U.S. Cellular Reports Third Quarter 2012 Results

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Announces Transaction to Exit Certain Midwest Markets

CHICAGO, Nov. 7, 2012 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

3Q 2012 Highlights

  • Retail gross additions increased 23 percent resulting in a net gain of 19,000 retail customers, compared to a net loss of 23,000 retail customers.
  • Postpaid gross additions increased 7 percent and postpaid churn increased to 1.7 percent, resulting in a net loss of 38,000 postpaid customers in the quarter.  Postpaid customers comprised 93 percent of retail customers.
  • Prepaid gross additions increased 71 percent, driven by the introduction of U Prepaid in select Walmart stores, and prepaid churn decreased to 5.9 percent, resulting in a net increase of 57,000 prepaid customers in the quarter.
  • Total revenues increased 3 percent; service revenues remained steady at $1,036.4 million.
  • Postpaid ARPU (average revenue per user) increased 4 percent to $54.34 from $52.41; total ARPU increased 3 percent to $59.57 from $58.09.
  • Postpaid smartphone customers increased to 38.6 percent of customers from 26.2 percent. Smartphones as a percent of total devices sold increased to 53.0 percent from 39.9 percent; 50 percent of smartphones sold were 4G.
  • Cell sites in service increased 2 percent to 7,984, of which 4,545 are owned towers.
  • 4G LTE network now covers 30 percent of customers; expect to reach 58 percent of customers by year end.

As previously announced, U.S. Cellular will hold a teleconference Nov. 7, 2012 at 7:30 a.m. CST. Interested parties may listen to the call live by accessing the Investor Relations page of www.uscellular.com or www.teldta.com.

United States Cellular Corporation (NYSE:USM) reported service revenues of $1,036.4 million for the third quarter of 2012 and $1,036.6 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $35.5 million and $0.42, respectively, for the third quarter of 2012, compared to $62.1 million and $0.73, respectively, in the comparable period one year ago.

"We achieved some positive milestones in the quarter, including retail customer growth driven by strong results in the prepaid segment of our business, and migration of customers to our 4G LTE network," said Mary N. Dillon, U.S. Cellular president and CEO, "though postpaid churn remained elevated and profitability was impacted by device subsidies and the expected decline in regulatory support.

"Sales of our U Prepaid service at Walmart drove prepaid net additions. We're now leveraging this important distribution channel to offer postpaid service in more than 400 Walmart stores, and we'll continue to explore new opportunities to bring our services and products to more customers.

"We increased gross postpaid customers seven percent through effective marketing and sales programs such as our new Hello Better advertising campaign and by offering high-demand devices like the Samsung Galaxy S® III, though our postpaid churn rate remained high. Profitability declined, however, as we incurred higher subsidies to encourage adoption of 4G LTE devices, which represented 50 percent of smartphone sales. While the cost to subsidize these devices has a short-term impact on profitability, we expect longer-term benefits as customers migrate to the more efficient 4G LTE network, including growth in ARPU and lower capital expenditures for our legacy networks."

U.S. Cellular Strategic Actions

In a separate release, U.S. Cellular also announced today two strategic actions designed to increase focus on markets where it has strong positions and streamline operations to increase overall efficiency and effectiveness. The company has entered into a definitive agreement with Sprint, who will purchase its customers and PCS spectrum in certain Midwest markets. U.S. Cellular will also transition the operations of its Bolingbrook, Ill., customer care center to an existing vendor partner. Further information can be found on the U.S. Cellular Investor Relations website.

Guidance for year ending Dec. 31, 2012                             

Guidance for the year ending Dec. 31, 2012, as of Nov. 7, 2012, before the effects of the Sprint Transaction is provided below, compared to the previous guidance provided on Aug. 3, 2012. 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 this guidance. 

