PR Newswire | Nov 4, 2021 04:06PM EDT

11/04 15:05 CDT

UScellular reports third quarter 2021 resultsExecuting on strategic priorities CHICAGO, Nov. 4, 2021

CHICAGO, Nov. 4, 2021 /PRNewswire/ --

As previously announced, UScellular will hold a teleconference November 4, 2021, at 4:00 p.m. CDT. Listen to the call live via the Events & Presentations page ofinvestors.uscellular.com.

United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,016 million for the third quarter of 2021, versus $1,027 million for the same period one year ago. Service revenues totaled $788 million, versus $775 million for the same period a year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $34 million and $0.38, respectively, for the third quarter of 2021 compared to $85 million and $0.97, respectively, in the same period one year ago.

"UScellular's third quarter results show continued growth in retail service revenue, driven in part by the positive impact of postpaid ARPU," said Laurent Therivel, UScellular President and CEO. "Prepaid results have also continued to improve as we have progressed through the year.

"Our business and government and tower operations are gaining momentum towards the growth we believe is achievable in their respective areas. Leveraging our regional strategy, we are optimizing promotions that balance subscriber growth and profitability as we head into the upcoming holiday season.

"Network performance is a hallmark of our value proposition. Our 5G and network modernization programs are on track, and we are optimistic on the use of millimeter wave spectrum for fixed wireless access and its potential to serve rural customers. We are continuing trials to validate network performance and customer experience as we look to bring this high-speed product to market.

"I am constantly impressed with our team at UScellular and the resilience that they are displaying through the pandemic. As workforce shortages become an increasing concern, UScellular's associate retention rates remain very high, evidence of our strong associate engagement."

2021Estimated Results

UScellular's current estimates of full-year 2021 results are shown below. Such estimates represent management's view as of November 4, 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 $3,050-$3,150$3,075-$3,125

Adjusted OIBDA^1 $850-$950 Unchanged

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

Capital expenditures $775-$875 $700-$800

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 Nine Months Ended Year Ended Results September 30, 2021December 31, 2020

(Dollars in millions)

Net income (GAAP) N/A $ 132$ 233

Add back:

Income tax expense N/A 31 17

Income before income taxes (GAAP) $155-$255 $ 163$ 250

Add back:

Interest expense 180 144 112

Depreciation, amortization and accretion expense 675 510 683

EBITDA (Non-GAAP)^1 $1,010-$1,110 $ 817$ 1,045

Add back or deduct:

(Gain) loss on asset disposals, net 15 15 25

(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)

Adjusted EBITDA (Non-GAAP)^1 $1,025-$1,125 $ 831$ 1,063

Deduct:

Equity in earnings of unconsolidated entities 170 137 179

Interest and dividend income 5 5 8

Adjusted OIBDA (Non-GAAP)^1 $850-$950 $ 689$ 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 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 September 30, 2021, can be found on UScellular's website at investors.uscellular.com.

Stock RepurchaseDuring the third quarter of 2021, UScellular repurchased 626,410 Common Shares for $20 million.

Conference Call InformationUScellular will hold a conference call on November 4, 2021 at 4:00 p.m. Central Time.

* Access the live call on the Events & Presentations page of investors.uscellular.com or at https://event.on24.com/wcc/r/3192472/D1EB8251CA63A8AE47DD208E6469C968 * Access the call by phone at (833) 968-2187, conference ID: 6753568.

