U.S. Cellular Reports Fourth Quarter 2010 Results

Provides financial guidance for 2011

News provided by

Feb 24, 2011, 08:05 ET

CHICAGO, Feb. 24, 2011 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

Fourth Quarter Highlights

Service revenues were $992 million.
Retail service ARPU (average revenue per unit) increased to $47.41 from $47.07.
Net retail customer losses of 10,000 postpaid and 11,000 prepaid.
Retail postpaid churn improved to 1.5 percent from 1.6 percent; postpaid customers comprised 95 percent of retail customers.
5 percent increase in cell sites in service to 7,645.
Nearly 1.2 million customers adopted Belief Plans.

As previously announced, U.S. Cellular will hold a teleconference Feb. 24, 2011 at 9:30 a.m. CST. Listen to the live call via the Conference Calls page of www.teldta.com or uscellular.com.

United States Cellular Corporation (NYSE: USM) reported service revenues of $991.9 million for the fourth quarter of 2010, versus $985.4 million for the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $6.8 million and $0.08, respectively, for the fourth quarter of 2010; compared to $6.6 million and $0.08, respectively, for the comparable period in 2009.

For the twelve months ended Dec. 31, 2010, U.S. Cellular reported service revenues of $3,913.0 million, compared to $3,927.1 million in 2009. Net income attributable to U.S. Cellular shareholders for 2010 and related diluted earnings per share, were $132.3 million and $1.53, respectively. In 2009, net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $206.7 million and $2.37 respectively. Fourth quarter and full year 2009 results were impacted by a $14.0 million (pre-tax), or $0.10 diluted loss per share, charge for impairment of licenses.

"U.S. Cellular had many significant accomplishments during the fourth quarter, but our financial performance was impacted by strong competitive pressures and the actions we took to protect our customer base, as well as spending on our enablement initiatives," said Mary Dillon, U.S. Cellular president and CEO.

"We ended 2010 with nearly 1.2 million new and existing customers on our Belief Plans, demonstrating the value our customers place on this innovative program to enhance overall customer satisfaction. During the fourth quarter, we increased average revenue per customer and customer loyalty. In addition, demand for smartphones was quite strong. Smartphone sales represented 40 percent of all devices sold during the quarter and will be a big factor in helping to drive revenue growth in the future, although there was a negative impact on near-term profitability. Smartphone owners currently make up just 17 percent of our postpaid base, so we have significant room for growth in this area. We have a very competitive selection of phones and devices, like the Samsung Galaxy series, and we're evolving our network to provide a fast, high-quality 4G experience.

"Our customers know that we offer the best experience in wireless, as validated by numerous third-party awards, including being named a J.D. Power and Associates 2011 Customer Service Champion, and we're working hard to spread the word. We are confident that we have the right strategies in place to help us compete effectively."

Fourth Quarter Treasury Activity

U.S. Cellular entered into a new $300 million revolving credit facility that is due to expire in Dec. 2015.

Guidance for year ending Dec. 31, 2011

This guidance represents the views of management as of Feb. 24, 2011, and should not be assumed to be accurate as of any other date. There can be no assurance that final results will not differ materially from this guidance. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.


	2011	2010
	Estimated Results	Actual Results
Service revenues	$4,000 - $4,100 million	$3,913.0 million
Adjusted OIBDA (1) (3)	$775 - $875 million	$783.1 million
Operating income (3)	$185 - $285 million	$195.4 million
Depreciation, amortization and accretion expenses, and
losses on asset disposals and impairment of assets (2)	Approx. $590 million	$587.8 million
Capital expenditures (3)	Approx. $650 million	$583.1 million

(1)	Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows.

(2)	2010 Actual Results include losses on asset disposals and no losses on impairment of assets. The 2011 Estimated Results include only the estimate for Depreciation, amortization and accretion expenses and losses on disposals of assets, and do not include any estimate for losses on impairment of assets (since these cannot be predicted).

(3)	This guidance is based on U.S. Cellular's current plans. New developments or changing competitive conditions in the wireless industry, such as the rate of deployment of 4G Long-term Evolution ("LTE") technology by other carriers, could affect U.S. Cellular's LTE deployment plans and, as a result, its capital expenditures and operating expenses.