 

2012 Estimated Results (1)

 

Previous Estimates (2)

Service revenues

$4,075-$4,125 million

 

$4,050-$4,150 million

Operating income (3)

$200-$250 million

 

$200-$300 million

Depreciation, amortization and accretion expenses,

     

   and impairment of assets and net gain

     

   or loss on asset disposals and exchanges (3)

Approx. $600 million

 

Unchanged

Adjusted OIBDA (3) (4)

$800-$850 million

 

$800-$900 million

Capital expenditures

Approx. $850 million

 

Unchanged

       

(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 customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges) could affect U.S. Cellular's plans and, therefore, its 2012 estimated results. These estimates are before the effects of the definitive agreement signed with Sprint, who will purchase U.S. Cellular customers and PCS Spectrum in certain Midwest markets. The Company expects to incur incremental operating expenses in the fourth quarter of 2012 in the range of $30 to $60 million for severance, incremental accelerated depreciation, asset write-downs and other costs related to this transaction, which will decrease Operating income, increase Depreciation, amortization and accretion expenses, and impairment of assets and net gain or loss on asset disposals and exchanges, and decrease OIBDA.   

(2)

The 2012 Estimated Results as disclosed in U.S. Cellular's Quarterly Report on Form 10-Q for the period ended June 30, 2012.

(3)

The 2012 Estimated Results do not include any estimate for unrecognized net gains or losses related to disposals and exchanges of assets or losses on impairment of assets (since such transactions and their effects are uncertain).

(4)

Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets (if any); and the net gain or loss on asset disposals and exchanges (if any).  Adjusted OIBDA excludes the loss on impairment of assets (if any) and net gain or loss on asset disposals and exchanges (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; such gains or losses may occur in the future.

 

Adjusted OIBDA may also be commonly referred to by management as operating cash flow. 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. This amount should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows.

 

Conference call information

U.S. Cellular will hold a conference call on Nov. 7, 2012 at 7:30 a.m. CST.

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

About U.S. Cellular

United States Cellular Corporation, the nation's seventh-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to approximately 5.8 million customers in 26 states. The Chicago-based company employed approximately 8,400 people as of Sept. 30, 2012. At the end of the third quarter of 2012, Telephone and Data Systems, Inc. owned 84 percent of U.S. Cellular.

Visit www.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: impacts of the Sprint Transaction including, but not limited to, the ability to obtain regulatory approval, 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; 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.

United States Cellular Corporation

Summary Operating Data (Unaudited)

                               

Quarter Ended

 

9/30/2012

   

6/30/2012

   

3/31/2012

   

12/31/2011

   

9/30/2011

Total population

                           
 

Consolidated markets (1)

 

92,996,000

   

92,684,000

   

92,684,000

   

91,965,000

   

91,965,000

 

Consolidated operating markets (1)

 

46,966,000

   

46,966,000

   

46,966,000

   

46,888,000

   

46,888,000

Market penetration at end of period

                           
 

Consolidated markets (2)

 

6.2%

   

6.3%

   

6.3%

   

6.4%

   

6.5%

 

Consolidated operating markets (2)

 

12.4%

   

12.3%

   

12.4%

   

12.6%

   

12.7%

All customers

                           
 

Total at end of period

 

5,808,000

   

5,799,000

   

5,837,000

   

5,891,000

   

5,932,000

 

Gross additions

 

364,000

   

290,000

   

285,000

   

306,000

   

299,000

 

Net additions (losses)

 

9,000

   

(38,000)

   

(49,000)

   

(41,000)

   

(36,000)

 

Smartphones sold as a percent of

                           
 

    total devices sold (3)

 

53.0%

   

51.9%

   

54.1%

   

52.5%

   

39.9%

Retail customers

                           
 

Total at end of period

 

5,561,000

   

5,542,000

   

5,570,000

   

5,608,000

   

5,621,000

 

Smartphone penetration (3) (4)

 

38.6%

   

36.8%

   

34.4%

   

30.5%

   

26.2%

 

Gross additions

 

350,000

   

277,000

   

273,000

   

298,000

   

284,000

 

Net retail additions (losses) (5)

 

19,000

   

(28,000)

   

