 

 3

 

 

 3

 

 

 3

 

 

 3

 

 

 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average monthly revenue per unit (4)

 

$

53.53

 

$

52.71

 

$

52.41

 

$

53.51

 

$

53.43

 

 

Voice and other retail service (4)

 

$

34.66

 

$

 35.14

 

$

 36.05

 

$

36.77

 

$

37.51

 

 

Data service (4)(6)

 

$

12.46

 

$

 11.67

 

$

 10.93

 

$

10.30

 

$

9.46

 

 

Total retail service (4)

 

$

47.12

 

$

46.81

 

$

46.98

 

$

47.07

 

$

46.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inbound roaming (4)

 

$

3.97

 

$

3.30

 

$

2.82

 

$

3.35

 

$

3.73

 

 

Other (4)

 

$

2.44

 

$

2.60

 

$

2.61

 

$

3.09

 

$

2.73

 

Postpaid churn rate (5)

 

 

1.6

%

 

1.4

%

 

1.4

%

 

1.6

%

 

1.7

%

Capital expenditures (000s)

 

$

124,700

 

$

133,500

 

$

121,500

 

$

189,000

 

$

128,900

 

Cell sites in service

 

 

7,524

 

 

7,416

 

 

7,310

 

 

7,279

 

 

7,161

 

 

(1)     Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).

(2)     Calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.

(3)     Calculated by adding net postpaid additions (losses) and net prepaid additions (losses).

(4)     Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.

(5)     Calculated by dividing the total postpaid customer disconnects during the quarter by the average postpaid customer base for the quarter.

(6)     Effective for the fourth quarter of 2010, revenues from data products and services will no longer be separately disclosed as the determination of such revenues is increasingly dependent on allocations of bundled service prices to multiple bundled elements.

 

3

 

 

 

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Increase (Decrease)

 

 

 

 

2010

 

2009 (1)

 

Amount

Percent

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service

$

 983,503

 

 

$

 983,918

 

 

$

 (415

)

—

 

 

Equipment sales

 

 77,278

 

 

 

 73,377

 

 

 

 3,901

 

5

%

 

 

Total operating revenues

 

 1,060,781

 

 

 

 1,057,295

 

 

 

 3,486

 

—

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

System operations (excluding Depreciation, amortization and accretion reported below)

 

 218,021

 

 

 

 205,611

 

 

 

 12,410

 

6

%

 

Cost of equipment sold

 

 189,291

 

 

 

 189,354

 

 

 

 (63

)

—

 

 

Selling, general and administrative

 

 446,938

 

 

 

 454,645

 

 

 

 (7,707

)

(2

%)

 

Depreciation, amortization and accretion

 

 144,717

 

 

 

 146,052

 

 

 

 (1,335

)

(1

%)

 

Loss on asset disposals, net

 

 1,981

 

 

 

 2,085

 

 

 

 (104

)

(5

%)

 

 

Total operating expenses

 

 1,000,948

 

 

 

 997,747

 

 

 

 3,201

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 59,833

 

 

 

 59,548

 

 

 

 285

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

 23,971

 

 

 

 23,126

 

 

 

 845

 

4

%

 

Interest and dividend income

 

 1,101

 

 

 

 1,420

 

 

 

 (319

)

(22

%)

 

Interest expense

 

 (15,956

)

 

 

 (19,782

)

 

 

 3,826

 

19

%

 

Other, net

 

 (620

)

 

 

 905

 

 

 

 (1,525

)

>(100

%)

 

 

Total investment and other income

 

 8,496

 

 

 

 5,669

 

 

 

 2,827

 

50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 68,329

 

 

 

 65,217

 

 

 

 3,112

 

5

%

 

Income tax expense

 

 25,051

 

 

 

 25,279

 

 

 

 (228

)

(1

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 43,278

 

 

 

 39,938

 

 

 

 3,340

 

8

%

 

Less: Net income attributable to noncontrolling interests, net of tax

 

 (5,920

)

 

 

 (5,606

)

 

 

 (314

)

(6

%)

Net income attributable to U.S. Cellular shareholders

$

 37,358

 

 

$

 34,332

 

 

$

 3,026

 

9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 85,992

 

 

 

 86,848

 

 

 

 (856

)

(1

%)

Basic earnings per share attributable to U.S. Cellular shareholders

$

0.43

 

