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U.S. Cellular Reports Fourth Quarter 2012 Results And 2013 Financial Guidance

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CHICAGO, Feb. 26, 2013 /PRNewswire via COMTEX/ -- As previously announced, U.S. Cellular will hold a teleconference Feb. 26, 2013 at 9:30 a.m. CST. Listen to the live call via the Conference Calls page of www.teldta.com or www.uscellular.com.

United States Cellular Corporation /quotes/zigman/244512/quotes/nls/usm USM -3.67% reported service revenues of $1,008.9 million for the fourth quarter of 2012, versus $1,030.0 million for the comparable period one year ago. Net loss attributable to U.S. Cellular shareholders was $39.6 million, or $0.47 per diluted share, for the fourth quarter of 2012. In the fourth quarter of 2011, net income attributable to U.S. Cellular shareholders was $2.8 million, or $0.03 per diluted share.

As previously announced on Nov. 7, 2012, U.S. Cellular reached a definitive agreement to sell its Chicago, St. Louis, central Illinois and three other markets (the "Divestiture Markets") to subsidiaries of Sprint Nextel Corporation /quotes/zigman/240259/quotes/nls/s S +0.17% for $480 million (the "Divestiture Transaction"). The transaction is subject to regulatory approvals and is expected to close in mid-2013. In the fourth quarter of 2012, U.S. Cellular's operating income was reduced by $44.5 million due to divestiture-related costs, including a $10.7 million write-down of assets, $12.6 million in employee-related costs, including severance, and $20 million in accelerated depreciation, amortization and accretion.

The table below provides pro forma performance highlights for U.S. Cellular's Total Consolidated Markets, Divestiture Markets, and Core Markets for the fourth quarter of 2012. Core Markets are the markets that U.S. Cellular will continue to own upon completion of the Divestiture Transaction.

        ($ in millions except ARPU) Total Consolidated Divestiture Markets Core Markets (1) Markets (1) Postpaid gross additions 241,000 23,000 218,000 Postpaid churn 1.83% 3.35% 1.67% Postpaid net additions (losses) (41,000) (25,000) (16,000) Prepaid net additions (losses) 37,000 (1,000) 38,000 Service revenues (1) $1,008.9 $101.4 $907.5 Postpaid ARPU (1) $54.56 $60.91 $53.92




        
        (1) Total Consolidated Markets amounts represent GAAP financial measures and Divestiture Markets and Core Markets amounts represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Divestiture Markets and Core Markets may be useful to investors and other users of its financial information.
        


The following table highlights the performance of the Core Markets for the fourth quarter of 2012 and 2011.





                                                                                     %
        ($ in millions except ARPU)                       Q4 2012       Q4 2011      Change
        Postpaid gross additions                              218,000       209,000      4%
        Postpaid churn                                        1.67%         1.48%        (13%)
        Postpaid net additions (losses)                       (16,000)      (2,000)      (>100%)
        Prepaid net additions                                 38,000        6,000        >100%
        Retail net additions                                  22,000        4,000        >100%
        Service revenues (1)                                  $907.5        $917.5       (1%)
        Postpaid ARPU (1)                                     $53.92        $52.62       2%
        Smartphones sold as % of total devices                62.9%         52.6%        20%
        4G/LTE smartphones as % of total smartphones sold     75%           0%           >100%
        Capital expenditures (1)                              $241          $253         (5%)
        Cell sites in service                                 6,292         6,154        2%
        Owned towers                                          3,847         3,755        2%
        






        
        (1) The Core Markets amounts for Q4 2012 and Q4 2011 represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Core Markets may be useful to investors and other users of its financial information.
        


"Our aggressive sales and marketing strategies in the fourth quarter drove a strong increase in smartphone penetration, and encouraged more customers in more markets to migrate to 4G LTE," said Mary N. Dillon, U.S. Cellular president and CEO. "The announcement of the Divestiture Transaction resulted in an anticipated increase in postpaid churn and lower net additions in the Divestiture Markets. In our Core Markets, however, we had positive net retail additions in the quarter. The improved results were driven by prepaid additions, as postpaid additions continued to be negatively impacted by elevated churn.

