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U.S. Cellular Reports Second Quarter 2013 Results



              U.S. Cellular Reports Second Quarter 2013 Results

PR Newswire

CHICAGO, Aug. 2, 2013

CHICAGO, Aug. 2, 2013 /PRNewswire/ -- As previously announced, U.S. Cellular
will hold a teleconference Aug. 2, 2013 at 9:30 a.m. CDT. Listen to the live
call via the Conference Calls page of teldta.com or uscellular.com.

United States Cellular Corporation (NYSE:USM) reported service revenues of
$911.0 million for the second quarter of 2013, versus $1,029.7 million for the
comparable period one year ago. Net income attributable to U.S. Cellular
shareholders and related diluted earnings per share were $143.4 million and
$1.69 respectively, for the second quarter of 2013, compared to $52.7 million
and $0.62, respectively, in the comparable period one year ago.

The following significant events occurred during the second quarter of 2013:

  o On April 3, U.S. Cellular deconsolidated the St. Lawrence Seaway RSA
    Cellular Partnership ("NY1") and the New York RSA 2 Cellular Partnership
    ("NY2"). As a result, the NY1 and NY2 partnerships results are now
    reported using the equity method of accounting for investments in its
    consolidated financial statements. U.S. Cellular has retained the same
    ownership percentage and will continue to report the same percentage of
    income.
  o On May 16, U.S. Cellular's previously announced transaction to sell its
    Chicago, St. Louis, central Illinois and three other markets (the
    "Divestiture Transaction") closed and the company received $480 million in
    cash and recognized a pre-tax gain of $266.4 million.
  o On June 25, U.S. Cellular paid a special dividend of $5.75 per Common
    Share and Series A Common Share, for a total of $482.3 million.

"We have taken significant steps this year to improve U.S. Cellular's
competitive position and financial foundation," said Kenneth R. Meyers, U.S.
Cellular president and CEO. "We divested underperforming markets in May to
focus on higher potential markets, and we returned value to shareholders
through a special, one-time dividend. In June, we announced an agreement to
monetize non-strategic spectrum at a significant valuation.

"In the second half, we are continuing to execute aggressive strategies to
accelerate customer growth and reduce expenses. We're working to complete the
4G LTE network expansion as we prepare to offer an even more competitive
device portfolio with the introduction of Apple products later this year. We
also plan to begin offering shared data plans, supported by a new billing and
operations support system that enables us to bring new services and products
to market faster."

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 U.S.
Cellular's Form 10-Q for the quarter ended June 30, 2013.  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.

                2013 Estimated Results (1)
                Core Markets (2)    Divestiture        U.S. Cellular
                                    Markets (2)(3)     Consolidated (2)(3)
                Previous  Current   Previous  Current  Previous  Current
(Dollars in
millions)
Service         Unchanged $3,475 -  $145 -    $140     $3,620 -  $3,615-$3,715
revenues                  $3,575    $165               $3,740
Adjusted
income before   Unchanged $560 -    $35 - $55 $40      $595 -    $600-$700
income taxes              $660                         $715
(4)
Capital         Unchanged $730      Unchanged $5       Unchanged $735
expenditures

 