 

$

0.40

 

 

$

0.03

 

7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

 86,428

 

 

 

 87,128

 

 

 

 (700

)

(1

%)

Diluted earnings per share attributable to U.S. Cellular shareholders

$

0.43

 

 

$

0.39

 

 

$

0.04

 

10

%

 

(1)    Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

4

 

 

 

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Increase (Decrease)

 

 

 

 

2010

 

2009 (1)

 

Amount

Percent

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service

$

 2,921,087

 

 

$

 2,941,720

 

 

$

 (20,633

)

(1

%)

 

Equipment sales

 

 193,444

 

 

 

 212,062

 

 

 

 (18,618

)

(9

%)

 

 

Total operating revenues

 

 3,114,531

 

 

 

 3,153,782

 

 

 

 (39,251

)

(1

%)

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

System operations (excluding Depreciation, amortization and accretion reported below)

 

 638,677

 

 

 

 600,308

 

 

 

 38,369

 

6

%

 

Cost of equipment sold

 

 512,361

 

 

 

 531,110

 

 

 

 (18,749

)

 

(4

%)

 

Selling, general and administrative

 

 1,321,720

 

 

 

 1,274,261

 

 

 

 47,459

 

4

%

 

Depreciation, amortization and accretion

 

 432,405

 

 

 

 422,707

 

 

 

 9,698

 

2

%

 

Loss on asset disposals, net

 

 8,407

 

 

 

 8,641

 

 

 

 (234

)

(3

%)

 

 

Total operating expenses

 

 2,913,570

 

 

 

 2,837,027

 

 

 

 76,543

 

3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 200,961

 

 

 

 316,755

 

 

 

 (115,794

)

(37

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

 74,418

 

 

 

 73,247

 

 

 

 1,171

 

2

%

 

Interest and dividend income

 

 2,984

 

 

 

 2,648

 

 

 

 336

 

13

%

 

Interest expense

 

 (48,918

)

 

 

 (59,065

)

 

 

 10,147

 

17

%

 

Other, net

 

 (213

)

 

 

 1,183

 

 

 

 (1,396

)

—

 

 

 

Total investment and other income

 

 28,271

 

 

 

 18,013

 

 

 

 10,258

 

57

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 229,232

 

 

 

 334,768

 

 

 

 (105,536

)

(32

%)

 

Income tax expense

 

 86,894

 

 

 

 117,026

 

 

 

 (30,132

)

(26

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 142,338

 

 

 

 217,742

 

 

 

 (75,404

)

(35

%)

 

Less: Net income attributable to noncontrolling interests, net of tax

 

 (16,858

)

 

 

 (17,583

)

 

 

 725

 

 

4

%

Net income attributable to U.S. Cellular shareholders

$

 125,480

 

 

$

 200,159

 

 

$

 (74,679

)

(37

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 86,329

 

 

 

 87,011

 

 

 

 (682

)

(1

%)

Basic earnings per share attributable to U.S. Cellular shareholders

$

1.45

 

 

$

2.30

 

 

$

(0.85

)

(37

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

 86,706

 

 

 

 87,216

 

 

 

 (510

)

(1

%)

Diluted earnings per share attributable to U.S. Cellular shareholders

$

1.45

 

 

$

2.29

 

 

$

(0.84

)

(37

%)

 

(1)    Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

5

 

 

 

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

September 30,

2010 

 

December 31,

2009 (1)

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

 269,292

 

$

 294,411

 

Short-term investments

 

 120,771

 

 

 330

 

Accounts receivable from customers and others

 

 415,107

 

 

 425,057

 

Inventory

 

 119,882

 

 

 152,556

 

Prepaid income taxes

 

 32,086

 

 

 717

 

Prepaid expenses

 

 70,759

 

 

 63,463

 

Net deferred income tax asset

 

 21,570

 

 

 21,570

 

Other current assets

 

 49,111

 

 

 51,013

 

 

 

 1,098,578

 

 

 1,009,117

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

Licenses

 

 1,445,501

 

 

 1,435,000

 

Goodwill

 

 494,737

 

 

 494,737

 

Customer lists

 

 869

 

 

 4,083

 

Investments in unconsolidated entities

 

 177,075

 

 

 161,481

 

Notes and interest receivable – long-term

 

