Exhibit 99.1
As previously announced, U.S. Cellular will hold a teleconference on May 10, 2010, at 9:30 am CDT. Interested parties may listen to the call live by accessing the Conference Calls page ofwww.teldta.comoruscellular.com.
Contact: Jane W. McCahon, Vice President, Corporate Relations
(312) 592-5379jane.mccahon@teldta.com
Julie D. Mathews, Manager, Investor Relations
(312) 592-5341julie.mathews@teldta.com
FOR RELEASE: IMMEDIATE
U.S. cellular Reports First QUARTER RESULTS
Data revenues increase 28 percent; postpay churn reduced to 1.4 percent
Note: Comparisons are year over year unless otherwise noted.
1Q 2010 Highlights
§ 24,000 retail net additions, reflecting a gain of 33,000 prepaid customers and a loss of 9,000 postpay customers.
§ Service revenues of $965.2 million decreased 2 percent due to reductions in voice and inbound roaming revenues, offset by higher data revenues.
§ 28 percent increase in data revenues to $201.3 million, representing 21 percent of total service revenues.
§ Retail service ARPU (average revenue per unit) increased to $46.99 from $46.87.
§ Retail postpay churn of 1.4 percent; postpay customers comprised 95 percent of retail customers.
§ 5 percent increase in cell sites in service to 7,310.
§ Repurchased 127,500 common shares for $5.2 million.
CHICAGO – May 10, 2010 – United States Cellular Corporation [NYSE:USM] reported service revenues of $965.2 million for the first quarter of 2010, a 2 percent decrease from $983.6 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $48.2 million and $0.55, respectively, for the first quarter of 2010, compared to $84.5 million and $0.97, respectively, in the comparable period one year ago.
“U.S. Cellular’s commitment to providing excellent communications experiences including superior data services delivered results in important areas,” said John E. Rooney, U.S. Cellular president and CEO. “Data revenues grew 28 percent due to the continuing rapid adoption of smartphones and premium phones, and the increased data use related to these phones, as well as to overall increases in text and picture messaging. The growth in data revenues partially offset the effect of lower voice revenues and inbound roaming revenues.
“We also achieved a reduction in churn, as customers responded well to our high-quality services and wide range of feature-rich handsets, and to our Battery Swap and Overage Protection programs, demonstrating that we understand our customers’ needs and exceed their expectations.
“As we expand 3G availability and add to our portfolio of smartphones, including two new Android phones—one from HTC and an exclusive from Samsung, we expect data revenues to continue to grow and to comprise an ever larger share of service revenues.
“Though postpay customers remain our primary focus, we are executing on growth opportunities in the prepaid segment. The improved prepaid additions this quarter are proof that we provide outstanding communications experiences for all of our customers. To build on this success, we significantly enhanced our prepaid offerings at the end of the quarter by adding new data services such as picture messaging, applications such as ring tones and games, e-mail and web services.
“Also, as part of our major enablement initiatives, we upgraded our campaign management system to facilitate more targeted and effective direct mail campaigns. Though profitability for the quarter was impacted by planned expenditures related to these initiatives, we expect that the initiatives will ultimately reduce operational expenses and support our customer-focused strategy over the long term.”
Guidance
Guidance for the year ending Dec. 31, 2010 as of May 10, 2010 is as follows. Guidance is unchanged from Feb. 25, 2010 except that the company has commenced guidance on adjusted OIBDA. There can be no assurance that final results will not differ materially from this guidance.
| Service revenues | $3,975-$4,075 million |
| Adjusted OIBDA(1) | $850-$950 million |
| Operating income | $250-$350 million |
| Depreciation, amortization andaccretion(2) | Approx. $600 million |
| Capital expenditures | Approx. $600 million |
(1) Defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of intangible assets (if any). This amount may also be commonly referred to by management as operating cash flow. This amount should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows.
(2) Includes estimated losses on disposals of assets but does not include an estimate for loss on impairment of intangible assets since this cannot be predicted.