    These estimates are based on U.S. Cellular's current plans, which include
    an expansion of the multi-year deployment of 4G LTE technology; such
    expansion includes deployment on 700 MHz in additional markets as well as
(1) deployment on the 850 MHz band to provide additional capacity for future
    growth in data usage, enable potential future 4G LTE roaming, and support
    the sale of Apple products. The financial impacts of selling Apple
    products in 2013 consist of the following:
      o Increased Service revenues resulting from net incremental customers
        added and retained as a result of offering Apple products;
      o Decreased Adjusted income before income taxes as a result of net
        increases in costs, primarily loss on equipment sales as a result of
        offering Apple products; and
      o Increased Capital expenditures related to the deployment on the 850
        MHz band to provide additional capacity for future growth in data
        usage, which includes capacity required to accommodate Apple products.
    These estimates also reflect the impacts of the deconsolidation of certain
    partnerships as of April 2013. These estimates do not include (i) the
    reported gain on sale of business and other exit costs, net (ii) the
    reported gain on investments, or (iii) the expected gains from pending
    spectrum license divestitures. 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.
    The U.S. Cellular Consolidated amounts represent GAAP financial measures
    and include the results of both the Core Markets and the Divestiture
    Markets. The amounts for the Core Markets and Divestiture Markets
    represent non-GAAP financial measures. U.S. Cellular believes that the
    amounts for the Core Markets and Divestiture Markets may be useful to
    investors and other users of its financial information in evaluating the
    separate results for the Core Markets. Divestiture Markets are comprised
(2) of U.S. Cellular's Chicago, central Illinois, St. Louis and certain
    Indiana/Michigan/Ohio markets. Core Markets are comprised of all other
    markets in which U.S. Cellular conducts business including Peoria,
    Rockford and certain other areas in Illinois, and in Columbia, Joplin,
    Jefferson City and certain other areas in Missouri. Core Markets as
    defined also includes any other income or expenses due to U.S. Cellular's
    direct or indirect ownership interests in other spectrum in the
    Divestiture Markets which was not included in the sale and other retained
    assets from the Divestiture Markets.
(3) These estimates reflect the Divestiture Transaction which closed on May
    16, 2013.
    Adjusted income before income taxes is a non-GAAP financial measure
    defined as Income before income taxes, adjusted for: Depreciation,
    amortization and accretion, net Gain or loss on sale of business and other
    exit costs (if any), net Gain or loss on investments (if any), and
    Interest expense. Adjusted income before income taxes excludes these items
    in order to show operating results on a more comparable basis from period
    to period. In the future, U.S. Cellular may also exclude other items from
    adjusted income before income taxes if such items may help reflect
    operating results on a more comparable basis. U.S. Cellular does not
(4) intend to imply that any such amounts that are excluded are non-recurring,
    infrequent or unusual; such amounts may occur in the future. 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. The following tables provide a reconciliation of Income (loss)
    before income taxes to Adjusted income before income taxes for 2013
    Estimated Results, six months ended June 30, 2013 actual results, and 2012
    actual results:

                            2013 Estimated Results
                            Core Markets   Divestiture      U.S. Cellular
                            (2)            Markets (2)(3)   Consolidated
                                                            (2)(3)
(Dollars in millions)
Income (loss) before income ($10)-$90      $30              $20-$120
taxes
Depreciation, amortization  $540           $250             $790
and accretion expense (5)
(Gain) loss on sale of
business and other          —              ($240)           ($240)
exit costs, net
(Gain) loss on investments  ($20)          —                ($20)
Interest expense            $50            —                $50
Adjusted income before      $560-$660      $40              $600-$700
income taxes
                            U.S. Cellular Consolidated Actual Results
                                           Six Months Ended Year Ended

                                           June 30, 2013    December 31, 2012
Income before income taxes                 $ 282            $ 205
Depreciation, amortization and accretion   393              609
expense (5)
(Gain) loss on sale of business and other  (242)            21
exit costs, net
(Gain) loss on investments                 (19)             4
Interest expense                           21               42
Adjusted income before income taxes        $ 435            $ 881

 

    The 2013 estimated amount for Depreciation, amortization and accretion
    expense in the Divestiture Markets includes approximately $168 million of
    incremental accelerated depreciation, amortization and accretion resulting
(5) from the Divestiture Transaction. Actual results for the six months ended
    June 30, 2013 and the year ended December 31, 2012 include $88 million and
    $20 million, respectively, of incremental accelerated depreciation,
    amortization and accretion resulting from the Divestiture Transaction.

Conference Call Information

U.S. Cellular will hold a conference call on Aug. 2, 2013 at 9:30 a.m. CDT.