 4,107

 

 

 4,214

 

Long-term investments

 

 46,156

 

 

 —

 

 

 

 2,168,445

 

 

 2,099,515

 

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

 

 

In service and under construction

 

 6,203,085

 

 

 5,884,307

 

Less: accumulated depreciation

 

 3,649,212

 

 

 3,282,969

 

 

 

 2,553,873

 

 

 2,601,338

 

 

 

 

 

 

 

Other assets and deferred charges

 

 38,195

 

 

 38,776

 

 

 

 

 

 

 

Total assets

$

 5,859,091

 

$

 5,748,746

 

(1)     Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

6

 

 

 

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

 

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

2010

 

December 31,

2009 (1)

Current liabilities

 

 

 

 

 

 

 

 

Current portion of long-term debt

$

 91

 

 

$

 76

 

 

Accounts payable

 

 

 

 

 

 

 

 

 

Affiliated

 

 6,291

 

 

 

 14,732

 

 

 

Trade

 

 245,542

 

 

 

 296,288

 

 

Customer deposits and deferred revenues

 

 142,220

 

 

 

 140,248

 

 

Accrued taxes

 

 78,686

 

 

 

 57,507

 

 

Accrued compensation

 

 57,207

 

 

 

 62,242

 

 

Other current liabilities

 

 88,216

 

 

 

 92,884

 

 

 

 

 

 618,253

 

 

 

 663,977

 

 

 

 

 

 

 

 

 

 

 

Deferred liabilities and credits

 

 

 

 

 

 

 

 

Net deferred income tax liability

 

 559,746

 

 

 

 513,994

 

 

Other deferred liabilities and credits

 

 269,333

 

 

 

 262,412

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 867,790

 

 

 

 867,522

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests with mandatory redemption features

 

 791

 

 

 

 727

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

U.S. Cellular shareholders’ equity

 

 

 

 

 

 

 

 

Series A Common and Common Shares, par value $1 per share

 

 88,074

 

 

 

 88,074

 

 

Additional paid-in capital

 

 1,364,266

 

 

 

 1,356,322

 

 

Treasury shares

 

 (97,109

)

 

 

 (69,616

)

 

Retained earnings

 

 2,126,825

 

 

 

 2,013,633

 

 

 

Total U.S. Cellular shareholders’ equity

 

 3,482,056

 

 

 

 3,388,413

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests

 

 61,122

 

 

 

 51,701

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

 3,543,178

 

 

 

 3,440,114

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$

 5,859,091

 

 

$

 5,748,746

 

 

(1)     Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

7

 

 

 

 

United States Cellular Corporation

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)

 

In an effort to improve investment returns, during the third quarter of 2010, U.S. Cellular elected to use a portion of its cash balance to directly purchase government-backed securities, specifically U.S. treasury securities and securities insured by the Federal Deposit Insurance Corporation (“FDIC”).  The maturity dates of such direct investments were staggered in order to maintain cash balances and liquidity at targeted levels.  U.S. Cellular also continues to invest in certificates of deposit that are insured by the FDIC.  The following table presents U.S. Cellular’s cash and cash equivalents; and investments in government-backed securities and certificates of deposit at September 30, 2010 and December 31, 2009.

 

 

September 30,

2010 

 

December 31,

2009 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

269,292

 

$

294,411

Amounts included in short-term investments (1)(2)

 

 

 

 

 

 

 

Government-backed securities (3)

 

 

 

120,521

 

 

 —

 

Certificates of deposit

 

 

 

250

 

 

330

 

 

 

 

$

120,771

 

$

330

Amounts included in long-term investments (1)(4)

 

 

 

 

 

 

 

Government-backed securities (3)

 

 

$

46,156

 

$

 —

 

(1)     Designated as held-to-maturity investments and are recorded at amortized cost on the Consolidated Balance Sheet.

(2)     Maturities are less than twelve months from the respective balance sheet dates.

(3)     Includes U.S. treasuries and corporate notes guaranteed under the FDIC’s Temporary Liquidity Guarantee Program.

(4)     Maturities range between 14 and 25 months from the balance sheet date.

