PR Newswire | Feb 18, 2021 04:06PM EST

02/18 15:05 CST

UScellular reports fourth quarter and full year 2020 results2020 results provide strong foundation for 2021Provides guidance for 2021 CHICAGO, Feb. 18, 2021

CHICAGO, Feb. 18, 2021 /PRNewswire/ --

As previously announced, UScellular will hold a teleconferenceonFebruary 19, 2021 at 9:00 a.m. CST. Listen to the call live via the Events & Presentations page of investors.uscellular.com.

United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,073 million for the fourth quarter of 2020, versus $1,052 million for the same period one year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $5 million and $0.06, respectively, for the fourth quarter of 2020 compared to $18 million and $0.20, respectively, in the same period one year ago.

UScellular reported total operating revenues of $4,037 million and $4,022 million for the years ended 2020 and 2019, respectively. Net income attributable to UScellular shareholders and related diluted earnings per share were $229 million and $2.62, respectively, for the year ended 2020 compared to $127 million and $1.44, respectively, for the year ended 2019.

"UScellular met the challenges of 2020 successfully, as we closed out the year with strong results - a testament to the essential nature of our services, our talented and resilient team, and our unwavering commitment to keeping our customers connected," said Laurent Therivel, UScellular President and CEO.

"2020 was a strong year for UScellular. Notwithstanding the challenges of the pandemic, we maintained high levels of customer satisfaction and grew retail net additions. Growth in operating revenue, combined with maintaining operational and cost discipline, contributed to an increase in full year profitability. Our network modernization program and investments in 5G continued, and despite significant increases in data usage, we were able to keep system expenses in check.

"I look forward to building on the momentum of 2020 as we move into the new year. Connecting our customers, especially in underserved areas, with the highest-quality network is one of our top priorities and remains a key competitive differentiator. We will be focused on market share expansion, ramping up business opportunities that utilize 5G and IoT, enhancing our digital experience, and continuing our network modernization programs."

2021 Estimated Results

UScellular's current estimates of full-year 2021 results are shown below. Such estimates represent management's view as of February 18, 2021 and should not be assumed to be current as of any future date. UScellular undertakes no duty to update such estimates, whether as a result of new information, future events or otherwise. There can be no assurance that final results will not differ materially from estimated results.

2021 EstimatedActual Results for Results the Year Ended December 31, 2020

(Dollars in millions)

Service revenues $3,025-$3,125 $3,067

Adjusted OIBDA^1 $800-$950 $876

Adjusted EBITDA^1 $975-$1,125 $1,063

Capital expenditures $775-$875 $940

The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2021 estimated results and actual results for the year ended December 31, 2020. In providing 2021 estimated results, UScellular has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, UScellular believes that the impact of income taxes cannot be reasonably predicted; therefore, UScellular is unable to provide such guidance.

2021 Estimated Actual Results for Results the Year Ended December 31, 2020

(Dollars in millions)

Net income (GAAP) N/A $233

Add back or deduct:

Income tax expense N/A 17

Income before income taxes (GAAP) $135-$285 $250

Add back:

Interest expense 135 112

Depreciation, amortization and accretion expense685 683

EBITDA (Non-GAAP)^1 $955-$1,105 $1,045

Add back or deduct:

(Gain) loss on asset disposals, net 20 25

(Gain) loss on license sales and exchanges, net - (5)

(Gain) loss on investments - (2)

Adjusted EBITDA (Non-GAAP)^1 $975-$1,125 $1,063

Deduct:

Equity in earnings of unconsolidated entities 170 179

Interest and dividend income 5 8

Adjusted OIBDA (Non-GAAP)^1 $800-$950 $876

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. UScellular does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of UScellular's operating results before^ significant recurring non-cash charges, gains and losses, and other items as1 presented above as they provide additional relevant and useful information to investors and other users of UScellular's financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for December 31, 2020, can be found on UScellular's website at investors.uscellular.com.

Conference Call Information

UScellular will hold a conference call on February 19, 2021 at 9:00 a.m. Central Time.

* Access the live call on the Events & Presentations page of investors.uscellular.com or at https://www.webcaster4.com/Webcast/Page/1145/40052 * Access the call by phone at 833/968-2187 (US/Canada), conference ID: 5593349

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.uscellular.com. The call will be archived on the Events & Presentations page of investors.uscellular.com.

