10-Q 1 usm-20220331.htm 10-Q usm-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to

Commission file number 001-09712
usm-20220331_g1.jpg
UNITED STATES CELLULAR CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
62-1147325
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
8410 West Bryn Mawr, Chicago, Illinois 60631
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (773) 399-8900
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Shares, $1 par valueUSMNew York Stock Exchange
6.25% Senior Notes due 2069UZDNew York Stock Exchange
5.50% Senior Notes due 2070UZENew York Stock Exchange
5.50% Senior Notes due 2070UZFNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes
No

The number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 2022, is 52,552,000 Common Shares, $1 par value, and 33,005,900 Series A Common Shares, $1 par value.



United States Cellular Corporation
Quarterly Report on Form 10-Q
For the Period Ended March 31, 2022
Index
Page No.


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United States Cellular Corporation
Management’s Discussion and Analysis of
Financial Condition and Results of Operations 
Executive Overview
The following discussion and analysis compares United States Cellular Corporation’s (UScellular) financial results for the three months ended March 31, 2022, to the three months ended March 31, 2021. It should be read in conjunction with UScellular’s interim consolidated financial statements and notes included herein, and with the description of UScellular’s business, its audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) included in UScellular’s Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2021. Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers. 
This report contains statements that are not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions. These statements constitute and represent “forward looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward looking statements. See Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement for additional information.
UScellular uses certain “non-GAAP financial measures” and each such measure is identified in the MD&A. A discussion of the reason UScellular determines these metrics to be useful and reconciliations of these measures to their most directly comparable measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) are included in the Supplemental Information Relating to Non-GAAP Financial Measures section within the MD&A of this Form 10-Q Report.
1

General
UScellular owns, operates, and invests in wireless markets throughout the United States. UScellular is an 83%-owned subsidiary of Telephone and Data Systems, Inc. (TDS).
OPERATIONS
 
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Serves customers with 4.8 million retail connections including 4.3 million postpaid and 0.5 million prepaid connections
Operates in 21 states
Employs approximately 4,800 associates
4,310 owned towers
6,899 cell sites in service
2

UScellular Mission and Strategy
UScellular’s mission is to provide exceptional wireless communication services which enhance consumers’ lives, increase the competitiveness of local businesses, and improve the efficiency of government operations in the markets UScellular serves.
UScellular's strategy is to attract and retain customers through a value proposition comprising a high-quality network, outstanding customer service, and competitive devices, plans and pricing - all provided with a community focus. Strategic efforts include:
UScellular offers economical and competitively priced service plans and devices to its customers and is focused on increasing revenues from sales of related products such as device protection plans and from new services such as fixed wireless home internet. In addition, UScellular is focused on increasing revenues from prepaid plans, tower rent revenues and expanding its solutions available to business and government customers.
UScellular continues to enhance its network capabilities, including by deploying 5G technology. 5G technology helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency. UScellular's 5G deployment is initially focused on mobility services using its low band spectrum. UScellular has acquired high-band and mid-band spectrum, deployed high-band spectrum on a limited basis, and will further deploy high-band and mid-band in the future to further enable the delivery of 5G services. UScellular has launched 5G services in portions of substantially all of UScellular’s markets and will continue to launch in additional areas in the coming years.
UScellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on capital. As part of this strategy, UScellular actively seeks attractive opportunities to acquire wireless spectrum, including pursuant to FCC auctions.
3

Terms Used by UScellular
The following is a list of definitions of certain industry terms that are used throughout this document:
4G LTE – fourth generation Long-Term Evolution, which is a wireless technology that enables more network capacity for more data per user as well as faster access to data compared to third generation (3G) technology.
5G – fifth generation wireless technology that helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency.
Account – represents an individual or business financially responsible for one or multiple associated connections. An account may include a variety of types of connections such as handsets and connected devices.
Auctions 105, 107 and 110 – Auction 105 was an FCC auction of 3.5 GHz wireless spectrum licenses that started in July 2020 and concluded in September 2020. Auction 107 was an FCC auction of 3.7-3.98 GHz wireless spectrum licenses that started in December 2020 and concluded in February 2021. Auction 110 was an FCC auction of 3.45-3.55 GHz wireless spectrum licenses that started in October 2021 and concluded in January 2022.
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.
Connected Devices – non-handset devices that connect directly to the UScellular network. Connected devices include products such as tablets, wearables, modems, and hotspots.
Coronavirus Aid, Relief, and Economic Security (CARES) Act – economic relief package signed into law on March 27, 2020 to address the public health and economic impacts of COVID-19, including a variety of tax provisions.
EBITDA – refers to earnings before interest, taxes, depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted EBITDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Free Cash Flow – non-GAAP metric defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Gross Additions – represents the total number of new connections added during the period, without regard to connections that were terminated during that period.
Net Additions (Losses) – represents the total number of new connections added during the period, net of connections that were terminated during that period.
OIBDA – refers to operating income before depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted OIBDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Postpaid Average Revenue per Account (Postpaid ARPA) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
Postpaid Average Revenue per User (Postpaid ARPU) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid connections and by the number of months in the period.
Retail Connections – individual lines of service associated with each device activated by a postpaid or prepaid customer. Connections are associated with all types of devices that connect directly to the UScellular network.
Universal Service Fund (USF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States.
4