"Smartphones were 63 percent of the devices we sold in our Core Markets during the quarter, and the number of 4G LTE smartphones sold nearly doubled from the third quarter. Although revenue from customers increased, overall service revenues declined due to reduced regulatory support revenues and lower roaming revenues as a result of lower negotiated rates. The lower negotiated rates also had a positive effect on roaming expense. Profitability was impacted by the lower service revenues and higher subsidies for 4G LTE smartphones in particular. As customers migrate to the more efficient 4G LTE network, we expect longer-term benefits, including growth in ARPU and lower capital expenditures for our legacy networks."

"We are moving forward rapidly on our strategies to differentiate our outstanding customer experience even further from our competitors. We're integrating and enhancing all of our channels to provide seamless shopping, and looking for more opportunities to expand distribution and be where our customers want to shop. As we continue to invest in our future through expanded 4G LTE access and devices, as well as the implementation of our new billing and operational system, we're also simplifying our operations and processes to increase efficiency and reduce complexity and cost.

"As we move through the regulatory approval process for the Divestiture Transaction, we're maintaining high-quality service and support for our customers in these markets, helping many of our associates to transition to new roles at U.S. Cellular, and preparing for a smooth transition later in 2013."

2013 ESTIMATES

U.S. Cellular's estimates of full-year 2013 results are shown below. Such estimates represent U.S. Cellular's views as of the date of filing of U.S. Cellular's Form 10-K for the year ended December 31, 2012. Such forward--looking statements should not be assumed to be current as of any future date. U.S. Cellular undertakes no duty to update such information whether as a result of new information, future events or otherwise. There can be no assurance that final results will not differ materially from such estimated results.

U.S. Cellular has changed the measures which it uses to present estimates of operating results. U.S. Cellular previously presented Adjusted OIBDA, defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets; and the net gain or loss on asset disposals and exchanges. U.S. Cellular believes Adjusted income before income taxes, as defined below, is a measure which provides a more comprehensive and meaningful view of U.S. Cellular's recurring results of operations.





                                                 2013 Estimated Results (1)
                                                 Core             Divestiture     U.S. Cellular
                                                 Markets (2)      Markets (2)(3)  Consolidated (2)(3)
        (Dollars in millions)
        Service revenues                         $3,600 - $3,700  $165 - $185     $3,765 - $3,885
        Adjusted income before income taxes (4)  $765 - $865      $15 - $35       $780 - $900
        Capital expenditures                     Approx. $600     --              Approx. $600
        






        
        (1) These estimates are based on U.S. Cellular's current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011.  New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges) could affect U.S. Cellular's plans and, therefore, its 2013 estimated results.
        (2) The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets.  As used herein, "Core Markets" represents U.S. Cellular's total Consolidated Markets excluding the Divestiture Markets.  The Core Markets and Divestiture Markets amounts represent non-GAAP financial measures.  U.S. Cellular believes that the Core Markets and Divestiture Markets amounts may be useful to investors and other users of its financial information in evaluating the pro forma results for the Core Markets.
        (3) These estimates assume the Divestiture Transaction closes July 1, 2013.  Actual effects could vary significantly from these estimates as a result of a change in the expected timing of the Divestiture Transaction.
        (4) Adjusted income before income taxes is a non-GAAP financial measure defined as income before:  Income taxes, Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs, and Interest expense. Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity.  U.S. Cellular believes Adjusted income before income taxes is a meaningful measure of U.S. Cellular's operating results before significant recurring non-cash charges, discrete gains and losses and financing charges (Interest expense). The following tables provide a reconciliation of Income before income taxes to Adjusted income before income taxes for 2013 Estimated Results and 2012, 2011and 2010 actual results:
        






