PR Newswire | May 6, 2021 04:05PM EDT

05/06 15:05 CDT

UScellular reports first quarter 2021 resultsStrong results drive increases to 2021 guidance CHICAGO, May 6, 2021

CHICAGO, May 6, 2021 /PRNewswire/ -- United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,023 million for the first quarter of 2021, versus $963 million for the same period one year ago. Service revenues totaled $771 million, versus $762 million for the same period a year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $60 million and $0.69, respectively, for the first quarter of 2021 compared to $71 million and $0.81, respectively, in the same period one year ago.

"UScellular had a strong start to 2021," said Laurent Therivel, UScellular President and CEO. "First quarter service revenues increased, showing the positive impact of higher ARPU. Operational and cost discipline throughout the quarter also contributed to our strong financial performance.

"With attractive promotions that are resonating with customers, postpaid and prepaid handset additions strengthened compared to the same period one year ago. We have adopted a regional model to be more agile, respond better to the customer, and execute more market-specific promotions.

"One of our top priorities and key competitive differentiators is to connect customers with the highest-quality network, including in underserved areas. Our 5G and network modernization programs are on track and we now offer 5G in portions of substantially all of our markets. We have also begun deploying our mmWave spectrum in order to offer fixed wireless access in three test markets, which will provide us with valuable learnings as we look to roll out this high-speed product to additional markets in our footprint. Our purchases of mid-band spectrum in the recent auctions will further enable our 5G capabilities well into the future.

"In April, we unveiled an exciting new brand campaign that highlights our community-first approach. 'America's Locally Grown Wireless' celebrates what makes UScellular such a special company. Over the years, we've become a national wireless provider with customers all over the country, but we've never lost sight of what's important - staying loyal to the people and communities we serve and providing them a great wireless experience.

"I want to thank all of our associates for their contributions and enthusiasm in executing our 2021 growth strategies thus far. I'm confident that UScellular is well-positioned as we, along with the rest of the country, begin to recover from the pandemic."

2021Estimated Results

UScellular's current estimates of full-year 2021 results are shown below. Such estimates represent management's view as of May 6, 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 Estimated Results

Previous Current

(Dollars in millions)

Service revenues $3,025-$3,125$3,050-$3,150

Adjusted OIBDA^1 $800-$950 $850-$950

Adjusted EBITDA^1 $975-$1,125 $1,025-$1,125

Capital expenditures $775-$875 Unchanged

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. 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.

Actual Results

2021 Estimated Three Months EndedYear Ended Results March 31, 2021 December 31, 2020

(Dollars in millions)

Net income (GAAP) N/A $ 62 $ 233

Add back:

Income tax expense N/A 27 17

Income before income $175-$275 $ 89 $ 250 taxes (GAAP)

Add back:

Interest expense 150 39 112

Depreciation, amortization and 680 170 683 accretion expense

EBITDA (Non-GAAP)^1 $1,005-$1,105 $ 298 $ 1,045

Add back or deduct:

(Gain) loss on asset 20 5 25 disposals, net

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

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

(Gain) loss on - - (2) investments

Adjusted EBITDA $1,025-$1,125 $ 302 $ 1,063 (Non-GAAP)^1

Deduct:

Equity in earnings of 170 42 179 unconsolidated entities

Interest and dividend 5 2 8 income

Adjusted OIBDA $850-$950 $ 258 $ 876 (Non-GAAP)^1

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 as presented above as1 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 March 31, 2021, can be found on UScellular's website at investors.uscellular.com.

Stock RepurchaseDuring the first quarter of 2021, UScellular repurchased 54,900 Common Shares for $2 million.

Conference Call InformationUScellular will hold a conference call on May 7, 2021 at 9:00 a.m. Central Time.

* Access the live call on the Events & Presentations page of investors.uscellular.com or at https://event.on24.com/wcc/r/3155155/0CD2FBCBA421B063439060A77D169D23. * Access the call by phone at (833) 968-2187, conference ID: 2661419.

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 UScellularUnited 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 employed approximately 5,200 associates as of March 31, 2021. At the end of the first quarter of 2021, 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, as updated by any UScellular Form 10-Q filed subsequent to such 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 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Ended

Retail Connections

Postpaid

Total at end4,406,000 4,412,000 4,401,000 4,372,000 4,359,000 of period

Gross 143,000 171,000 168,000 129,000 132,000 additions

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

Smartphones 101,000 117,000 98,000 82,000 88,000

Connected 39,000 52,000 66,000 44,000 42,000 devices

Net additions (6,000) 11,000 28,000 12,000 (26,000) (losses)

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

Smartphones 6,000 12,000 8,000 11,000 (10,000)

Connected (3,000) 8,000 28,000 9,000 (6,000) devices

ARPU^1 $47.65 $47.51 $47.10 $46.24 $47.23

ARPA^2 $125.25 $124.87 $123.27 $120.70 $122.92

Churn rate^31.12 %1.21 %1.06 %0.89 %1.21 %

Handsets 0.92 %1.01 %0.88 %0.71 %0.95 %

Connected 2.53 %2.64 %2.35 %2.24 %3.11 %devices

Prepaid

Total at end496,000 499,000 506,000 496,000 494,000 of period

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

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

ARPU^1 $35.25 $35.15 $35.45 $34.89 $34.07

Churn rate^34.37 %4.24 %3.59 %4.05 %4.67 %

Total connections 4,961,000 4,968,000 4,962,000 4,919,000 4,903,000 at end of period^4

Market penetration at end of period

Consolidated operating 31,493,000 31,314,000 31,314,000 31,292,000 31,292,000 population

