Document And Entity Information
Document And Entity Information | 6 Months Ended |
Jun. 30, 2016shares | |
Entity Registrant Name | United States Cellular Corporation |
Entity Central Index Key | 821,130 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2016 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Accelerated Filer |
Document Fiscal Year Focus | 2,016 |
Document Fiscal Period Focus | Q2 |
Trading Symbol | USM |
Common Shares | |
Entity Common Stock, Shares Outstanding | 51,801,561 |
Series A Common Shares | |
Entity Common Stock, Shares Outstanding | 33,005,877 |
Consolidated Statement Of Opera
Consolidated Statement Of Operations - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Operating revenues | ||||
Service | $ 762 | $ 824 | $ 1,521 | $ 1,653 |
Equipment sales | 218 | 152 | 417 | 288 |
Total operating revenues | 980 | 976 | 1,938 | 1,941 |
Operating expenses | ||||
System operations (excluding Depreciation, amortization and accretion reported below) | 193 | 196 | 376 | 387 |
Cost of equipment sold | 262 | 254 | 518 | 492 |
Selling, general and administrative (including charges from affiliates of $23 million and $24 million, respectively, for the three months, and $48 million and $44 million, respectively, for the six months) | 357 | 364 | 719 | 731 |
Depreciation, amortization and accretion | 154 | 151 | 307 | 298 |
(Gain) loss on asset disposals, net | 5 | 5 | 10 | 10 |
(Gain) loss on sale of business and other exit costs, net | (2) | (113) | ||
(Gain) loss on license sales and exchanges, net | (9) | (9) | (123) | |
Total operating expenses | 962 | 968 | 1,921 | 1,682 |
Operating income | 18 | 8 | 17 | 259 |
Investment and other income (expense) | ||||
Equity in earnings of unconsolidated entities | 37 | 36 | 72 | 70 |
Interest and dividend income | 14 | 9 | 27 | 17 |
Interest expense | (28) | (20) | (56) | (40) |
Other, net | (1) | |||
Total investment and other income | 22 | 25 | 43 | 47 |
Income before income taxes | 40 | 33 | 60 | 306 |
Income tax expense | 13 | 13 | 23 | 121 |
Net income | 27 | 20 | 37 | 185 |
Less: Net income attributable to noncontrolling interests, net of tax | 1 | 1 | 6 | |
Net income attributable to U.S. Cellular shareholders | $ 27 | $ 19 | $ 36 | $ 179 |
Basic weighted average shares outstanding | 85 | 84 | 85 | 84 |
Basic earnings per share attributable to U.S. Cellular shareholders | $ 0.32 | $ 0.23 | $ 0.43 | $ 2.13 |
Diluted weighted average shares outstanding | 85 | 85 | 85 | 85 |
Diluted earnings per share attributable to U.S. Cellular shareholders | $ 0.32 | $ 0.23 | $ 0.43 | $ 2.11 |
Consolidated Statement Of Oper3
Consolidated Statement Of Operations Parenthetical - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Operating expenses | ||||
Selling, general and administrative, charges from affiliates | $ 23 | $ 24 | $ 48 | $ 44 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Cash flows from operating activities | ||
Net income | $ 37 | $ 185 |
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | ||
Depreciation, amortization and accretion | 307 | 298 |
Bad debts expense | 44 | 52 |
Stock-based compensation expense | 12 | 12 |
Deferred income taxes, net | 7 | (17) |
Equity in earnings of unconsolidated entities | (72) | (70) |
Distributions from unconsolidated entities | 30 | 27 |
(Gain) loss on asset disposals, net | 10 | 10 |
(Gain) loss on sale of business and other exit costs, net | (113) | |
(Gain) loss on license sales and exchanges, net | (9) | (123) |
Noncash interest expense | 1 | 1 |
Other operating activities | (2) | |
Changes in assets and liabilities from operations | ||
Accounts receivable | 9 | 5 |
Equipment installment plans receivable | (94) | (65) |
Inventory | (27) | 132 |
Accounts payable | 35 | 25 |
Customer deposits and deferred revenues | (18) | (7) |
Accrued taxes | 41 | 139 |
Accrued interest | (1) | |
Other assets and liabilities | (49) | (68) |
Net cash provided by operating activities | 261 | 423 |
Cash flows from investing activities | ||
Cash paid for additions to property, plant and equipment | (177) | (259) |
Cash paid for aquisitions and licenses | (46) | (280) |
Cash received from divestitures and exchanges | 17 | 282 |
Federal Communications Commission deposit | (143) | |
Other investing activities | (1) | 1 |
Net cash used in investing activities | (350) | (256) |
Cash flows from financing activities | ||
Repayment of long-term debt | (6) | |
Common shares reissued for benefit plans, net of tax payments | 3 | (2) |
Common shares repurchased | (2) | (2) |
Payment of debt issuance costs | (2) | (3) |
Acquisition of assets in common control transaction | (2) | |
Distributions to noncontrolling interests | (1) | (6) |
Other financing activities | 3 | (2) |
Net cash used in financing activities | (5) | (17) |
Net increase (decrease) in cash and cash equivalents | (94) | 150 |
Cash and cash equivalents | ||
Beginning of period | 715 | 212 |
End of period | $ 621 | $ 362 |
Consolidated Balance Sheet
Consolidated Balance Sheet - USD ($) $ in Millions | Jun. 30, 2016 | Dec. 31, 2015 | |
Current assets | |||
Cash and cash equivalents | $ 621 | $ 715 | |
Accounts receivable | |||
Customers and agents, less allowances of $44 and $45, respectively | 613 | 608 | |
Roaming | 19 | 20 | |
Affiliated | 1 | ||
Other, less allowances of $1 and $1, respectively | 47 | 44 | |
Inventory, net | 176 | 149 | |
Prepaid expenses | 86 | 81 | |
Other current assets | 22 | 55 | |
Total current assets | 1,585 | 1,672 | |
Assets held for sale | 23 | ||
Licenses | 1,854 | 1,834 | |
Goodwill | 370 | 370 | |
Investments in unconsolidated entities | 407 | 363 | |
Property, plant and equipment | |||
In service and under construction | 7,605 | 7,669 | |
Less: Accumulated depreciation and amortization | 5,095 | 5,020 | |
Property, plant and equipment, net | 2,510 | 2,649 | |
Other assets and deferred charges | 342 | 172 | |
Total assets | [1] | 7,091 | 7,060 |
Current liabilities | |||
Current portion of long-term debt | 11 | 11 | |
Accounts payable | |||
Affiliated | 16 | 10 | |
Trade | 294 | 275 | |
Customer deposits and deferred revenues | 231 | 251 | |
Accrued taxes | 35 | 28 | |
Accrued compensation | 52 | 68 | |
Other current liabilities | 80 | 105 | |
Total current liabilities | 719 | 748 | |
Deferred liabilities and credits | |||
Deferred income tax liability, net | 827 | 821 | |
Other deferred liabilities and credits | 300 | 290 | |
Long-term debt, net | 1,623 | 1,629 | |
Commitments and contingencies | |||
Noncontrolling interests with redemption features | 1 | 1 | |
U.S. Cellular shareholders' equity | |||
Series A Common and Common Shares Authorized 190 shares (50 Series A Common and 140 Common Shares) Issued 88 shares (33 Series A Common and 55 Common Shares) Outstanding 85 shares (33 Series A Common and 52 Common Shares) and 84 shares (33 Series A Common and 51 Common Shares), respectively Par Value ($1.00 per share) ($33 Series A Common and $55 Common Shares) | 88 | 88 | |
Additional paid-in capital | 1,510 | 1,497 | |
Treasury Shares, at cost, 3 and 4 Common Shares, respectively | (137) | (157) | |
Retained earnings | 2,150 | 2,133 | |
Total U.S. Cellular shareholders' equity | 3,611 | 3,561 | |
Noncontrolling interests | 10 | 10 | |
Total equity | 3,621 | 3,571 | |
Total liabilities and equity | [1] | $ 7,091 | $ 7,060 |
[1] | The consolidated total assets as of June 30, 2016 and December 31, 2015 include assets held by consolidated VIEs of $827 million and $658 million, respectively, which are not available to be used to settle the obligations of U.S. Cellular. The consolidated total liabilities as of June 30, 2016 and December 31, 2015 include certain liabilities of consolidated VIEs of $18 million and $1 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of U.S. Cellular. See Note 9 — Variable Interest Entities for additional information. |
Consolidated Balance Sheet Pare
Consolidated Balance Sheet Parenthetical - USD ($) shares in Millions, $ in Millions | Jun. 30, 2016 | Dec. 31, 2015 |
Current assets | ||
Customers and agent allowances | $ 44 | $ 45 |
Other allowances | $ 1 | $ 1 |
U.S. Cellular shareholders' equity | ||
Authorized shares | 190 | 190 |
Issued shares | 88 | 88 |
Outstanding shares | 85 | 84 |
Par value | $ 88 | $ 88 |
Variable Interest Entities VIEs | ||
Total VIE assets that can be used to settle only the VIEs' obligations | 827 | 658 |