        
                                                                        2013 Estimated Results
                                                                        Core                                   Divestiture                            U.S. Cellular
                                                                        Markets (2)                            Markets (2)(3)                         Consolidated (2)(3)
            (Dollars in millions)
            Income before income taxes (5)                              $165-$265                              ($180)-($160)                          ($15)-$105
            Depreciation, amortization and                              Approx. $545                           Approx. $195                           Approx. $740
            accretion expense (6)
            Interest expense                                            Approx. $55                            --                                     Approx. $55
            Adjusted income before income taxes                         $765 - $865                            $15 - $35                              $780 - $900
                                                                        U.S. Cellular Consolidated Actual Results
            Year Ended December 31,                                     2012                                   2011                                   2010
            (Dollars in millions)
            Income before income taxes                                $ 205.1                                $ 312.8                                $ 241.1
            Depreciation, amortization and                              608.6                                  573.6                                  571.0
            accretion expense (6)
            (Gain) loss on sale of business and other exit costs, net   21.0                                   -                                      -
            Interest expense                                            42.4                                   65.6                                   61.6
            Adjusted income before income taxes                       $ 877.1                                $ 952.0                                $ 873.7
        (5) This amount does not include any estimate for (Gain) loss on sale of business and other exit costs, net, as the timing of such amount is not readily estimable.
        (6) The 2013 estimated amounts for depreciation, amortization and accretion expense in the Divestiture Markets include approximately $120 million of incremental accelerated depreciation resulting from the Divestiture Transaction.  The 2012 actual results include $20.1 million of incremental accelerated depreciation resulting from the Divestiture Transaction.
        


Conference Call Information

U.S. Cellular will hold a conference call on Feb. 26, 2013 at 9:30 a.m. CST.

-- Access the live call on the Conference Calls page of uscellular.com or at http://ir.teldta.com/phoenix.zhtml?c=67422&p=irol-eventDetails&EventId=4917451.

-- 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 provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to 5.8 million customers in 26 states. The Chicago-based company had 8,100 full- and part-time associates as of Dec. 31, 2012. At the end of the year, Telephone and Data Systems, Inc. owned 84 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: impacts of the Divestiture Transaction including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transaction and the financial impacts of such transaction; the ability of the company to successfully manage and grow its markets; the overall economy; competition; 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 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; and changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company. 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 ("SEC"), which are incorporated by reference herein.

For more information about U.S. Cellular, visit uscellular.com.





        United States Cellular Corporation
        Total Markets Summary Operating Data (Unaudited)
        Quarter Ended                                                 12/31/2012      9/30/2012       6/30/2012       3/31/2012       12/31/2011
        Total population
                          Consolidated markets (1)                    93,244,000      92,996,000      92,684,000      92,684,000      91,965,000
                          Consolidated operating markets (1)          46,966,000      46,966,000      46,966,000      46,966,000      46,888,000
        Market penetration at end of period
                          Consolidated markets (2)                    6.2%            6.2%            6.3%            6.3%            6.4%
                          Consolidated operating markets (2)          12.3%           12.4%           12.3%           12.4%           12.6%
        All customers
                          Total at end of period                      5,798,000       5,808,000       5,799,000       5,837,000       5,891,000
                          Gross additions                             363,000         364,000         290,000         285,000         306,000
                          Net additions (losses)                      (10,000)        9,000           (38,000)        (49,000)        (41,000)
                          Smartphones sold as a percent               62.9%           53.0%           51.9%           54.1%           52.5%
                          of total devices sold (3)
        Retail customers
                          Total at end of period                      5,557,000       5,561,000       5,542,000       5,570,000       5,608,000
                          Postpaid smartphone penetration (3) (4)     41.8%           38.6%           36.8%           34.4%           30.5%
                          Gross additions                             348,000         350,000         277,000         273,000         298,000
                          Net retail additions (losses) (5)           (4,000)         19,000          (28,000)        (34,000)        (13,000)
                          Net postpaid additions (losses)             (41,000)        (38,000)        (48,000)        (38,000)        (20,000)
                          Net prepaid additions (losses)              37,000          57,000          20,000          4,000           7,000
        Service revenue components (000s)
                          Retail service                          $   886,014     $   884,219     $   889,219     $   888,527     $   882,091
                          Inbound roaming                             76,090          106,132         86,363          80,132          93,353
                          Other                                       46,820          46,019          54,160          55,161          54,601
        Total service revenues (000s)                             $   1,008,924   $   1,036,370   $   1,029,742   $   1,023,820   $   1,030,045
        Total ARPU (6)                                            $   58.00       $   59.57       $   59.05       $   58.21       $   58.13
        Billed ARPU (7)                                           $   50.94       $   50.83       $   50.99       $   50.52       $   49.78
        Postpaid ARPU (8)                                         $   54.56       $   54.34       $   54.42       $   54.00       $   53.35
        Postpaid churn rate (9)                                       1.8%            1.7%            1.6%            1.6%            1.6%
        Capital expenditures (000s)                               $   253,100     $   199,100     $   183,200     $   201,300     $   276,400
        Cell sites in service                                         8,028           7,984           7,932           7,875           7,882
        