The foregoing guidance represents the views of management as of May 10, 2010 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events or otherwise.
Conference call information
U.S. Cellular will hold a conference call on May 10, 2010 at 9:30 a.m. CDT.
· Access the live call on the Conference Calls page ofuscellular.com at http://ir.teldta.com/phoenix.zhtml?p=irol-eventDetails&c=67422&eventID=3055234.
· Access the call by phone at 866-871-4351(US/Canada) and use conference ID72053512.
Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page ofuscellular.com, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. The call will be archived on the Conference Calls page ofuscellular.com.
2
About U.S. Cellular
United States Cellular Corporation, the nation’s sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to approximately 6.1 million customers in 26 states. The Chicago-based company employed approximately 8,900 full-time equivalent associates as of March 31, 2010. At the end of the quarter, Telephone and Data Systems, Inc. owned 82 percent of U.S. Cellular.
Visituscellular.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of the company to successfully manage and grow its markets; the economy; competition; the state and fed eral telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology;uncertainty of access to the capital markets;pending and future litigation; changes in income tax rates, laws, regulations or rulings;acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company; and the ability to obtain or maintain roaming arrangements with other carriers. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.
3
UNITED STATES CELLULAR CORPORATION SUMMARY OPERATING DATA | |||||||||||||||||||||
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Quarter Ended | 3/31/2010 |
| 12/31/2009 |
| 9/30/2009 |
| 6/30/2009 |
| 3/31/2009 | ||||||||||||
Total population |
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| Consolidated markets (1) |
| 90,468,000 |
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| 89,712,000 |
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| 85,118,000 |
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| 83,726,000 |
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| 83,726,000 |
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| Consolidated operating markets (1) |
| 46,546,000 |
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| 46,306,000 |
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| 46,306,000 |
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| 46,306,000 |
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| 46,306,000 |
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Market penetration at end of period |
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| Consolidated markets (2) |
| 6.8 | % |
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| 6.8 | % |
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| 7.2 | % |
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| 7.4 | % |
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| 7.5 | % | |
| Consolidated operating markets (2) |
| 13.2 | % |
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| 13.3 | % |
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| 13.2 | % |
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| 13.3 | % |
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| 13.5 | % | |
All customers |
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| Total at end of period |
| 6,147,000 |
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| 6,141,000 |
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| 6,131,000 |
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| 6,155,000 |
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| 6,243,000 |
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| Gross additions |
| 358,000 |
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| 399,000 |
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| 386,000 |
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| 317,000 |
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| 404,000 |
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| Net additions (losses) |
| 6,000 |
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| 10,000 |
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| (24,000 | ) |
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| (88,000 | ) |
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| 47,000 |
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Retail customers |
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| Total at end of period |
| 5,768,000 |
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| 5,744,000 |
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| 5,705,000 |
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| 5,711,000 |
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| 5,770,000 |
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| Gross additions |
| 305,000 |
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| 354,000 |
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| 351,000 |
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| 286,000 |
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| 366,000 |
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Net retail additions (losses) (3) | 24,000 | 39,000 | (6,000 | ) | (59,000 | ) | 63,000 | ||||||||||||||