Consolidated operating 16 %16 %16 %16 %16 %penetration^ 5

Capital expenditures$125 $320 $216 $168 $236 (millions)

Total cell sites in 6,802 6,797 6,758 6,673 6,629 service

Owned towers4,270 4,271 4,246 4,208 4,184

Average Revenue Per User (ARPU) - metric is calculated by dividing a^ revenue base by an average number of connections and by the number1 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 by2 dividing total 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 that3 disconnect 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 March 31,

2021 2020 2021 vs. 2020

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

Operating revenues

Service $771 $762 1 %

Equipment sales 252 201 26 %

Total operating revenues 1,023 963 6 %



Operating expenses

System operations (excluding Depreciation, 185 180 3 %amortization and accretion reported below)

Cost of equipment sold 275 217 26 %

Selling, general and administrative 305 335 (9) %

Depreciation, amortization and accretion 170 177 (4) %

(Gain) loss on asset disposals, net 5 4 39 %

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

Total operating expenses 939 913 3 %



Operating income 84 50 67 %



Investment and other income (expense)

Equity in earnings of unconsolidated entities 42 45 (7) %

Interest and dividend income 2 4 (52) %

Interest expense (39) (24) (66) %

Other, net - 1 N/M

Total investment and other income 5 26 (82) %



Income before income taxes 89 76 17 %

Income tax expense 27 4 N/M

Net income 62 72 (14) %

Less: Net income attributable to noncontrolling 2 1 32 %interests, net of tax

Net income attributable to UScellular shareholders$60 $71 (15) %



Basic weighted average shares outstanding 86 86 -

Basic earnings per share attributable to $0.70$0.82(15) %UScellular shareholders



Diluted weighted average shares outstanding 88 88 -

Diluted earnings per share attributable to $0.69$0.81(15) %UScellular shareholders

N/M - Percentage change not meaningful

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)

Three Months Ended March 31,

2021 2020

(Dollars in millions)

Cash flows from operating activities

Net income $62 $72

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

Depreciation, amortization and accretion 170 177

Bad debts expense 7 33

Stock-based compensation expense 6 7

Deferred income taxes, net 23 52

Equity in earnings of unconsolidated entities (42) (45)

Distributions from unconsolidated entities 22 24

(Gain) loss on asset disposals, net 5 4

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

Other operating activities (1) -

Changes in assets and liabilities from operations

Accounts receivable 4 55

Equipment installment plans receivable (18) 23

Inventory 7 (50)

Accounts payable (86) 97

Customer deposits and deferred revenues 7 (10)

Accrued taxes 3 (49)

Accrued interest 9 9

Other assets and liabilities (53) (57)

Net cash provided by operating activities 124 342



Cash flows from investing activities

Cash paid for additions to property, plant and equipment (133) (315)

Cash paid for licenses (1,256)(26)

Cash paid for investments - (1)

Cash received from divestitures and exchanges 1 -

Net cash used in investing activities (1,388)(342)



Cash flows from financing activities

Issuance of long-term debt 492 -

Repayment of long-term debt - (2)

Common Shares reissued for benefit plans, net of tax (1) - payments

Repurchase of Common Shares (2) (21)

Payment of debt issuance costs (1) (1)

Distributions to noncontrolling interests (1) (1)

Other financing activities (2) 1

Net cash provided by (used in) financing activities 485 (24)



Net decrease in cash, cash equivalents and restricted cash(779) (24)



Cash, cash equivalents and restricted cash

Beginning of period 1,291 291

End of period $512 $267

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)



ASSETS



March 31, 2021December 31, 2020

(Dollars in millions)

Current assets

Cash and cash equivalents $479 $ 1,271

Short-term investments 3 3

Accounts receivable, net 994 998

Inventory, net 139 146

Prepaid expenses 63 51

Income taxes receivable 124 125

Other current assets 43 29

Total current assets 1,845 2,623



Assets held for sale 1 2



Licenses 3,915 2,629



Investments in unconsolidated entities455 435



Property, plant and equipment, net 2,419 2,466



Operating lease right-of-use assets 933 924



Other assets and deferred charges 580 602



Total assets $10,148 $ 9,681

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)



LIABILITIES AND EQUITY



March 31, 2021December 31, 2020

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt $ 2 $2

Accounts payable 282 387

Customer deposits and deferred revenues 158 151

Accrued taxes 47 48

Accrued compensation 40 82

Short-term operating lease liabilities 120 116

Other current liabilities 90 85

Total current liabilities 739 871



Liabilities held for sale - 1



Deferred liabilities and credits

Deferred income tax liability, net 656 633

Long-term operating lease liabilities 879 875

Other deferred liabilities and credits 393 376



Long-term debt, net 2,981 2,489



Noncontrolling interests with redemption 10 10 features



Equity

UScellular shareholders' equity

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

Additional paid-in capital 1,657 1,651

Treasury shares (66) (67)

Retained earnings 2,796 2,739

Total UScellular shareholders' equity 4,475 4,411



Noncontrolling interests 15 15



Total equity 4,490 4,426



Total liabilities and equity $ 10,148 $9,681

United States Cellular Corporation Financial Measures and Reconciliations (Unaudited)



Free Cash Flow

Three Months Ended March 31,

2021 2020

(Dollars in millions)

Cash flows from operating activities (GAAP) $124 $ 342

Less: Cash paid for additions to property, plant and 133 315 equipment

Free cash flow (Non-GAAP)^1 $(9) $ 27

Free cash flow is a non-GAAP financial measure which UScellular^ believes may be useful to investors and other users of its financial1 information in 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