  o Access the live call on the Conference Calls page of uscellular.com or at
    http://www.videonewswire.com/event.asp?id=95316
  o 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 5.0 million customers in 23 states. The Chicago-based company had 7,000
full- and part-time associates as of June 30, 2013. 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  6/30/2013     3/31/2013     12/31/2012    9/30/2012     6/30/2012
Retail
Customers
 Postpaid
  Total at end   4,412,000     5,060,000     5,134,000     5,175,000     5,213,000
  of period
  Gross          165,000       191,000       241,000       230,000       199,000
  additions
  Net
  additions      (120,000)     (74,000)      (41,000)      (38,000)      (48,000)
  (losses)
  ARPU (1)     $ 54.18       $ 54.85       $ 54.56       $ 54.34       $ 54.42
  Churn rate     2.0%          1.7%          1.8%          1.7%          1.6%
  (2)
  Smartphone
  penetration    45.5%         43.5%         41.8%         38.6%         36.8%
  (3) (4)
 Prepaid
  Total at end   381,000       446,000       423,000       386,000       329,000
  of period
  Gross          77,000        104,000       107,000       120,000       78,000
  additions
  Net
  additions      (7,000)       23,000        37,000        57,000        20,000
  (losses)
  ARPU (1)     $ 31.69       $ 33.31       $ 33.56       $ 32.97       $ 33.59
  Churn rate     6.8%          6.2%          5.8%          5.9%          6.2%
  (2)
Total
customers at     4,968,000     5,736,000     5,798,000     5,808,000     5,799,000
end of period
Billed ARPU    $ 50.60       $ 51.13       $ 50.94       $ 50.83       $ 50.99
(1)
Service
revenue ARPU   $ 57.45       $ 57.63       $ 58.00       $ 59.57       $ 59.05
(1)
Smartphones
sold as a
percent of       66.0%         61.7%         62.9%         53.0%         51.9%
total devices
sold
Total
population
  Consolidated   84,025,000    93,943,000    93,244,000    92,996,000    92,684,000
  markets (5)
  Consolidated
  operating      31,822,000    47,440,000    46,966,000    46,966,000    46,966,000
  markets (5)
Market
penetration at
end of period
  Consolidated   5.9%          6.1%          6.2%          6.2%          6.3%
  markets (6)
  Consolidated
  operating      15.6%         12.1%         12.3%         12.4%         12.3%
  markets (6)
Capital
expenditures   $ 168,500     $ 118,400     $ 253,100     $ 199,100     $ 183,200
(000s)
Total cell
sites in         7,748         8,027         8,028         7,984         7,932
service
Owned towers     4,411         4,411         4,408         4,377         4,346
in service

 

United States Cellular Corporation
Core Markets Summary Operating Data (Unaudited)
Excludes NY1 & NY2
Quarter Ended  6/30/2013     3/31/2013     12/31/2012    9/30/2012     6/30/2012
Retail
Customers
 Postpaid
  Total at end   4,412,000     4,463,000     4,496,000     4,515,000     4,538,000
  of period
  Gross          165,000       176,000       208,000       196,000       167,000
  additions
  Net
  additions      (53,000)      (33,000)      (19,000)      (23,000)      (30,000)
  (losses)
  ARPU (1)     $ 54.44       $ 54.21       $ 53.91       $ 53.67       $ 53.73
  Churn rate     1.6%          1.6%          1.7%          1.6%          1.4%
  (2)
  Smartphone
  penetration    45.5%         43.0%         41.1%         37.8%         36.0%
  (3) (4)
 Prepaid
  Total at end   381,000       373,000       342,000       305,000       246,000
  of period
  Gross          76,000        91,000        87,000        99,000        60,000
  additions
  Net
  additions      8,000         31,000        37,000        59,000        23,000
  (losses)
  ARPU (1)     $ 31.65       $ 32.92       $ 33.21       $ 32.97       $ 33.23
  Churn rate     6.0%          5.6%          5.1%          4.8%          5.4%
  (2)
Total
customers at     4,968,000     5,005,000     5,022,000     5,012,000     4,989,000
end of period
Billed ARPU    $ 50.98       $ 50.93       $ 50.71       $ 50.59       $ 50.71
(1)
Service
revenue ARPU   $ 57.88       $ 57.14       $ 57.67       $ 59.34       $ 58.89
(1)
Smartphones
sold as a
percent of       66.1%         62.1%         62.9%         53.0%         52.0%
total

devices sold
Total
population
  Consolidated   84,025,000    84,025,000    83,384,000    82,595,000    82,283,000
  markets (5)
  Consolidated
  operating      31,822,000    31,822,000    31,445,000    31,110,000    31,110,000
  markets (5)
Market
penetration at
end of period
  Consolidated   5.9%          6.0%          6.0%          6.1%          6.1%
  markets (6)
  Consolidated
  operating      15.6%         15.7%         16.0%         16.1%         16.0%
  markets (6)
Capital
expenditures   $ 171,200     $ 113,300     $ 241,400     $ 184,100     $ 163,600
(000s)
Total cell
sites in         6,113         6,113         6,130         6,089         6,041
service
Owned towers     3,844         3,846         3,847         3,818         3,787
in service