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| Net postpay additions (losses) |
| (9,000 | ) |
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| 26,000 |
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| 8,000 |
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| (32,000 | ) |
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| 60,000 |
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| Net prepaid additions (losses) |
| 33,000 |
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| 13,000 |
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| (14,000 | ) |
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| (27,000 | ) |
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| 3,000 |
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Service revenues components (000s) |
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| Voice and other retail service | $ | 663,939 |
| $ | 676,554 |
| $ | 690,106 |
| $ | 708,609 |
| $ | 718,885 |
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| Data service |
| 201,280 |
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| 189,759 |
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| 174,286 |
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| 161,955 |
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| 156,954 |
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| Total retail service | $ | 865,219 |
| $ | 866,313 |
| $ | 864,392 |
| $ | 870,564 |
| $ | 875,839 |
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| Inbound roaming |
| 51,942 |
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| 61,728 |
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| 68,767 |
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| 62,223 |
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| 60,057 |
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| Other |
| 48,027 |
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| 56,814 |
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| 50,289 |
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| 41,323 |
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| 47,719 |
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Total service revenues (000s) (4) | $ | 965,188 |
| $ | 984,855 |
| $ | 983,448 |
| $ | 974,110 |
| $ | 983,615 |
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| Divided by average customers (000s) |
| 6,137 |
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| 6,139 |
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| 6,138 |
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| 6,199 |
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| 6,229 |
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| Divided by three months in each quarter |
| 3 |
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| 3 |
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| 3 |
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| 3 |
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| 3 |
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Average monthly revenue per unit (5) | $ | 52.42 |
| $ | 53.48 |
| $ | 53.41 |
| $ | 52.38 |
| $ | 52.64 |
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Voice and other retail service (5) | $ | 36.06 |
| $ | 36.75 |
| $ | 37.48 |
| $ | 38.11 |
| $ | 38.47 |
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| Data service (5) | $ | 10.93 |
| $ | 10.30 |
| $ | 9.46 |
| $ | 8.71 |
| $ | 8.40 |
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| Total retail service (5) | $ | 46.99 |
| $ | 47.05 |
| $ | 46.94 |
| $ | 46.82 |
| $ | 46.87 |
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| Inbound roaming (5) | $ | 2.82 |
| $ | 3.35 |
| $ | 3.73 |
| $ | 3.35 |
| $ | 3.21 |
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| Other (5) | $ | 2.61 |
| $ | 3.08 |
| $ | 2.74 |
| $ | 2.21 |
| $ | 2.56 |
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Postpay churn rate (6) |
| 1.4 | % |
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| 1.6 | % |
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| 1.7 | % |
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| 1.7 | % |
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| 1.5 | % | ||
Capital expenditures (000s) | $ | 121,500 |
| $ | 189,000 |
| $ | 128,900 |
| $ | 91,200 |
| $ | 137,700 |
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Cell sites in service |
| 7,310 |
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| 7,279 |
|
| 7,161 |
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| 7,043 |
|
| 6,942 |
|
(1) Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).
(2) Calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.
(3) Calculated by adding net postpay additions (losses) and net prepaid additions (losses).
(4) U.S. Cellular revised previously reported Service revenues for all quarterly periods in 2009 to reflect certain corrections. See “Revision of Prior Period Amounts” section for additional details. Previously reported Service revenues were $986.3 million, $984.9 million, $974.8 million and $981.9 million for the three month periods ended December 31, September 30, June 30 and March 31, 2009, respectively.
(5) Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.
(6) Calculated by dividing the total postpay customer disconnects during the quarter by the average postpay customer base for the quarter.