        
        (1) Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.
        (2) Market Penetration is 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) Smartphones represent wireless devices which run on an Android(TM), BlackBerry�, or Windows Mobile� operating system, excluding tablets.
        (4) Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.
        (5) Includes net postpaid additions (losses) and net prepaid additions (losses).
        (6) Total ARPU - Average monthly service revenue per user includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.
        (7) Billed ARPU - Average monthly billed revenue per user is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.
        (8) Postpaid ARPU - Average monthly revenue per postpaid user is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.
        (9) Represents the percentage of the postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.
        






        
        United States Cellular Corporation
        Consolidated Statement of Operations Highlights
        Three Months Ended December 31,
        (Unaudited, dollars and shares in thousands, except per share amounts)
                                                                                                                                                           Increase (Decrease)
                                                                                                                         2012             2011             Amount          Percent
        Operating revenues
                                  Service                                                                                $     1,008,924  $     1,030,045  $     (21,121)  (2%)
                                  Equipment sales                                                                              106,282          69,588           36,694    53%
                                                                             Total operating revenues                          1,115,206        1,099,633        15,573    1%
        Operating expenses
                                  System operations (excluding Depreciation, amortization and accretion reported below)        221,169          242,123          (20,954)  (9%)
                                  Cost of equipment sold                                                                       309,182          228,085          81,097    36%
                                  Selling, general and administrative                                                          449,110          467,265          (18,155)  (4%)
                                  Depreciation, amortization and accretion                                                     169,242          141,976          27,266    19%
                                  Loss on asset disposals and exchanges, net                                                   2,121            3,868            (1,747)   (45%)
                                  (Gain) loss on sale of business and other exit costs, net                                    25,170           -                25,170    N/M
                                                                             Total operating expenses                          1,175,994        1,083,317        92,677    9%
        Operating income (loss)                                                                                                (60,788)         16,316           (77,104)  >(100%)
        Investment and other income (expense)
                                  Equity in earnings of unconsolidated entities                                                18,780           18,277           503       3%
                                  Interest and dividend income                                                                 821              929              (108)     (12%)
                                  Gain (loss) on investment                                                                    10               (2,000)          2,010     >(100%)
                                  Interest expense                                                                             (7,121)          (13,709)         6,588     48%
                                  Other, net                                                                                   327              (631)            958       >(100%)
                                                                             Total investment and other income (expense)       12,817           2,866            9,951     >100%
        Income (loss) before income taxes                                                                                      (47,971)         19,182           (67,153)  >(100%)
                                  Income tax expense (benefit)                                                                 (18,647)         11,307           (29,954)  >(100%)
        Net income (loss)                                                                                                      (29,324)         7,875            (37,199)  >(100%)
                                  Less: Net income attributable to noncontrolling interests, net of tax                        (10,298)         (5,074)          (5,224)   >100%
        Net income (loss) attributable to U.S. Cellular shareholders                                                     $     (39,622)   $     2,801      $     (42,423)  >(100%)
        Basic weighted average shares outstanding                                                                              84,568           84,559           9         -
        Basic earnings (loss) per share attributable to U.S. Cellular shareholders                                       $     (0.47)     $     0.03       $     (0.50)    >(100%)
        Diluted weighted average shares outstanding                                                                            84,568           85,005           (437)     (1%)
        Diluted earnings (loss) per share attributable to U.S. Cellular shareholders                                     $     (0.47)     $     0.03       $     (0.50)    >(100%)
        