Operational Overview
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As of March 31,20222021
Retail Connections – End of Period
Postpaid4,335,000 4,406,000
Prepaid495,000 496,000
Total4,830,000 4,902,000

Q1 2022
Q1 2021
Q1 2022 vs. Q1 2021
Postpaid Activity and Churn
Gross Additions
Handsets91,000 104,000 (13)%
Connected Devices35,000 39,000 (10)%
Total Gross Additions126,000 143,000 (12)%
Net Additions (Losses)
Handsets(36,000)(3,000)N/M
Connected Devices(8,000)(3,000)N/M
Total Net Additions (Losses)(44,000)(6,000)N/M
Churn
Handsets1.10 %0.92 %
Connected Devices2.70 %2.53 %
Total Churn1.30 %1.12 %
N/M - Percentage change not meaningful
Total postpaid handset net losses increased for the three months ended March 31, 2022, when compared to the same period last year due to lower gross additions and higher defections resulting from aggressive industry-wide competition.
Total postpaid connected device net additions decreased for the three months ended March 31, 2022, when compared to the same period last year due primarily to lower demand for internet-related products as a result of a reduction in COVID-related funding vehicles.
Macroeconomic factors have caused some supply chain disruption and delays, including constraints on certain devices. These supply constraints are due primarily to component availability, resulting in extended lead times and additional uncertainty, which may negatively impact UScellular in future periods.
Postpaid Revenue
Three Months Ended
March 31,
202220212022 vs. 2021
Average Revenue Per User (ARPU)
$49.71 $47.65 4 %
Average Revenue Per Account (ARPA)
$129.93 $125.25 4 %
Postpaid ARPU and Postpaid ARPA increased for the three months ended March 31, 2022, when compared to the same period last year, due to (i) an increase in cost recovery surcharges, (ii) favorable plan and product offering mix and (iii) an increase in device protection plan revenues. These increases were partially offset by an increase in promotional discounts.
5

Financial Overview
Three Months Ended
March 31,
202220212022 vs. 2021
(Dollars in millions)
 
 
 
Retail service1
$702 $683 %
Inbound roaming21 28 (27)%
Other1
64 60 %
Service revenues787 771 %
Equipment sales223 252 (12)%
Total operating revenues1,010 1,023 (1)%
System operations (excluding Depreciation, amortization and accretion reported below)185 185 
Cost of equipment sold257 275 (6)%
Selling, general and administrative325 305 %
Depreciation, amortization and accretion171 170 %
(Gain) loss on asset disposals, net2 (69)%
(Gain) loss on sale of business and other exit costs, net(1)(1)(5)%
Total operating expenses939 939 
Operating income$71 $84 (15)%
Net income$52 $62 (17)%
Adjusted OIBDA (Non-GAAP)2
$243 $258 (6)%
Adjusted EBITDA (Non-GAAP)2
$289 $302 (4)%
Capital expenditures3
$137 $125 10 %
12021 amounts have been adjusted to reclassify $2 million of Internet of Things (IoT) and Reseller revenues from Retail service to Other.
2Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
3Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
6

Operating Revenues
Three Months Ended March 31, 2022 and 2021
(Dollars in millions)
usm-20220331_g5.jpg