4
United States Cellular Corporation Consolidated Statement of Operations Highlights | |||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||
(Unaudited, dollars and shares in thousands, except per share amounts) | |||||||||||||||||
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| Increase (Decrease) | |||||
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| 2010 |
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| 2009 (1) |
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| Amount |
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| Percent | ||||
Operating revenues |
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| Service | $ | 965,188 |
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| $ | 983,615 |
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| $ | (18,427 | ) |
| (2 | %) | ||
| Equipment sales |
| 58,849 |
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| 70,890 |
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| (12,041 | ) |
| (17 | %) | ||
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| Total operating revenues |
| 1,024,037 |
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| 1,054,505 |
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| (30,468 | ) |
| (3 | %) | |
Operating expenses |
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| System operations (excluding Depreciation,amortization and accretion reported below) |
| 207,077 |
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| 199,883 |
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| 7,194 |
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| 4 | % | ||
| Cost of equipment sold |
| 161,105 |
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| 185,701 |
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| (24,596 | ) |
| (13 | %) | ||
| Selling, general and administrative |
| 428,661 |
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| 408,159 |
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| 20,502 |
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| 5 | % | ||
| Depreciation, amortization and accretion |
| 143,233 |
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| 137,878 |
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| 5,355 |
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| 4 | % | ||
| Loss on asset disposals, net |
| 5,176 |
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| 3,945 |
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| 1,231 |
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| 31 | % | ||
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| Total operating expenses |
| 945,252 |
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| 935,566 |
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| 9,686 |
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| 1 | % | |
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Operating income |
| 78,785 |
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| 118,939 |
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| (40,154 | ) |
| (34 | %) | |||
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Investment and other income (expense) |
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| Equity in earnings of unconsolidated entities |
| 24,694 |
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| 25,327 |
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| (633 | ) |
| (2 | %) | ||
| Interest and dividend income |
| 1,021 |
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| 477 |
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| 544 |
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| >100 | % | ||
| Interest expense |
| (16,286 | ) |
|
| (19,287 | ) |
|
| 3,001 |
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| 16 | % | ||
| Other, net |
| (65 | ) |
|
| 280 |
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| (345 | ) |
| >(100 | %) | ||
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| Total investment and other income (expense) |
| 9,364 |
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| 6,797 |
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| 2,567 |
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| 38 | % | |
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Income before income taxes |
| 88,149 |
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| 125,736 |
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| (37,587 | ) |
| (30 | %) | |||
| Income tax expense |
| 34,198 |
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| 35,226 |
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| (1,028 | ) |
| (3 | %) | ||
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Net income |
| 53,951 |
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| 90,510 |
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| (36,559 | ) |
| (40 | %) | |||
| Less: Net income attributable to noncontrollinginterests, net of tax |
| (5,719 | ) |
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| (6,008 | ) |
|
| 289 |
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| 5 | % | ||
Net income attributable to U.S. Cellular shareholders | $ | 48,232 |
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| $ | 84,502 |
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| $ | (36,270 | ) |
| (43 | %) | |||
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Basic weighted average shares outstanding |
| 86,576 |
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| 87,196 |
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| (620 | ) |
| (1 | %) | |||
Basic earnings per share attributable toU.S. Cellular shareholders | $ | 0.56 |
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| $ | 0.97 |
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| $ | (0.41 | ) |
| (42 | %) | |||
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Diluted weighted average shares outstanding |
| 86,978 |
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| 87,446 |
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| (468 | ) |
| (1 | %) | |||
Diluted earnings per share attributable to U.S. Cellular shareholders | $ | 0.55 |
|
| $ | 0.97 |
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| $ | (0.42 | ) |
| (43 | %) |
(1) Amounts have been revised. See “Revision of Prior Period Amounts” section for additional details.
5
United States Cellular Corporation Consolidated Balance Sheet Highlights | ||||||
(Unaudited, dollars in thousands) | ||||||
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ASSETS | ||||||
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| March 31, |
| December 31, | ||
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| 2010 |
| 2009 (1) | ||
Current assets |
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| Cash and cash equivalents | $ | 289,658 |
| $ | 294,411 |
| Short-term investments |
| 25,534 |
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| 330 |
| Accounts receivable from customers and other |
| 404,553 |
|
| 425,057 |
| Inventory |
| 153,278 |
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| 152,556 |
| Prepaid income taxes |
| — |
|
| 717 |
| Prepaid expenses |
| 72,829 |
|
| 63,463 |
| Net deferred income tax asset |
| 21,570 |
|
| 21,570 |
| Other current assets |
| 55,250 |
|
| 51,013 |
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| 1,022,672 |
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| 1,009,117 |
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Investments |
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| |
| Licenses |
| 1,438,800 |
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| 1,435,000 |
| Goodwill |
| 494,737 |
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| 494,737 |
| Customer lists |
| 2,892 |
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| 4,083 |
| Investments in unconsolidated entities |
| 178,903 |
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| 161,481 |
| Notes and interest receivable – long-term |
| 4,179 |
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| 4,214 |
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| 2,119,511 |
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| 2,099,515 |
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Property, plant and equipment |
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| In service and under construction |
| 5,975,704 |
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| 5,884,307 |
| Less: accumulated depreciation |
| 3,397,244 |
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| 3,282,969 |
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| 2,578,460 |
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| 2,601,338 |
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Other assets and deferred charges |
| 38,393 |
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| 38,776 | |
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Total assets | $ | 5,759,036 |
| $ | 5,748,746 |
(1) Amounts have been revised. See “Revision of Prior Period Amounts” section for additional details.
