Form 8-K UNITED STATES CELLULAR For: Jul 31

FORM 8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CURRENT REPORT

Pursuant to Section 13 or 15d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 31, 2015

UNITED STATES CELLULAR CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

1-9712

62-1147325

(State or other jurisdiction of

(Commission

(I.R.S. Employer Identification No.)

incorporation or organization)

File Number)

9410 West Bryn Mawr, Chicago, Illinois

60631

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (773) 399-8900

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below)

□

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

□

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

□

Pre-commencement communications pursuant to Rule 14d-2(b) under the Echange Act (17 CFR 240.14d-2(b))

□

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

By:

/s/ Steven T. Campbell

Steven T. Campbell

Executive Vice President – Finance,

Chief Financial Officer and Treasurer

(principal financial officer)

EXHIBIT INDEX

The following exhibits are filed or furnished herewith as noted below.

Exhibit

No.

Description

99.1

Earnings Press Release dated July 31, 2015

99.2

Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement

2015 Estimated Results

Current

Previous

(Dollars in millions)

Total operating revenues

$4,000-$4,100

$4,000-$4,200

Operating cash flow (1)

$440-$540

$400-$500

Adjusted EBITDA (1)

$600-$700

$580-$680

Capital expenditures

Approx. $

600

Unchanged

Actual Results

2015 Estimated

Results (2)

Six Months Ended June 30, 2015

Year Ended

December 31, 2014

(Dollars in millions)

Net income (loss) (GAAP)

N/A

$

185 

$

(47)

Add back:

Income tax expense (benefit)

N/A

121 

(12)

Income (loss) before income taxes

   (GAAP)

$

165-265 

$

306 

$

(59)

Add back:

Interest expense

80

40 

57 

Depreciation, amortization and

   accretion expense

600

298 

606 

EBITDA

$

845-945 

$

643 

$

605 

Add back (deduct):

(Gain) loss on sale of business and

   other exit costs, net

(115)

(113)

(33)

(Gain) loss on license sales and

   exchanges, net

(145)

(123)

(113)

(Gain) loss on assets disposals, net

15

10 

21 

Adjusted EBITDA

$

600-700 

$

417 

$

480 

Deduct:

Equity in earnings of unconsolidated

   entities

(125)

(70)

(130)

Interest and dividend income

(35)

(17)

(12)

Operating cash flow (3)

$

440-540 

$

330 

$

338 

Note: Totals may not foot due to rounding differences.

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2015

3/31/2015

12/31/2014

9/30/2014

6/30/2014

Retail Customers

Postpaid

Total at end of period

4,324,000 

4,307,000 

4,298,000 

4,200,000 

4,148,000 

Gross additions

191,000 

200,000 

302,000 

251,000 

190,000 

Net additions (losses)

17,000 

9,000 

98,000 

52,000 

(26,000)

ARPU (1)

$

53.62 

$

54.87 

$

56.51 

$

56.37 

$

56.82 

ARPA (2)

$

133.85 

$

134.94 

$

136.13 

$

132.99 

$

131.95 

Churn rate (3)

1.3%

1.5%

1.6%

1.6%

1.7%

Smartphone penetration (4)

69.1%

66.9%

64.8%

61.7%

58.4%

Prepaid

Total at end of period

368,000 

360,000 

348,000 

350,000 

352,000 

Gross additions

65,000 

73,000 

60,000 

64,000 

65,000 

Net additions (losses)

8,000 

12,000 

(2,000)

(2,000)

(4,000)

ARPU (1)

$

35.98 

$

35.72 

$

35.33 

$

34.40 

$

34.02 

Churn rate (3)

5.2%

5.8%

5.9%

6.3%

6.5%

Total customers at end of period

4,779,000 

4,775,000 

4,760,000 

4,674,000 

4,653,000 

Billed ARPU (1)

$

51.29 

$

52.29 

$

53.63 

$

53.24 

$

53.36 

Service revenue ARPU (1)

$

57.55 

$

58.01 

$

60.10 

$

60.92 

$

60.32 

Smartphones sold as a percent of total

  handsets sold

86.7%

85.7%

86.5%

80.8%

79.0%

Total population

Consolidated markets (5)

45,737,000 

45,737,000 

50,906,000 

54,817,000 

54,817,000 

Consolidated operating markets (5)

31,814,000 

31,814,000 

31,729,000 

31,729,000 

31,729,000 

Market penetration at end of period

Consolidated markets (6)

10.4%

10.4%

9.4%

8.5%

8.5%

Consolidated operating markets (6)

15.0%

15.0%

15.0%

14.7%

14.7%

Capital expenditures (000s)

$

133,666 

$

66,460 

$

181,655 

$

142,452 

$

143,927 

Total cell sites in service

6,223 

6,219 

6,220 

6,209 

6,183 

Owned towers (7)

3,940 

3,936 

4,280 

4,487 

4,457 

(1)

Average Revenue Per User (“ARPU”) metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period.  These revenue bases and customer populations are shown below:

a.

Postpaid ARPU consists of total postpaid service revenues and postpaid customers.

b.