        
        United States Cellular Corporation
        Consolidated Statement of Operations Highlights
        Twelve Months Ended December 31,
        (Unaudited, dollars and shares in thousands, except per share amounts)
                                                                                                                                                         Increase (Decrease)
                                                                                                                       2012             2011             Amount           Percent
        Operating revenues
                                Service                                                                                $     4,098,856  $     4,053,797  $     45,059     1%
                                Equipment sales                                                                              353,228          289,549          63,679     22%
                                                                           Total operating revenues                          4,452,084        4,343,346        108,738    3%
        Operating expenses
                                System operations (excluding Depreciation, amortization and accretion reported below)        946,805          929,379          17,426     2%
                                Cost of equipment sold                                                                       935,947          791,802          144,145    18%
                                Selling, general and administrative                                                          1,764,933        1,769,701        (4,768)    -
                                Depreciation, amortization and accretion                                                     608,633          573,557          35,076     6%
                                (Gain) loss on asset disposals and exchanges, net                                            18,088           (1,873)          19,961     >(100%)
                                (Gain) loss on sale of business and other exit costs, net                                    21,022           -                21,022     N/M
                                                                           Total operating expenses                          4,295,428        4,062,566        232,862    6%
        Operating income                                                                                                     156,656          280,780          (124,124)  (44%)
        Investment and other income (expense)
                                Equity in earnings of unconsolidated entities                                                90,364           83,566           6,798      8%
                                Interest and dividend income                                                                 3,644            3,395            249        7%
                                Gain (loss) on investment                                                                    (3,718)          11,373           (15,091)   >(100%)
                                Interest expense                                                                             (42,393)         (65,614)         23,221     35%
                                Other, net                                                                                   500              (678)            1,178      >(100%)
                                                                           Total investment and other income (expense)       48,397           32,042           16,355     51%
        Income before income taxes                                                                                           205,053          312,822          (107,769)  (34%)
                                Income tax expense                                                                           63,977           114,078          (50,101)   (44%)
        Net income                                                                                                           141,076          198,744          (57,668)   (29%)
                                Less: Net income attributable to noncontrolling interests, net of tax                        (30,070)         (23,703)         (6,367)    (27%)
        Net income attributable to U.S. Cellular shareholders                                                          $     111,006    $     175,041    $     (64,035)   (37%)
        Basic weighted average shares outstanding                                                                            84,645           84,877           (232)      -
        Basic earnings per share attributable to U.S. Cellular shareholders                                            $     1.31       $     2.06       $     (0.75)     (36%)
        Diluted weighted average shares outstanding                                                                          85,067           85,335           (268)      -
        Diluted earnings per share attributable to U.S. Cellular shareholders                                          $     1.30       $     2.05       $     (0.75)     (37%)
        






