Exhibit 99.1
As previously announced, U.S. Cellular will hold a teleconference Feb. 24, 2011 at 9:30 a.m. CST. Listen to the live call via the Conference Calls page ofwww.teldta.com oruscellular.com.
Contact: Jane W. McCahon, Vice President, Corporate Relations
(312) 592-5379;jane.mccahon@teldta.com
Julie D. Mathews, Manager, Investor Relations
(312) 592-5341;julie.mathews@teldta.com
FOR RELEASE: IMMEDIATE
U.S. cellular Reports fourth QUARTER 2010 RESULTS
Provides financial guidance for 2011
Note: Comparisons are year over year unless otherwise noted.
Fourth Quarter Highlights
§ Service revenues were $992 million.
§ Retail service ARPU (average revenue per unit) increased to $47.41 from $47.07.
§ Net retail customer losses of 10,000 postpaid and 11,000 prepaid.
§ Retail postpaid churn improved to 1.5 percent from 1.6 percent; postpaid customers comprised 95 percent of retail customers.
§ 5 percent increase in cell sites in service to 7,645.
§ Nearly 1.2 million customers adopted Belief Plans.
CHICAGO – Feb. 24, 2011 – United States Cellular Corporation [NYSE:USM] reported service revenues of $991.9 million for the fourth quarter of 2010, versus $985.4 million for the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $6.8 million and $0.08, respectively, for the fourth quarter of 2010; compared to $6.6 million and $0.08, respectively, for the comparable period in 2009.
For the twelve months ended Dec. 31, 2010, U.S. Cellular reported service revenues of $3,913.0 million, compared to $3,927.1 million in 2009. Net income attributable to U.S. Cellular shareholders for 2010 and related diluted earnings per share, were $132.3 million and $1.53, respectively. In 2009, net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $206.7 million and $2.37 respectively. Fourth quarter and full year 2009 results were impacted by a $14.0 million (pre-tax), or $0.10 diluted loss per share, charge for impairment of licenses.
“U.S. Cellular had many significant accomplishments during the fourth quarter, but our financial performance was impacted by strong competitive pressures and the actions we took to protect our customer base, as well as spending on our enablement initiatives,” said Mary Dillon, U.S. Cellular president and CEO.
“We ended 2010 with nearly 1.2 million new and existing customers on our Belief Plans, demonstrating the value our customers place on this innovative program to enhance overall customer satisfaction. During the fourth quarter, we increased average revenue per customer and customer loyalty. In addition, demand for smartphones was quite strong. Smartphone sales represented 40 percent of all devices sold during the quarter and will be a big factor in helping to drive revenue growth in the future, although there was a negative impact on near-term profitability. Smartphone owners currently make up just 17 percent of our postpaid base, so we have significant room for growth in this area. We have a very competitive selection of phones and devices, like the Samsung Galaxy series, and we’re evolving our network to provide a fast, high-quality 4G experience.
“Our customers know that we offer the best experience in wireless, as validated by numerous third-party awards, including being named aJ.D. Power and Associates 2011 Customer Service Champion, and we’re working hard to spread the word. We are confident that we have the right strategies in place to help us compete effectively.”
Fourth Quarter Treasury Activity
U.S. Cellular entered into a new $300 million revolving credit facility that is due to expire in Dec. 2015.
Guidance for year ending Dec. 31, 2011
This guidance represents the views of management as of Feb. 24, 2011, and should not be assumed to be accurate as of any other date. There can be no assurance that final results will not differ materially from this guidance. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.
| 2011 Estimated Results | | 2010 Actual Results |
| |
Service revenues | $4,000 - $4,100 million | | $3,913.0 million |
Adjusted OIBDA (1) (3) | $775 - $875 million | | $783.1 million |
Operating income (3) | $185 - $285 million | | $195.4 million |
Depreciation, amortization and accretion expenses, and losses on asset disposals and impairment of assets (2) | Approx. $590 million | | $587.8 million |
Capital expenditures (3) | Approx. $650 million | | $583.1 million |
(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 assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows.
