USM US Cellular Corp

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 30, 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 Exchange 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))

Date:

October 30, 2015

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 October 30, 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

Approx. $

4,000

$4,000-$4,100

Operating cash flow (1)

$540-$620

$440-$540

Adjusted EBITDA (1)

$710-$790

$600-$700

Capital expenditures

Approx. $

600

Unchanged

Actual Results

2015 Estimated

Results (2)

Nine Months Ended September 30, 2015

Year Ended

December 31, 2014

(Dollars in millions)

Net income (loss) (GAAP)

N/A

$

250 

$

(47)

Add back:

Income tax expense (benefit)

N/A

161 

(12)

Income (loss) before income taxes

   (GAAP)

$

275-355 

$

411 

$

(59)

Add back:

Interest expense

80

61 

57 

Depreciation, amortization and

   accretion expense

600

450 

606 

EBITDA

$

955-1,035 

$

922 

$

605 

Add back (deduct):

(Gain) loss on sale of business and

   other exit costs, net

(115)

(114)

(33)

(Gain) loss on license sales and

   exchanges, net

(145)

(147)

(113)

(Gain) loss on assets disposals, net

15

12 

21 

Adjusted EBITDA

$

710-790 

$

674 

$

480 

Deduct:

Equity in earnings of unconsolidated

   entities

(135)

(110)

(130)

Interest and dividend income

(35)

(26)

(12)

Operating cash flow (3)

$

540-620 

$

538 

$

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

9/30/2015

6/30/2015

3/31/2015

12/31/2014

9/30/2014

Retail Customers

Postpaid

Total at end of period

4,341,000 

4,324,000 

4,307,000 

4,298,000 

4,200,000 

Gross additions

200,000 

191,000 

200,000 

302,000 

251,000 

Net additions (losses)

17,000 

17,000 

9,000 

98,000 

52,000 

ARPU (1)

$

58.12 

$

53.62 

$

54.87 

$

56.51 

$

56.37 

ARPA (2)

$

147.00 

$

133.85 

$

134.94 

$

136.13 

$

132.99 

Churn rate (3)

1.4%

1.3%

1.5%

1.6%

1.6%

Smartphone penetration (4)

72%

69%

67%

65%

62%

Prepaid

Total at end of period

380,000 

368,000 

360,000 

348,000 

350,000 

Gross additions

71,000 

65,000 

73,000 

60,000 

64,000 

Net additions (losses)

12,000 

8,000 

12,000 

(2,000)

(2,000)

ARPU (1)

$

35.64 

$

35.98 

$

35.72 

$

35.33 

$

34.40 

Churn rate (3)

5.2%

5.2%

5.8%

5.9%

6.3%

Total customers at end of period

4,807,000 

4,779,000 

4,775,000 

4,760,000 

4,674,000 

Billed ARPU (1)

$

55.42 

$

51.29 

$

52.29 

$

53.63 

$

53.24 

Service revenue ARPU (1)

$

62.31 

$

57.55 

$

58.01 

$

60.10 

$

60.92 

Smartphones sold as a percent of total

  handsets sold

87%

87%

86%

87%

81%

Total population

Consolidated markets (5) (8)

50,313,000 

52,809,000 

52,822,000 

58,840,000 

60,136,000 

Consolidated operating markets (5)

31,814,000 

31,814,000 

31,814,000 

31,729,000 

31,729,000 

Market penetration at end of period

Consolidated markets (6)

10%

9%

9%

8%

8%

Consolidated operating markets (6)

15%

15%

15%

15%

15%

Capital expenditures (000s)

$

134,816 

$

133,666 

$

66,460 

$

181,655 

$

142,452 

Total cell sites in service

6,246 

6,223 

6,219 

6,220 

6,209 

Owned towers (7)

3,957 

3,940 

3,936 

4,280 

4,487 

(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)

During the third quarter of 2015 U.S. Cellular reassessed population statistics with respect to markets which U.S. Cellular consolidates and revised its calculations to more accurately accumulate such population statistics.  As a result, prior period population data and corresponding market penetration ratios were revised for markets that U.S. Cellular currently consolidates, or previously consolidated in the periods presented.  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.