About UScellular

United States Cellular Corporation provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to customers with 5.0 million connections in 21 states. The Chicago-based company had 5,300 full- and part-time associates as of December 31, 2020. At the end of the fourth quarter of 2020, Telephone and Data Systems, Inc. owned 82 percent of UScellular. For more information about UScellular, visit uscellular.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: intense competition; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; the ability to attract people of outstanding talent throughout all levels of the organization; UScellular's smaller scale relative to larger competitors; changes in demand, consumer preferences and perceptions, price competition, or churn rates; advances in technology; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of UScellular's businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties; uncertainties in UScellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on UScellular indebtedness or comply with the terms of debt covenants; conditions in the U.S. telecommunications industry; the value of assets and investments; the state and federal regulatory environment; pending and future litigation; potential conflicts of interests between TDS and UScellular; cyber-attacks or other breaches of network or information technology security; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; the impact, duration and severity of public health emergencies, such as the COVID-19 pandemic. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under "Risk Factors" in the most recent filing of UScellular's Form 10-K.

For more information about UScellular, visit: www.uscellular.com

United States Cellular Corporation

Summary Operating Data (Unaudited)



As of or for the Quarter Ended 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019

Retail Connections

Postpaid

Total at end of period 4,412,000 4,401,000 4,372,000 4,359,000 4,383,000

Gross additions 171,000 168,000 129,000 132,000 170,000

Feature phones 2,000 4,000 3,000 2,000 2,000

Smartphones 117,000 98,000 82,000 88,000 128,000

Connected devices 52,000 66,000 44,000 42,000 40,000

Net additions (losses) 11,000 28,000 12,000 (26,000) (12,000)

Feature phones (9,000) (8,000) (8,000) (10,000) (11,000)

Smartphones 12,000 8,000 11,000 (10,000) 13,000

Connected devices 8,000 28,000 9,000 (6,000) (14,000)

ARPU^1 $47.51 $47.10 $46.24 $47.23 $46.57

ARPA^2 $124.87 $123.27 $120.70 $122.92 $120.99

Churn rate^3 1.21 %1.06 %0.89 %1.21 %1.38 %

Handsets 1.01 %0.88 %0.71 %0.95 %1.11 %

Connected devices 2.64 %2.35 %2.24 %3.11 %3.44 %

Prepaid

Total at end of period 499,000 506,000 496,000 494,000 506,000

Gross additions 56,000 65,000 62,000 57,000 63,000

Net additions (losses) (8,000) 11,000 2,000 (12,000) (3,000)

ARPU^1 $35.15 $35.45 $34.89 $34.07 $34.11

Churn rate^3 4.24 %3.59 %4.05 %4.67 %4.40 %

Total connections at end of period^44,968,000 4,962,000 4,919,000 4,903,000 4,941,000

Market penetration at end of period

Consolidated operating population 31,314,000 31,314,000 31,292,000 31,292,000 30,740,000

Consolidated operating penetration^516 %16 %16 %16 %16 %

Capital expenditures (millions) $320 $216 $168 $236 $243

Total cell sites in service 6,797 6,758 6,673 6,629 6,578

Owned towers 4,271 4,246 4,208 4,184 4,166

Due to rounding, the sum of quarterly results may not equal the total for theyear.

^ Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue1 base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:

? Postpaid ARPU consists of total postpaid service revenues and postpaid connections.

? Prepaid ARPU consists of total prepaid service revenues and prepaid connections.

^ Average Revenue Per Account (ARPA) - metric is calculated by dividing total2 postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.

^ Churn rate represents the percentage of the connections that disconnect3 service each month. These rates represent the average monthly churn rate for each respective period.

^ Includes reseller and other connections.4

^ Market penetration is calculated by dividing the number of wireless5 connections at the end of the period by the total estimated population of consolidated operating markets.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)



Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 vs. 20192020 2019 2020 vs. 2019

(Dollars and shares in millions, except per share amounts)

Operating revenues

Service $776 $763 2 % $3,067$3,0351 %

Equipment sales 297 289 3 % 970 987 (2) %

Total operating revenues 1,073 1,052 2 % 4,037 4,022 -



Operating expenses

System operations (excluding Depreciation, amortization and 202 188 7 % 782 756 3 % accretion reported below)

Cost of equipment sold 319 305 5 % 1,011 1,028 (2) %

Selling, general and administrative 374 378 (1) % 1,368 1,406 (3) %

Depreciation, amortization and accretion 168 178 (6) % 683 702 (3) %

(Gain) loss on asset disposals, net 11 6 91 % 25 19 36 %

(Gain) loss on sale of business and other exit costs, net - - N/M - (1) N/M

(Gain) loss on license sales and exchanges, net (5) - N/M (5) - N/M

Total operating expenses 1,069 1,055 1 % 3,864 3,910 (1) %



Operating income (loss) 4 (3) N/M 173 112 54 %



Investment and other income (expense)

Equity in earnings of unconsolidated entities 42 38 11 % 179 166 8 %

Interest and dividend income 2 3 (44) % 8 17 (54) %

Gain (loss) on investments (1) - N/M 2 - N/M

Interest expense (35) (23) (53) % (112) (110) (2) %

Total investment and other income 8 18 (58) % 77 73 6 %



Income before income taxes 12 15 (20) % 250 185 35 %

Income tax expense (benefit) 5 (3) N/M 17 52 (68) %

Net income 7 18 (64) % 233 133 76 %

Less: Net income attributable to noncontrolling interests, net of 2 - N/M 4 6 (30) % tax