        
        United States Cellular Corporation
        Consolidated Balance Sheet Highlights
        (Unaudited, dollars in thousands)
        ASSETS
                                                                       December 31,      December 31,
                                                                       2012              2011
        Current assets
                         Cash and cash equivalents                     $      378,358    $      424,155
                         Short-term investments                               100,676           127,039
                         Accounts receivable from customers and others        445,220           441,821
                         Inventory                                            155,886           127,056
                         Income taxes receivable                              1,612             74,791
                         Prepaid expenses                                     62,560            55,980
                         Net deferred income tax asset                        35,419            31,905
                         Other current assets                                 16,745            10,096
                                                                              1,196,476         1,292,843
        Assets held for sale                                                  216,763           49,647
        Investments
                         Licenses                                             1,456,794         1,470,769
                         Goodwill                                             421,743           494,737
                         Customer lists, net                                  102               314
                         Investments in unconsolidated entities               144,531           138,096
                         Notes and interest receivable--long-term             -                 1,921
                         Long-term investments                                50,305            30,057
                                                                              2,073,475         2,135,894
        Property, plant and equipment
                         In service and under construction                    7,478,428         7,008,449
                         Less: accumulated depreciation                       4,455,840         4,218,147
                                                                              3,022,588         2,790,302
        Other assets and deferred charges                                     78,148            59,290
        Total assets                                                   $      6,587,450  $      6,327,976
        






        
        United States Cellular Corporation
        Consolidated Balance Sheet Highlights
        (Unaudited, dollars in thousands)
        LIABILITIES AND EQUITY
                                                                                               December 31,      December 31,
                                                                                               2012              2011
        Current liabilities
                         Current portion of long-term debt                                     $      92         $      127
                         Accounts payable
                                                      Affiliated                                      10,725            12,183
                                                      Trade                                           310,936           303,779
                         Customer deposits and deferred revenues                                      192,113           181,355
                         Accrued taxes                                                                35,834            34,095
                         Accrued compensation                                                         90,418            69,551
                         Other current liabilities                                                    114,881           121,190
                                                                                                      754,999           722,280
        Liabilities held for sale                                                                     19,594            1,051
        Deferred liabilities and credits
                         Net deferred income tax liability                                            849,818           799,190
                         Other deferred liabilities and credits                                       288,441           248,213
        Long-term debt                                                                                878,858           880,320
        Noncontrolling interests with redemption features                                             493               1,005
        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                                                   1,412,453         1,387,341
                         Treasury shares                                                              (165,724)         (152,817)
                         Retained earnings                                                            2,399,052         2,297,363
                                                      Total U.S. Cellular shareholders' equity        3,733,855         3,619,961
        Noncontrolling interests                                                                      61,392            55,956
                         Total equity                                                                 3,795,247         3,675,917
        Total liabilities and equity                                                           $      6,587,450  $      6,327,976
        






        
        United States Cellular Corporation
        Schedule of Cash and Cash Equivalents and Investments
        (Unaudited, dollars in thousands)
        The following table presents U.S. Cellular's cash and cash equivalents and investments at December 31, 2012 and December 31, 2011.
                                                                  December 31,                           December 31,
                                                                  2012                                   2011
        Cash and cash equivalents                                 $                  378,358             $                  424,155
        Amounts included in short-term investments (1)(2)
                                 Government-backed securities (3)                    100,676                                127,039
        Amounts included in long-term investments (1)(4)
                                 Government-backed securities (3)                    50,305                                 30,057
        Total cash and cash equivalents and investments           $                  529,339             $                  581,251
        






        
        (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. treasury securities and corporate notes guaranteed under the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program.
        (4) Maturities range between 14 and 23 months from the balance sheet date.
        