Total VIE liabilities for which creditors have no recourse | $ 18 | $ 1 |
Common Shares | ||
U.S. Cellular shareholders' equity | ||
Authorized shares | 140 | 140 |
Issued shares | 55 | 55 |
Outstanding shares | 52 | 51 |
Par value per share | $ 1 | $ 1 |
Par value | $ 55 | $ 55 |
Treasury shares | 3 | 4 |
Series A Common Shares | ||
U.S. Cellular shareholders' equity | ||
Authorized shares | 50 | 50 |
Issued shares | 33 | 33 |
Outstanding shares | 33 | 33 |
Par value per share | $ 1 | $ 1 |
Par value | $ 33 | $ 33 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Equity - USD ($) $ in Millions | Total | Series A Common and Common shares | Additional paid-in capital | Treasury shares | Retained earnings | Total U.S. Cellular shareholders' equity | Noncontrolling interests |
Beginning balance at Dec. 31, 2014 | $ 3,313 | $ 88 | $ 1,473 | $ (169) | $ 1,910 | $ 3,302 | $ 11 |
Net income attributable to U.S. Cellular shareholders | 179 | 179 | 179 | ||||
Repurchase of Common shares | (2) | (2) | (2) | ||||
Incentive and compensation plans | (2) | 13 | (15) | (2) | |||
Stock-based compensation awards | 11 | 11 | 11 | ||||
Distributions to noncontrolling interests | (1) | (1) | |||||
Acquisition of assets in common control transaction | (1) | 1 | (2) | (1) | |||
Ending balance at Jun. 30, 2015 | 3,497 | 88 | 1,485 | (158) | 2,072 | 3,487 | 10 |
Beginning balance at Dec. 31, 2015 | 3,571 | 88 | 1,497 | (157) | 2,133 | 3,561 | 10 |
Net income attributable to U.S. Cellular shareholders | 36 | 36 | 36 | ||||
Net loss attributable to noncontrolling interests classified as equity | 1 | 1 | |||||
Repurchase of Common shares | (2) | (2) | (2) | ||||
Incentive and compensation plans | 3 | 22 | (19) | 3 | |||
Stock-based compensation awards | 13 | 13 | 13 | ||||
Distributions to noncontrolling interests | (1) | (1) | |||||
Ending balance at Jun. 30, 2016 | $ 3,621 | $ 88 | $ 1,510 | $ (137) | $ 2,150 | $ 3,611 | $ 10 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2016 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | United States Cellular Corporation Notes to Consolidated Financial Statements Note 1 Basis of Presentation United States Cellular Corporation (“U.S. Cellular”), a Delaware corporation, is an 83% -owned subsidiary of Telephone and Data Systems, Inc. (“TDS”). The accounting policies of U.S. Cellular conform to accounting principles generall y accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The consolidated financial statements include the accounts of U.S. Cellular, subsidiaries in w hich it has a controlling financial interest, general partnerships in which U.S. Cellular has a majority partnership interest and certain entities in which U.S. Cellular has a variable interest that require consolidation under GAAP. All material intercomp any accounts and transactions have been eliminated. The unaudited consolidated financial statements included herein have been prepared by U.S. Cellular pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain inform ation and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, U.S. Cellular believes that the disclosures included herein are adequate to ma ke the information presented not misleading. Calculated amounts and percentages are based on the underlying actual numbers rather than the numbers rounded to millions as presented. These unaudited consolidated financial statements should be read in conju nction with the consolidated financial statements and the notes thereto included in U.S. Cellular’s Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2015 . The accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring items, unless otherwise disclosed) necessary for the fair statement of U.S. Cellular’s financial position as of June 30, 2016 and December 31, 2015 , its results of operations for the three and six months ended June 30, 2016 and 2015 , and its cash flows and changes in equity for the six months ended June 30, 2016 and 2015 . The Consolidated Statement of Comprehensive Income was not included because comprehensive income for the three and six months ended June 30, 2016 and 2015 equaled net income. These results are not necessarily indicative of the results to be expected for the full year. Recently Issued Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and has since amended the standard with Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Deferral of the Eff ective Date , Accounting Standards Update 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , Accounting Standards Update 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing , and Accounting Standards Update 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients . These standards replace existing revenue recognition rules with a single comprehens ive model to use in accounting for revenue arising from contracts with customers. U.S. Cellular is required to adopt ASU 2014-09, as amended, on January 1, 2018. Early adoption as of January 1, 2017 is permitted; however, U.S. Cellular does not intend to adopt early. ASU 2014-09, as amended, impacts U.S. Cellular’s revenue recognition related to the allocation of contract revenues between various services and equipment, and the timing of when those revenues are recognized. In addition, the new requireme nts require deferral of incremental contract acquisition and fulfillment costs and subsequent expense recognition over the contract period or expected customer life. U.S. Cellular will transition to the new standard under one of the two adoption methods a vailable for implementation. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, a cumulative effect adjustment is recognized upon adoption and the guidance is applied prospectively. U.S. Cellular is currently evaluating the guidance, developing its implementation plan, and evaluating the effects ASU 2014-09, as amended, will have on its financial position and results of operations u pon adoption. In August 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires U.S. Cellular to assess its ability to continue a s a going concern each interim and annual reporting period and provide certain disclosures if there is substantial doubt about the entity’s ability to continue as a going concern, including management’s plan to alleviate the substantial doubt. U.S. Cellul ar is required to adopt the provisions of ASU 2014-15 for the annual period ending December 31, 2016, but early adoption is permitted. The adoption of ASU 2014-15 will not impact U.S. Cellular’s financial position or results of operations but may impact f uture disclosures. In July 2015, the FASB issued Accounting Standards Update 2015-11, Inventory: Simplifying the Measurement of Inventory (“ASU 2015-11”), which requires inventory to be measured at the lower of cost or net realizable value. U.S. Cellular is required to adopt ASU 2015-11 on January 1, 2017. Early adoption is permitted. The adoption of ASU 2015-11 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations. In January 2016, the FASB issued Ac counting Standards Update 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This ASU introduces changes to current accounting for equity investments and financial liabiliti es under the fair value option and the presentation and disclosure requirements for financial instruments. U.S. Cellular is required to adopt ASU 2016-01 on January 1, 2018. Certain provisions are eligible for early adoption. U.S. Cellular is evaluating the effects that adoption of ASU 2016-01 will have on its financial position and results of operations. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to record a right-of-use a sset and lease liability for almost all leases. This ASU does not substantially impact lessor accounting. U.S. Cellular is required to adopt ASU 2016-02 on January 1, 2019. Early adoption is permitted. Upon adoption of ASU 2016-02, U.S. Cellular expect s a substantial increase to assets and liabilities on its balance sheet. U.S. Cellular is still evaluating the full effects that adoption of ASU 2016-02 will have on its financial position and results of operations. In March 2016, the FASB issued Accounti ng Standards Update 2016-04, Liabilities – Extinguishments of Liabilities: Recognition of Breakage from Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 requires companies that sell prepaid stored-value products redeemable for goods, ser vices or cash at third-party merchants to recognize breakage (i.e., the value that is ultimately not redeemed by the consumer) in a way that is consistent with how it will be recognized under the new revenue recognition standard. U.S. Cellular is required to adopt ASU 2016-04 on January 1, 2018. Early adoption is permitted. The adoption of ASU 2016-04 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations. In March 2016, the FASB issued Accounting Stan dards Update 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 intends to simplify the accounting for share-based payment transactions, including the income tax consequences, c lassification of awards as either equity or liabilities, and classification on the statement of cash flows. U.S. Cellular is required to adopt ASU 2016-09 on January 1, 2017. Early adoption is permitted. U.S. Cellular is evaluating the effects that adop tion of ASU 2016-09 will have on its financial position, results of operations and cash flows. In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments ( “ASU 2016-13”). ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosure relating to the credit quality of trade and other receivables, including information relatin g to management’s estimate of credit allowances. U.S. Cellular is required to adopt ASU 2016-13 on January 1, 2020. Early adoption as of January 1, 2019 is permitted. U.S. Cellular is evaluating the effects that adoption of ASU 2016-13 will have on its financial position, results of operations and disclosures. Amounts Collected from Customers and Remitted to Governmental Authorities U.S. Cellular records amounts collected from customers and remitted to governmental authorities net within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities totaled $ 16 million and $ 34 million for the three and six months ended June 30, 2016 , respectively, and $ 20 million and $ 41 million for the three and six months ended June 30, 2015 , respectively. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 2 Fair Value Measurements As of June 30, 2016 and December 31, 2015 , U.S. Cellular did not have any financial or nonfinancial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP. The provisions of GAAP establish a fair value hierarchy t hat contains three levels for inputs used in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in act ive markets or quoted market prices for identical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 or Level 1 assets. U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below. Level within the Fair Value Hierarchy June 30, 2016 December 31, 2015 Book Value Fair Value Book Value Fair Value (Dollars in millions) Cash and cash equivalents 1 $ 621 $ 621 $ 715 $ 715 Long-term debt Retail 2 917 952 917 929 Insti tutional 2 533 521 533 501 Other 2 208 208 214 214 The fair value of Cash and cash equivalents approximates the book value due to the short-term nature of these financial instruments. Long-term debt excludes capital lease obligations and the current portion of Long-term debt. The fair value of “Retail” Long-term debt was estimated using market prices for the 6.95% Senior Notes, 7.25% Senior Notes due 2063 and 7.25% Senior Notes due 2064. U.S. Cellular’s “Institution al” debt consists of the 6.7% Senior Notes which are traded over the counter. U.S. Cellular’s “Other” debt consists of a senior term loan credit facility. U.S. Cellular estimated the fair value of its Institutional and Other debt through a discounted cas h flow analysis using the interest rates or estimated yield to maturity for each borrowing, which ranged from 3.38% to 7.12% and 3.19% to 7.51% at June 30, 2016 and December 31, 2015 , respectively. |
Equipment Installment Plans
Equipment Installment Plans | 6 Months Ended |
Jun. 30, 2016 | |
Receivables [Abstract] | |
Equipment Installment Plans | Note 3 Equipment Installment Plans U.S. Cellular offers customers, through its owned and agent distribution channels, the option to purchase certain devices under equipment installment contracts over a specified time period. For certain equipment installment plans (“EIP”), after a specified period of time or amount of payments, the customer may have the right to upgrade to a new device and have the remaining unpaid equipment installment contract balance waived, subject to certain conditions, including trading in the original device in good working condition and signing a new equipment installment contract. U.S. Cellular values this trade-in right as a guarantee lia bility. The guarantee liability is initially measured at fair value and is determined based on assumptions including the probability and timing of the customer upgrading to a new device and the fair value of the device being traded-in at the time of trade -in. As of June 30, 2016 and December 31, 2015 , the guarantee liability related to these plans was $ 66 million and $ 93 million, respectively, and is reflected in Customer deposits and deferred revenues in the Consolidated Balance Sheet. U.S. Cellular equipment installment plans do not provide for explicit interest charges. For equipment installment plans with a durati on of greater than twelve months, U.S. Cellular imputes interest. Equipment installment plan receivables had a weighted average effective imputed interest rate of 10.2% and 9.7% as of June 30, 2016 and December 31, 2015 , respectively. The following table summarizes unbilled equipment installment plan receivables a s of June 30, 2016 and December 31, 2015 . Such amounts are included in the Consolidated Balance Sheet as Accounts receivable – customers and agents and Other assets an d deferred charges, where applicable. June 30, 2016 December 31, 2015 (Dollars in millions) Short-term portion of unbilled equipment installment plan receivables, gross $ 314 $ 279 Short-term portion of unbilled deferred interest (28) (21) Short-term portion of unbilled allowance for credit losses (19) (14) Short-term portion of unbilled equipment installment plan receivables, net $ 267 $ 244 Long-term portion of unbilled equipment installment plan receivables, gross $ 127 $ 76 Long-term portion of unbilled deferred interest (6) (2) Long-term portion of unbilled allowance for credit losses (10) (6) Long-term portion of unbilled equipment installment plan receivables, net $ 111 $ 68 U.S. Cellular assesses the collectability of the equipment installment plan receivables based on historical payment experience, account aging and other qualitative factors and provides an allowance for estimated losses. The credit profiles of U.S. Cellular’s customers on equipment installment plans are similar to those of U.S. Cellular customers with traditional subsidized plans. Customers with a higher risk credit profile are required to make a deposit for equipment purchased through an installment contract. U.S. Cellular recorded out-of-period adjustments during the six months ended June 30, 2015 due to errors related to equipment installment plan transactions that were attributable to 2014. U.S. Cellular determined that these adjustments were not material t o the quarterly periods or the annual results for 2015. These equipment installment plan adjustments had the impact of reducing Equipment sales revenues by $ 6 million for both the three and six months ended June 30, 2015, and In come before income taxes by $ 5 million and $ 6 million, for the three and six months ended June 30, 2015, respectively. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Note 4 Earnings Per Share Basic earnings per share attributable to U.S. Cellular shareholders is computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributa ble to U.S. Cellular shareholders is computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities . Potentially dilutive securities primarily include incremental shares issuable upon the exercise of outstanding stock options and the vesting of restricted stock units. The amounts used in computing earnings per common share and the effects of potentiall y dilutive securities on the weighted average number of common shares were as follows: Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 (Dollars and shares in millions, except per share amounts) Net income attributable to U.S. Cellular shareholders $ 27 $ 19 $ 36 $ 179 Weighted average number of shares used in basic earnings per share 85 84 85 84 Effects of dilutive securities – 1 – 1 Weighted average number of shares used in diluted earnings per share 85 85 85 85 Basic earnings per share attributable to U.S. Cellular shareholders $ 0.32 $ 0.23 $ 0.43 $ 2.13 Diluted earnings per share attributable to U.S. Cellular shareholders $ 0.32 $ 0.23 $ 0.43 $ 2.11 Certain Common Shares issuable upon the exercise of stock options or vesting of restricted stock units were not included in average diluted shares outstanding for the calculation of Diluted earnings per share attributable to U.S. Cellular shareholders because their effects were antidilutive. The number of such Common Shares excluded was 3 million shares for both the three and six months ended June 30, 2016 , and 4 million shares and 3 million shares for the three and six months ended June 30, 2015 , respectively. |