(34,000)

   

(13,000)

   

(23,000)

 

      Net postpaid additions (losses)

 

(38,000)

   

(48,000)

   

(38,000)

   

(20,000)

   

(34,000)

 

      Net prepaid additions (losses)

 

57,000

   

20,000

   

4,000

   

7,000

   

11,000

Service revenue components (000s)

                           
 

Retail service

$

884,219

 

$

889,219

 

$

888,527

 

$

882,091

 

$

871,199

 

Inbound roaming

 

106,132

   

86,363

   

80,132

   

93,353

   

107,810

 

Other

 

46,019

   

54,160

   

55,161

   

54,601

   

57,600

Total service revenues (000s)

$

1,036,370

 

$

1,029,742

 

$

1,023,820

 

$

1,030,045

 

$

1,036,609

Total ARPU (6)

$

59.57

 

$

59.05

 

$

58.21

 

$

58.13

 

$

58.09

Billed ARPU (7)

$

50.83

 

$

50.99

 

$

50.52

 

$

49.78

 

$

48.82

Postpaid ARPU (8)

$

54.34

 

$

54.42

 

$

54.00

 

$

53.35

 

$

52.41

Postpaid churn rate (9)

 

1.7%

   

1.6%

   

1.6%

   

1.6%

   

1.5%

Capital expenditures (000s)

$

199,100

 

$

183,200

 

$

201,300

 

$

276,400

 

$

248,000

Cell sites in service

 

7,984

   

7,932

   

7,875

   

7,882

   

7,828

   

(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™, 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 September 30,

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

                                   
                       

      Increase (Decrease)

       

2012

 

2011

 

Amount

 

Percent

Operating revenues

                           
 

Service

$

1,036,370

   

$

1,036,609

   

$

(239)

     

 

Equipment sales

 

103,987

     

73,830

     

30,157

     

41%

   

Total operating revenues

 

1,140,357

     

1,110,439

     

29,918

     

3%

                                   

Operating expenses

                           
 

System operations (excluding Depreciation,

  amortization and accretion reported below)

 

249,245

     

241,852

     

7,393

     

3%

 

Cost of equipment sold

 

248,029

     

196,229

     

51,800

     

26%

 

Selling, general and administrative

 

438,526

     

438,774

     

(248)

     

 

Depreciation, amortization and accretion

 

145,151

     

141,664

     

3,487

     

2%

 

(Gain) loss on asset disposals and exchanges, net

 

11,327

     

(9,700)

     

21,027

     

>100%

   

Total operating expenses

 

1,092,278

     

1,008,819

     

83,459

     

8%

                                   

Operating income

 

48,079

     

101,620

     

(53,541)

     

(53%)

                                   

Investment and other income (expense)

                           
 

Equity in earnings of unconsolidated entities

 

24,816

     

21,929

     

2,887

     

13%

 

Interest and dividend income

 

935

     

869

     

66

     

8%

 

Interest expense

 

(9,501)

     

(11,522)

     

2,021

     

18%

 

Other, net

 

200

     

(97)

     

297

     

>100%

   

Total investment and other income (expense)

 

16,450

     

11,179

     

5,271

     

47%

                                   

Income before income taxes

 

64,529

     

112,799

     

(48,270)

     

(43%)

 

Income tax expense

 

22,389

     

43,292

     

(20,903)

     

(48%)

                                   

Net income

 

42,140

     

69,507

     

(27,367)

     

(39%)

 

Less: Net income attributable to noncontrolling

  interests, net of tax

 

(6,689)

     

(7,367)

     

678

     

9%

Net income attributable to U.S. Cellular

  shareholders

$

35,451

   

$

62,140

   

$

(26,689)

     

(43%)

                               

Basic weighted average shares outstanding

 

84,737

     

84,547

     

190

     

Basic earnings per share attributable to

  U.S. Cellular shareholders

$

0.42

   

$

0.73

   

$

(0.31)

     

(42%)

                                   

Diluted weighted average shares outstanding

 