(2) 2010 Actual Results include losses on asset disposals and no losses on impairment of assets. The 2011 Estimated Results include only the estimate for Depreciation, amortization and accretion expenses and losses on disposals of assets, and do not include any estimate for losses on impairment of assets (since these cannot be predicted).
(3) This guidance is based on U.S. Cellular’s current plans. New developments or changing competitive conditions in the wireless industry, such as the rate of deployment of 4G Long-term Evolution (“LTE”) technology by other carriers, could affect U.S. Cellular’s LTE deployment plans and, as a result, its capital expenditures and operating expenses.
Conference call information
U.S. Cellular will hold a conference call on Feb. 24, 2011 at 9:30 a.m. CST.
§ Listen to the live call online athttp://www.videonewswire.com/event.asp?id=76812 or on the Conference Calls page ofwww.uscellular.com.
§ Listen to 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 ofwww.uscellular.com. The call will be archived on the Conference Calls page ofwww.uscellular.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 6.1 million customers in 26 states. The Chicago-based company had 9,000 full-time equivalent associates as of Dec. 31, 2010. For more information about U.S. Cellular, visitwww.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: The ability of the company to successfully grow its markets; changes in the overall economy, competition, the state a nd federal telecommunications regulatory environment, and the value of assets and investments; adverse changes in the ratings afforded the company’s debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology;uncertainty of access to the capital markets; risks and uncertainties relating to possible future restatements;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 unit, churn rates, roaming revenue and terms, the availability of handset devices and 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 used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.
For more information about U.S. Cellular, visitwww.uscellular.com.
3
UNITED STATES CELLULAR CORPORATION SUMMARY OPERATING DATA (UNAUDITED) |
|
|
Quarter Ended | 12/31/2010 | | 9/30/2010 | | 6/30/2010 | | 3/31/2010 | | 12/31/2009 |
Total population |
| Consolidated markets (1) | | 90,468,000 | | | | 90,468,000 | | | | 90,468,000 | | | | 90,468,000 | | | | 89,712,000 | |
| Consolidated operating markets (1) | | 46,546,000 | | | | 46,546,000 | | | | 46,546,000 | | | | 46,546,000 | | | | 46,306,000 | |
Market penetration at end of period |
| Consolidated markets (2) | | 6.7 | % | | | 6.7 | % | | | 6.8 | % | | | 6.8 | % | | | 6.8 | % |
| Consolidated operating markets (2) | | 13.0 | % | | | 13.1 | % | | | 13.2 | % | | | 13.2 | % | | | 13.3 | % |
All customers |
| Total at end of period | | 6,072,000 | | | | 6,103,000 | | | | 6,144,000 | | | | 6,147,000 | | | | 6,141,000 | |
| Gross additions | | 327,000 | | | | 338,000 | | | | 349,000 | | | | 358,000 | | | | 399,000 | |
| Net additions (losses) | | (31,000 | ) | | | (41,000 | ) | | | (3,000 | ) | | | 6,000 | | | | 10,000 | |
| Smartphones sold as a percent of total devices sold (3) | | 39.6 | % | | | 23.6 | % | | | 15.8 | % | | | 16.6 | % | | | 14.7 | % |
Retail customers |
| Total at end of period | | 5,729,000 | | | | 5,750,000 | | | | 5,775,000 | | | | 5,768,000 | | | | 5,744,000 | |
| Smartphone penetration (3)(4) | | 16.6 | % | | | 12.0 | % | | | 10.1 | % | | | 8.9 | % | | | 7.5 | % |
| Gross additions | | 292,000 | | | | 301,000 | | | | 307,000 | | | | 305,000 | | | | 354,000 | |