 

    ARPU metrics are calculated by dividing a revenue base by an average
(1) number of customers by the number of months in the period.  These revenue
    bases and customer populations are shown below:
    a.   Postpaid ARPU consists of total postpaid service revenues and
         postpaid customers.
    b.   Prepaid ARPU consists of total prepaid service revenues and prepaid
         customers.
    c.   Billed ARPU consists of total retail service revenues and postpaid,
         prepaid and reseller customers.
         Service revenue ARPU consists of total retail service revenues,
    d.   inbound roaming and other service revenues and postpaid, prepaid and
         reseller customers.
    Churn metrics represent the percentage of the postpaid or prepaid
(2) customers that disconnect service each month. These metrics represent the
    average monthly postpaid or prepaid churn rate for each respective period.
(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.
    Used only to calculate market penetration of consolidated and core markets
(5) and consolidated and core operating markets, respectively. See footnote
    (6) below.
    Market penetration is calculated by dividing the number of wireless
(6) customers at the end of the period by the total population of consolidated
    and core markets and consolidated and core operating markets,
    respectively, as estimated by Claritas®.

    

United States Cellular Corporation
Consolidated Statement of Operations Highlights
Three Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
                                                           Increase (Decrease)
                           2013         2012         Amount           Percent
Operating revenues
 Service                   $ 910,966    $ 1,029,742  $   (118,776)    (12%)
 Equipment sales             84,164       74,658         9,506        13%
      Total operating        995,130      1,104,400      (109,270)    (10%)
      revenues
Operating expenses
 System operations
 (excluding Depreciation,    192,267      243,227        (50,960)     (21%)
 amortization and
 accretion reported below)
 Cost of equipment sold      217,070      191,700        25,370       13%
 Selling, general and        404,127      435,053        (30,926)     (7%)
 administrative
 Depreciation,
 amortization and            202,580      147,555        55,025       37%
 accretion
 Loss on asset disposals,    9,018        2,702          6,316        >100%
 net
 (Gain) loss on sale of
 business and other exit     (249,024)    —              (249,024)    N/M
 costs, net
      Total operating        776,038      1,020,237      (244,199)    (24%)
      expenses
Operating income             219,092      84,163         134,929      >100%
Investment and other
income (expense)
 Equity in earnings of       35,602       25,154         10,448       42%
 unconsolidated entities
 Interest and dividend       969          845            124          15%
 income
 Gain (loss) on              18,527       (3,728)        22,255       >(100%)
 investments
 Interest expense            (10,154)     (12,360)       2,206        18%
 Other, net                  321          (229)          550          >(100%)
      Total investment and
      other income           45,265       9,682          35,583       >100%
      (expense)
Income before income taxes   264,357      93,845         170,512      >100%
 Income tax expense          120,682      34,597         86,085       >100%
Net income                   143,675      59,248         84,427       >100%
 Less: Net income
 attributable to             (284)        (6,563)        6,279        96%
 noncontrolling interests,
 net of tax
Net income attributable to $ 143,391    $ 52,685     $   90,706       >100%
U.S. Cellular shareholders
Basic weighted average       83,845       84,707         (862)        (1%)
shares outstanding
Basic earnings per share
attributable to U.S.       $ 1.71       $ 0.62       $   1.09         >100%
Cellular shareholders
Diluted weighted average     84,661       85,236         (575)        (1%)
shares outstanding
Diluted earnings per share
attributable to U.S.       $ 1.69       $ 0.62       $   1.07         >100%
Cellular shareholders

 