Conference call information

U.S. Cellular will hold a conference call on Feb. 24, 2011 at 9:30 a.m. CST.

Listen to the live call online at http://www.videonewswire.com/event.asp?id=76812 or on the Conference Calls page of www.uscellular.com.
Listen to the call by phone at 877/407-8029 (US/Canada), no pass code required.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of www.uscellular.com. The call will be archived on the Conference Calls page of www.uscellular.com.

About U.S. Cellular®

United States Cellular Corporation, the nation's sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to 6.1 million customers in 26 states. The Chicago-based company had 9,000 full-time equivalent associates as of Dec. 31, 2010. For more information about U.S. Cellular, visit www.uscellular.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates and expectations. These statements are based on current estimates, projections and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of the company to successfully grow its markets; changes in the overall economy, competition, the state and federal telecommunications regulatory environment, and the value of assets and investments; adverse changes in the ratings afforded the company's debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to possible future restatements; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices and the mix of products and services offered by the company. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.

For more information about U.S. Cellular, visit www.uscellular.com.


UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA (UNAUDITED)

Quarter Ended			12/31/2010		9/30/2010		6/30/2010		3/31/2010				12/31/2009
Total population
	Consolidated markets(1)		90,468,000		90,468,000		90,468,000		90,468,000				89,712,000
	Consolidated operating markets(1)		46,546,000		46,546,000		46,546,000		46,546,000				46,306,000
Market penetration at end of period
	Consolidated markets(2)		6.7%		6.7%		6.8%		6.8%				6.8%
	Consolidated operating markets(2)		13.0%		13.1%		13.2%		13.2%				13.3%
All customers
	Total at end of period		6,072,000		6,103,000		6,144,000		6,147,000				6,141,000
	Gross additions		327,000		338,000		349,000		358,000				399,000
	Net additions (losses)		(31,000)		(41,000)		(3,000)		6,000				10,000
	Smartphones sold as a percent of
	total devices sold(3)		39.6%		23.6%		15.8%		16.6%				14.7%
Retail customers
	Total at end of period		5,729,000		5,750,000		5,775,000		5,768,000				5,744,000
	Smartphone penetration (3) (4)		16.6%		12.0%		10.1%		8.9%				7.5%
	Gross additions		292,000		301,000		307,000		305,000				354,000
	Net retail additions (losses)(5)		(21,000)		(25,000)		7,000		24,000				39,000
	Net postpaid additions (losses)		(10,000)		(25,000)		(22,000)		(9,000)				26,000
	Net prepaid additions (losses)		(11,000)		---		29,000		33,000				13,000
Service revenue components (000s)
	Retail service	$	864,905	$	865,766	$	863,836	$	865,039		$		866,866
	Inbound roaming		67,545		72,901		60,902		51,942				61,728
	Other		59,464		44,836		47,838		48,027				56,814
Total service revenues (000s)		$	991,914	$	983,503	$	972,576	$	965,008		$		985,408
	Divided by average customers (000s)		6,081		6,124		6,151		6,137				6,139
	Divided by three months in each quarter		3		3		3		3				3
	Total average monthly revenue per unit(6)	$	54.37	$	53.53	$	52.71	$	52.41		$		53.51
Components of average monthly revenue per customer by revenue type
	Retail service(6)	$	47.41	$	47.12	$	46.81	$	46.98	$		47.07
	Inbound roaming(6)	$	3.70	$	3.97	$	3.30	$	2.82	$		3.35
	Other(6)	$	3.26	$	2.44	$	2.60	$	2.61	$		3.09

Retail postpaid churn rate(7)			1.5%		1.6%		1.4%		1.4%			1.6%
Capital expenditures (000s)		$	203,400	$	124,700	$	133,500	$	121,500	$		189,000
Cell sites in service			7,645		7,524		7,416		7,310			7,279

(1)	Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).
(2)	Calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.
(3)	Smartphones represent wireless devices which run on a Blackberry, Windows Mobile, or Android operating system.
(4)	Smartphone penetration is calculated by dividing postpaid customers on smartphone service plans by total postpaid customers.
(5)	Calculated by adding net postpaid additions (losses) and net prepaid additions (losses).
(6)	Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.
(7)	Represents the percentage of the retail postpaid customer base that disconnects service each month. This amount represents the average retail postpaid churn rate for each respective quarterly period.