| Net retail additions (losses) (5) | | (21,000 | ) | | | (25,000 | ) | | | 7,000 | | | | 24,000 | | | | 39,000 | |
| Net postpaid additions (losses) | | (10,000 | ) | | | (25,000 | ) | | | (22,000 | ) | | | (9,000 | ) | | | 26,000 | |
| Net prepaid additions (losses) | | (11,000 | ) | | | — | | | | 29,000 | | | | 33,000 | | | | 13,000 | |
Service revenue components (000s) |
| Retail service | $ | 864,905 | | | $ | 865,766 | | | $ | 863,836 | | | $ | 865,039 | | | $ | 866,866 | |
| Inbound roaming | | 67,545 | | | | 72,901 | | | | 60,902 | | | | 51,942 | | | | 61,728 | |
| Other | | 59,464 | | | | 44,836 | | | | 47,838 | | | | 48,027 | | | | 56,814 | |
Total service revenues (000s) | $ | 991,914 | | | $ | 983,503 | | | $ | 972,576 | | | $ | 965,008 | | | $ | 985,408 | |
| Divided by average customers (000s) | | 6,081 | | | | 6,124 | | | | 6,151 | | | | 6,137 | | | | 6,139 | |
| Divided by three months in each quarter | | 3 | | | | 3 | | | | 3 | | | | 3 | | | | 3 | |
| Total average monthly revenue per unit (6) | $ | 54.37 | | | $ | 53.53 | | | $ | 52.71 | | | $ | 52.41 | | | $ | 53.51 | |
Components of average monthly revenue per customer by revenue type |
| Retail service (6) | $ | 47.41 | | | $ | 47.12 | | | $ | 46.81 | | | $ | 46.98 | | | $ | 47.07 | |
| Inbound roaming (6) | $ | 3.70 | | | $ | 3.97 | | | $ | 3.30 | | | $ | 2.82 | | | $ | 3.35 | |
| Other (6) | $ | 3.26 | | | $ | 2.44 | | | $ | 2.60 | | | $ | 2.61 | | | $ | 3.09 | |
|
Retail postpaid churn rate(7) | | 1.5 | % | | | 1.6 | % | | | 1.4 | % | | | 1.4 | % | | | 1.6 | % |
Capital expenditures (000s) | $ | 203,400 | | | $ | 124,700 | | | $ | 133,500 | | | $ | 121,500 | | | $ | 189,000 | |
Cell sites in service | | 7,645 | | | | 7,524 | | | | 7,416 | | | | 7,310 | | | | 7,279 | |
(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) Smartphones represent wireless devices which run on a Blackberry, Windows Mobile, or Android operating system.
(4) Smartphone penetration is calculated by dividing postpaid smartphone customers on smartphone service plans by total postpaid customers.
(5) Calculated by adding net postpaid additions (losses) and net prepaid additions (losses).
(6) Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.
(7) Represents the percentage of the retail postpaid customer base that disconnects service each month. This amount represents the average retail postpaid churn rate for each respective quarterly period.
4
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) |
| | | 2010 | | 2009 | | Amount | Percent |
Operating revenues | | | | | | | | | | | | | |
| Service | $ | 991,914 | | | $ | 985,408 | | | $ | 6,506 | | 1 | % |
| Equipment sales | | 71,236 | | | | 74,690 | | | | (3,454 | ) | (5 | %) |
| | Total operating revenues | | 1,063,150 | | | | 1,060,098 | | | | 3,052 | | — | |
| | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | |
| System operations (excluding Depreciation, amortizationand accretion reported below) | | 216,254 | | | | 202,546 | | | | 13,708 | | 7 | % |
| Cost of equipment sold | | 230,620 | | | | 211,883 | | | | 18,737 | | 9 | % |
| Selling, general and administrative | | 474,904 | | | | 473,143 | | | | 1,761 | | — | |
| Depreciation, amortization and accretion | | 144,649 | | | | 146,807 | | | | (2,158 | ) | (1 | %) |
| Loss on impairment of intangible assets | | — | | | | 14,000 | | | | (14,000 | ) | N/M | |
| Loss on asset disposals, net | | 2,310 | | | | 7,528 | | | | (5,218 | ) | (69 | %) |
| | Total operating expenses | | 1,068,737 | | | | 1,055,907 | | | | 12,830 | | 1 | % |
| | | | | | | | | | | | | | | |
Operating income (loss) | | (5,587 | ) | | | 4,191 | | | | (9,778 | ) | >(100 | %) |