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 4,900 associates as of September 30, 2021. At the end of the third 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 Ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020

Retail Connections

Postpaid

Total at end of period 4,391,000 4,399,000 4,406,000 4,412,000 4,401,000

Gross additions 145,000 141,000 143,000 171,000 168,000

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

Smartphones 103,000 98,000 101,000 117,000 98,000

Connected devices 40,000 40,000 39,000 52,000 66,000

Net additions (losses) (8,000) (6,000) (6,000) 11,000 28,000

Feature phones (7,000) (7,000) (9,000) (9,000) (8,000)

Smartphones 2,000 6,000 6,000 12,000 8,000

Connected devices (3,000) (5,000) (3,000) 8,000 28,000

ARPU^1,2 $48.12 $47.74 $47.65 $47.51 $47.10

ARPA^1,3 $125.99 $125.25 $125.25 $124.87 $123.27

Churn rate^4 1.15 %1.11 %1.12 %1.21 %1.06 %

Handsets 0.95 %0.88 %0.92 %1.01 %0.88 %

Connected devices 2.59 %2.69 %2.53 %2.64 %2.35 %

Prepaid

Total at end of period 518,000 507,000 496,000 499,000 506,000

Gross additions 74,000 65,000 62,000 56,000 65,000

Net additions (losses) 11,000 10,000 (3,000) (8,000) 11,000

ARPU^2 $35.05 $35.64 $35.25 $35.15 $35.45

Churn rate^4 4.09 %3.66 %4.37 %4.24 %3.59 %

Total connections at end of period^54,972,000 4,967,000 4,961,000 4,968,000 4,962,000

Market penetration at end of period

Consolidated operating population 31,865,000 31,493,000 31,493,000 31,314,000 31,314,000

Consolidated operating penetration^616 %16 %16 %16 %16 %

Capital expenditures (millions) $185 $148 $125 $320 $216

Total cell sites in service 6,857 6,819 6,802 6,797 6,758

Owned towers 4,274 4,278 4,270 4,271 4,246

^ Q3 2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue1 related to a third quarter out-of-period error.

^ Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue2 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 total3 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 disconnect4 service each month. These rates represent the average monthly churn rate for each respective period.

^ Includes reseller and other connections.5

^ Market penetration is calculated by dividing the number of wireless6 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 Nine Months Ended September 30, September 30,

2021 2020 2021 2021 2020 2021 vs. 2020 vs. 2020

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

Operating revenues

Service^1 $788 $775 2 % $2,333$2,2902 %

Equipment sales 228 252 (10) % 720 674 7 %

Total operating revenues 1,016 1,027 (1) % 3,053 2,964 3 %



Operating expenses

System operations (excluding Depreciation, amortization and 205 203 1 % 594 580 2 % accretion reported below)

Cost of equipment sold 252 257 (2) % 786 692 14 %

Selling, general and administrative 346 335 3 % 984 994 (1) %

Depreciation, amortization and accretion 160 161 - 510 516 (1) %

(Gain) loss on asset disposals, net 8 6 29 % 15 14 7 %

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

Total operating expenses 971 962 1 % 2,888 2,796 3 %



Operating income 45 65 (31) % 165 168 (2) %



Investment and other income (expense)

Equity in earnings of unconsolidated entities 48 48 - 137 137 -

Interest and dividend income 1 2 (23) % 5 6 (28) %

Gain (loss) on investments - 3 N/M - 3 N/M

Interest expense (45) (29) (56) % (144) (76) (86) %

Total investment and other income (expense) 4 24 (82) % (2) 70 N/M



Income before income taxes 49 89 (44) % 163 238 (31) %

Income tax expense 14 4 N/M 31 11 N/M

Net income 35 85 (59) % 132 227 (42) %

Less: Net income attributable to noncontrolling interests, net of tax1 - 33 % 4 3 21 %

Net income attributable to UScellular shareholders $34 $85 (60) % $128 $224 (43) %



Basic weighted average shares outstanding 86 86 1 % 87 86 1 %

Basic earnings per share attributable to UScellular $0.39$0.98(61) % $1.48 $2.60 (43) % shareholders



Diluted weighted average shares outstanding 87 88 - 88 87 -

Diluted earnings per share attributable to UScellular $0.38$0.97(60) % $1.46 $2.56 (43) % shareholders

N/M - Percentage change not meaningful

^ During the three months ended September 30, 2021, UScellular recorded a1 $9 million out-of-period error, which increased Service revenue by $9 million for the three and nine months ended September 30, 2021.