Service revenues consist of:
Retail Service - Postpaid and prepaid charges for voice, data and value-added services and cost recovery surcharges
Inbound Roaming - Charges to other wireless carriers whose customers use UScellular’s wireless systems when roaming
Other Service - Amounts received from the Federal USF, tower rental revenues, and miscellaneous other service revenues
Equipment revenues consist of:
Sales of wireless devices and related accessories to new and existing customers, agents, and third-party distributors
Key components of changes in the statement of operations line items were as follows:
Total operating revenues
Retail service revenues increased for the three months ended March 31, 2022, primarily as a result of an increase in Postpaid ARPU as previously discussed in the Operational Overview section.
Inbound roaming revenues decreased for the three months ended March 31, 2022, primarily driven by lower data revenues resulting from lower usage and lower rates. UScellular expects inbound roaming revenues to continue to decline during 2022 relative to prior year levels.
Other service revenues increased for the three months ended March 31, 2022, resulting from increases in tower rental revenues and miscellaneous other service revenues.
Equipment sales revenues decreased for the three months ended March 31, 2022, due primarily to a decrease in the volume of new smartphone and accessory sales, and higher promotional activity.
In recent periods, wireless service providers have increased promotional aggressiveness to attract new customers and retain existing customers. Operating revenues and Operating income may be negatively impacted in future periods by the competitive need to offer increased promotional discounts to new and existing customers.
Cost of equipment sold
Cost of equipment sold decreased for the three months ended March 31, 2022, due primarily to a decrease in the volume of new smartphone and accessory sales.
Selling, general and administrative expenses
Selling, general and administrative expenses increased for the three months ended March 31, 2022, due primarily to increases in bad debts expense.
7

Components of Other Income (Expense)
Three Months Ended
March 31,
202220212022 vs. 2021
(Dollars in millions)
Operating income$71 $84 (15)%
Equity in earnings of unconsolidated entities45 42 %
Interest and dividend income1 (46)%
Interest expense(33)(39)14 %
Total investment and other income13 N/M
Income before income taxes84 89 (6)%
Income tax expense32 27 19 %
Net income52 62 (17)%
Less: Net income attributable to noncontrolling interests, net of tax3 53 %
Net income attributable to UScellular shareholders$49 $60 (18)%
N/M - Percentage change not meaningful
Equity in earnings of unconsolidated entities
Equity in earnings of unconsolidated entities represents UScellular’s share of net income from entities in which it has a noncontrolling interest and that are accounted for using the equity method or the net asset value practical expedient. UScellular’s investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pretax income of $18 million and $19 million for the three months ended March 31, 2022 and 2021, respectively. See Note 7 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.
Interest expense
Interest expense decreased for the three months ended March 31, 2022, due primarily to efforts to lower financing costs, including the redemptions of higher cost Senior Notes during 2021 and utilizing the term loans and other debt facilities with lower interest rates.
Income tax expense
The effective tax rate on Income before income taxes for the three months ended March 31, 2022 and 2021, was 38.4% and 30.4%, respectively. The effective tax rates for the three month periods reflect a combined rate of federal and state taxes, adjusted for impacts of nondeductible expenses.
During the three months ended March 31, 2022, UScellular received a federal income tax refund of $123 million related to the 2020 net operating loss carryback enabled by the CARES Act.
8

Liquidity and Capital Resources
Sources of Liquidity
UScellular operates a capital-intensive business. In the past, UScellular’s existing cash and investment balances, funds available under its financing agreements, and cash flows from operating and certain investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for UScellular to meet its normal day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions, primarily of wireless spectrum licenses. There is no assurance that this will be the case in the future. See Market Risk for additional information regarding maturities of long-term debt.
UScellular has incurred negative free cash flow at times in the past and this could occur in the future. However, UScellular believes that existing cash and investment balances, funds available under its financing agreements and expected cash flows from operating and investing activities will provide sufficient liquidity for UScellular to meet its normal day-to-day operating needs and debt service requirements for the foreseeable future. UScellular will continue to monitor the rapidly changing business and market conditions and plans to take appropriate actions, as necessary, to meet its liquidity needs.
UScellular may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers of wireless telecommunications services, wireless spectrum license acquisitions, capital expenditures, agreements to purchase goods or services, leases, debt service requirements, repurchases of shares, or making additional investments. It may be necessary from time to time to increase the size of the existing revolving credit agreement, to put in place new credit agreements, or to obtain other forms of financing in order to fund potential expenditures.
Cash and Cash Equivalents
Cash and cash equivalents include cash and money market investments. The primary objective of UScellular's Cash and cash equivalents investment activities is to preserve principal.

Cash and Cash Equivalents
(Dollars in millions)
usm-20220331_g6.jpg





The majority of UScellular’s Cash and cash equivalents are held in bank deposit accounts and in money market funds that purchase only debt issued by the U.S. Treasury or U.S. government agencies. Refer to the Consolidated Cash Flow Analysis for additional information related to changes in Cash and cash equivalents.
In addition to Cash and cash equivalents, UScellular had undrawn borrowing capacity from existing debt facilities of $590 million at March 31, 2022. See the Financing section below for further details.
Financing
Revolving Credit Agreement
UScellular has an unsecured revolving credit agreement with a maximum borrowing capacity of $300 million. Amounts under the revolving credit agreement may be borrowed, repaid and reborrowed from time to time until maturity in July 2026. During the three months ended March 31, 2022, UScellular borrowed and repaid $75 million under its revolving credit agreement. As of March 31, 2022, there were no outstanding borrowings under the revolving credit agreement, and UScellular's unused borrowing capacity was $300 million.
9