| | | | | | | | | | | | | | | |
Investment and other income (expense) | | | | | | | | | | | | | |
| Equity in earnings of unconsolidated entities | | 22,900 | | | | 23,553 | | | | (653 | ) | (3 | %) |
| Interest and dividend income | | 824 | | | | 949 | | | | (125 | ) | (13 | %) |
| Interest expense | | (12,637 | ) | | | (19,134 | ) | | | 6,497 | | 34 | % |
| Other, net | | 285 | | | | 259 | | | | 26 | | 10 | % |
| | Total investment and other income (expense) | | 11,372 | | | | 5,627 | | | | 5,745 | | >100 | % |
| | | | | | | | | | | | | | | |
Income before income taxes | | 5,785 | | | | 9,818 | | | | (4,033 | ) | (41 | %) |
| Income tax (benefit) | | (7,285 | ) | | | (940 | ) | | | (6,345 | ) | >(100 | %) |
| | | | | | | | | | | | | | | |
Net income | | 13,070 | | | | 10,758 | | | | 2,312 | | 21 | % |
| Less: Net (income) attributable to noncontrolling interests,net of tax | | (6,226 | ) | | | (4,185 | ) | | | (2,041 | ) | (49 | %) |
Net income attributable to U.S. Cellular shareholders | $ | 6,844 | | | $ | 6,573 | | | $ | 271 | | 4 | % |
| | | | | | | | | | | | | | |
Basic weighted average shares outstanding | | 85,668 | | | | 86,719 | | | | (1,051 | ) | (1 | %) |
Basic earnings per share attributable to U.S. Cellular shareholders | $ | 0.08 | | | $ | 0.08 | | | $ | — | | — | |
| | | | | | | | | | | | | | | |
Diluted weighted average shares outstanding | | 86,190 | | | | 87,087 | | | | (897 | ) | (1 | %) |
Diluted earnings per share attributable toU.S. Cellular shareholders | $ | 0.08 | | | $ | 0.08 | | | $ | — | | — | |
N/M – Percentage change not meaningful
5
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) |
| | | 2010 | | 2009 | | Amount | Percent |
Operating revenues | | | | | | | | | | | | | |
| Service | $ | 3,913,001 | | | $ | 3,927,128 | | | $ | (14,127 | ) | — | |
| Equipment sales | | 264,680 | | | | 286,752 | | | | (22,072 | ) | (8 | %) |
| | Total operating revenues | | 4,177,681 | | | | 4,213,880 | | | | (36,199 | ) | (1 | %) |
| | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | |
| System operations (excluding Depreciation, amortizationand accretion reported below) | | 854,931 | | | | 802,854 | | | | 52,077 | | 6 | % |
| Cost of equipment sold | | 742,981 | | | | 742,993 | | | | (12 | ) | — | |
| Selling, general and administrative | | 1,796,624 | | | | 1,747,404 | | | | 49,220 | | 3 | % |
| Depreciation, amortization and accretion | | 577,054 | | | | 569,514 | | | | 7,540 | | 1 | % |
| Loss on impairment of intangible assets | | — | | | | 14,000 | | | | (14,000 | ) | N/M | |
| Loss on asset disposals, net | | 10,717 | | | | 16,169 | | | | (5,452 | ) | (34 | %) |
| | Total operating expenses | | 3,982,307 | | | | 3,892,934 | | | | 89,373 | | 2 | % |
| | | | | | | | | | | | | | | |
Operating income | | 195,374 | | | | 320,946 | | | | (125,572 | ) | (39 | %) |
| | | | | | | | | | | | | | | |
Investment and other income (expense) | | | | | | | | | | | | | |
| Equity in earnings of unconsolidated entities | | 97,318 | | | | 96,800 | | | | 518 | | 1 | % |
| Interest and dividend income | | 3,808 | | | | 3,597 | | | | 211 | | 6 | % |
| Interest expense | | (61,555 | ) | | | (78,199 | ) | | | 16,644 | | 21 | % |
| Other, net | | 72 | | | | 1,442 | | | | (1,370 | ) | (95 | %) |
| | Total investment and other income (expense) | | 39,643 | | | | 23,640 | | | | 16,003 | | 68 | % |
| | | | | | | | | | | | | | | |
Income before income taxes | | 235,017 | | | | 344,586 | | | | (109,569 | ) | (32 | %) |
| Income tax expense | | 79,609 | | | | 116,086 | | | | (36,477 | ) | (31 | %) |
| | | | | | | | | | | | | | | |