United States Cellular Corporation
Consolidated Statement of Operations Highlights
Six Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
                                                          Increase (Decrease)
                          2013         2012         Amount           Percent
Operating revenues
 Service                  $ 1,907,315  $ 2,053,562  $   (146,247)    (7%)
 Equipment sales            169,561      142,959        26,602       19%
      Total operating       2,076,876    2,196,521      (119,645)    (5%)
      revenues
Operating expenses
 System operations
 (excluding Depreciation,
 amortization and           408,566      476,391        (67,825)     (14%)
 accretion reported
 below)
 Cost of equipment sold     458,761      378,736        80,025       21%
 Selling, general and       824,207      877,297        (53,090)     (6%)
 administrative
 Depreciation,
 amortization and           392,425      294,240        98,185       33%
 accretion
 Loss on asset disposals,   14,452       4,705          9,747        >100%
 net
 (Gain) loss on sale of
 business and other exit    (242,093)    (4,213)        (237,880)    >100%
 costs, net
      Total operating       1,856,318    2,027,156      (170,838)    (8%)
      expenses
Operating income            220,558      169,365        51,193       30%
Investment and other
income (expense)
 Equity in earnings of      62,437       46,768         15,669       34%
 unconsolidated entities
 Interest and dividend      1,872        1,888          (16)         (1%)
 income
 Gain (loss) on             18,527       (3,728)        22,255       >(100%)
 investments
 Interest expense           (21,064)     (25,771)       4,707        18%
 Other, net                 106          (27)           133          >(100%)
      Total investment      61,878       19,130         42,748       >100%
      and other income
Income before income        282,436      188,495        93,941       50%
taxes
 Income tax expense         128,051      60,235         67,816       >100%
Net income                  154,385      128,260        26,125       20%
 Less: Net income
 attributable to            (6,080)      (13,083)       7,003        54%
 noncontrolling
 interests, net of tax
Net income attributable
to U.S. Cellular          $ 148,305    $ 115,177    $   33,128       29%
shareholders
Basic weighted average      83,842       84,638         (796)        (1%)
shares outstanding
Basic earnings per share
attributable to U.S.      $ 1.77       $ 1.36       $   0.41         30%
Cellular shareholders
Diluted weighted average    84,655       85,248         (593)        (1%)
shares outstanding
Diluted earnings per
share attributable to     $ 1.75       $ 1.35       $   0.40         30%
U.S. Cellular
shareholders

 

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
ASSETS
                                               June 30,     December 31,
                                               2013         2012
Current assets
 Cash and cash equivalents                     $ 467,421    $  378,358
 Short-term investments                          110,352       100,676
 Accounts receivable from customers and others   368,826       445,220
 Inventory                                       163,433       155,886
 Income taxes receivable                         —             1,612
 Prepaid expenses                                68,063        62,560
 Net deferred income tax asset                   48,818        35,419
 Other current assets                            18,845        16,745
                                                 1,245,758     1,196,476
Assets held for sale                             78,389        216,763
Investments
 Licenses                                        1,396,179     1,456,794
 Goodwill                                        387,360       421,743
 Customer lists, net                             33            102
 Investments in unconsolidated entities          276,363       144,531
 Long-term investments                           40,120        50,305
                                                 2,100,055     2,073,475
Property, plant and equipment
 In service and under construction               7,380,123     7,478,428
 Less: Accumulated depreciation                  4,556,614     4,455,840
                                                 2,823,509     3,022,588
Other assets and deferred charges                82,067        78,148
Total assets                                   $ 6,329,778  $  6,587,450

 

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
                                                    June 30,     December 31,
                                                    2013         2012
Current liabilities
  Current portion of long-term debt                 $ 100        $  92
  Accounts payable
      Affiliated                                      15,459        10,725
      Trade                                           341,581       310,936
  Customer deposits and deferred revenues             198,799       192,113
  Accrued taxes                                       183,312       35,834
  Accrued compensation                                62,140        90,418
  Other current liabilities                           100,500       114,881
                                                      901,891       754,999
Liabilities held for sale                             559           19,594
Deferred liabilities and credits
  Net deferred income tax liability                   835,808       849,818
  Other deferred liabilities and credits              306,262       288,441
Long-term debt                                        879,121       878,858
Noncontrolling interests with redemption features     512           493
Equity
U.S. Cellular shareholders' equity
  Series A Common and Common Shares, par value $1     88,074        88,074
  per share
  Additional paid-in capital                          1,418,428     1,412,453
  Treasury shares                                     (177,173)     (165,724)
  Retained earnings                                   2,055,905     2,399,052
      Total U.S. Cellular shareholders' equity        3,385,234     3,733,855
Noncontrolling interests                              20,391        61,392
  Total equity                                        3,405,625     3,795,247
Total liabilities and equity                        $ 6,329,778  $  6,587,450