Term Loan Agreements
UScellular has term loan agreements with maximum borrowing capacities of $800 million. The maturity dates for the term loan agreements range from July 2026 to July 2031. During the three months ended March 31, 2022, UScellular borrowed $400 million under its term loan credit agreements. As of March 31, 2022, UScellular's outstanding borrowings under the term loan agreements were $699 million and UScellular's unused borrowing capacity was $100 million.
Export Credit Financing Agreement
In December 2021, UScellular entered into a $150 million term loan credit facility with Export Development Canada to finance (or refinance) equipment imported from Canada, including equipment purchased prior to entering the term loan credit facility agreement. During the three months ended March 31, 2022, UScellular borrowed $150 million, which is the full amount available under the agreement and is due in January 2027.
Receivables Securitization Agreement
UScellular, through its subsidiaries, has a receivables securitization agreement to permit securitized borrowings using its equipment installment plan receivables. In March 2022, UScellular amended the agreement to extend the maturity date to March 2024. Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until March 2024. During the three months ended March 31, 2022, UScellular repaid $50 million under the agreement. As of March 31, 2022, the outstanding borrowings under the agreement were $400 million and the unused borrowing capacity under the agreement was $50 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement.
In April 2022, UScellular repaid $50 million under the receivables securitization agreement.
Repurchase Agreement
In January 2022, UScellular, through a subsidiary (the repo subsidiary), entered into a repurchase agreement to borrow up to $200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender. The transaction is accounted for as a one-month secured borrowing. The expiration date of the repurchase agreement is in January 2023. During the three months ended March 31, 2022, the repo subsidiary borrowed $60 million under the repurchase agreement. As of March 31, 2022, the outstanding borrowings under the agreement were $60 million and the unused borrowing capacity was $140 million.
Financial Covenants
UScellular believes that it was in compliance with all of the financial covenants and requirements set forth in its revolving credit agreement, term loan credit agreements, export credit financing agreement and receivables securitization agreement as of March 31, 2022.
Other Long-Term Financing
UScellular has an effective shelf registration statement on Form S-3 to issue senior or subordinated debt securities, preferred shares and depositary shares.
See Note 8 — Debt in the Notes to Consolidated Financial Statements for additional information related to the financing agreements.
10

Capital Expenditures
Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures; excludes wireless spectrum license additions), which include the effects of accruals and capitalized interest, for the three months ended March 31, 2022 and 2021, were as follows:

Capital Expenditures
(Dollars in millions)
usm-20220331_g7.jpg




Capital expenditures for the full year 2022 are expected to be between $700 million and $800 million. These expenditures are expected to be used principally for the following purposes:
Continue network modernization and 5G deployment;
Enhance and maintain UScellular's network coverage, including providing additional speed and capacity to accommodate increased data usage by current customers; and
Invest in information technology to support existing and new services and products.
Macroeconomic factors may impact the acquisition or cost of products and materials as well as contribute to internal and external labor shortages.
UScellular intends to finance its capital expenditures for 2022 using primarily Cash flows from operating activities, existing cash balances and, as required, additional debt financing from its existing agreements and/or other forms of financing.
Acquisitions, Divestitures and Exchanges
UScellular may be engaged from time to time in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties or wireless spectrum licenses (including pursuant to FCC auctions). In general, UScellular may not disclose such transactions until there is a definitive agreement.
Other Obligations
UScellular will require capital for future spending on existing contractual obligations, including long-term debt obligations; lease commitments; commitments for device purchases, network facilities and transport services; agreements for software licensing; long-term marketing programs; commitments for wireless spectrum licenses acquired through FCC auctions; and other agreements to purchase goods or services.
Variable Interest Entities
UScellular consolidates certain “variable interest entities” as defined under GAAP. See Note 9 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities. UScellular may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations.
Common Share Repurchase Program
During the three months ended March 31, 2022, UScellular repurchased 363,821 Common Shares for $10 million at an average cost per share of $28.64. As of March 31, 2022, the total cumulative amount of UScellular Common Shares authorized to be repurchased is 3,153,000. For additional information related to the current repurchase authorization, see Unregistered Sales of Equity Securities and Use of Proceeds.
11