6
United States Cellular Corporation Consolidated Balance Sheet Highlights |
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(Unaudited, dollars in thousands) |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| March 31, |
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| December 31, |
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| 2010 |
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| 2009 (1) |
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Current liabilities |
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| Current portion of long-term debt | $ | 84 |
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| $ | 76 |
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| Accounts payable |
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| Affiliated |
| 8,889 |
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| 14,732 |
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| Trade |
| 256,913 |
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| 296,288 |
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| Customer deposits and deferred revenues |
| 140,651 |
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| 140,248 |
| |
| Accrued taxes |
| 83,876 |
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| 52,026 |
| |
| Accrued compensation |
| 38,220 |
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| 62,242 |
| |
| Other current liabilities |
| 90,602 |
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| 92,884 |
| |
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| 619,235 |
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| 658,496 |
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Deferred liabilities and credits |
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| Net deferred income tax liability |
| 504,822 |
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| 513,151 |
| |
| Other deferred liabilities and credits |
| 268,795 |
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| 262,412 |
| |
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| 773,617 |
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| 775,563 |
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Long-term debt |
| 867,662 |
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| 867,522 |
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Commitments and contingencies |
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Noncontrolling interests with mandatory redemption features |
| 752 |
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|
| 727 |
| ||
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
| ||
U.S. Cellular shareholders’ equity |
|
|
|
|
|
|
| ||
| Common Shares, par value $1 per share |
| 55,068 |
|
|
| 55,068 |
| |
| Series A Common Shares, par value $1 per share |
| 33,006 |
|
|
| 33,006 |
| |
| Additional paid-in capital |
| 1,360,712 |
|
|
| 1,356,322 |
| |
| Treasury shares |
| (72,194 | ) |
|
| (69,616 | ) | |
| Retained earnings |
| 2,066,066 |
|
|
| 2,019,957 |
| |
|
| Total U.S. Cellular shareholders’ equity |
| 3,442,658 |
|
|
| 3,394,737 |
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests |
| 55,112 |
|
|
| 51,701 |
| ||
|
|
|
|
|
|
|
|
|
|
| Total equity |
| 3,497,770 |
|
|
| 3,446,438 |
| |
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity | $ | 5,759,036 |
|
| $ | 5,748,746 |
|
7
United States Cellular Corporation Consolidated Statement of Cash Flows | ||||||||||
Three Months Ended March 31, | ||||||||||
(Unaudited, dollars in thousands) | ||||||||||
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
| 2010 |
|
| 2009 (1) | |||
Cash flows from operating activities |
|
|
|
|