85,152

     

84,940

     

212

     

Diluted earnings per share attributable to

  U.S. Cellular shareholders

$

0.42

   

$

0.73

   

$

(0.31)

     

(42%)

 
 
 

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)

 

2012

 

2011

 

Amount

 

Percent

Operating revenues

                           
 

Service

$

3,089,932

   

$

3,023,752

   

$

66,180

     

2%

 

Equipment sales

 

246,946

     

219,961

     

26,985

     

12%

   

Total operating revenues

 

3,336,878

     

3,243,713

     

93,165

     

3%

                                   

Operating expenses

                           
 

System operations (excluding Depreciation,

  amortization and accretion reported below)

 

725,636

     

687,256

     

38,380

     

6%

 

Cost of equipment sold

 

626,765

     

563,717

     

63,048

     

11%

 

Selling, general and administrative

 

1,315,823

     

1,302,436

     

13,387

     

1%

 

Depreciation, amortization and accretion

 

439,391

     

431,581

     

7,810

     

2%

 

(Gain) loss on asset disposals and exchanges, net

 

11,819

     

(5,741)

     

17,560

     

>100%

   

Total operating expenses

 

3,119,434

     

2,979,249

     

140,185

     

5%

                                   

Operating income

 

217,444

     

264,464

     

(47,020)

     

(18%)

                                   

Investment and other income (expense)

                           
 

Equity in earnings of unconsolidated entities

 

71,584

     

65,289

     

6,295

     

10%

 

Interest and dividend income

 

2,823

     

2,466

     

357

     

14%

 

Gain (loss) on investment

 

(3,728)

     

13,373

     

(17,101)

     

>(100)%

 

Interest expense

 

(35,272)

     

(51,905)

     

16,633

     

32%

 

Other, net

 

173

     

(47)

     

220

     

>100%

   

Total investment and other income (expense)

 

35,580

     

29,176

     

6,404

     

22%

                                   

Income before income taxes

 

253,024

     

293,640

     

(40,616)

     

(14%)

 

Income tax expense

 

82,624

     

102,771

     

(20,147)

     

(20%)

                                   

Net income

 

170,400

     

190,869

     

(20,469)

     

(11%)

 

Less: Net income attributable to noncontrolling

  interests, net of tax

 

(19,772)

     

(18,629)

     

(1,143)

     

(6%)

Net income attributable to U.S. Cellular

  shareholders

$

150,628

   

$

172,240

   

$

(21,612)

     

(13%)

                                   

Basic weighted average shares outstanding

 

84,671

     

84,984

     

(313)

     

Basic earnings per share attributable to

  U.S. Cellular shareholders

$

1.78

   

$

2.03

   

$

(0.25)

     

(12%)

                                   

Diluted weighted average shares outstanding

 

85,090

     

85,448

     

(358)

     

Diluted earnings per share attributable to

  U.S. Cellular shareholders

$

1.77

   

$

2.02

   

$

(0.25)

     

(12%)

   
   
   

United States Cellular Corporation

Consolidated Balance Sheet Highlights

 

(Unaudited, dollars in thousands)

 
                     

ASSETS

 
                     
     

September 30,

 

December 31,

 
     

2012

 

2011

 

Current assets

               
 

Cash and cash equivalents

$

409,579

   

$

424,155

   
 

Short-term investments

 

140,494

     

127,039

   
 

Accounts receivable from customers and others

 

463,785

     

441,821

   
 

Inventory

 

196,523

     

127,056

   
 

Income taxes receivable

 

2,280

     

74,791

   
 

Prepaid expenses

 

60,631

     

55,980

   
 

Net deferred income tax asset

 

37,868

     

31,905

   
 

Other current assets

 

15,993

     

10,096

   
   

1,327,153

     

1,292,843

   
                 

Assets held for sale

 

     

49,647

   
                 

Investments

               
 

Licenses

 

1,531,873

     

1,470,769

   
 

Goodwill

 

494,737

     

494,737

   
 