        
        United States Cellular Corporation
        Consolidated Statement of Cash Flows
        Twelve Months Ended December 31,
        (Unaudited, dollars in thousands)
                                                                                                                   2012            2011
        Cash flows from operating activities
                      Net income                                                                                   $    141,076    $    198,744
                      Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
                                                      Depreciation, amortization and accretion                          608,633         573,557
                                                      Bad debts expense                                                 67,372          62,157
                                                      Stock-based compensation expense                                  21,466          20,183
                                                      Deferred income taxes, net                                        49,244          203,264
                                                      Equity in earnings of unconsolidated entities                     (90,364)        (83,566)
                                                      Distributions from unconsolidated entities                        84,417          91,768
                                                      (Gain) loss on asset disposals and exchanges, net                 18,088          (1,873)
                                                      (Gain) loss on sale of business and other exit costs, net         21,022          -
                                                      (Gain) loss on investment                                         3,718           (11,373)
                                                      Noncash interest expense                                          (1,822)         10,040
                                                      Other operating activities                                        546             102
                      Changes in assets and liabilities from operations
                                                      Accounts receivable                                               (64,816)        (82,175)
                                                      Inventory                                                         (28,786)        (14,640)
                                                      Accounts payable - trade                                          (4,977)         28,410
                                                      Accounts payable - affiliate                                      (1,458)         1,392
                                                      Customer deposits and deferred revenues                           30,353          34,927
                                                      Accrued taxes                                                     73,064          (39,984)
                                                      Accrued interest                                                  167             225
                                                      Other assets and liabilities                                      (27,652)        (3,296)
                                                                                                                        899,291         987,862
        Cash flows from investing activities
                      Cash used for additions to property, plant and equipment                                          (826,400)       (771,798)
                      Cash paid for acquisitions and licenses                                                           (122,690)       (23,773)
                      Cash paid for investments                                                                         (120,000)       (110,000)
                      Cash received for divestitures                                                                    49,932          -
                      Cash received for investments                                                                     125,000         145,250
                      Other investing activities                                                                        (2,453)         718
                                                                                                                        (896,611)       (759,603)
        Cash flows from financing activities
                      Repayment of long-term debt                                                                       (145)           (330,338)
                      Issuance of long-term debt                                                                        -               342,000
                      Common shares reissued for benefit plans, net of tax payments                                     (2,205)         1,935
                      Common shares repurchased                                                                         (20,045)        (62,294)
                      Payment of debt issuance costs                                                                    (514)           (11,400)
                      Distributions to noncontrolling interests                                                         (22,970)        (21,094)
                      Payments to acquire additional interest in subsidiaries                                           (3,167)         -
                      Other financing activities                                                                        569             172
                                                                                                                        (48,477)        (81,019)
        Net increase (decrease) in cash and cash equivalents                                                            (45,797)        147,240
        Cash and cash equivalents
                      Beginning of period                                                                               424,155         276,915
                      End of period                                                                                $    378,358    $    424,155
        






        
        United States Cellular Corporation
        Financial Measures and Reconciliations
        (Unaudited, dollars in thousands)
                                                                                   Three Months Ended December 31,  Twelve Months Ended December 31,
                                                                                          2012         2011                2012         2011
        Service revenues                                                           $      1,008,924  $ 1,030,045    $      4,098,856  $ 4,053,797
        Operating income (loss)                                                           (60,788)     16,316              156,656      280,780
        Add:
                        Depreciation, amortization and accretion                          169,242      141,976             608,633      573,557
                        Loss on impairment of assets                                      -            -                   -            -
                        (Gain) loss on asset disposals and exchanges, net                 2,121        3,868               18,088       (1,873)
                        (Gain) loss on sale of business and other exit costs, net         25,170       -                   21,022       -
                                                     Adjusted OIBDA (1)            $      135,745    $ 162,160      $      804,399    $ 852,464
                                                     Adjusted OIBDA margin (2)            13.5%        15.7%               19.6%        21.0%
                                                                                          2012         2011                2012         2011
        Cash flows from operating activities                                       $      290,857    $ 249,041      $      899,291    $ 987,862
        Deduct:
        Cash used for additions to property, plant and                                    214,969      309,471             826,400      771,798
        equipment
                                                     Free cash flow (3)            $      75,888     $ (60,430)     $      72,891     $ 216,064
        






        
        (1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets (if any); the net gain or loss on asset disposals and exchanges (if any); and the net gain or loss on sale of business and other exit costs (if any).
        (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 loss, and such net loss is included in adjusted OIBDA as a cost of earning service revenues 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. U.S. Cellular believes this measure provides useful information to investors regarding U.S. Cellular's financial condition and results of operations because it highlights certain key cash and non-cash items and their impacts on cash flows from operating activities.
        (3) Free cash flow is defined as cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure. U.S. Cellular believes that free cash flow as reported by U.S. Cellular may be 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.
        


SOURCE United States Cellular Corporation