2019 Estimated Results

Previous

Current

(Dollars in millions)

Total operating revenues

$4,000-$4,200

$3,900-$4,100*

Adjusted OIBDA (1)

$725-$875

Unchanged

Adjusted EBITDA (1)

$900-$1,050

Unchanged

Capital expenditures

$625-$725

Unchanged

* Change represents lower equipment sales revenues.

Actual Results

2019 EstimatedResults

Six Months EndedJune 30, 2019

Year EndedDecember 31, 2018

(Dollars in millions)

Net income (GAAP)

N/A

$

90

$

164

Add back or deduct:

Income tax expense

N/A

41

51

Income before income taxes (GAAP)

$70-$220

$

131

$

215

Add back:

Interest expense

115

58

116

Depreciation, amortization and accretion expense

700

345

640

EBITDA (Non-GAAP) (1)

$885-$1,035

$

534

$

971

Add back or deduct:

(Gain) loss on asset disposals, net

15

7

10

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

—

(2)

—

(Gain) loss on license sales and exchanges, net

—

(2)

(18)

Adjusted EBITDA (Non-GAAP) (1)

$900-$1,050

$

537

$

963

Deduct:

Equity in earnings of unconsolidated entities

155

84

159

Interest and dividend income

20

11

15

Other, net

—

(1)

(1)

Adjusted OIBDA (Non-GAAP) (1)

$725-$875

$

443

$

790

(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. 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 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 June 30, 2019, 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

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

Retail Connections

Postpaid

Total at end of period

4,414,000

4,440,000

4,472,000

4,466,000

4,468,000

Gross additions

137,000

137,000

179,000

172,000

146,000

Feature phones

5,000

4,000

4,000

3,000

5,000

Smartphones

97,000

98,000

132,000

130,000

106,000

Connected devices

35,000

35,000

43,000

39,000

35,000

Net additions (losses)

(26,000)

(32,000)

6,000

(1,000)

(13,000)

Feature phones

(10,000)

(13,000)

(11,000)

(14,000)

(12,000)

Smartphones

(1,000)

(1,000)

31,000

29,000

17,000

Connected devices

(15,000)

(18,000)

(14,000)

(16,000)

(18,000)

ARPU (1)

$

45.90

$

45.44

$

45.58

$

45.31

$

44.74

ARPA (2)

$

119.46

$

118.84

$

119.60

$

119.42

$

118.57

Churn rate (3)

1.23

%

1.26

%

1.29

%

1.29

%

1.19

%

Handsets

0.97

%

0.99

%

1.00

%

1.02

%

0.92

%

Connected devices

3.01

%

3.08

%

3.20

%

3.04

%

2.85

%

Prepaid

Total at end of period

500,000

503,000

516,000

528,000

527,000

Gross additions

61,000

61,000

66,000

80,000

78,000

Net additions (losses)

(2,000)

(13,000)

(12,000)

1,000

2,000

ARPU (1)

$

34.43

$

33.44

$

32.80

$

32.09

$

32.32

Churn rate (3)

4.20

%

4.92

%

4.98

%

4.98

%

4.83

%

Total connections at end of period (4)

4,967,000

4,995,000

5,041,000

5,050,000

5,051,000

Market penetration at end of period

Consolidated operating population

31,310,000

31,310,000

31,469,000

31,469,000

31,469,000

Consolidated operating penetration (5)

16

%

16

%

16

%

16

%

16

%

Capital expenditures (millions)

$

195

$

102

$

242

$

118

$

86

Total cell sites in service

6,535

6,506

6,531

6,506

6,478

Owned towers

4,116

4,106

4,129

4,119

4,105

(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 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.

(3)

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.

(4)

Includes reseller and other connections.

(5)

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 EndedJune 30,

Six Months EndedJune 30,

2019

2018

2019 vs. 2018

2019

2018

2019 vs. 2018

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

Operating revenues

Service

$

757

$

741

2

%

$

1,498

$

1,465

2

%

Equipment sales

216

233

(7)

%

441

450

(2)

%

Total operating revenues

973

974

–

1,939

1,915

1

%

Operating expenses

System operations (excluding Depreciation, amortization and accretion reported below)

193

187

3

%

369

365

1

%

Cost of equipment sold

224

240

(6)

%

458

459

–

Selling, general and administrative

344

342

1

%

669

668

–

Depreciation, amortization and accretion

177

159

11

%

345

317

8

%

(Gain) loss on asset disposals, net

5

1

N/M

7

2

N/M

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

—

—

N/M

(2)

—

N/M

(Gain) loss on license sales and exchanges, net

—

(11)

N/M

(2)

(17)

88

%

Total operating expenses

943

918

3

%

1,844

1,794

3

%

Operating income

30

56

(45)

%

95

121

(21)

%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

40

40

1

%

84

78

8

%

Interest and dividend income

5

3

63

%

11

7

60

%

Interest expense

(29)

(29)

1

%

(58)

(58)

–

Other, net

—

—

N/M

(1)

(1)

N/M

Total investment and other income

16

14

10

%

36

26

36

%

Income before income taxes

46

70

(34)

%

131

147

(11)

%

Income tax expense

14

18

(24)

%

41

40

–

Net income

32

52

(38)

%

90

107

(15)

%

Less: Net income attributable to noncontrolling interests, net of tax

1

3

(76)

%

4

14

(66)