Acquisitions, Divestitures and
Acquisitions, Divestitures and Exchanges | 6 Months Ended |
Jun. 30, 2016 | |
Acquisitions, Divestitures and Exchanges [Abstract] | |
Acquisitions, Divestitures and Exchanges | Note 5 Acquisitions, Divestitures and Exchanges In February 2016, U.S. Cellular entered into an agreement with a third party to exchange certain 700 MHz licenses for certain AWS and PCS licenses and $ 28 million of cash. This license exchange will be accomplished in two closings. The fir st closing occurred in June 2016 at which time U.S. Cellular received $ 13 million of cash and recorded a gain of $ 9 million. The second closing is expected to occur in the second half of 2016 and U.S. Cellular expects to recognize a gain at that time . As a result of this exchange, the remaining licenses with a carrying value of $ 8 million have been classified as “Assets held for sale” in the Consolidated Balance Sheet as of June 30, 2016 . In 2016, U.S. Cellular entered into additional agreements with third parties to transfer FCC licenses in non-operating markets and receive FCC licenses in operating markets. The agreements provide fo r the transfer of certain AWS and PCS spectrum licenses and approximately $ 1 million, net, in cash to U.S. Cellular, in exchange for U.S. Cellular transferring certain AWS, PCS and 700 MHz spectrum licenses to the third parties. These transactions are subject to regulatory approval and other customary closing conditions, and are expected to close in the second half of 2016. See Note 10 — Subsequent Events for additional information related to one of these exchange agreements. Upon closing of each transaction, U.S. Cellular expects to recognize a gain. As a result of these additional exchange agreements, licenses with a car rying value of $ 15 million have been classified as “Assets held for sale” in the Consolidated Balance Sheet as of June 30, 2016 . In 2015 and 2016, U.S. Cellular entered into multiple agre ements to purchase spectrum licenses located in U.S. Cellular’s existing operating markets. The aggregate purchase price for these spectrum licenses is $ 56 million, of which $ 46 million closed in the three months ended June 30, 2016. The remaining agreements are expected to close in the second half of 2016. In March 2016, the FCC released a list of applicants that successfully completed applications for the forward auction of 600 MHz spectrum licenses, referred to as Auction 1002, including U.S. Cellular. Forward auction bidding is scheduled to begin on August 16, 2016. In June 2016, U.S. Cellular made an upfront payment to the FCC of $ 143 million to establish its initial bidding eligibility. |
Intangible Assets
Intangible Assets | 6 Months Ended |
Jun. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Note 6 Intangible Assets Changes in U.S. Cellular’s Licenses for the six months ended June 30, 2016 are presented below. There were no significant changes to Goodwill during t he six months ended June 30, 2016 . Licenses (Dollars in millions) Balance December 31, 2015¹ $ 1,834 Acquisitions 46 Transferred to Assets held for sale (23) Exchanges (3) Balance June 30, 2016¹ $ 1,854 1 Amounts include payments totaling $338 million made by Advantage Spectrum L.P. to the FCC for licenses in which it `was the provisional winning bidder in Auction 97. These licenses were granted by the FCC in July 2016. See Note 9 — Variable Interest Entities for additional information. |
Investments in Unconsolidated E
Investments in Unconsolidated Entities | 6 Months Ended |
Jun. 30, 2016 | |
Investments in Unconsolidated Entities [Abstract] | |
Investments in Unconsolidated Entities | Note 7 Investments in Unconsolidated Entities Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. These investments are accounted for using either the equity or cost method. The following table, which is based in part on information provided by third parties, summarizes the combined results of operations of U.S. Cellular’s equity method investments. Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 (Dollars in millions) Revenues $ 1,636 $ 1,721 $ 3,318 $ 3,451 Operating expenses 1,168 1,277 2,398 2,564 Operating income 468 444 920 887 Other income (expense), net (3) (10) (6) (5) Net income $ 465 $ 434 $ 914 $ 882 |
Debt
Debt | 6 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Note 8 Debt Revolving Credit Facilities U.S. Cellular has a revolving credit facility available for general corporate purposes. In June 2016, U.S. Cellular entered into a new $300 million revolving credit agreement with certain lenders and other parties. As a result of the new agreement, U.S. Cellular’s revolving credit agreement due to expire in December 2017 was terminated. Amounts under the new revolving credit facility may be borrowed, repaid and reborrowed from time-to-time until maturity in June 2021. As of June 30, 2016 , there were no outstanding borrowings under the revolving credit facility, except for letters of credit. Interest expense primarily associated with the unused commitment fees on the revolving line of credit was immaterial for ea ch of the six months ended June 30, 2016 and 2015 . The following table summarizes the terms of the revolving credit facility as of June 30, 2016 : (Dollars in millions) Maximum borrowing capacity $ 300 Letters of credit outstanding $ 17 Amount borrowed $ – Amount available for use $ 283 Illustrative borrowing rate: One-month London Interbank Offered Rate ("LIBOR") plus contractual spread 1 2.18% Illustrative LIBOR Rate 0.43% Contractual spread 1.75% Commitment fees on amount available for use 2 0.30% Agreement date June 2016 Maturity date June 2021 1 Borrowings under the revolving credit facility bear interest either at a LIBOR rate or at an alternative Base Rate as defined in the revolving credit agreement, plus an applicable margin, at U.S. Cellular’s option. U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twel ve months or less if requested by U.S. Cellular and approved by the lenders). 2 The revolving credit facility has commitment fees based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies. The new revolving credit agreement includes the following financial covenants: Consolidated Interest Coverage Ratio may not be less than 3.00 to 1.00 as of the end of any fiscal quarter. Consolidated Leverage Ratio may not be greater than the ratios indicated as of the end of any fiscal quarter for each period specified below: Period Ratios From the agreement date of June 15, 2016 through June 30, 2019 3.25 to 1.00 From July 1, 2019 and thereafter 3.00 to 1.00 Certain U.S. Cellular wholly-owned subsidiaries have jointly and severally unconditionally guaranteed the payment and performance of the obligations of U.S. Cellular under the revolving credit agreement pursuant to a guaranty dated June 15, 2016. Other subsidiaries that meet certain criter ia will be required to provide a similar guaranty in the future. U.S. Cellular believes it was in compliance with all of the financial and other covenants and requirements set forth in the revolving credit facility as of June 30, 2016. At June 30, 2016, U .S. Cellular had recorded $ 3 million of unamortized debt issuance costs related to the revolving credit facility which is included in Other assets and deferred charges in the Consolidated Balance Sheet. Included in that amount w as $ 2 million related to the new revolving credit facility. Term Loan In June 2016, U.S. Cellular also amended and restated its senior term loan credit facility. Certain modifications were made to the financial covenants and subsidiary guarantees were added in order to align with the new revolving credit agreements. There were no significant changes to the maturity date or other key terms of the agreement. |