Net income | | 155,408 | | | | 228,500 | | | | (73,092 | ) | (32 | %) |
| Less: Net (income) attributable to noncontrolling interests,net of tax | | (23,084 | ) | | | (21,768 | ) | | | (1,316 | ) | (6 | %) |
Net income attributable to U.S. Cellular shareholders | $ | 132,324 | | | $ | 206,732 | | | $ | (74,408 | ) | (36 | %) |
| | | | | | | | | | | | | | |
Basic weighted average shares outstanding | | 86,128 | | | | 86,946 | | | | (818 | ) | (1 | %) |
Basic earnings per share attributable toU.S. Cellular shareholders | $ | 1.54 | | | $ | 2.38 | | | $ | (0.84 | ) | (35 | %) |
| | | | | | | | | | | | | | | |
Diluted weighted average shares outstanding | | 86,518 | | | | 87,168 | | | | (650 | ) | (1 | %) |
Diluted earnings per share attributable toU.S. Cellular shareholders | $ | 1.53 | | | $ | 2.37 | | | $ | (0.84 | ) | (35 | %) |
N/M – Percentage change not meaningful
6
UNITED STATES CELLULAR CORPORATION CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Unaudited, dollars in thousands) |
|
|
| | | | | | |
ASSETS |
| | | | | | |
| | | | | | |
| | December 31,
2010 | | December 31, 2009 |
| | |
Current assets | | | | | |
| Cash and cash equivalents | $ | 294,426 | | $ | 294,411 |
| Short-term investments | | 146,586 | | | 330 |
| Accounts receivable from customers and other | | 424,019 | | | 425,057 |
| Inventory | | 112,279 | | | 152,556 |
| Prepaid income taxes | | 41,397 | | | 717 |
| Prepaid expenses | | 53,356 | | | 63,463 |
| Net deferred income tax asset | | 26,757 | | | 21,570 |
| Other current assets | | 10,804 | | | 51,013 |
| | | 1,109,624 | | | 1,009,117 |
| | | | | | |
Investments | | | | | |
| Licenses | | 1,452,101 | | | 1,435,000 |
| Goodwill | | 494,737 | | | 494,737 |
| Customer lists, net | | 759 | | | 4,083 |
| Investments in unconsolidated entities | | 160,847 | | | 161,481 |
| Notes and interest receivable—long-term | | 4,070 | | | 4,214 |
| Long-term investments | | 46,033 | | | — |
| | | 2,158,547 | | | 2,099,515 |
| | | | | | |
Property, plant and equipment | | | | | |
| In service and under construction | | 6,382,581 | | | 5,884,307 |
| Less: accumulated depreciation | | 3,767,509 | | | 3,282,969 |
| | | 2,615,072 | | | 2,601,338 |
| | | | | | |
Other assets and deferred charges | | 50,367 | | | 38,776 |
| | | | | | |
| | | | | | |
Total assets | $ | 5,933,610 | | $ | 5,748,746 |
7
UNITED STATES CELLULAR CORPORATION CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Unaudited, dollars in thousands) LIABILITIES AND EQUITY |
|
|
|
|
| | | | | | | | | |
| | | | | | | | | |
| | | December 31, 2010 | | December 31, 2009 |
| | | |
Current liabilities | | | | | | | |
| Current portion of long-term debt | $ | 101 | | | $ | 76 | |
| Accounts payable | | | | | | | |
| | Affiliated | | 10,791 | | | | 14,732 | |
| | Trade | | 281,601 | | | | 296,288 | |
| Customer deposits and deferred revenues | | 146,428 | | | | 140,248 | |
| Accrued taxes | | 39,299 | | | | 57,507 | |
| Accrued compensation | | 65,952 | | | | 62,242 | |
| Other current liabilities | | 121,823 | | | | 92,884 | |
| | | | 665,995 | | | | 663,977 | |
| | | | | | | | | |
Deferred liabilities and credits | | | | | | | |
| Net deferred income tax liability | | 579,769 | | | | 513,994 | |
| Other deferred liabilities and credits | | 284,949 | | | | 262,412 | |
| | | | | | | | | |
Long-term debt | | 867,941 | | | | 867,522 | |
| | | | | | | | | |
Commitments and contingencies | | | | | | | |
| | | | | | | | | |
Noncontrolling interests with redemption features | | 855 | | | | 727 | |
| | | | | | | | | |
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 | | 1,368,487 | | | | 1,356,322 | |