Net income attributable to UScellular shareholders $5 $18 (70) % $229 $127 81 %



Basic weighted average shares outstanding 86 86 - 86 86 -

Basic earnings per share attributable to UScellular shareholders $0.06$0.21(70) % $2.66 $1.47 81 %



Diluted weighted average shares outstanding 88 88 - 87 88 (1) %

Diluted earnings per share attributable to UScellular shareholders$0.06$0.20(70) % $2.62 $1.44 82 %



N/M - Percentage change not meaningful

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)



Year Ended December 31, 2020 2019

(Dollars in millions)

Cash flows from operating activities

Net income $233 $133

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities

Depreciation, amortization and accretion 683 702

Bad debts expense 72 107

Stock-based compensation expense 32 41

Deferred income taxes, net 130 (4)

Equity in earnings of unconsolidated entities (179) (166)

Distributions from unconsolidated entities 189 161

(Gain) loss on asset disposals, net 25 19

(Gain) loss on sale of business and other exit costs, net - (1)

(Gain) loss on license sales and exchanges, net (5) -

(Gain) loss on investments (2) -

Other operating activities 2 4

Changes in assets and liabilities from operations

Accounts receivable (8) (46)

Equipment installment plans receivable (54) (97)

Inventory 16 (20)

Accounts payable 145 (69)

Customer deposits and deferred revenues 2 (8)

Accrued taxes (57) (23)

Other assets and liabilities 13 (9)

Net cash provided by operating activities 1,237 724



Cash flows from investing activities

Cash paid for additions to property, plant and equipment (989) (650)

Cash paid for licenses (171) (266)

Cash received from investments 1 29

Cash paid for investments (3) (11)

Cash received from divestitures and exchanges 26 41

Advance payments for license acquisitions (30) (5)

Other investing activities 3 (2)

Net cash used in investing activities (1,163)(864)



Cash flows from financing activities

Issuance of long-term debt 1,125 -

Repayment of long-term debt (108) (116)

Common Shares reissued for benefit plans, net of tax payments (11) (9)

Repurchase of Common Shares (23) (21)

Payment of debt issuance costs (38) (1)

Distributions to noncontrolling interests (6) (4)

Payments to acquire additional interest in subsidiaries (11) -

Other financing activities (2) (1)

Net cash provided by (used in) financing activities 926 (152)



Net increase (decrease) in cash, cash equivalents and restricted cash 1,000 (292)



Cash, cash equivalents and restricted cash

Beginning of period 291 583

End of period $1,291$291

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)



ASSETS



December 31, 2020 2019

(Dollars in millions)

Current assets

Cash and cash equivalents $1,271$285

Short-term investments 3 -

Accounts receivable, net 998 1,010

Inventory, net 146 162

Prepaid expenses 51 50

Income taxes receivable 125 46

Other current assets 29 20

Total current assets 2,623 1,573



Assets held for sale 2 -



Licenses 2,629 2,471



Investments in unconsolidated entities435 447



Property, plant and equipment, net 2,466 2,207



Operating lease right-of-use assets 924 900



Other assets and deferred charges 602 566



Total assets $9,681$8,164

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)



LIABILITIES AND EQUITY



December 31, 2020 2019

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt $2 $8

Accounts payable 387 304

Customer deposits and deferred revenues 151 148

Accrued taxes 48 30

Accrued compensation 82 76

Short-term operating lease liabilities 116 105

Other current liabilities 85 79

Total current liabilities 871 750



Liabilities held for sale 1 -



Deferred liabilities and credits

Deferred income tax liability, net 633 507

Long-term operating lease liabilities 875 865

Other deferred liabilities and credits 376 319



Long-term debt, net 2,489 1,502



Noncontrolling interests with redemption features 10 11



Equity

UScellular shareholders' equity

Series A Common and Common Shares, par value $1.00 per share88 88

Additional paid-in capital 1,651 1,629

Treasury shares (67) (70)

Retained earnings 2,739 2,550

Total UScellular shareholders' equity 4,411 4,197



Noncontrolling interests 15 13



Total equity 4,426 4,210



Total liabilities and equity $9,681$8,164

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)



Free Cash Flow

Three Months EndedYear Ended December 31, December 31,

2020 2019 2020 2019

(Dollars in millions)

Cash flows from operating activities (GAAP) $288 $37 $1,237$724

Less: Cash paid for additions to property, plant and equipment299 210 989 650

Free cash flow (Non-GAAP)^1 $(11)$(173) $248 $74

Free cash flow is a non-GAAP financial measure which UScellular believes may^ be useful to investors and other users of its financial information in1 evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

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SOURCE United States Cellular Corporation