2017 Estimated Results

Current

Previous

(Dollars in millions)

Total operating revenues (1)

$3,800-$4,000

Unchanged

Adjusted OIBDA (1)(2)(3)

$550-$650

Unchanged

Adjusted EBITDA (2)

$700-$800

Unchanged

Capital expenditures

Approx.

$500

Unchanged

Actual Results

2017 Estimated

Results

Six Months Ended June 30, 2017

Year Ended

December 31, 2016

(Dollars in millions)

Net income (GAAP)

N/A

$

40 

$

49 

Add back:

Income tax expense

N/A

33 

33 

Income (loss) before income taxes (GAAP)

$

(30)-70

$

73 

$

82 

Add back:

Interest expense

110

56 

113 

Depreciation, amortization and accretion expense

620

307 

618 

EBITDA (Non-GAAP)

$

700-800 

$

436 

$

813 

Add back (deduct):

(Gain) loss on license sales and exchanges, net

(20)

(19)

(19)

(Gain) loss on assets disposals, net

20

9 

22 

Adjusted EBITDA (Non-GAAP) (2)

$

700-800 

$

426 

$

816 

Deduct:

Equity in earnings of unconsolidated entities

140

66 

140 

Interest and dividend income (1)

10

5 

6 

Other, net

–

(1)

1 

Adjusted OIBDA (Non-GAAP) (1)(2)(3)

$

550-650 

$

356 

$

669 

Note: Totals may not foot due to rounding differences.

(1)

Equipment installment plan interest income is reflected as a component of Service revenues consistent with an accounting policy change effective January 1, 2017.  All prior period numbers have been recast to conform to this accounting change. 

(2)

Adjusted EBITDA is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted OIBDA is defined as net income adjusted for the items set forth in the reconciliation above.  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.  U.S. Cellular 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 U.S. Cellular’s operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of U.S. Cellular’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 Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income (loss) before income taxes.

(3)

A reconciliation of Adjusted OIBDA (Non-GAAP) to Operating income (GAAP) for June 30, 2017, actual results can be found on U.S. Cellular’s website at investors.uscellular.com.

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

Retail Connections

Postpaid

Total at end of period

4,478,000 

4,455,000 

4,482,000 

4,484,000 

4,490,000 

Gross additions

174,000 

146,000 

187,000 

174,000 

197,000 

Feature phones

7,000 

7,000 

7,000 

10,000 

8,000 

Smartphones

116,000 

88,000 

109,000 

105,000 

107,000 

Connected devices

51,000 

51,000 

71,000 

59,000 

82,000 

Net additions (losses)

23,000 

(27,000)

(2,000)

(6,000)

36,000 

Feature phones

(15,000)

(19,000)

(21,000)

(20,000)

(21,000)

Smartphones

34,000 

(9,000)

(4,000)

(7,000)

8,000 

Connected devices

4,000 

1,000 

23,000 

21,000 

49,000 

ARPU (1)

$

44.60 

$

45.42 

$

45.19 

$

47.08 

$

47.37 

ABPU (Non-GAAP)(2)

$

55.19 

$

55.82 

$

55.43 

$

56.79 

$

56.09 

ARPA (3)

$

119.73 

$

121.88 

$

120.67 

$

125.31 

$

124.91 

ABPA (Non-GAAP)(4)

$

148.15 

$

149.78 

$

148.02 

$

151.16 

$

147.90 

Churn rate (5)

1.13%

1.29%

1.41%

1.34%

1.20%

Handsets

0.91%

1.08%

1.23%

1.22%

1.10%

Connected devices

2.35%

2.55%

2.49%

2.04%

1.84%

Prepaid

Total at end of period

484,000 

480,000 

484,000 

480,000 

413,000 

Gross additions

73,000 

78,000 

83,000 

132,000 

73,000 

Net additions (losses)

3,000 

(4,000)

4,000 

67,000 

14,000 

ARPU (1)

$

33.52 

$

33.66 

$

33.25 

$

34.39 

$

34.58 

Churn rate (5)

4.93%

5.69%

5.44%

4.84%

4.86%

Total connections at end of period (6)

5,023,000 

4,996,000 

5,031,000 

5,030,000 

4,973,000 

Market penetration at end of period

Consolidated operating population

32,089,000 

32,089,000 

31,994,000 

31,994,000 

31,994,000 

Consolidated operating penetration (7)

16%

16%

16%

16%

16%

Capital expenditures (millions)

$

84 

$

61 

$

171 

$

103 

$

93 

Total cell sites in service

6,421 

6,417 

6,415 

6,374 

6,324 

Owned towers

4,044 

4,041 

4,040 

4,015 

3,988 

(1)

Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue 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.

(2)

Average Billings Per User (ABPU) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid connections and by the number of months in the period.  Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(3)

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

(4)

Average Billings Per Account (ABPA) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.  Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(5)

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

(6)

Includes reseller and other connections.