Customer lists, net

 

135

     

314

   
 

Investments in unconsolidated entities

 

162,012

     

138,096

   
 

Notes and interest receivable – long-term

 

     

1,921

   
 

Long-term investments

 

10,171

     

30,057

   
   

2,198,928

     

2,135,894

   
                 

Property, plant and equipment, net

               
 

In service and under construction

 

7,341,632

     

7,008,449

   
 

Less: accumulated depreciation

 

4,406,847

     

4,218,147

   
   

2,934,785

     

2,790,302

   
                 

Other assets and deferred charges

 

75,482

     

59,290

   
                 

Total assets

$

6,536,348

   

$

6,327,976

   
 
 
 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

                         

LIABILITIES AND EQUITY

                         
           

September 30,

 

December 31,

           

2012

 

2011

Current liabilities

             
 

Current portion of long-term debt

$

127

   

$

127

 
 

Accounts payable

             
   

Affiliated

 

7,398

     

12,183

 
   

Trade

 

250,681

     

303,779

 
 

Customer deposits and deferred revenues

 

208,042

     

181,355

 
 

Accrued taxes

 

60,695

     

34,095

 
 

Accrued compensation

 

52,200

     

69,551

 
 

Other current liabilities

 

92,957

     

121,190

 
     

672,100

     

722,280

               

Liabilities held for sale

   

     

1,051

               

Deferred liabilities and credits

             
 

Net deferred income tax liability

 

861,709

     

799,190

 
 

Other deferred liabilities and credits

 

259,499

     

248,213

 
               

Long-term debt

   

880,486

     

880,320

               
               

Noncontrolling interests with mandatory redemption features

 

759

     

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

 

1,406,617

     

1,387,341

 
 

Treasury shares

 

(145,859)

     

(152,817)

 
 

Retained earnings

 

2,438,760

     

2,297,363

 
   

Total U.S. Cellular shareholders' equity

   

3,787,592

     

3,619,961

               

Noncontrolling interests

   

74,203

     

55,956

 
               
 

Total equity

 

3,861,795

     

3,675,917

 
               

Total liabilities and equity

$

6,536,348

   

$

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 September 30, 2012 and December 31, 2011.

           
     

September 30,

 

December 31,

   

2012

 

2011

                   
 

Cash and cash equivalents

$

409,579

   

$

424,155

 
                   
 

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

             
   

Government-backed securities (3)

 

140,494

     

127,039

 
                   
 

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

             
   

Government-backed securities (3)

 

10,171

     

30,057

 
                   
 

Total cash and cash equivalents and investments

$

560,244

   

$

581,251

 
   

(1)

Designated as held-to-maturity investments and 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 Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program.

(4)

At September 30, 2012, maturities range between  17 and 18 months from the balance sheet date.

   
   
   

United States Cellular Corporation

Consolidated Statement of Cash Flows

 

Nine Months Ended September 30,

 

(Unaudited, dollars in thousands)

 
                       
                       
       

2012

 

2011

 

Cash flows from operating activities

               
 

Net income

$

170,400

   

$

190,869

   
 

Add (deduct) adjustments to reconcile net income to net

               
   

cash flows from operating activities

               
     

Depreciation, amortization and accretion

 

439,391

     

431,581

   
     

Bad debts expense

 

51,293

     

44,718

   
     

Stock-based compensation expense

 

15,924

     

15,475

   
     

Deferred income taxes, net

 

52,865

     

145,687

   
     

Equity in earnings of unconsolidated entities

 

(71,584)

     

(65,289)

   
     

Distributions from unconsolidated entities

 

45,211

     

52,037

   
     

(Gain) loss on asset disposals and exchanges, net

 

11,819

     

(5,741)

   
     

(Gain) loss on investment

 

3,728

     

(13,373)

   
     

Noncash interest expense

 

1,331

     

9,582

   
     

Other operating activities

 

863

     

1,143

   
 

Changes in assets and liabilities from operations

               
     

Accounts receivable

 