%

Net income attributable to U.S. Cellular shareholders

$

31

$

49

(35)

%

$

86

$

93

(8)

%

Basic weighted average shares outstanding

87

86

1

%

87

85

1

%

Basic earnings per share attributable to U.S. Cellular shareholders

$

0.36

$

0.57

(36)

%

$

0.99

$

1.09

(9)

%

Diluted weighted average shares outstanding

88

86

2

%

88

86

2

%

Diluted earnings per share attributable to U.S. Cellular shareholders

$

0.35

$

0.56

(37)

%

$

0.97

$

1.08

(10)

%

N/M - Percentage change not meaningful

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)

Six Months EndedJune 30,

2019

2018

(Dollars in millions)

Cash flows from operating activities

Net income

$

90

$

107

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

Depreciation, amortization and accretion

345

317

Bad debts expense

48

40

Stock-based compensation expense

25

17

Deferred income taxes, net

27

9

Equity in earnings of unconsolidated entities

(84)

(78)

Distributions from unconsolidated entities

76

70

(Gain) loss on asset disposals, net

7

2

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

(2)

—

(Gain) loss on license sales and exchanges, net

(2)

(17)

Other operating activities

2

2

Changes in assets and liabilities from operations

Accounts receivable

3

43

Equipment installment plans receivable

(11)

(47)

Inventory

(4)

(3)

Accounts payable

(7)

(35)

Customer deposits and deferred revenues

8

(23)

Accrued taxes

3

6

Other assets and liabilities

(48)

(45)

Net cash provided by operating activities

476

365

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(282)

(173)

Cash paid for licenses

(255)

(2)

Cash received from investments

11

50

Cash paid for investments

(11)

—

Cash received from divestitures and exchanges

32

21

Other investing activities

(1)

3

Net cash used in investing activities

(506)

(101)

Cash flows from financing activities

Repayment of long-term debt

(10)

(10)

Common Shares reissued for benefit plans, net of tax payments

(8)

—

Distributions to noncontrolling interests

(2)

(4)

Other financing activities

(1)

(5)

Net cash used in financing activities

(21)

(19)

Net increase (decrease) in cash, cash equivalents and restricted cash

(51)

245

Cash, cash equivalents and restricted cash

Beginning of period

583

352

End of period

$

532

$

597

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

June 30, 2019 (1)

December 31, 2018

(Dollars in millions)

Current assets

Cash and cash equivalents

$

528

$

580

Short-term investments

18

17

Accounts receivable

959

976

Inventory, net

146

142

Prepaid expenses

48

63

Other current assets

36

34

Total current assets

1,735

1,812

Assets held for sale

—

54

Licenses

2,469

2,186

Investments in unconsolidated entities

450

441

Property, plant and equipment, net

2,154

2,202

Operating lease right-of-use assets

888

—

Other assets and deferred charges

527

579

Total assets

$

8,223

$

7,274

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)

LIABILITIES AND EQUITY

June 30, 2019 (1)

December 31, 2018

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt

$

19

$

19

Accounts payable

321

313

Customer deposits and deferred revenues

164

157

Accrued taxes

32

30

Accrued compensation

45

78

Short-term operating lease liabilities

101

—

Other current liabilities

65

94

Total current liabilities

747

691

Liabilities held for sale

—

1

Deferred liabilities and credits

Deferred income tax liability, net

538

510

Long-term operating lease liabilities

858

—

Other deferred liabilities and credits

299

389

Long-term debt, net

1,596

1,605

Noncontrolling interests with redemption features

10

11

Equity

U.S. Cellular shareholders' equity

Series A Common and Common Shares, par value $1 per share

88

88

Additional paid-in capital

1,615

1,590

Treasury shares

(50)

(65)

Retained earnings

2,509

2,444

Total U.S. Cellular shareholders' equity

4,162

4,057

Noncontrolling interests

13

10

Total equity

4,175

4,067

Total liabilities and equity

$

8,223

$

7,274

(1)

As of January 1, 2019, U.S. Cellular adopted the new lease accounting standard, ASC 842. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2019 amounts include the impacts of ASC 842, but 2018 amounts remain as previously reported.

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow

Three Months EndedJune 30,

Six Months EndedJune 30,

2019

2018

2019

2018

(Dollars in millions)

Cash flows from operating activities (GAAP)

$

189

$

178

$

476

$

365

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

175

98

282

173

Free cash flow (Non-GAAP) (1)

$

14

$

80

$

194

$

192

(1)

Free cash flow is a non-GAAP financial measure which U.S. Cellular believes may be useful to investors and other users of its financial 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.

Three Months EndedJune 30,

2019

2018

(Dollars in millions)

Net income (GAAP)

$

32

$

52

Add back:

Income tax expense

14

18

Interest expense

29

29

Depreciation, amortization and accretion

177

159

EBITDA (Non-GAAP)

252

258

Add back or deduct:

(Gain) loss on asset disposals, net

5

1

(Gain) loss on license sales and exchanges, net

—

(11)

Adjusted EBITDA (Non-GAAP)

257

248

Deduct:

Equity in earnings of unconsolidated entities

40

40

Interest and dividend income

5

3

Adjusted OIBDA (Non-GAAP)

212

205

Deduct:

Depreciation, amortization and accretion

177

159

(Gain) loss on asset disposals, net

5

1

(Gain) loss on license sales and exchanges, net

—

(11)

Operating income (GAAP)

$

30

$

56