Market Overview

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

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CHICAGO, Feb. 26, 2013 /PRNewswire/ --

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 (NYSE: USM) 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 (NYSE: S) 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
Markets



Divestiture Markets
(1)



Core 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

Markets (2)



Divestiture

Markets (2)(3)



U.S. Cellular
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

Markets (2)





Divestiture

Markets (2)(3)





U.S. Cellular
Consolidated (2)(3)



(Dollars in millions)



















Income before income taxes (5)



$165-$265





($180)-($160)





($15)-$105



Depreciation, amortization and

  accretion expense (6)



Approx. $545





Approx. $195





Approx. $740



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

  accretion expense (6)



608.6





573.6





571.0



(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.

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

  of total devices sold (3)



62.9%





53.0%





51.9%





54.1%





52.5%

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™, 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

  equipment





214,969





309,471





826,400





771,798







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

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