Prepaid ARPU consists of total prepaid service revenues and prepaid customers.

c.

Billed ARPU consists of total postpaid, prepaid and reseller service revenues and postpaid, prepaid and reseller customers.

d.

Service revenue ARPU consists of total postpaid, prepaid and reseller service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)

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

(3)

Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

(4)

Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid handset customers.

(5)

The decrease in the population of Consolidated markets is due primarily to the license exchange transactions of certain non-operating licenses in North Carolina in December 2014 and Illinois and Indiana in March 2015. Total Population is used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively.  See footnote (6) below.

(6)

Market penetration is 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.  The increase in consolidated markets penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (5) above.

(7)

During the quarters ended March 31, 2015 and December 31, 2014, sold 359 and 236 towers, respectively, in divested markets.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended June 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

      Change

2015

2014

Amount

Percent

Operating revenues

Service

$

824,373 

$

843,473 

$

(19,100)

(2)%

Equipment sales

151,294 

114,300 

36,994 

32%

Total operating revenues

975,667 

957,773 

17,894 

2%

Operating expenses

System operations (excluding Depreciation, amortization

   and accretion reported below)

196,276 

187,131 

9,145 

5%

Cost of equipment sold

253,671 

271,978 

(18,307)

(7)%

Selling, general and administrative

362,971 

404,252 

(41,281)

(10)%

Depreciation, amortization and accretion

150,581 

148,337 

2,244 

2%

(Gain) loss on asset disposals, net

5,399 

6,893 

(1,494)

(22)%

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

(1,705)

(10,511)

8,806 

84%

(Gain) loss on license sales and exchanges, net

(25)

– 

(25)

Total operating expenses

967,168 

1,008,080 

(40,912)

(4)%

Operating income (loss)

8,499 

(50,307)

58,806 

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

35,584 

33,120 

2,464 

7%

Interest and dividend income

8,969 

1,573 

7,396 

>100%

Interest expense

(20,154)

(14,336)

(5,818)

(41)%

Other, net

91 

100 

(9)

(9)%

Total investment and other income

24,490 

20,457 

4,033 

20%

Income (loss) before income taxes

32,989 

(29,850)

62,839 

>100%

Income tax expense (benefit)

13,079 

(10,399)

23,478 

>100%

Net income (loss)

19,910 

(19,451)

39,361 

>100%

Less: Net income (loss) attributable to noncontrolling

   interests, net of tax

558 

(662)

1,220 

>100%

Net income (loss) attributable to U.S. Cellular shareholders

$

19,352 

$

(18,789)

$

38,141 

>100%

Basic weighted average shares outstanding

84,293 

84,341 

(48)

-

Basic earnings (loss) per share attributable to

   U.S. Cellular shareholders

$

0.23 

$

(0.22)

$

0.45 

>100%

Diluted weighted average shares outstanding

84,892 

84,341 

551 

1%

Diluted earnings (loss) per share attributable to

   U.S. Cellular shareholders

$

0.23 

$

(0.22)

$

0.45 

>100%

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Six Months Ended June 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

Change

2015

2014

Amount

Percent

Operating revenues

Service

$

1,652,584 

$

1,697,086 

$

(44,502)

(3)%

Equipment sales

288,328 

186,498 

101,830 

55%

Total operating revenues

1,940,912 

1,883,584 

57,328 

3%

Operating expenses

System operations (excluding Depreciation, amortization

   and accretion reported below)

386,953 

367,738 

19,215 

5%

Cost of equipment sold

491,972 

542,452 

(50,480)

(9)%

Selling, general and administrative

731,939 

799,816 

(67,877)

(8)%

Depreciation, amortization and accretion

297,666 

316,090 

(18,424)

(6)%

(Gain) loss on asset disposals, net

9,650 

8,827 

823 

9%

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

(113,182)

(17,411)

(95,771)

>(100)%

(Gain) loss on license sales and exchanges, net

(122,898)

(91,446)

(31,452)

(34)%

Total operating expenses

1,682,100 

1,926,066 

(243,966)

(13)%

Operating income

258,812 

(42,482)

301,294 

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

70,055 

70,195 

(140)

-

Interest and dividend income

16,535 

2,457 

14,078 

>100%

Interest expense

(40,118)

(29,198)

(10,920)

(37)%

Other, net

196 

186 

10 

5%

Total investment and other income

46,668 

43,640 

3,028 

7%

Income before income taxes

305,480 

1,158 

304,322 

>100%

Income tax expense

120,580 

2,205 

118,375 

>100%

Net income

184,900 

(1,047)

185,947 

>100%

Less: Net income (loss) attributable to noncontrolling

   interests, net of tax

5,484 

(1,740)

7,224 

>100%

Net income attributable to U.S. Cellular shareholders

$

179,416 

$

693 

$

178,723 

>100%

Basic weighted average shares outstanding

84,168 

84,277 

(109)

-

Basic earnings per share attributable to

   U.S. Cellular shareholders

$

2.13 

$

0.01 

$

2.12 

>100%

Diluted weighted average shares outstanding

84,849 

85,041 

(192)