Consolidated Cash Flow Analysis
UScellular operates a capital-intensive business. UScellular makes substantial investments to acquire wireless spectrum licenses and properties and to construct and upgrade wireless telecommunications networks and facilities as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades to UScellular’s networks. Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, timing and other factors. The following discussion summarizes UScellular's cash flow activities for the three months ended March 31, 2022 and 2021.
2022 Commentary
UScellular’s Cash, cash equivalents and restricted cash increased $145 million. Net cash provided by operating activities was $311 million due to net income of $52 million adjusted for non-cash items of $182 million, distributions received from unconsolidated entities of $19 million, and changes in working capital items which increased net cash by $58 million. The working capital changes were primarily driven by a federal income tax refund of $123 million received during the quarter, partially offset by payment of associate bonuses and timing of vendor payments.
Cash flows used for investing activities were $710 million, which included payments for property, plant and equipment of $150 million and payments for wireless spectrum licenses of $561 million.
Cash flows provided by financing activities were $544 million, due primarily to $400 million borrowed under the term loans, $150 million borrowed under the export credit financing agreement, $75 million borrowed under the revolving credit agreement, and $60 million borrowed under the EIP receivables repurchase agreement. These were partially offset by a $75 million repayment on the revolving credit agreement, a $50 million repayment on the receivables securitization agreement, and the repurchase of Common Shares.
2021 Commentary
UScellular’s Cash, cash equivalents and restricted cash decreased $779 million. Net cash provided by operating activities was $124 million due to net income of $62 million adjusted for non-cash items of $167 million and distributions received from unconsolidated entities of $22 million. This was partially offset by changes in working capital items which decreased net cash by $127 million. The working capital changes were primarily influenced by the timing of vendor payments and annual associate bonus payments.
Cash flows used for investing activities were $1,388 million, which included payments for property, plant and equipment of $133 million and payments for wireless spectrum licenses of $1,256 million.
Cash flows provided by financing activities were $485 million, due primarily to $275 million borrowed under the receivables securitization agreement and $217 million borrowed under the term loan.
12

Consolidated Balance Sheet Analysis
The following discussion addresses certain captions in the consolidated balance sheet and changes therein. This discussion is intended to highlight the significant changes and is not intended to fully reconcile the changes. Notable balance sheet changes during 2022 were as follows:
Income taxes receivable
Income taxes receivable decreased $123 million due primarily to a federal income tax refund received related to the 2020 net operating loss carryback enabled by the CARES Act.
Accounts payable - Trade
Accounts payable - Trade decreased $74 million due primarily to vendor payment timing differences.
Accrued compensation
Accrued compensation decreased $41 million due primarily to associate bonus payments in March 2022.
Other current liabilities
Other current liabilities increased $75 million due primarily to $60 million borrowed under the EIP receivables repurchase agreement. See Note 8 — Debt in the Notes to Consolidated Financial Statements for additional information.
Long-term debt, net
The following table presents the components of the $492 million increase in Long-term debt, net:
Long-term debt, net
(Dollars in millions)
Balance at December 31, 2021$2,728 
Borrowings under Revolving Credit Agreements75 
Borrowings under Term Loan Agreements400 
Borrowings under Export Credit Financing Agreement150 
Repayments under Revolving Credit Agreements(75)
Repayments under Receivables Securitization Agreement(50)
Other(8)
Balance at March 31, 2022$3,220 
13

Supplemental Information Relating to Non-GAAP Financial Measures
UScellular sometimes uses information derived from consolidated financial information but not presented in its financial statements prepared in accordance with GAAP to evaluate the performance of its business. Specifically, UScellular has referred to the following measures in this Form 10-Q Report:
EBITDA
Adjusted EBITDA
Adjusted OIBDA
Free cash flow

Certain of these measures are considered “non-GAAP financial measures” under U.S. Securities and Exchange Commission Rules. Following are explanations of each of these measures.
EBITDA, Adjusted EBITDA and Adjusted OIBDA
EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation below. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under 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. UScellular does not intend to imply that any such items set forth in the reconciliation below 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 and Operating income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of UScellular’s operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of UScellular’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 following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income and Operating income.
Three Months Ended
March 31,
20222021
(Dollars in millions)
Net income (GAAP)
$52 $62 
Add back:
Income tax expense32 27 
Interest expense33 39 
Depreciation, amortization and accretion171 170 
EBITDA (Non-GAAP)288 298 
Add back or deduct:
(Gain) loss on asset disposals, net2 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Adjusted EBITDA (Non-GAAP)289 302 
Deduct:
Equity in earnings of unconsolidated entities45 42 
Interest and dividend income1 
Adjusted OIBDA (Non-GAAP)243 258 
Deduct:
Depreciation, amortization and accretion171 170 
(Gain) loss on asset disposals, net2 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Operating income (GAAP)
$71 $84 
14

Free Cash Flow
The following table presents Free cash flow, which is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure which UScellular 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 Ended
March 31,
20222021
(Dollars in millions)
Cash flows from operating activities (GAAP)$311 $124 
Less: Cash paid for additions to property, plant and equipment150 133 
Free cash flow (Non-GAAP)$161 $(9)
15