(67,302)

     

(57,564)

   
     

Inventory

 

(69,423)

     

(36,326)

   
     

Accounts payable - trade

 

(28,902)

     

41,733

   
     

Accounts payable - affiliate

 

(4,785)

     

1,185

   
     

Customer deposits and deferred revenues

 

26,687

     

30,695

   
     

Accrued taxes

 

99,556

     

9,679

   
     

Accrued interest

 

9,508

     

9,283

   
     

Other assets and liabilities

 

(77,821)

     

(66,553)

   
   

608,759

     

738,821

   
                 

Cash flows from investing activities

               
 

Cash used for additions to property, plant and equipment

 

(611,431)

     

(462,327)

   
 

Cash paid for acquisitions and licenses

 

(57,957)

     

(23,773)

   
 

Cash received for divestitures

 

49,932

     

   
 

Cash paid for investments

 

(45,000)

     

(50,000)

   
 

Cash received for investments

 

50,000

     

85,250

   
 

Other investing activities

 

(5,030)

     

(210)

   
   

(619,486)

     

(451,060)

   
                 

Cash flows from financing activities

               
 

Repayment of long-term debt

 

(343)

     

(330,106)

   
 

Issuance of long-term debt

 

     

342,000

   
 

Common shares reissued for benefit plans, net of tax payments

 

(2,299)

     

1,755

   
 

Common shares repurchased

 

     

(62,294)

   
 

Payment of debt issuance costs

 

     

(11,394)

   
 

Distributions to noncontrolling interests

 

(1,491)

     

(1,176)

   
 

Other financing activities

 

284

     

169

   
   

(3,849)

     

(61,046)

   
                 

Cash classified as held for sale

 

     

(11,237)

   
                 

Net increase (decrease) in cash and cash equivalents

 

(14,576)

     

215,478

   
                 

Cash and cash equivalents

               
 

Beginning of period

 

424,155

     

276,915

   
 

End of period

$

409,579

   

$

492,393

   
   
   

United States Cellular Corporation 
Financial Measures and Reconciliations

 

(Unaudited, dollars in thousands)

 
                           
     

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2012

 

2011

 

2012

 

2011

                                   

Service revenues

$

1,036,370

   

$

1,036,609

   

$

3,089,932

   

$

3,023,752

 
                                   

Operating income

 

48,079

     

101,620

     

217,444

     

264,464

 

Add:

                             
 

Depreciation, amortization and accretion

 

145,151

     

141,664

     

439,391

     

431,581

 
 

Loss of impairment of assets

 

     

     

     

 
 

(Gain) loss on asset disposals and exchanges, net

 

11,327

     

(9,700)

     

11,819

     

(5,741)

 
   

Adjusted OIBDA (1)

$

204,557

   

$

233,584

   

$

668,654

   

$

690,304

 
                                   
   

Adjusted OIBDA margin (2)

 

19.7%

     

22.5%

     

21.6%

     

22.8%

 
                                   
                           
 

2012

 

2011

 

2012

 

2011

                                   

Cash flows from operating activities

$

196,522

   

$

300,721

   

$

608,759

   

$

738,821

 

Deduct:

                             
 

Cash used for additions to property, plant and equipment

 

(181,206)

     

(196,933)

     

(611,431)

     

(462,327)

 
   

Free cash flow (3)

$

15,316

   

$

103,788

   

$

(2,672)

   

$

276,494

 
   

(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); and the net gain or loss on asset disposals and exchanges (if any).  Adjusted OIBDA excludes the loss on impairment of assets (if any) and net gain or loss on asset disposals and exchanges (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; such gains or losses may occur in the future.

 

Adjusted OIBDA may also be commonly referred to by management as operating cash flow.  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.  This amount 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 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

Jane W. McCahon, Vice President, Corporate Relations, +1-312-592-5379, jane.mccahon@teldta.com; Julie D. Mathews, Manager, Investor Relations, +1-312-592-5341, julie.mathews@teldta.com

 

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