		UNITED STATES CELLULAR CORPORATION
		CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS
		Three Months Ended December 31,
		(Unaudited, dollars and shares in thousands, except per share amounts)

							Increase (Decrease)
			2010		2009		Amount		Percent
Operating revenues
	Service		$	991,914	$	985,408	$	6,506	1%
	Equipment sales			71,236		74,690		(3,454)	(5%)
		Total operating revenues		1,063,150		1,060,098		3,052	—

Operating expenses
	System operations (excluding Depreciation, amortization
		and accretion reported below)		216,254		202,546		13,708	7%
	Cost of equipment sold			230,620		211,883		18,737	9%
	Selling, general and administrative			474,904		473,143		1,761	—
	Depreciation, amortization and accretion			144,649		146,807		(2,158)	(1%)
	Loss on impairment of intangible assets			---		14,000		(14,000)	N/M
	Loss on asset disposals, net			2,310		7,528		(5,218)	(69%)
		Total operating expenses		1,068,737		1,055,907		12,830	1%

Operating income (loss)				(5,587)		4,191		(9,778)	>100%

Investment and other income (expense)
	Equity in earnings of unconsolidated entities			22,900		23,553		(653)	(3%)
	Interest and dividend income			824		949		(125)	(13%)
	Interest expense			(12,637)		(19,134)		6,497	34%
	Other, net			285		259		26	10%
		Total investment and other income (expense)		11,372		5,627		5,745	>100%

Income before income taxes				5,785		9,818		(4,033)	(41%)
	Income tax (benefit)			(7,285)		(940)		(6,345)	>100%

Net income				13,070		10,758		2,312	21%
	Less: Net (income) attributable to noncontrolling interests,
		net of tax		(6,226)		(4,185)		(2,041)	(49%)
Net income attributable to U.S. Cellular shareholders			$	6,844	$	6,573	$	271	4%

Basic weighted average shares outstanding				85,668		86,719		(1,051)	(1%)
Basic earnings per share attributable to
	U.S. Cellular shareholders		$	0.08	$	0.08	$	---	—

Diluted weighted average shares outstanding				86,190		87,087		(897)	(1%)
Diluted earnings per share attributable to
	U.S. Cellular shareholders		$	0.08	$	0.08	$	---	—
N/M – Percentage change not meaningful


UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS
Twelve Months Ended December 31,
(Unaudited, dollars and shares in thousands, except per share amounts)

							Increase (Decrease)
			2010		2009		Amount		Percent
Operating revenues
	Service		$	3,913,001	$	3,927,128	$	(14,127)	—
	Equipment sales			264,680		286,752		(22,072)	(8%)
		Total operating revenues		4,177,681		4,213,880		(36,199)	(1%)

Operating expenses
	System operations (excluding Depreciation, amortization
		and accretion reported below)		854,931		802,854		52,077	6%
	Cost of equipment sold			742,981		742,993		(12)	—
	Selling, general and administrative			1,796,624		1,747,404		49,220	3%
	Depreciation, amortization and accretion			577,054		569,514		7,540	1%
	Loss on impairment of intangible assets			---		14,000		(14,000)	N/M
	Loss on asset disposals, net			10,717		16,169		(5,452)	(34%)
		Total operating expenses		3,982,307		3,892,934		89,373	2%

Operating income				195,374		320,946		(125,572)	(39%)

Investment and other income (expense)
	Equity in earnings of unconsolidated entities			97,318		96,800		518	1%
	Interest and dividend income			3,808		3,597		211	6%
	Interest expense			(61,555)		(78,199)		16,644	21%
	Other, net			72		1,442		(1,370)	(95%)
		Total investment and other income (expense)		39,643		23,640		16,003	68%

Income before income taxes				235,017		344,586		(109,569)	(32%)
	Income tax expense			79,609		116,086		(36,477)	(31%)