Application of Critical Accounting Policies and Estimates
UScellular prepares its consolidated financial statements in accordance with GAAP. UScellular’s significant accounting policies are discussed in detail in Note 1 — Summary of Significant Accounting Policies, Note 2 — Revenue Recognition and Note 10 — Leases in the Notes to Consolidated Financial Statements and UScellular’s Application of Critical Accounting Policies and Estimates is discussed in detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in UScellular’s Form 10-K for the year ended December 31, 2021. 
Regulatory Matters
Spectrum Auctions
On March 2, 2020, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.5 GHz band (Auction 105). On September 2, 2020, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 243 wireless spectrum licenses for a purchase price of $14 million, of which up to $5 million relates to licenses which are subject to the FCC's spectrum aggregation and ownership attribution rules for Auction 105. None of the wireless spectrum licenses have been granted yet by the FCC.
On August 7, 2020, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.7-3.98 GHz bands (Auction 107). On February 24, 2021, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 254 wireless spectrum licenses for $1,283 million. UScellular paid $30 million of this amount in 2020 and the remainder in March 2021. The wireless spectrum licenses from Auction 107 were granted by the FCC in July 2021. Additionally, UScellular expects to be obligated to pay approximately $187 million in total from 2021 through 2024 related to relocation costs and accelerated relocation incentive payments. Such additional costs were accrued and capitalized at the time the licenses were granted. In October 2021, UScellular paid $36 million related to the additional costs. The spectrum must be cleared by incumbent providers before UScellular can access it. UScellular does not expect to have access to this spectrum until late 2023.
On June 9, 2021, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110). On January 14, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses for $580 million. UScellular paid $20 million of this amount in 2021 and the remainder in January and February 2022. The wireless spectrum licenses from Auction 110 were granted by the FCC on May 4, 2022.
16

Private Securities Litigation Reform Act of 1995
Safe Harbor Cautionary Statement

This Form 10-Q, including exhibits, contains statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities, events or developments that UScellular intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, but are not limited to, those set forth below, as more fully described under “Risk Factors” in UScellular’s Form 10-K for the year ended December 31, 2021 and in this Form 10-Q. Each of the following risks could have a material adverse effect on UScellular’s business, financial condition or results of operations. However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. UScellular undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. You should carefully consider the Risk Factors in UScellular’s Form 10-K for the year ended December 31, 2021, the following factors and other information contained in, or incorporated by reference into, this Form 10-Q to understand the material risks relating to UScellular’s business, financial condition or results of operations.
Operational Risk Factors
Intense competition involving products, services, pricing, promotions and network speed and technologies could adversely affect UScellular’s revenues or increase its costs to compete.
Changes in roaming practices or other factors could cause UScellular's roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact UScellular's ability to service its customers in geographic areas where UScellular does not have its own network, which could have an adverse effect on UScellular's business, financial condition or results of operations.
A failure by UScellular to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on UScellular’s business, financial condition or results of operations.
An inability to attract people of outstanding talent throughout all levels of the organization, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on UScellular's business, financial condition or results of operations.
UScellular’s smaller scale relative to larger competitors that may have greater financial and other resources than UScellular could cause UScellular to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.
Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on UScellular’s business, financial condition or results of operations.
Advances or changes in technology could render certain technologies used by UScellular obsolete, could put UScellular at a competitive disadvantage, could reduce UScellular’s revenues or could increase its costs of doing business.
Complexities associated with deploying new technologies present substantial risk and UScellular investments in unproven technologies may not produce the benefits that UScellular expects.
Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of UScellular’s business could have an adverse effect on UScellular’s business, financial condition or results of operations.
A failure by UScellular to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations.
Difficulties involving third parties with which UScellular does business, including changes in UScellular's relationships with or financial or operational difficulties, including supply chain disruptions, of key suppliers or independent agents and third-party national retailers who market UScellular’s services, could adversely affect UScellular's business, financial condition or results of operations.
A failure by UScellular to maintain flexible and capable telecommunication networks or information technologies, or a material disruption thereof, could have an adverse effect on UScellular’s business, financial condition or results of operations.
17