 

8

 

 

 

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

Nine Months Ended September 30,

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

2009 (1)

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

$

 142,338

 

 

$

 217,742

 

 

Add (deduct) adjustments to reconcile net income to net

 

 

 

 

 

 

 

 

 

cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 432,405

 

 

 

 422,707

 

 

 

 

Bad debts expense

 

 56,244

 

 

 

 73,100

 

 

 

 

Stock-based compensation expense

 

 13,539

 

 

 

 13,000

 

 

 

 

Deferred income taxes, net

 

 50,180

 

 

 

 44,486

 

 

 

 

Equity in earnings of unconsolidated entities

 

 (74,418

)

 

 

 (73,247

)

 

 

 

Distributions from unconsolidated entities

 

 59,149

 

 

 

 51,306

 

 

 

 

Loss on asset disposals, net

 

 8,407

 

 

 

 8,641

 

 

 

 

Other operating activities

 

 106

 

 

 

 1,824

 

 

Changes in assets and liabilities from operations

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 (46,293

)

 

 

 (106,380

)

 

 

 

Inventory

 

 32,673

 

 

 

 (4,509

)

 

 

 

Accounts payable - trade

 

 (50,720

)

 

 

 (13,432

)

 

 

 

Accounts payable - affiliate

 

 (8,440

)

 

 

 (980

)

 

 

 

Customer deposits and deferred revenues

 

 1,972

 

 

 

 (6,185

)

 

 

 

Accrued taxes

 

 (19,491

)

 

 

 68,695

 

 

 

 

Accrued interest

 

 9,295

 

 

 

 9,787

 

 

 

 

Other assets and liabilities

 

 (22,933

)

 

 

 (68,861

)

 

 

 

 

 

 584,013

  

 

 

 637,694

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 (379,692

)

 

 

 (357,770

)

 

Cash paid for acquisitions and licenses

 

 (10,501

)

 

 

 (12,527

)

 

Cash paid for investments

 

 (190,250

)

 

 

 (275

)

 

Cash received for investments

 

 25,330

 

 

 

 —

 

 

Other investing activities

 

 656

  

 

 

 1,682

 

 

 

 

 

 

 (554,457

)  

 

 

 (368,890

 )

Cash flows from financing activities

 

 

 

 

 

 

 

Common shares reissued for benefit plans, net of tax payments

 

 738

 

 

 

 (119

)

 

Common shares repurchased

 

 (40,520

)

 

 

 (24,283

)

 

Payment of debt issuance costs

 

 —

 

 

 

 (4,416

)

 

Distributions to noncontrolling interests

 

 (5,828

)

 

 

 (5,855

)

 

Other financing activities

 

 (9,065

)

 

 

 (233

) 

 

 

 

 

 

 (54,675

)

 

 

 (34,906

)

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 (25,119

)

 

 

 233,898

 

 

 

 

 

 

 

 

 

  

 Cash and cash equivalents

 

 

 

 

 

 

 

Beginning of period

 

 294,411

 

 

 

 170,996

 

 

End of period

$

 269,292

 

 

$

 404,894

 

 

(1)     Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

9

 

 

 

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2010

2009 (5)

 

2010

 

2009 (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

983,503

 

$

983,918 

 

 

$

2,921,087 

 

$

2,941,720 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

59,833

 

 

59,548 

 

 

 

200,961 

 

 

316,755 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

144,717

 

 

146,052 

 

 

 

432,405 

 

 

422,707 

 

Loss on asset disposals

 

 

1,981

 

  

2,085 

 

 

 

8,407 

 

 

 

8,641 

 

 

 

Adjusted OIBDA (1)(4)

 

$

206,531

 

$

207,685 

 

 

$

641,773 

 

 

$

748,103 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted OIBDA margin (2)

 

 

21.0

%

 

 

21.1

%

 

 

22.0

%

 

 

25.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

$

180,307

 

$

264,571 

 

 

$

584,013 

 

$

637,694 

Deduct:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

124,688

 

 

128,868 

 

 

 

379,692 

 

 

 

357,770 

 

 

 

Free cash flow (3)

 

$

55,619

 

$

135,703 

 

 

$

204,321 

 

 

$

279,924 

 

 

(1)    Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization, and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow.  This measure should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows.

(2)    Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues. Equipment revenues are excluded from the denominator of the calculation since equipment is generally sold at a net negative margin, and the equipment subsidy is effectively a cost for purposes of assessing business results.  U.S. Cellular believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular’s business results.  Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.