Net income				155,408		228,500		(73,092)	(32%)
	Less: Net (income) attributable to noncontrolling interests,
		net of tax		(23,084)		(21,768)		(1,316)	(6%)
Net income attributable to U.S. Cellular shareholders			$	132,324	$	206,732	$	(74,408)	(36%)

Basic weighted average shares outstanding				86,128		86,946		(818)	(1%)
Basic earnings per share attributable to
	U.S. Cellular shareholders		$	1.54	$	2.38	$	(0.84)	(35%)

Diluted weighted average shares outstanding				86,518		87,168		(650)	(1%)
Diluted earnings per share attributable to
	U.S. Cellular shareholders		$	1.53	$	2.37	$	(0.84)	(35%)
N/M – Percentage change not meaningful


UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)

ASSETS


		December 31,		December 31,
		2010		2009
Current assets
	Cash and cash equivalents	$	294,426	$	294,411
	Short-term investments		146,586		330
	Accounts receivable from customers and other		424,019		425,057
	Inventory		112,279		152,556
	Prepaid income taxes		41,397		717
	Prepaid expenses		53,356		63,463
	Net deferred income tax asset		26,757		21,570
	Other current assets		10,804		51,013
			1,109,624		1,009,117

Investments
	Licenses		1,452,101		1,435,000
	Goodwill		494,737		494,737
	Customer lists, net		759		4,083
	Investments in unconsolidated entities		160,847		161,481
	Notes and interest receivable--long-term		4,070		4,214
	Long-term investments		46,033		---
			2,158,547		2,099,515

Property, plant and equipment
	In service and under construction		6,382,581		5,884,307
	Less: accumulated depreciation		3,767,509		3,282,969
			2,615,072		2,601,338

Other assets and deferred charges			50,367		38,776


Total assets		$	5,933,610	$	5,748,746


UNITED STATES CELLULAR CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY


			December 31,		December 31,
			2010		2009
Current liabilities
	Current portion of long-term debt		$	101	$	76
	Accounts payable
		Affiliated		10,791		14,732
		Trade		281,601		296,288
	Customer deposits and deferred revenues			146,428		140,248
	Accrued taxes			39,299		57,507
	Accrued compensation			65,952		62,242
	Other current liabilities			121,823		92,884
				665,995		663,977

Deferred liabilities and credits
	Net deferred income tax liability			579,769		513,994
	Other deferred liabilities and credits			284,949		262,412
				864,718		776,406

Long-term debt				867,941		867,522

Commitments and contingencies

Noncontrolling interests with redemption features				855		727

Equity
U.S. Cellular shareholders' equity
	Series A Common and Common Shares, par value $1 per share			88,074		88,074
	Additional paid-in capital			1,368,487		1,356,322
	Treasury Shares			(105,616)		(69,616)
	Retained earnings			2,129,638		2,013,633
		Total U.S. Cellular shareholders equity		3,480,583		3,388,413

Noncontrolling interests				53,518		51,701

	Total equity			3,534,101		3,440,114

Total liabilities and equity			$	5,933,610	$	5,748,746

United States Cellular Corporation
Schedule of Cash and Cash Equivalents and Investments
(Unaudited, dollars in thousands)

In an effort to improve investment returns, during 2010, U.S. Cellular elected to use a portion of its cash balance to directly purchase government-backed securities, specifically U.S. treasury securities and securities insured by the Federal Deposit Insurance Corporation ("FDIC"). The maturity dates of such direct investments were staggered in order to maintain cash balances and liquidity at targeted levels. U.S. Cellular also continues to invest in certificates of deposit that are insured by the FDIC. The following table presents U.S. Cellular's cash and cash equivalents; and investments in government-backed securities and certificates of deposit at December 31, 2010 and December 31, 2009.


		December 31,		December 31,
		2010		2009

Cash and cash equivalents		$	294,426	$	294,411
Amounts included in short-term investments (1)(2)
	Government-backed securities (3)		146,336		—
	Certificates of deposit		250		330
		$	146,586	$	330
Amounts included in long-term investments (1)(4)
	Government-backed securities (3)	$	46,033	$	—

(1)	Designated as held-to-maturity investments and are recorded at amortized cost on the Consolidated Balance Sheet.
(2)	Maturities are less than twelve months from the respective balance sheet dates.
(3)	Includes U.S. treasuries and corporate notes guaranteed under the FDIC's Temporary Liquidity Guarantee Program.
(4)	Maturities range between 14 and 24 months from the balance sheet date.