Financial Risk Factors
Uncertainty in UScellular’s future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, other changes in UScellular’s performance or market conditions, changes in UScellular’s credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to UScellular, which could require UScellular to reduce its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, and/or reduce or cease share repurchases.
UScellular has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.
UScellular’s assets and revenue are concentrated in the U.S. wireless telecommunications industry. Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry.
UScellular has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on UScellular’s financial condition or results of operations.
Regulatory, Legal and Governance Risk Factors
Failure by UScellular to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect UScellular’s business, financial condition or results of operations.
UScellular receives significant regulatory support, and is also subject to numerous surcharges and fees from federal, state and local governments – the applicability and the amount of the support and fees are subject to great uncertainty, including the ability to pass through certain fees to customers, and this uncertainty could have an adverse effect on UScellular’s business, financial condition or results of operations.
Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on UScellular’s business, financial condition or results of operations.
The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices or frequencies used by other industries, could have an adverse effect on UScellular's business, financial condition or results of operations.
Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent UScellular from using necessary technology to provide products or services or subject UScellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on UScellular’s business, financial condition or results of operations.
There are potential conflicts of interests between TDS and UScellular.
Certain matters, such as control by TDS and provisions in the UScellular Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of UScellular or have other consequences.
General Risk Factors
UScellular has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on UScellular's business, financial condition or results of operations.
Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede UScellular’s access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on UScellular’s business, financial condition or results of operations.
The impact of public health emergencies, such as the COVID-19 pandemic, on UScellular's business is uncertain, but depending on duration and severity could have a material adverse effect on UScellular's business, financial condition or results of operations.
18

Risk Factors
In addition to the information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in UScellular’s Form 10-K for the year ended December 31, 2021, which could materially affect UScellular’s business, financial condition or future results. The risks described in this Form 10-Q and the Form 10-K for the year ended December 31, 2021, may not be the only risks that could affect UScellular. Additional unidentified or unrecognized risks and uncertainties could materially adversely affect UScellular’s business, financial condition and/or operating results. Subject to the foregoing, UScellular has not identified for disclosure any material changes to the risk factors as previously disclosed in UScellular’s Form 10-K for the year ended December 31, 2021.
Quantitative and Qualitative Disclosures about Market Risk
Market Risk
As of March 31, 2022, approximately 60% of UScellular's long-term debt was in fixed-rate notes and approximately 40% in variable-rate debt. Fluctuations in market interest rates can lead to volatility in the fair value of fixed-rate notes and interest expense on variable-rate debt.
The following table presents the scheduled principal payments on long-term debt, lease obligations, and the related weighted average interest rates by maturity dates at March 31, 2022.
Principal Payments Due by Period
Long-Term Debt Obligations1
Weighted-Avg. Interest Rates on Long-Term Debt Obligations2
(Dollars in millions)
Remainder of 2022$2.7 %
202312 2.1 %
202412 2.2 %
202512 2.1 %
202612 2.1 %
Thereafter2,845 4.9 %
Total$2,896 4.9 %
1    The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debt instruments, unamortized discounts related to the 6.7% Senior Notes, and outstanding borrowings under the receivables securitization agreement, which principal repayments are not scheduled but are instead based on actual receivable collections.
2    Represents the weighted average stated interest rates at March 31, 2022, for debt maturing in the respective periods.
See Note 3 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information related to the fair value of UScellular’s Long-term debt as of March 31, 2022.
19

Financial Statements
United States Cellular Corporation
Consolidated Statement of Operations
(Unaudited)
 
Three Months Ended
March 31,
20222021
(Dollars and shares in millions, except per share amounts)
Operating revenues
Service$787 $771 
Equipment sales223 252 
Total operating revenues1,010 1,023 
Operating expenses
System operations (excluding Depreciation, amortization and accretion reported below)185 185 
Cost of equipment sold257 275 
Selling, general and administrative325 305 
Depreciation, amortization and accretion171 170 
(Gain) loss on asset disposals, net2 5 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Total operating expenses939 939 
Operating income71 84 
Investment and other income (expense)
Equity in earnings of unconsolidated entities45 42 
Interest and dividend income1 2 
Interest expense(33)(39)
Total investment and other income13 5 
Income before income taxes84 89 
Income tax expense32 27 
Net income52 62 
Less: Net income attributable to noncontrolling interests, net of tax3 2 
Net income attributable to UScellular shareholders$49 $60 
Basic weighted average shares outstanding86 86 
Basic earnings per share attributable to UScellular shareholders$0.57 $0.70 
Diluted weighted average shares outstanding87 88 
Diluted earnings per share attributable to UScellular shareholders$0.57 $0.69 
The accompanying notes are an integral part of these consolidated financial statements.
20