|
| ||||
| Net income | $ | 53,951 |
|
| $ | 90,510 | |||
| Add (deduct) adjustments to reconcile net income to net cash flows from operating activities |
|
|
|
|
|
| |||
|
|
| Depreciation, amortization and accretion |
| 143,233 |
|
|
| 137,878 | |
|
|
| Bad debts expense |
| 19,193 |
|
|
| 18,704 | |
|
|
| Stock-based compensation expense |
| 3,830 |
|
|
| 2,964 | |
|
|
| Deferred income taxes, net |
| (2,419 | ) |
|
| 2,342 | |
|
|
| Equity in earnings of unconsolidated entities |
| (24,694 | ) |
|
| (25,327 | ) |
|
|
| Distributions from unconsolidated entities |
| 7,238 |
|
|
| 5,908 | |
|
|
| Loss on asset disposals, net |
| 5,176 |
|
|
| 3,945 | |
|
|
| Other operating activities |
| 274 |
|
|
| 440 | |
| Changes in assets and liabilities from operations |
|
|
|
|
|
| |||
|
|
| Accounts receivable |
| 1,313 |
|
|
| (18,132 | ) |
|
|
| Inventory |
| (722 | ) |
|
| 7,204 | |
|
|
| Accounts payable—trade |
| (39,375 | ) |
|
| (30,754 | ) |
|
|
| Accounts payable—affiliate |
| (5,843 | ) |
|
| (2,358 | ) |
|
|
| Customer deposits and deferred revenues |
| 403 |
|
|
| (1,579 | ) |
|
|
| Accrued taxes |
| 29,860 |
|
|
| 42,144 | |
|
|
| Accrued interest |
| 9,221 |
|
|
| 9,337 | |
|
|
| Other assets and liabilities |
| (48,387 | ) |
|
| (57,664 | ) |
|
|
|
|
| 152,252 |
|
|
| 185,562 | |
Cash flows from investing activities |
|
|
|
|
|
| ||||
| Additions to property, plant and equipment |
| (121,514 | ) |
|
| (137,741 | ) | ||
| Cash paid for acquisitions and licenses |
| (3,800 | ) |
|
| (12,127 | ) | ||
| Cash paid for investments |
| (25,000 | ) |
|
| (278 | ) | ||
| Other investing activities |
| 356 |
|
|
| 518 | |||
|
|
|
|
| (149,958 | ) |
|
| (149,628 | ) |
Cash flows from financing activities |
|
|
|
|
|
| ||||
| Common shares reissued for benefit plans, net of tax payments |
| 486 |
|
|
| 356 | |||
| Common shares repurchased |
| (5,186 | ) |
|
| (13,291 | ) | ||
| Distributions to noncontrolling interests |
| (2,284 | ) |
|
| (2,101 | ) | ||
| Other financing activities |
| (63 | ) |
|
| (97 | ) | ||
|
|
|
|
| (7,047 | ) |
|
| (15,133 | ) |
|
|
|
|
|
|
|
|
|
| |
Net increase (decrease) in cash and cash equivalents |
| (4,753 | ) |
|
| 20,801 | ||||
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
|
|
|
|
| ||||
| Beginning of period |
| 294,411 |
|
|
| 170,996 | |||
| End of period | $ | 289,658 |
|
| $ | 191,797 |
8
United States Cellular Corporation Financial Measures and Reconciliations |
| |||||||||
Three Months Ended March 31, |
| |||||||||
(Unaudited, dollars in thousands) |
| |||||||||
|
|
|
|
|
|
| ||||
|
| 2010 |
| 2009 (5) | ||||||
| Service revenues | $ | 965,188 |
| $ | 983,615 |
| |||
|
|
|
|
|
|
|
|
|
| |
| Operating income |
| 78,785 |
|
| 118,939 |
| |||
| Add: |
|
|
|
|
|
| |||
|
| Depreciation, amortization and accretion | $ | 143,233 |
| $ | 137,878 |
| ||
|
| Loss on asset disposals |
| 5,176 |
|
| 3,945 |
| ||
|
|
| Adjusted OIBDA (1)(4) | $ | 227,194 |
| $ | 260,762 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
| Adjusted OIBDA margin (2) |
| 23.5 | % |
| 26.5 | % | |
|
|
|
|
|
|
|
|
|
| |
|
| 2010 |
| 2009 | ||||||
|
|
|
|
|
|
|
|
|
| |
| Cash flows from operating activities | $ | 152,252 |
| $ | 185,562 |
| |||
| Deduct: |
|
|
|
|
|
| |||
|
| Capital expenditures |
| 121,514 |
|
| 137,741 |
| ||
|
|
| Free cash flow (3) | $ | 30,738 |
| $ | 47,821 |
|
(1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization, and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of intangible assets (if any). This amount may also be commonly referred to by management as operating cash flow. This amount should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows.