UNITED STATES CELLULAR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve Months Ended December 31,
(Unaudited, dollars in thousands)

				2010		2009
Cash flows from operating activities
	Net income			$	155,408	$	228,500
	Add (deduct) adjustments to reconcile net income
		to net cash flows from operating activities
			Depreciation, amortization and accretion		577,054		569,514
			Bad debts expense		76,292		107,991
			Stock-based compensation expense		18,044		16,362
			Deferred income taxes, net		71,378		45,496
			Equity in earnings of unconsolidated entities		(97,318)		(96,800)
			Distributions from unconsolidated entities		100,359		91,105
			Loss on impairment of intangible assets		—		14,000
			Loss on asset disposals, net		10,717		16,169
			Noncash interest expense		2,540		2,442
			Excess tax benefit from stock awards		(114)		(24)
			Other operating activities		(2,369)		—
	Changes in assets and liabilities from operations
			Accounts receivable		(75,252)		(114,646)
			Inventory		40,277		(35,992)
			Accounts payable - trade		(14,660)		47,503
			Accounts payable - affiliate		(3,940)		5,119
			Customer deposits and deferred revenues		6,180		(9,921)
			Accrued taxes		(70,057)		48,218
			Accrued interest		204		(2,121)
			Other assets and liabilities		79,546		(51,107)
					874,289		881,808

Cash flows from investing activities
	Additions to property, plant and equipment				(583,134)		(546,758)
	Cash received from divestitures				-		50
	Cash paid for acquisitions and licenses				(17,101)		(16,027)
	Cash paid for investments				(250,250)		(450)
	Cash received for investments				60,330		120
	Other investing activities				(953)		1,614
					(791,108)		(561,451)

Cash flows from financing activities
	Repayment of long-term debt				(316)		(140,236)
	Common shares reissued for benefit plans, net of tax payments				509		(82)
	Common shares repurchased				(52,827)		(33,585)
	Excess tax benefit from stock awards				114		24
	Payment of debt issuance costs				(2,229)		(4,421)
	Distributions to noncontrolling interests				(19,631)		(18,426)
	Payments to acquire additional interest in subsidiaries				(8,786)		(285)
	Other financing activities				-		69
					(83,166)		(196,942)

Net increase in cash and cash equivalents					15		123,415

Cash and cash equivalents
	Beginning of period				294,411		170,996
	End of period			$	294,426	$	294,411


United States Cellular Corporation Financial Measures and Reconciliations
(Unaudited, dollars in thousands)

				Three Months Ended December 31,				Twelve Months Ended December 31,
					2010		2009		2010		2009

	Service revenues			$	991,914	$	985,408	$	3,913,001	$	3,927,128

	Operating income (loss)				(5,587)		4,191		195,374		320,946
	Add:
		Depreciation, amortization and accretion			144,649		146,807		577,054		569,514
		Loss on impairment of intangible asset			—		14,000		—		14,000
		Loss on asset disposals			2,310		7,528		10,717		16,169
			Adjusted OIBDA (1)	$	141,372	$	172,526	$	783,145	$	920,629

			Adjusted OIBDA margin (2)		14.3%		17.5%		20.0%		23.4%


					2010		2009		2010		2009
	Cash flows from operating activities			$	290,276	$	244,114	$	874,289	$	881,808
	Deduct:
		Capital expenditures			203,442		188,988		583,134		546,758
			Free cash flow (3)	$	86,834	$	55,126	$	291,155	$	335,050

(1)	Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization, and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period. U.S. Cellular does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.
(2)	Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues. Equipment revenues are excluded from the denominator of the calculation since equipment is generally sold at a net negative margin, and the net equipment subsidy is effectively a cost for purposes of assessing business results and is already reflected in adjusted OIBDA. U.S. Cellular believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular's business results. Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.
(3)	Free cash flow is defined as cash flows from operating activities minus capital expenditures. Free cash flow is a non-GAAP financial measure. U.S. Cellular believes that free cash flow as reported by U.S. Cellular is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.