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)

Nine Months Ended September 30,

2021 2020

(Dollars in millions)

Cash flows from operating activities

Net income $132 $227

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

Depreciation, amortization and accretion 510 516

Bad debts expense 34 52

Stock-based compensation expense 20 25

Deferred income taxes, net 47 158

Equity in earnings of unconsolidated entities (137) (137)

Distributions from unconsolidated entities 106 118

(Gain) loss on asset disposals, net 15 14

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

(Gain) loss on investments - (3)

Other operating activities 31 1

Changes in assets and liabilities from operations

Accounts receivable 19 31

Equipment installment plans receivable (44) 13

Inventory 10 5

Accounts payable (33) 77

Customer deposits and deferred revenues 10 (23)

Accrued taxes (36) (102)

Accrued interest 7 14

Other assets and liabilities (23) (36)

Net cash provided by operating activities 667 950



Cash flows from investing activities

Cash paid for additions to property, plant and equipment (456) (690)

Cash paid for licenses (1,263)(169)

Cash received from investments 3 1

Cash paid for investments - (1)

Cash received from divestitures and exchanges 2 1

Advance payments for license acquisitions (20) -

Other investing activities 2 3

Net cash used in investing activities (1,732)(855)



Cash flows from financing activities

Issuance of long-term debt 1,217 625

Repayment of long-term debt (1,117)(6)

Common Shares reissued for benefit plans, net of tax (16) (12) payments

Repurchase of Common Shares (21) (23)

Payment of debt issuance costs (20) (20)

Distributions to noncontrolling interests (2) (2)

Other financing activities (4) -

Net cash provided by financing activities 37 562



Net increase (decrease) in cash, cash equivalents and (1,028)657 restricted cash



Cash, cash equivalents and restricted cash

Beginning of period 1,291 291

End of period $263 $948

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)



ASSETS



September 30, 2021December 31, 2020

(Dollars in millions)

Current assets

Cash and cash equivalents $ 231 $ 1,271

Short-term investments - 3

Accounts receivable, net 978 998

Inventory, net 136 146

Prepaid expenses 59 51

Income taxes receivable 125 125

Other current assets 42 29

Total current assets 1,571 2,623



Assets held for sale 3 2



Licenses 4,102 2,629



Investments in unconsolidated entities466 435



Property, plant and equipment, net 2,457 2,466



Operating lease right-of-use assets 953 924



Other assets and deferred charges 592 602



Total assets $ 10,144 $ 9,681

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)



LIABILITIES AND EQUITY



September 30, 2021December 31, 2020

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt $3 $2

Accounts payable 372 387

Customer deposits and deferred revenues 161 151

Accrued taxes 32 48

Accrued compensation 69 82

Short-term operating lease liabilities 126 116

Other current liabilities 93 85

Total current liabilities 856 871



Liabilities held for sale - 1



Deferred liabilities and credits

Deferred income tax liability, net 680 633

Long-term operating lease liabilities 890 875

Other deferred liabilities and credits 565 376



Long-term debt, net 2,604 2,489



Noncontrolling interests with redemption features 10 10



Equity

UScellular shareholders' equity

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

Additional paid-in capital 1,671 1,651

Treasury shares (58) (67)

Retained earnings 2,822 2,739

Total UScellular shareholders' equity 4,523 4,411



Noncontrolling interests 16 15



Total equity 4,539 4,426



Total liabilities and equity $10,144 $9,681

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)



Free Cash Flow



Three Months EndedNine Months Ended September 30, September 30,

2021 2020 2021 2020

(Dollars in millions)

Cash flows from operating activities (GAAP) $304 $257 $667 $950

Less: Cash paid for additions to property, plant and equipment175 219 456 690

Free cash flow (Non-GAAP)^1 $129 $38 $211 $260

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