Variable Interest Entities
Variable Interest Entities | 6 Months Ended |
Jun. 30, 2016 | |
Variable Interest Entities [Abstract] | |
Variable Interest Entities | Note 9 Variable Interest Entities In February 2015, the FASB issued Accounting Standards Update 2015-02, Consolidation: Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 changes consolidation accounting including revising certain criteria for identifying variable interest entities. U.S. Cellular adopted the provisions of this standard as of January 1, 2016. As a result, certain consolidated subsidiaries and unconsolidated entities that were not defined as variable interest entities under previous accounting guidance are defined as variable interest entities under the provisions of ASU 2015-02. U.S. C ellular’s modified retrospective adoption of ASU 2015-02 did not change the group of entities which U.S. Cellular is required to consolidate in its financial statements. Accordingly, the adoption of ASU 2015-02 did not impact its financial position or res ults of operations. Consolidated VIEs U.S. Cellular consolidates variable interest entities (“VIEs”) in which it has a controlling financial interest as defined by GAAP and is therefore deemed the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when events warranting reconsideration occur. These VIEs have risks similar to those described in the “Risk Factors” in U.S. Cellular’s Form 10-K for the yea r ended December 31, 2015 . The following VIEs were formed to participate in FCC auctions of wireless spectrum and to fund, establish, and provide wireless service with respect to any FCC licenses won in the a uctions: Advantage Spectrum L.P. (“Advantage Spectrum”) and Frequency Advantage L.P., the general partner of Advantage Spectrum; Aquinas Wireless L.P. (“Aquinas Wireless”); and King Street Wireless L.P. (“King Street Wireless”) and King Street Wireless, Inc., the general partner of King Street Wireless. These particular VIEs are collectively referred to as designated entities. Historically and as of June 30, 2016 , U.S. Cellular consolidated these VIEs. The power to direct the activities that most significantly impact the economic performance of these VIEs is shared. Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the limited partnerships and make all de cisions to carry on the business of the partnerships. The general partner of each partnership needs the consent of the limited partner, an indirect U.S. Cellular subsidiary, to sell or lease certain licenses, to make certain large expenditures, admit othe r partners or liquidate the limited partnerships. Although the power to direct the activities of these VIEs is shared, U.S. Cellular has the most significant level of exposure to the variability associated with the economic performance of the VIEs, indica ting that U.S. Cellular is the primary beneficiary of the VIEs. Therefore, in accordance with GAAP, these VIEs are consolidated. In March 2015, King Street Wireless made a $ 60 million distribution to its owners. Of this distrib ution, $ 6 million was provided to King Street Wireless, Inc. and $ 54 million was provided to U.S. Cellular. FCC Auction 97 ended in January 2015. U.S. Cellular participated in Auction 97 indirectly th rough its interest in Advantage Spectrum. An indirect subsidiary of U.S. Cellular is a limited partner in Advantage Spectrum. Advantage Spectrum applied as a designated entity, and received bid credits with respect to spectrum purchased in Auction 97. A dvantage Spectrum was the winning bidder for 124 licenses for an aggregate bid of $ 338 million, after its designated entity discount of 25 %. This amount is c lassified as Licenses in U.S. Cellular’s Consolidated Balance Sheet. Advantage Spectrum’s bid amount, less the initial deposit of $ 60 million paid in 2014, plus certain other charges totaling $ 2 millio n, was paid to the FCC in March 2015. These licenses were granted by the FCC in July 2016. U.S. Cellular also consolidates other VIEs that are limited partnerships that provide wireless service. ASU 2015-02 modified the manner in which limited partners hips and similar legal entities are evaluated under the variable interest model. A limited partnership is a variable interest entity unless the limited partners hold substantive participating rights or kick-out rights over the general partners. For certa in limited partnerships, U.S. Cellular is the general partner and manages the operations. In these partnerships, the limited partners do not have substantive kick-out or participating rights and, further, such limited partners do not have the authority to remove the general partner. Therefore, beginning January 1, 2016, these limited partnerships are also recognized as VIEs and are consolidated under the variable interest model. Prior to the adoption of ASU 2015-02, these limited partnerships were consol idated under the voting interest model. The following table presents the classification and balances of the consolidated VIEs’ assets and liabilities in U.S. Cellular’s Consolidated Balance Sheet. June 30, December 31, 2016¹ 2015¹ (Dollars in millions) Assets Cash and cash equivalents $ 2 $ 1 Accounts receivable 41 – Other current assets 7 – Assets held for sale 2 – Licenses 2 652 649 Property, plant and equipment, net 112 8 Other assets and deferred charges 11 – Total assets $ 827 $ 658 Liabilities Current liabilities $ 24 $ – Deferred liabilities and credits 12 1 Total liabilities $ 36 $ 1 1 ASU 2015-02 was adopted on a modified retrospective basis and, accordingly, prior year amounts have not been revised to reflect the change in guidance. 2 Includes payments totaling $338 million made by Advantage Spectrum to the FCC as described above. Unconsolidated VIEs U.S. Cellular manages the operations of and holds a variable interest in certain other limited partnerships, but is not the primary beneficiary of these entities and, therefore, does not consolidate them under the variable interest model outlined in ASU 2015-02. U.S. Cellular’s total investment in these unconsolidated entities was $ 6 million and $ 5 mi llion at June 30, 2016 and December 31, 2015 , respectively, and is included in Investments in unconsolidated entities in U.S. Cellular’s Consolidated Balance Sheet. The ma ximum exposure from unconsolidated VIEs is limited to the investment held by U.S. Cellular in those entities. Other Related Matters U.S. Cellular made contributions, loans and/or advances to its VIEs totaling $ 26 million and $ 281 million during the six months ended June 30, 2016 and June 30, 2015 , respectively . U.S. Cellular may agree to make additional capital contributions and/or advances to these or other VIEs and/or to their general partners to provid e additional funding for operations or the development of licenses granted in various auctions. U.S. Cellular may finance such amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or other long-term debt. There is no assurance that U.S. Cellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent events | Note 10 Subsequent Events In February 2016, U.S. Cellular entered into an agreement with a third party that provided for the transfer of certain AWS spectrum licenses and $ 2 million in cash to U.S. Cellular, in exchange for U.S. Cellular transferring certain AWS, PCS and 700 MHz licenses with a carrying value of $ 7 million to the third party. This transaction closed on August 1, 2016. U.S. Cellula r expects to recognize a gain as a result of this exchange. See Note 5 — Acquisitions, Divestitures and Exchanges for additional information. |
Summary of Significant Accounti
Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Significant Accounting Policies) | 6 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | The accounting policies of U.S. Cellular conform to accounting principles generall y accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The consolidated financial statements include the accounts of U.S. Cellular, subsidiaries in w hich it has a controlling financial interest, general partnerships in which U.S. Cellular has a majority partnership interest and certain entities in which U.S. Cellular has a variable interest that require consolidation under GAAP. All material intercomp any accounts and transactions have been eliminated. |