(2) Defined as Adjusted OIBDA divided by service revenues. Equipment revenues are excluded from the denominator of the calculation since equipment is generally sold at a net negative margin, and the equipment subsidy is effectively a cost for purposes of assessing business results. U.S. Cellular believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular’s business results. Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.
(3) Defined as cash flows from operating activities minus capital expenditures. Free cash flow is a Non-GAAP financial measure. U.S. Cellular believes that free cash flow as reported by U.S. Cellular is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.
(4) Excludes the net gain or loss on asset disposals and loss on impairment of intangible assets, if any, in order to show operating results on a more comparable basis from period to period. U.S. Cellular does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual. Accordingly, you should be aware that U.S. Cellular may incur such amounts in the future.
(5) Previously reported GAAP amounts have been revised. See “Revision of Prior Period Amounts” section for additional details.
9
Revision of Prior Period Amounts
In preparing its financial statements for the three months ended March 31, 2010, U.S. Cellular discovered certain errors related to accounting for service revenues and sales tax liabilities. These errors resulted in the overstatement of service revenues and understatement of sales tax liabilities for 2009, 2008 and 2007. In accordance withSEC Staff Accounting Bulletin Nos. 99 and 108 (“SAB 99 and SAB 108”), U.S. Cellular evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports was not required. However, if the adjustments to correct the cumulative errors had been recorded in the first quarter 2010, U.S. Cellular believes the impact would have been sign ificant to the first quarter and would impact comparisons to prior periods. As permitted by SAB 108, U.S. Cellular revised in the current filing and plans to revise in the next filings of its quarterly and annual consolidated financial statements previously reported annual and quarterly results for 2009, 2008 and 2007 for these immaterial amounts. In addition to recording these adjustments, U.S. Cellular recorded and plans to record other adjustments to prior-year amounts to correct other immaterial items, which include adjustments related to rent expense as disclosed in U.S. Cellular’s 2009 Form 10-K.
The Consolidated Balance Sheet at December 31, 2009 was revised to reflect the cumulative effect of these errors which resulted in a decrease to Retained earnings of $9.6 million. Also, in accordance with SAB 108, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows have been revised as follows:
Consolidated Statement of Operations —Three Months Ended March 31, 2009 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As previously |
|
|
|
|
|
|
|
|
|
| (Dollars in thousands) |
| reported |
|
|
| Adjustment |
|
|
| Revised |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Service revenues | $ | 981,874 |
|
| $ | 1,741 |
|
| $ | 983,615 |
| ||
| Total operating revenues |
| 1,052,764 |
|
|
| 1,741 |
|
|
| 1,054,505 |
| ||
| System operations expense (excluding Depreciation, amortization and accretion) |
| 200,003 |
|
|
| (120 | ) |
|