(7)

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

(8)

As licenses awarded in Auction 97 have not yet been granted, population statistics related to such licenses have not been included in population data.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

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

      Change

2015

2014

Amount

Percent

Operating revenues

Service

$

895,960 

$

851,063 

$

44,897 

5%

Equipment sales

172,946 

149,356 

23,590 

16%

Total operating revenues

1,068,906 

1,000,419 

68,487 

7%

Operating expenses

System operations (excluding Depreciation, amortization

   and accretion reported below)

198,982 

199,750 

(768)

-

Cost of equipment sold

287,256 

307,862 

(20,606)

(7)%

Selling, general and administrative

374,585 

397,545 

(22,960)

(6)%

Depreciation, amortization and accretion

152,369 

148,952 

3,417 

2%

(Gain) loss on asset disposals, net

2,618 

7,947 

(5,329)

(67)%

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

(643)

(10,283)

9,640 

94%

(Gain) loss on license sales and exchanges, net

(23,986)

– 

(23,986)

Total operating expenses

991,181 

1,051,773 

(60,592)

(6)%

Operating income (loss)

77,725 

(51,354)

129,079 

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

39,674 

35,971 

3,703 

10%

Interest and dividend income

9,299 

3,572 

5,727 

>100%

Interest expense

(21,121)

(13,514)

(7,607)

(56)%

Other, net

78 

95 

(17)

(18)%

Total investment and other income

27,930 

26,124 

1,806 

7%

Income (loss) before income taxes

105,655 

(25,230)

130,885 

>100%

Income tax expense (benefit)

40,634 

(1,459)

42,093 

>100%

Net income (loss)

65,021 

(23,771)

88,792 

>100%

Less: Net income (loss) attributable to noncontrolling

   interests, net of tax

1,427 

(1,606)

3,033 

>100%

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

$

63,594 

$

(22,165)

$

85,759 

>100%

Basic weighted average shares outstanding

84,333 

84,233 

100 

-

Basic earnings (loss) per share attributable to

   U.S. Cellular shareholders

$

0.75 

$

(0.26)

$

1.02 

>100%

Diluted weighted average shares outstanding

84,947 

84,233 

714 

1%

Diluted earnings (loss) per share attributable to

   U.S. Cellular shareholders

$

0.75 

$

(0.26)

$

1.01 

>100%

United States Cellular Corporation

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

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

Change

2015

2014

Amount

Percent

Operating revenues

Service

$

2,548,544 

$

2,548,149 

$

395 

-

Equipment sales

461,274 

335,854 

125,420 

37%

Total operating revenues

3,009,818 

2,884,003 

125,815 

4%

Operating expenses

System operations (excluding Depreciation, amortization

   and accretion reported below)

585,935 

567,488 

18,447 

3%

Cost of equipment sold

779,228 

850,314 

(71,086)

(8)%

Selling, general and administrative

1,106,524 

1,197,361 

(90,837)

(8)%

Depreciation, amortization and accretion

450,035 

465,042 

(15,007)

(3)%

(Gain) loss on asset disposals, net

12,268 

16,774 

(4,506)

(27)%

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

(113,825)

(27,694)

(86,131)

>(100)%

(Gain) loss on license sales and exchanges, net

(146,884)

(91,446)

(55,438)

(61)%

Total operating expenses

2,673,281 

2,977,839 

(304,558)

(10)%

Operating income (loss)

336,537 

(93,836)

430,373 

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

109,729 

106,166 

3,563 

3%

Interest and dividend income

25,834 

6,029 

19,805 

>100%

Interest expense

(61,239)

(42,712)

(18,527)

(43)%

Other, net

274 

281 

(7)

(2)%

Total investment and other income

74,598 

69,764 

4,834 

7%

Income (loss) before income taxes

411,135 

(24,072)

435,207 

>100%

Income tax expense

161,214 

746 

160,468 

>100%

Net income (loss)

249,921 

(24,818)

274,739 

>100%

Less: Net income (loss) attributable to noncontrolling

   interests, net of tax

6,911 

(3,346)

10,257 

>100%

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

$

243,010 

$

(21,472)

$

264,482 

>100%

Basic weighted average shares outstanding

84,224 

84,262 

(38)

-

Basic earnings (loss) per share attributable to

   U.S. Cellular shareholders

$

2.89 

$

(0.25)

$

3.14 

>100%

Diluted weighted average shares outstanding

84,869 

84,262 

607