(3)    Free cash flow is defined as cash flows from operating activities minus capital expenditures. Free cash flow is a non-GAAP financial measure.  U.S. Cellular believes that free cash flow as reported by U.S. Cellular is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

(4)    Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period.  U.S. Cellular does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.

(5)    Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

10

 

 

 

 

Revision of Prior Period Amounts

 

In preparing its financial statements for the three months ended March 31, 2010, U.S. Cellular discovered certain errors related to accounting for operating revenues and sales tax liabilities. The quantification of these errors was subsequently refined during the second quarter of 2010. These errors resulted in the overstatement of operating revenues and understatement of sales tax liabilities for the years ended December 31, 2009, 2008, 2007, and the three months ended March 31, 2010. In addition to recording these adjustments, U.S. Cellular recorded other adjustments to prior-period amounts to correct other immaterial items. In accordance with SEC Staff Accounting Bulletin Nos. 99 and 108 (“SAB 99 and SAB 108”), U.S. Cellular evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports was not required. However, if the adjustments to correct the cumulative errors had been recorded in the first or second quarter of 2010, U.S. Cellular believes the impact would have been significant to those respective periods and would impact comparisons to prior periods. As permitted by SAB 108, U.S. Cellular revised in the current filing its comparative consolidated financial statements for these immaterial amounts. In addition, on August 5, 2010, U.S. Cellular filed a Current Report on Form 8-K (Items 8.01 and 9.01) with the SEC to revise financial statements and other financial information previously included in its Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the period ended March 31, 2010.  Such Form 8-K contains revisions to the December 31, 2009 Consolidated Balance Sheet, originally filed on February 25, 2010 in TDS’ Annual Report on Form 10-K.  Also, in accordance with SAB 108, the Consolidated Balance Sheet, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the following comparative periods have been revised as follows: 

 

Consolidated Balance Sheet — September 30, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As previously

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

reported (1)

 

Adjustment

 

Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable - Due from customers

$

 338,852

 

 

$

 3,817

 

 

$

 342,669

 

 

Prepaid expenses

 

 63,020

 

 

 

 8,413

 

 

 

 71,433

 

 

Total current assets

 

 1,114,320

 

 

 

 12,230

 

 

 

 1,126,550

 

 

Total assets

 

 5,841,825

 

 

 

 12,230

 

 

 

 5,854,055

 

 

Customer deposits and deferred revenues

 

 146,224

 

 

 

 (2,241

)

 

 

 143,983

 

 

Accrued taxes

 

 56,500

 

 

 

 23,193

 

 

 

 79,693

 

 

Total current liabilities

 

 615,967

 

 

 

 20,952

 

 

 

 636,919

 

 

Other deferred liabilities and credits

 

 250,762

 

 

 

 1,314

 

 

 

 252,076

 

 

Total deferred liabilities and credits

 

 769,007

 

 

 

 1,314

 

 

 

 770,321

 

 

Retained earnings

 

 2,020,710

 

 

 

 (10,036

)

 

 

 2,010,674

 

 

Total U.S. Cellular shareholders’ equity

 

 3,398,416

 

 

 

 (10,036

)

 

 

 3,388,380

 

 

Total equity

 

 3,458,591

 

 

 

 (10,036

)

 

 

 3,448,555

 

 

Total liabilities and equity

 

 5,841,825

 

 

 

 12,230

 

 

 

 5,854,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Operations — Three Months Ended September 30, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As previously

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share amounts)

reported (1)

 

Adjustment

 

Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

$

 984,923

 

 

$

 (1,005

)

 

$

 983,918

 

 

Total operating revenues

 

 1,058,300

 

 

 

 (1,005

)

 

 

 1,057,295

 

 

System operations expenses (excluding Depreciation, amortization and accretion)

 

 205,458

 

 

 

 153

 

 

 

 205,611

 

 

Selling, general and administrative expenses

 

 454,839

 

 

 

 (194

)

 

 

 454,645

 

 

Depreciation, amortization and accretion

 

 147,586

 

 

 

 (1,534

)

 

 

 146,052

 

 

Loss on asset disposals, net

 

 3,371

 

 

 

 (1,286

)

 

 

 2,085

 

 

Total operating expenses

 

 1,000,608

 

 

 

 (2,861

)

 

 

 997,747

 