Basis of Accounting | The unaudited consolidated financial statements included herein have been prepared by U.S. Cellular pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain inform ation and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, U.S. Cellular believes that the disclosures included herein are adequate to ma ke the information presented not misleading. Calculated amounts and percentages are based on the underlying actual numbers rather than the numbers rounded to millions as presented. These unaudited consolidated financial statements should be read in conju nction with the consolidated financial statements and the notes thereto included in U.S. Cellular’s Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2015 . The accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring items, unless otherwise disclosed) necessary for the fair statement of U.S. Cellular’s financial position as of June 30, 2016 and December 31, 2015 , its results of operations for the three and six months ended June 30, 2016 and 2015 , and its cash flows and changes in equity for the six months ended June 30, 2016 and 2015 . The Consolidated Statement of Comprehensive Income was not included because comprehensive income for the three and six months ended June 30, 2016 and 2015 equaled net income. These results are not necessarily indicative of the results to be expected for the full year. |
Recently Issued Accounting Pronouncements | In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and has since amended the standard with Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Deferral of the Eff ective Date , Accounting Standards Update 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , Accounting Standards Update 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing , and Accounting Standards Update 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients . These standards replace existing revenue recognition rules with a single comprehens ive model to use in accounting for revenue arising from contracts with customers. U.S. Cellular is required to adopt ASU 2014-09, as amended, on January 1, 2018. Early adoption as of January 1, 2017 is permitted; however, U.S. Cellular does not intend to adopt early. ASU 2014-09, as amended, impacts U.S. Cellular’s revenue recognition related to the allocation of contract revenues between various services and equipment, and the timing of when those revenues are recognized. In addition, the new requireme nts require deferral of incremental contract acquisition and fulfillment costs and subsequent expense recognition over the contract period or expected customer life. U.S. Cellular will transition to the new standard under one of the two adoption methods a vailable for implementation. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, a cumulative effect adjustment is recognized upon adoption and the guidance is applied prospectively. U.S. Cellular is currently evaluating the guidance, developing its implementation plan, and evaluating the effects ASU 2014-09, as amended, will have on its financial position and results of operations u pon adoption. In August 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires U.S. Cellular to assess its ability to continue a s a going concern each interim and annual reporting period and provide certain disclosures if there is substantial doubt about the entity’s ability to continue as a going concern, including management’s plan to alleviate the substantial doubt. U.S. Cellul ar is required to adopt the provisions of ASU 2014-15 for the annual period ending December 31, 2016, but early adoption is permitted. The adoption of ASU 2014-15 will not impact U.S. Cellular’s financial position or results of operations but may impact f uture disclosures. In July 2015, the FASB issued Accounting Standards Update 2015-11, Inventory: Simplifying the Measurement of Inventory (“ASU 2015-11”), which requires inventory to be measured at the lower of cost or net realizable value. U.S. Cellular is required to adopt ASU 2015-11 on January 1, 2017. Early adoption is permitted. The adoption of ASU 2015-11 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations. In January 2016, the FASB issued Ac counting Standards Update 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This ASU introduces changes to current accounting for equity investments and financial liabiliti es under the fair value option and the presentation and disclosure requirements for financial instruments. U.S. Cellular is required to adopt ASU 2016-01 on January 1, 2018. Certain provisions are eligible for early adoption. U.S. Cellular is evaluating the effects that adoption of ASU 2016-01 will have on its financial position and results of operations. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to record a right-of-use a sset and lease liability for almost all leases. This ASU does not substantially impact lessor accounting. U.S. Cellular is required to adopt ASU 2016-02 on January 1, 2019. Early adoption is permitted. Upon adoption of ASU 2016-02, U.S. Cellular expect s a substantial increase to assets and liabilities on its balance sheet. U.S. Cellular is still evaluating the full effects that adoption of ASU 2016-02 will have on its financial position and results of operations. In March 2016, the FASB issued Accounti ng Standards Update 2016-04, Liabilities – Extinguishments of Liabilities: Recognition of Breakage from Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 requires companies that sell prepaid stored-value products redeemable for goods, ser vices or cash at third-party merchants to recognize breakage (i.e., the value that is ultimately not redeemed by the consumer) in a way that is consistent with how it will be recognized under the new revenue recognition standard. U.S. Cellular is required to adopt ASU 2016-04 on January 1, 2018. Early adoption is permitted. The adoption of ASU 2016-04 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations. In March 2016, the FASB issued Accounting Stan dards Update 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 intends to simplify the accounting for share-based payment transactions, including the income tax consequences, c lassification of awards as either equity or liabilities, and classification on the statement of cash flows. U.S. Cellular is required to adopt ASU 2016-09 on January 1, 2017. Early adoption is permitted. U.S. Cellular is evaluating the effects that adop tion of ASU 2016-09 will have on its financial position, results of operations and cash flows. In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments ( “ASU 2016-13”). ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosure relating to the credit quality of trade and other receivables, including information relatin g to management’s estimate of credit allowances. U.S. Cellular is required to adopt ASU 2016-13 on January 1, 2020. Early adoption as of January 1, 2019 is permitted. U.S. Cellular is evaluating the effects that adoption of ASU 2016-13 will have on its financial position, results of operations and disclosures. |
Variable Interest Entities | U.S. Cellular consolidates variable interest entities (“VIEs”) in which it has a controlling financial interest as defined by GAAP and is therefore deemed the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when events warranting reconsideration occur. These VIEs have risks similar to those described in the “Risk Factors” in U.S. Cellular’s Form 10-K for the yea r ended December 31, 2015 . |
Fair Value Measurements (Table)
Fair Value Measurements (Table) | 6 Months Ended |
Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair value measurements | U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below. Level within the Fair Value Hierarchy June 30, 2016 December 31, 2015 Book Value Fair Value Book Value Fair Value (Dollars in millions) Cash and cash equivalents 1 $ 621 $ 621 $ 715 $ 715 Long-term debt Retail 2 917 952 917 929 Insti tutional 2 533 521 533 501 Other 2 208 208 214 214 |
Equipment Installment Plans (Ta
Equipment Installment Plans (Table) | 6 Months Ended |
Jun. 30, 2016 | |
Receivables [Abstract] | |