(7)

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

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months Ended June 30,

2017

2016

2017 vs. 2016

Increase (Decrease)

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

Operating revenues

Service(1) 

$

740 

$

774 

$

(34)

(4)%

Equipment sales

223 

218 

5 

2%

Total operating revenues(1)

963 

992 

(29)

(3)%

Operating expenses

System operations (excluding Depreciation, amortization

   and accretion reported below)

189 

193 

(4)

(2)%

Cost of equipment sold

260 

262 

(2)

(1)%

Selling, general and administrative

351 

357 

(6)

(2)%

Depreciation, amortization and accretion

155 

154 

1 

-

(Gain) loss on asset disposals, net

5 

5 

– 

6%

(Gain) loss on license sales and exchanges, net

(2)

(9)

7 

81%

Total operating expenses

958 

962 

(4)

(1)%

Operating income(1)

5 

30 

(25)

(82)%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

33 

37 

(4)

(9)%

Interest and dividend income(1)

2 

2 

– 

29%

Interest expense

(28)

(28)

– 

(1)%

Other, net

– 

(1)

1 

(56)%

Total investment and other income(1)

7 

10 

(3)

(32)%

Income before income taxes

12 

40 

(28)

(70)%

Income tax expense

– 

13 

(13)

(97)%

Net income

12 

27 

(15)

(57)%

Less: Net income attributable to noncontrolling

   interests, net of tax

– 

– 

– 

>100%

Net income attributable to U.S. Cellular shareholders

$

12 

$

27 

$

(15)

(58)%

Basic weighted average shares outstanding

85 

85 

– 

-

Basic earnings per share attributable to

   U.S. Cellular shareholders

$

0.14 

$

0.32 

$

(0.18)

(56)%

Diluted weighted average shares outstanding

86 

85 

1 

-

Diluted earnings per share attributable to

   U.S. Cellular shareholders

$

0.14 

$

0.32 

$

(0.18)

(56)%

(1)

Equipment installment plan interest income is reflected as a component of Service revenues consistent with an accounting policy change effective January 1, 2017.  All prior period numbers have been recast to conform to this accounting change.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)

Six Months Ended June 30,

2017

2016

2017 vs. 2016

Increase (Decrease)

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

Operating revenues

Service(1)

$

1,486 

$

1,545 

$

(59)

(4)%

Equipment sales

413 

417 

(4)

(1)%

Total operating revenues(1)

1,899 

1,962 

(63)

(3)%

Operating expenses

System operations (excluding Depreciation, amortization

and accretion reported below)

364 

376 

(12)

(3)%

Cost of equipment sold

488 

518 

(30)

(6)%

Selling, general and administrative

691 

719 

(28)

(4)%

Depreciation, amortization and accretion

307 

307 

– 

-

(Gain) loss on asset disposals, net

9 

10 

(1)

(12)%

(Gain) loss on license sales and exchanges, net

(19)

(9)

(10)

>(100)%

Total operating expenses

1,840 

1,921 

(81)

(4)%

Operating income(1)

59 

41 

18 

45%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

66 

72 

(6)

(8)%

Interest and dividend income(1)

5 

3 

2 

38%

Interest expense

(56)

(56)

– 

(1)%

Other, net

(1)

– 

(1)

(23)%

Total investment and other income(1)

14 

19 

(5)

(27)%

Income before income taxes

73 

60 

13 

22%

Income tax expense

33 

23 

10 

43%

Net income

40 

37 

3 

8%

Less: Net income attributable to noncontrolling

   interests, net of tax

2 

1 

1 

>100%

Net income attributable to U.S. Cellular shareholders

$

38 

$

36 

$

2 

5%

Basic weighted average shares outstanding

85 

85 

– 

-

Basic earnings per share attributable to

U.S. Cellular shareholders

$

0.45 

$

0.43 

$

0.02 

5%

Diluted weighted average shares outstanding

86 

85 

1 

1%

Diluted earnings per share attributable to

U.S. Cellular shareholders

$

0.44 

$

0.43 

$

0.01 

2%

(1)

Equipment installment plan interest income is reflected as a component of Service revenues consistent with an accounting policy change effective January 1, 2017.  All prior period numbers have been recast to conform to this accounting change.

Six Months Ended

June 30,

2017

2016

(Dollars in millions)

Cash flows from operating activities

Net income

$

40 

$

37 

Add (deduct) adjustments to reconcile net income to net cash flows

from operating activities

Depreciation, amortization and accretion

307 

307 

Bad debts expense

47 

44 

Stock-based compensation expense

14 

12 

Deferred income taxes, net

(27)

7 

Equity in earnings of unconsolidated entities

(66)

(72)

Distributions from unconsolidated entities

65 

30 

(Gain) loss on asset disposals, net

9 

10 

(Gain) loss on license sales and exchanges, net

(19)

(9)

Noncash interest expense

1 

1 

Other operating activities

– 

(2)

Changes in assets and liabilities from operations

Accounts receivable

(5)

9 

Equipment installment plans receivable

(107)

(94)

Inventory

(2)

(27)

Accounts payable

(53)

35 

Customer deposits and deferred revenues

(6)

(18)

Accrued taxes

45 

41 

Accrued interest

– 

(1)

Other assets and liabilities

(23)

(49)

Net cash provided by operating activities

220 

261 

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(155)

(177)

Cash paid for licenses

(189)

(46)

Cash received from divestitures and exchanges

17 

17 

Federal Communications Commission deposit

– 

(143)

Other investing activities

– 

(1)

Net cash used in investing activities

(327)

(350)

Cash flows from financing activities

Repayment of long-term debt

(6)

(6)

Common shares reissued for benefit plans, net of tax payments

– 

3 

Common shares repurchased

– 

(2)

Payment of debt issuance costs

– 

(2)

Distributions to noncontrolling interests