| 199,883 |
| ||
| Selling, general and administrative expenses |
| 412,448 |
|
|
| (4,289 | ) |
|
| 408,159 |
| ||
| Depreciation, amortization and accretion |
| 137,651 |
|
|
| 227 |
|
|
| 137,878 |
| ||
| Loss on asset disposals, net |
| 2,191 |
|
|
| 1,754 |
|
|
| 3,945 |
| ||
| Total operating expenses |
| 937,994 |
|
|
| (2,428 | ) |
|
| 935,566 |
| ||
| Operating income |
| 114,770 |
|
|
| 4,169 |
|
|
| 118,939 |
| ||
| Interest expense |
| (19,022 | ) |
|
| (265 | ) |
|
| (19,287 | ) | ||
| Total investment and other income (expense) |
| 7,062 |
|
|
| (265 | ) |
|
| 6,797 |
| ||
| Income before income taxes |
| 121,832 |
|
|
| 3,904 |
|
|
| 125,736 |
| ||
| Income tax expense |
| 31,232 |
|
|
| 3,994 |
|
|
| 35,226 |
| ||
| Net income |
| 90,600 |
|
|
| (90 | ) |
|
| 90,510 |
| ||
| Net income attributable to U.S. Cellular shareholders |
| 84,592 |
|
|
| (90 | ) |
|
| 84,502 |
| ||
| Basic earnings attributable to U.S. Cellular shareholders |
| 0.97 |
|
|
| — |
|
|
| 0.97 |
| ||
| Diluted earnings attributable to U.S. Cellular shareholders |
| 0.97 |
|
|
| — |
|
|
| 0.97 |
|
Consolidated Balance Sheet — December 31, 2009 | ||||||||||||||
|
|
|
|
| As previously |
|
|
|
|
|
|
|
|
|
| (Dollars in thousands) |
| reported |
|
|
| Adjustment |
|
|
| Revised |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts receivable from customers and other | $ | 421,528 |
|
| $ | 3,529 |
|
| $ | 425,057 |
| ||
| Total current assets |
| 1,005,588 |
|
|
| 3,529 |
|
|
| 1,009,117 |
| ||
| Total assets |
| 5,745,217 |
|
|
| 3,529 |
|
|
| 5,748,746 |
| ||
| Customer deposits and deferred revenues |
| 143,760 |
|
|
| (3,512 | ) |
|
| 140,248 |
| ||
| Accrued taxes |
| 34,583 |
|
|
| 17,443 |
|
|
| 52,026 |
| ||
| Total current liabilities |
| 644,565 |
|
|
| 13,931 |
|
|
| 658,496 |
| ||
| Net deferred income tax liability |
| 513,994 |
|
|
| (843 | ) |
|
| 513,151 |
| ||
| Total deferred liabilities and credits |
| 776,406 |
|
|
| (843 | ) |
|
| 775,563 |
| ||
| Retained earnings |
| 2,029,516 |
|
|
| (9,559 | ) |
|
| 2,019,957 |
| ||
| Total U.S. Cellular shareholders’ equity |
| 3,404,296 |
|
|
| (9,559 | ) |
|
| 3,394,737 |
| ||
| Total equity |
| 3,455,997 |
|
|
| (9,559 | ) |
|
| 3,446,438 |
| ||
| Total liabilities and equity |
| 5,745,217 |
|
|
| 3,529 |
|
|
| 5,748,746 |
|
10
Consolidated Statement of Cash Flows — Three Months Ended March 31, 2009 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As previously |
|
|
|
|
|
|
|
|
|
| (Dollars in thousands) |
| reported |
|
|
| Adjustment |
|
|
| Revised |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net income | $ | 90,600 |
|
| $ | (90 | ) |
| $ | 90,510 |
| ||
| Depreciation, amortization and accretion |
| 137,651 |
|
|
| 227 |
|
|
| 137,878 |
| ||
| Deferred income taxes, net |
| 1,673 |
|
|
| 669 |
|
|
| 2,342 |
| ||
| Loss on asset disposals, net |
| 2,191 |
|
|
| 1,754 |
|
|
| 3,945 |
| ||
| Change in accounts receivable |
| (13,468 | ) |
|
| (4,664 | ) |
|
| (18,132 | ) | ||
| Change in customer deposits and deferred revenues |
| (1,392 | ) |
|
| (187 | ) |
|
| (1,579 | ) | ||
| Change in accrued taxes |
| 39,591 |
|
|
| 2,553 |
|
|
| 42,144 |
| ||
| Change in other assets and liabilities |
| (57,402 | ) |
|
| (262 | ) |
|
| (57,664 | ) | ||
| Cash flows from operating activities |
| 185,562 |
|
|
| — |
|
|
| 185,562 |
|
11