Equipment installment plans | The following table summarizes unbilled equipment installment plan receivables a s of June 30, 2016 and December 31, 2015 . Such amounts are included in the Consolidated Balance Sheet as Accounts receivable – customers and agents and Other assets an d deferred charges, where applicable. June 30, 2016 December 31, 2015 (Dollars in millions) Short-term portion of unbilled equipment installment plan receivables, gross $ 314 $ 279 Short-term portion of unbilled deferred interest (28) (21) Short-term portion of unbilled allowance for credit losses (19) (14) Short-term portion of unbilled equipment installment plan receivables, net $ 267 $ 244 Long-term portion of unbilled equipment installment plan receivables, gross $ 127 $ 76 Long-term portion of unbilled deferred interest (6) (2) Long-term portion of unbilled allowance for credit losses (10) (6) Long-term portion of unbilled equipment installment plan receivables, net $ 111 $ 68 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per share | The amounts used in computing earnings per common share and the effects of potentiall y dilutive securities on the weighted average number of common shares were as follows: Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 (Dollars and shares in millions, except per share amounts) Net income attributable to U.S. Cellular shareholders $ 27 $ 19 $ 36 $ 179 Weighted average number of shares used in basic earnings per share 85 84 85 84 Effects of dilutive securities – 1 – 1 Weighted average number of shares used in diluted earnings per share 85 85 85 85 Basic earnings per share attributable to U.S. Cellular shareholders $ 0.32 $ 0.23 $ 0.43 $ 2.13 Diluted earnings per share attributable to U.S. Cellular shareholders $ 0.32 $ 0.23 $ 0.43 $ 2.11 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Licenses | |
Licenses | Changes in U.S. Cellular’s Licenses for the six months ended June 30, 2016 are presented below. There were no significant changes to Goodwill during t he six months ended June 30, 2016 . Licenses (Dollars in millions) Balance December 31, 2015¹ $ 1,834 Acquisitions 46 Transferred to Assets held for sale (23) Exchanges (3) Balance June 30, 2016¹ $ 1,854 1 Amounts include payments totaling $338 million made by Advantage Spectrum L.P. to the FCC for licenses in which it `was the provisional winning bidder in Auction 97. These licenses were granted by the FCC in July 2016. See Note 9 — Variable Interest Entities for additional information. |
Investment in Unconsolidated En
Investment in Unconsolidated Entities (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Investments in Unconsolidated Entities [Abstract] | |
Equity method investments, summarized results of operations | The following table, which is based in part on information provided by third parties, summarizes the combined results of operations of U.S. Cellular’s equity method investments. Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 (Dollars in millions) Revenues $ 1,636 $ 1,721 $ 3,318 $ 3,451 Operating expenses 1,168 1,277 2,398 2,564 Operating income 468 444 920 887 Other income (expense), net (3) (10) (6) (5) Net income $ 465 $ 434 $ 914 $ 882 |
Debt (Table)
Debt (Table) | 6 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt instrument facilities | The following table summarizes the terms of the revolving credit facility as of June 30, 2016 : (Dollars in millions) Maximum borrowing capacity $ 300 Letters of credit outstanding $ 17 Amount borrowed $ – Amount available for use $ 283 Illustrative borrowing rate: One-month London Interbank Offered Rate ("LIBOR") plus contractual spread 1 2.18% Illustrative LIBOR Rate 0.43% Contractual spread 1.75% Commitment fees on amount available for use 2 0.30% Agreement date June 2016 Maturity date June 2021 1 Borrowings under the revolving credit facility bear interest either at a LIBOR rate or at an alternative Base Rate as defined in the revolving credit agreement, plus an applicable margin, at U.S. Cellular’s option. U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twel ve months or less if requested by U.S. Cellular and approved by the lenders). 2 The revolving credit facility has commitment fees based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies. |
Variable Interest Entities (Tab
Variable Interest Entities (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Variable Interest Entities [Abstract] | |
Consolidated VIE assets and liabilities | The following table presents the classification and balances of the consolidated VIEs’ assets and liabilities in U.S. Cellular’s Consolidated Balance Sheet. June 30, December 31, 2016¹ 2015¹ (Dollars in millions) Assets Cash and cash equivalents $ 2 $ 1 Accounts receivable 41 – Other current assets 7 – Assets held for sale 2 – Licenses 2 652 649 Property, plant and equipment, net 112 8 Other assets and deferred charges 11 – Total assets $ 827 $ 658 Liabilities Current liabilities $ 24 $ – Deferred liabilities and credits 12 1 Total liabilities $ 36 $ 1 1 ASU 2015-02 was adopted on a modified retrospective basis and, accordingly, prior year amounts have not been revised to reflect the change in guidance. 2 Includes payments totaling $338 million made by Advantage Spectrum to the FCC as described above. |
Basis of Presentation (Details)
Basis of Presentation (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Basis of Presentation [Line Items] | ||||
Amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities | $ 16 | $ 20 | $ 34 | $ 41 |
TDS | ||||
Basis of Presentation [Line Items] | ||||
TDS ownership of U.S. Cellular | 83.00% | 83.00% |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2016 | Dec. 31, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | |
Financial Instruments | ||||
Cash and cash equivalents | $ 621 | $ 715 | $ 362 | $ 212 |
Institutional and Other | Minimum | ||||
Financial Instruments | ||||
Fair value assumption, interest rate | 3.38% | 3.19% | ||
Institutional and Other | Maximum | ||||
Financial Instruments | ||||
Fair value assumption, interest rate | 7.12% | 7.51% | ||
Fair Value | Level 1 | ||||
Financial Instruments | ||||
Cash and cash equivalents | $ 621 | $ 715 | ||
Fair Value | Level 2 | Retail | ||||
Financial Instruments | ||||
Long-term debt | 952 | 929 | ||
Fair Value | Level 2 | Institutional | ||||
Financial Instruments | ||||
Long-term debt | 521 | 501 | ||
Fair Value | Level 2 | Other | ||||
Financial Instruments | ||||
Long-term debt | 208 | 214 | ||
Book Value | ||||
Financial Instruments | ||||
Cash and cash equivalents | 621 | 715 | ||
Book Value | Retail | ||||
Financial Instruments | ||||
Long-term debt | 917 | 917 | ||
Book Value | Institutional | ||||
Financial Instruments | ||||
Long-term debt | 533 | 533 | ||
Book Value | Other | ||||
Financial Instruments | ||||
Long-term debt | $ 208 | $ 214 |
Equipment Installment Plans (De
Equipment Installment Plans (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Equipment installment plans | ||||
Guarantee liability | $ 66 | $ 93 | ||
Imputed interest rate | 10.20% | 9.70% | ||
Equipment installment plans out-of-period adjustment | ||||
Equipment installment plans | ||||
Out-of-period adjustment description | U.S. Cellular recorded out-of-period adjustments during the six months ended June 30, 2015 due to errors related to equipment installment plan transactions that were attributable to 2014. U.S. Cellular determined that these adjustments were not material to the quarterly periods or the annual results for 2015. These equipment installment plan adjustments had the impact of reducing Equipment sales revenues by $6 million for both the three and six months ended June 30, 2015, and Income before income taxes by $5 million and $6 million, for the three and six months ended June 30, 2015, respectively. | |||
Equipment sales revenues | Equipment installment plans out-of-period adjustment | ||||
Equipment installment plans | ||||
Out-of-period adjustment | $ 6 | $ 6 | ||
Income before income taxes | Equipment installment plans out-of-period adjustment | ||||
Equipment installment plans | ||||
Out-of-period adjustment | $ 5 | $ 6 | ||
Short-term | ||||
Equipment installment plan receivables | ||||
Unbilled equipment installment plan receivables, gross | $ 314 | $ 279 | ||
Unbilled deferred interest | (28) | (21) | ||
Unbilled allowance for credit losses | (19) | (14) | ||
Unbilled equipment installment plan receivables, net | 267 | 244 | ||