 

Operating income

 

 57,692

 

 

 

 1,856

 

 

 

 59,548

 

 

Interest expense

 

 (19,358

)

 

 

 (424

)

 

 

 (19,782

)

 

Total investment and other income (expense)

 

 6,093

 

 

 

 (424

)

 

 

 5,669

 

 

Income before income taxes

 

 63,785

 

 

 

 1,432

 

 

 

 65,217

 

 

Income tax expense

 

 22,541

 

 

 

 2,738

 

 

 

 25,279

 

 

Net income

 

 41,244

 

 

 

 (1,306

)

 

 

 39,938

 

 

Net income attributable to U.S. Cellular shareholders

 

 35,638

 

 

 

 (1,306

)

 

 

 34,332

 

 

Basic earnings per share attributable to U.S. Cellular shareholders

 

 0.41

 

 

 

 (0.01

)

 

 

 0.40

 

 

Diluted earnings per share attributable to U.S. Cellular shareholders

 

 0.41

 

 

 

 (0.02

)

 

 

 0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

Consolidated Statement of Operations — Nine Months Ended September 30, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As previously

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share amounts)

reported (1)

 

Adjustment

 

Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

$

 2,941,552

 

 

$

 168

 

 

$

 2,941,720

 

 

Total operating revenues

 

 3,153,614

 

 

 

 168

 

 

 

 3,153,782

 

 

System operations expenses (excluding Depreciation, amortization and accretion)

 

 600,267

 

 

 

 41

 

 

 

 600,308

 

 

Selling, general and administrative expenses

 

 1,277,357

 

 

 

 (3,096

)

 

 

 1,274,261

 

 

Depreciation, amortization and accretion

 

 423,851

 

 

 

 (1,144

)

 

 

 422,707

 

 

Loss on asset disposals, net

 

 7,648

 

 

 

 993

 

 

 

 8,641

 

 

Total operating expenses

 

 2,840,233

 

 

 

 (3,206

)

 

 

 2,837,027

 

 

Operating income

 

 313,381

 

 

 

 3,374

 

 

 

 316,755

 

 

Interest expense

 

 (57,767

)

 

 

 (1,298

)

 

 

 (59,065

)

 

Total investment and other income (expense)

 

 19,311

 

 

 

 (1,298

)

 

 

 18,013

 

 

Income before income taxes

 

 332,692

 

 

 

 2,076

 

 

 

 334,768

 

 

Income tax expense

 

 111,521

 

 

 

 5,505

 

 

 

 117,026

 

 

Net income

 

 221,171

 

 

 

 (3,429

)

 

 

 217,742

 

 

Net income attributable to U.S. Cellular shareholders

 

 203,588

 

 

 

 (3,429

)

 

 

 200,159

 

 

Basic earnings per share attributable to U.S. Cellular shareholders

 

 2.34

 

 

 

 (0.04

)

 

 

 2.30

 

 

Diluted earnings per share attributable to U.S. Cellular shareholders

 

 2.33

 

 

 

 (0.04

)

 

 

 2.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows — Nine Months Ended September 30, 2009

 

 

 

 

 

 

As previously

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

reported (1)

 

Adjustment

 

Revised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

 221,171

 

 

$

 (3,429

)

 

$

 217,742

 

 

Depreciation, amortization and accretion

 

 423,851

 

 

 

 (1,144

)

 

 

 422,707

 

 

Deferred income taxes, net

 

 44,429

 

 

 

 57

 

 

 

 44,486

 

 

Loss on asset disposals, net

 

 7,648

 

 

 

 993

 

 

 

 8,641

 

 

Change in accounts receivable

 

 (101,263

)

 

 

 (5,117

)

 

 

 (106,380

)

 

Change in customer deposits and deferred revenues

 

 (4,858

)

 

 

 (1,327

)

 

 

 (6,185

)

 

Change in accrued taxes

 

 58,139

 

 

 

 10,556

 

 

 

 68,695

 

 

Change in other assets and liabilities

 

 (68,272

)

 

 

 (589

)

 

 

 (68,861

)

 

Cash flows from operating activities

 

 637,694

 

 

 

 —

 

 

 

 637,694

 

 

(1)     In Quarterly Report on Form 10-Q for the period ended September 30, 2009 filed on November 5, 2009.

 

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