| Treasury Shares | | (105,616 | ) | | | (69,616 | ) |
| Retained earnings | | 2,129,638 | | | | 2,013,633 | |
| | Total U.S. Cellular shareholders equity | | 3,480,583 | | | | 3,388,413 | |
| | | | | | | | | |
Noncontrolling interests | | 53,518 | | | | 51,701 | |
| | | | | | | | | |
| Total equity | | 3,534,101 | | | | 3,440,114 | |
| | | | | | | | | |
Total liabilities and equity | $ | 5,933,610 | | | $ | 5,748,746 | |
8
United States Cellular Corporation
Schedule of Cash and Cash Equivalents and Investments
(Unaudited, dollars in thousands)
In an effort to improve investment returns, during 2010, U.S. Cellular elected to use a portion of its cash balance to directly purchase government-backed securities, specifically U.S. treasury securities and securities insured by the Federal Deposit Insurance Corporation (“FDIC”). The maturity dates of such direct investments were staggered in order to maintain cash balances and liquidity at targeted levels. U.S. Cellular also continues to invest in certificates of deposit that are insured by the FDIC. The following table presents U.S. Cellular’s cash and cash equivalents; and investments in government-backed securities and certificates of deposit at December 31, 2010 and December 31, 2009.
| | | | | December 31, 2010 | | December 31, 2009 |
| | | |
| | | | | | | | | |
| Cash and cash equivalents | | $ | 294,426 | | $ | 294,411 |
| Amounts included in short-term investments (1)(2) | | | | | | |
| | Government-backed securities (3) | | | | 146,336 | | | — |
| | Certificates of deposit | | | | 250 | | | 330 |
| | | | | $ | 146,586 | | $ | 330 |
| Amounts included in long-term investments (1)(4) | | | | | | |
| | Government-backed securities (3) | | | $ | 46,033 | | $ | — |
(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. treasuries and corporate notes guaranteed under the FDIC’s Temporary Liquidity Guarantee Program.
(4) Maturities range between 14 and 24 months from the balance sheet date.
9
UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve Months Ended December 31,
(Unaudited, dollars in thousands) |
|
|
|
| | | | | |
| 2010 | | 2009 |
Cash flows from operating activities | | | | | | | |
| Net income | $ | 155,408 | | | $ | 228,500 | |
| Add (deduct) adjustments to reconcile net incometo net cash flows from operating activities | | | | | | | |
| | | Depreciation, amortization and accretion | | 577,054 | | | | 569,514 | |
| | | Bad debts expense | | 76,292 | | | | 107,991 | |
| | | Stock-based compensation expense | | 18,044 | | | | 16,362 | |
| | | Deferred income taxes, net | | 71,378 | | | | 45,496 | |
| | | Equity in earnings of unconsolidated entities | | (97,318 | ) | | | (96,800 | ) |
| | | Distributions from unconsolidated entities | | 100,359 | | | | 91,105 | |
| | | Loss on impairment of intangible assets | | — | | | | 14,000 | |
| | | Loss on asset disposals, net | | 10,717 | | | | 16,169 | |
| | | Noncash interest expense | | 2,540 | | | | 2,442 | |
| | | Excess tax benefit from stock awards | | (114 | ) | | | (24 | ) |
| | | Other operating activities | | (2,369 | ) | | | — | |
| Changes in assets and liabilities from operations | | | | | | | |
| | | Accounts receivable | | (75,252 | ) | | | (114,646 | ) |
| | | Inventory | | 40,277 | | | | (35,992 | ) |
| | | Accounts payable—trade | | (14,660 | ) | | | 47,503 | |
| | | Accounts payable—affiliate | | (3,940 | ) | | | 5,119 | |
| | | Customer deposits and deferred revenues | | 6,180 | | | | (9,921 | ) |
| | | Accrued taxes | | (70,057 | ) | | | 48,218 | |
| | | Accrued interest | | 204 | | | | (2,121 | ) |
| | | Other assets and liabilities | | 79,546 | | | | (51,107 | ) |