 

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 June 30, 2013 and December 31, 2012.
                                          June 30,            December 31,
                                          2013                2012
Cash and cash equivalents                 $    467,421        $     378,358
Amounts included in short-term
investments (1)(2)
           U.S. Treasury Notes                 110,352              100,676
Amounts included in long-term investments
(1)(3)
           U.S. Treasury Notes                 40,120               50,305
Total cash and cash equivalents and       $    617,893        $     529,339
investments

 

(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) At June 30, 2013, maturities range between 17 and 18 months.

    

United States Cellular Corporation
Consolidated Statement of Cash Flows
Six Months Ended June 30,
(Unaudited, dollars in thousands)
                                                     2013         2012
Cash flows from operating activities
 Net income                                          $ 154,385    $ 128,260
 Add (deduct) adjustments to reconcile net income to
 net cash flows from operating activities
              Depreciation, amortization and           392,425      294,240
              accretion
              Bad debts expense                        32,715       30,659
              Stock-based compensation expense         6,530        11,057
              Deferred income taxes, net               (26,527)     30,479
              Equity in earnings of unconsolidated     (62,437)     (46,768)
              entities
              Distributions from unconsolidated        45,370       6,743
              entities
              Loss on asset disposals, net             14,452       4,705
              (Gain) loss on sale of business and      (242,093)    (4,213)
              other exit costs, net
              (Gain) loss on investments               (18,527)     3,728
              Noncash interest expense                 526          902
              Other operating activities               489          321
 Changes in assets and liabilities from operations
              Accounts receivable                      (1,544)      (13,383)
              Inventory                                (7,644)      (56,039)
              Accounts payable - trade                 67,457       (20,987)
              Accounts payable - affiliate             4,734        3,129
              Customer deposits and deferred           8,663        21,131
              revenues
              Accrued taxes                            147,566      85,327
              Accrued interest                         176          149
              Other assets and liabilities             (68,131)     (67,203)
                                                       448,585      412,237
Cash flows from investing activities
 Cash used for additions to property, plant and        (323,157)    (430,225)
 equipment
 Cash paid for acquisitions and licenses               (14,150)     (12,647)
 Cash received from divestitures                       480,000      49,786
 Cash paid for investments                             —            (45,000)
 Cash received for investments                         —            45,000
 Other investing activities                            3,993        (3,097)
                                                       146,686      (396,183)
Cash flows from financing activities
 Repayment of long-term debt                           (71)         (45)
 Common shares reissued for benefit plans, net of      (2,206)      (2,465)
 tax payments
 Common shares repurchased                             (18,425)     —
 Dividends paid                                        (482,270)    —
 Distributions to noncontrolling interests             (3,292)      (643)
 Other financing activities                            56           568
                                                       (506,208)    (2,585)
Net increase in cash and cash equivalents              89,063       13,469
Cash and cash equivalents
 Beginning of period                                   378,358      424,155
 End of period                                       $ 467,421    $ 437,624

 

United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
                                 Three Months Ended     Six Months Ended
                                 June 30,               June 30,
                                   2013       2012        2013       2012
 Cash flows from operating       $ 224,970  $ 155,270   $ 448,585  $ 412,237
 activities
 Deduct:
 Cash used for additions to
 property, plant                   172,133    221,065     323,157    430,225

 and equipment
      Free cash flow (1)         $ 52,837   $ (65,795)  $ 125,428  $ (17,988)

 

    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
(1) 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

Website: http://www.uscellular.com
Contact: Jane W. McCahon, Vice President, Corporate Relations and Corporate
Secretary, (312) 592-5379, jane.mccahon@teldta.com; or Julie D. Mathews,
Manager, Investor Relations, (312) 592-5341, julie.mathews@teldta.com
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