Long-term | ||||
Equipment installment plan receivables | ||||
Unbilled equipment installment plan receivables, gross | 127 | 76 | ||
Unbilled deferred interest | (6) | (2) | ||
Unbilled allowance for credit losses | (10) | (6) | ||
Unbilled equipment installment plan receivables, net | $ 111 | $ 68 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Earnings per share | ||||
Net income attributable to U.S. Cellular shareholders | $ 27 | $ 19 | $ 36 | $ 179 |
Weighted average number of shares used in basic earnings per share | 85 | 84 | 85 | 84 |
Effects of dilutive securities | 1 | 1 | ||
Weighted average number of shares used in diluted earnings per share | 85 | 85 | 85 | 85 |
Basic earnings per share attributable to U.S. Cellular shareholders | $ 0.32 | $ 0.23 | $ 0.43 | $ 2.13 |
Diluted earnings per share attributable to U.S. Cellular shareholders | $ 0.32 | $ 0.23 | $ 0.43 | $ 2.11 |
Earnings per share, Other disclosures | ||||
Antidilutive securities | 3 | 4 | 3 | 3 |
Acquisitions, Divestitures an30
Acquisitions, Divestitures and Exchanges (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Feb. 29, 2016 | |
Acquisitions | |||||
Cash paid for acquisitions and licenses | $ 46 | $ 280 | |||
Federal Communications Commission deposit | 143 | ||||
Exchanges | |||||
Assets held for sale | $ 23 | $ 23 | 23 | ||
Cash received from divestitures and exchanges | 17 | 282 | |||
Gain on license sales and exchanges | 9 | 9 | $ 123 | ||
Aggregate license exchanges | |||||
Exchanges | |||||
Assets held for sale | 15 | 15 | 15 | ||
Net cash to be received | 1 | 1 | 1 | ||
License exchange 1 | |||||
Exchanges | |||||
Assets held for sale | 8 | 8 | 8 | ||
Net cash to be received | $ 28 | ||||
License exchange 1, first closing | |||||
Exchanges | |||||
Cash received from divestitures and exchanges | 13 | ||||
Gain on license sales and exchanges | 9 | ||||
License Acquisitions | Aggregate license acquisitions | |||||
Acquisitions | |||||
License acquisition agreement amount | $ 56 | 56 | $ 56 | ||
Cash paid for acquisitions and licenses | $ 46 |
Intangible Assets (Details)
Intangible Assets (Details) - Licenses $ in Millions | 6 Months Ended | |
Jun. 30, 2016USD ($) | ||
Licenses | ||
Balance, beginning of period | $ 1,834 | [1] |
Acquisitions | 46 | |
Transferred to Assets held for sale | (23) | |
Exchanges | (3) | |
Balance, end of period | 1,854 | [1] |
Total winning bid | $ 338 | |
[1] | Amounts include payments totaling $338 million made by Advantage Spectrum L.P. to the FCC for licenses in which it was the provisional winning bidder in Auction 97. These licenses were granted by the FCC in July 2016. See Note 9 — Variable Interest Entities for additional information. |
Investments in Unconsolidated32
Investments in Unconsolidated Entities (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Equity method investments, combined income statements | ||||
Revenues | $ 1,636 | $ 1,721 | $ 3,318 | $ 3,451 |
Operating expenses | 1,168 | 1,277 | 2,398 | 2,564 |
Operating income | 468 | 444 | 920 | 887 |
Other income (expense), net | (3) | (10) | (6) | (5) |
Net income | $ 465 | $ 434 | $ 914 | $ 882 |
Debt, revolving credit faciliti
Debt, revolving credit facilities (Details) $ in Millions | 6 Months Ended | ||
Jun. 30, 2016USD ($) | Jul. 01, 2019 | ||
Revolving credit | |||
Maximum borrowing capacity | $ 300 | ||
Letters of credit outstanding | 17 | ||
Amount available for use | $ 283 | ||
Illustrative borrowing rate: One-month London InterBank Offered Rate ("LIBOR") plus contractual spread | [1] | 2.18% | |
Illustrative LIBOR Rate | 0.43% | ||
Contractual spread | 1.75% | ||
Commitment fees on amount available for use | [2] | 0.30% | |
Agreement date | Jun. 15, 2016 | ||
Maturity date | Jun. 15, 2021 | ||
U.S. Cellular revolving credit facility | |||
Revolving credit | |||
Covenant compliance | U.S. Cellular believes it was in compliance with all of the financial and other covenants and requirements set forth in the revolving credit facility as of June 30, 2016. | ||
New revolving credit facility | |||
Revolving credit | |||
Interest Coverage Ratio | 3 | ||
Leverage Ratio | 3.25 | ||
New revolving credit facility | Future period | |||
Revolving credit | |||
Leverage Ratio | 3 | ||
Other assets and deferred charges | Aggregate revolving credit facility | |||
Revolving credit | |||
Debt issuance cost | $ 3 | ||
Other assets and deferred charges | New revolving credit facility | |||
Revolving credit | |||
Debt issuance cost | $ 2 | ||
[1] | Borrowings under the revolving credit facility bear interest either at a LIBOR rate or at an alternative Base Rate as defined in the revolving credit agreement, plus an applicable margin, at U.S. Cellular’s option. U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders). | ||
[2] | The revolving credit facility has commitment fees based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies. |
Variable Interest Entities (Det
Variable Interest Entities (Details) - USD ($) $ in Millions | 1 Months Ended | 6 Months Ended | 12 Months Ended | |||
Mar. 31, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | ||
Assets | ||||||
Cash and cash equivalents | $ 621 | $ 362 | $ 212 | $ 715 | ||
Accounts receivable | 613 | 608 | ||||
Other current assets | 22 | 55 | ||||
Assets held for sale | 23 | |||||
Licenses | 1,854 | 1,834 | ||||
Property, plant and equipment, net | 2,510 | 2,649 | ||||
Other assets and deferred charges | 342 | 172 | ||||
Liabilities | ||||||
Current liabilities | 719 | 748 | ||||
Variable Interest Entities, Other Disclosures | ||||||
Federal Communications Commission deposit | 143 | |||||
Investments in unconsolidated entities | 407 | 363 | ||||
Consolidated Variable Interest Entities | ||||||
Assets | ||||||
Cash and cash equivalents | [1] | 2 | 1 | |||
Accounts receivable | [1] | 41 | ||||
Other current assets | [1] | 7 | ||||
Assets held for sale | [1] | 2 | ||||
Licenses | [1],[2] | 652 | 649 | |||
Property, plant and equipment, net | [1] | 112 | 8 | |||
Other assets and deferred charges | [1] | 11 | ||||
Total assets | [1] | 827 | 658 | |||
Liabilities | ||||||
Current liabilities | [1] | 24 | ||||
Deferred liabilities and credits | [1] | 12 | 1 | |||
Total liabilities | [1] | 36 | 1 | |||
Unconsolidated Variable Interest Entities | ||||||
Variable Interest Entities, Other Disclosures | ||||||
Investments in unconsolidated entities | 6 | $ 5 | ||||
Aggregated Variable Interest Entities | ||||||
Variable Interest Entities, Other Disclosures | ||||||
Capital contributions, loans or advances | $ 26 | $ 281 | ||||
Advantage Spectrum L.P. | ||||||
Variable Interest Entities, Other Disclosures | ||||||
Federal Communications Commission deposit | $ 60 | |||||
Licenses won | 124 | |||||
Total winning bid | $ 338 | |||||
Designated entity auction discount | 25.00% | |||||
Other auction charges | $ 2 | |||||
King Street Wireless L.P. | ||||||
Variable Interest Entities, Other Disclosures | ||||||
Cash distributions paid | 60 | |||||
King Street Wireless, L.P. distribution paid to U.S. Cellular | 54 | |||||
King Street Wireless, L.P. distribution paid to King Street Wireless, Inc. | $ 6 | |||||
[1] | ASU 2015-02 was adopted on a modified retrospective basis and, accordingly, prior year amounts have not been revised to reflect the change in guidance. | |||||
[2] | Includes payments totaling $338 million made by Advantage Spectrum to the FCC as described above. |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ in Millions | Aug. 01, 2016 | Jun. 30, 2016 | Jun. 30, 2015 |
Subsequent Event [Line Items] | |||
Subsequent Event Description | In February 2016, U.S. Cellular entered into an agreement with a third party that provided for the transfer of certain AWS spectrum licenses and $2 million in cash to U.S. Cellular, in exchange for U.S. Cellular transferring certain AWS, PCS and 700 MHz licenses with a carrying value of $7 million to the third party. This transaction closed on August 1, 2016. U.S. Cellular expects to recognize a gain as a result of this exchange. See Note 5 — Acquisitions, Divestitures and Exchanges for additional information. | ||
Cash received from divestitures and exchanges | $ 17 | $ 282 | |
Subsequent event | License exchange 2 | |||
Subsequent Event [Line Items] | |||
Cash received from divestitures and exchanges | $ 2 | ||
Licenses disposed of in exchange | $ 7 |