| | | | | 874,289 | | | | 881,808 | |
| | | | | | | | | | |
Cash flows from investing activities | | | | | | | |
| Additions to property, plant and equipment | | (583,134 | ) | | | (546,758 | ) |
| Cash received from divestitures | | — | | | | 50 | |
| Cash paid for acquisitions and licenses | | (17,101 | ) | | | (16,027 | ) |
| Cash paid for investments | | (250,250 | ) | | | (450 | ) |
| Cash received for investments | | 60,330 | | | | 120 | |
| Other investing activities | | (953 | ) | | | 1,614 | |
| | | | | (791,108 | ) | | | (561,451 | ) |
| | | | | | | | | | |
Cash flows from financing activities | | | | | | | |
| Repayment of long-term debt | | (316 | ) | | | (140,236 | ) |
| Common shares reissued for benefit plans, net of tax payments | | 509 | | | | (82 | ) |
| Common shares repurchased | | (52,827 | ) | | | (33,585 | ) |
| Excess tax benefit from stock awards | | 114 | | | | 24 | |
| Payment of debt issuance costs | | (2,229 | ) | | | (4,421 | ) |
| Distributions to noncontrolling interests | | (19,631 | ) | | | (18,426 | ) |
| Payments to acquire additional interest in subsidiaries | | (8,786 | ) | | | (285 | ) |
| Other financing activities | | — | | | | 69 | |
| | | | | (83,166 | ) | | | (196,942 | ) |
| | | | | | | | | | |
Net increase in cash and cash equivalents | | 15 | | | | 123,415 | |
| | | | | | | | | | |
Cash and cash equivalents | | | | | | | |
| Beginning of period | | 294,411 | | | | 170,996 | |
| End of period | $ | 294,426 | | | $ | 294,411 | |
10
United States Cellular Corporation Financial Measures and Reconciliations
(Unaudited, dollars in thousands) |
|
| | | | | | | | | | | | | | | |
| | | | | Three Months Ended December 31, | | | Twelve Months Ended December 31, | |
| |
2010 | | 2009 | |
2010 | | 2009 |
| | | | | | | | | | | | | | | | | | | |
| Service revenues | | $ | 991,914 | | | $ | 985,408 | | | $ | 3,913,001 | | | $ | 3,927,128 | |
| | | | | | | | | | | | | | | | | | | |
| Operating income (loss) | | | (5,587 | ) | | | 4,191 | | | | 195,374 | | | | 320,946 | |
| Add: | | | | | | | | | | | | | | | | |
| | Depreciation, amortization and accretion | | | 144,649 | | | | 146,807 | | | | 577,054 | | | | 569,514 | |
| | Loss on impairment of intangible asset | | | — | | | | 14,000 | | | | — | | | | 14,000 | |
| | Loss on asset disposals | | | 2,310 | | | | 7,528 | | | | 10,717 | | | | 16,169 | |
| | | Adjusted OIBDA (1) | | $ | 141,372 | | | $ | 172,526 | | | $ | 783,145 | | | $ | 920,629 | |
| | | | | | | | | | | | | | | | | | | |
| | | Adjusted OIBDA margin (2) | | | 14.3 | % | | | 17.5 | % | | | 20.0 | % | | | 23.4 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | |
2010 | | 2009 | |
2010 | | 2009 |
| Cash flows from operating activities | | $ | 290,276 | | | $ | 244,114 | | | $ | 874,289 | | | $ | 881,808 | |
| Deduct: | | | | | | | | | | | | | | | | |
| | Capital expenditures | | | 203,442 | | | | 188,988 | | | | 583,134 | | | | 546,758 | |
| | | Free cash flow (3) | | $ | 86,834 | | | $ | 55,126 | | | $ | 291,155 | | | $ | 335,050 | |
(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 assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of 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, and accordingly, they may be incurred in the future.
(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 negative margin, and the net equipment subsidy is effectively a cost for purposes of assessing business results and is already reflected in adjusted OIBDA. 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) Free cash flow is 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.
11