United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
20222021
(Dollars in millions)
Cash flows from operating activities
Net income$52 $62 
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion171 170 
Bad debts expense25 7 
Stock-based compensation expense7 6 
Deferred income taxes, net22 23 
Equity in earnings of unconsolidated entities(45)(42)
Distributions from unconsolidated entities19 22 
(Gain) loss on asset disposals, net2 5 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Other operating activities1 (1)
Changes in assets and liabilities from operations
Accounts receivable15 4 
Equipment installment plans receivable (18)
Inventory(4)7 
Accounts payable(62)(86)
Customer deposits and deferred revenues9 7 
Accrued taxes130 3 
Accrued interest10 9 
Other assets and liabilities(40)(53)
Net cash provided by operating activities311 124 
Cash flows from investing activities
Cash paid for additions to property, plant and equipment(150)(133)
Cash paid for licenses(561)(1,256)
Cash received from divestitures and exchanges1 1 
Net cash used in investing activities(710)(1,388)
Cash flows from financing activities
Issuance of long-term debt625 492 
Repayment of long-term debt(126) 
Issuance of short-term debt60  
Common Shares reissued for benefit plans, net of tax payments (1)
Repurchase of Common Shares(10)(2)
Payment of debt issuance costs(1)(1)
Distributions to noncontrolling interests(1)(1)
Other financing activities(3)(2)
Net cash provided by financing activities544 485 
Net increase (decrease) in cash, cash equivalents and restricted cash145 (779)
Cash, cash equivalents and restricted cash
Beginning of period199 1,291 
End of period$344 $512 

The accompanying notes are an integral part of these consolidated financial statements.
21

United States Cellular Corporation
Consolidated Balance Sheet — Assets
(Unaudited)
March 31, 2022December 31, 2021
(Dollars in millions)
Current assets
Cash and cash equivalents$300 $156 
Accounts receivable
Customers and agents, less allowances of $59 and $57, respectively
964 976 
Roaming5 7 
Affiliated1  
Other, less allowances of $1 and $2, respectively
50 63 
Inventory, net177 173 
Prepaid expenses63 58 
Income taxes receivable 123 
Other current assets51 49 
Total current assets1,611 1,605 
Assets held for sale15 18 
Licenses4,677 4,088 
Investments in unconsolidated entities465 439 
Property, plant and equipment
In service and under construction9,136 9,056 
Less: Accumulated depreciation and amortization6,560 6,450 
Property, plant and equipment, net2,576 2,606 
Operating lease right-of-use assets952 959 
Other assets and deferred charges579 626 
Total assets1
$10,875 $10,341 
The accompanying notes are an integral part of these consolidated financial statements.
22

United States Cellular Corporation
Consolidated Balance Sheet — Liabilities and Equity
(Unaudited)
March 31, 2022December 31, 2021
(Dollars and shares in millions, except per share amounts)
Current liabilities
Current portion of long-term debt$6 $3 
Accounts payable
Affiliated9 14 
Trade272 346 
Customer deposits and deferred revenues200 191 
Accrued taxes34 33 
Accrued compensation42 83 
Short-term operating lease liabilities131 129 
Other current liabilities179 104 
Total current liabilities873 903 
Deferred liabilities and credits
Deferred income tax liability, net696 674 
Long-term operating lease liabilities882 889 
Other deferred liabilities and credits583 573 
Long-term debt, net3,220 2,728 
Commitments and contingencies
Noncontrolling interests with redemption features12 11 
Equity
UScellular shareholders’ equity
Series A Common and Common Shares
Authorized 190 shares (50 Series A Common and 140 Common Shares)
Issued 88 shares (33 Series A Common and 55 Common Shares)
Outstanding 86 shares (33 Series A Common and 53 Common Shares)
Par Value ($1.00 per share) ($33 Series A Common and $55 Common Shares)
88 88 
Additional paid-in capital1,685 1,678 
Treasury shares, at cost, 3 and 2 Common Shares, respectively
(77)(68)
Retained earnings2,897 2,849 
Total UScellular shareholders' equity4,593 4,547 
Noncontrolling interests16 16 
Total equity4,609 4,563 
Total liabilities and equity1
$10,875 $10,341 

The accompanying notes are an integral part of these consolidated financial statements.

1     The consolidated total assets as of March 31, 2022 and December 31, 2021, include assets held by consolidated variable interest entities (VIEs) of $1,433 million and $1,482 million, respectively, which are not available to be used to settle the obligations of UScellular. The consolidated total liabilities as of March 31, 2022 and December 31, 2021, include certain liabilities of consolidated VIEs of $23 million for which the creditors of the VIEs have no recourse to the general credit of UScellular. See Note 9 — Variable Interest Entities for additional information.
23

United States Cellular Corporation
Consolidated Statement of Changes in Equity
(Unaudited)
UScellular Shareholders
Series A
Common and
Common
shares
Additional
paid-in
capital
Treasury
shares
Retained
earnings
Total
UScellular
shareholders'
equity
Noncontrolling
interests
Total equity
(Dollars in millions)
December 31, 2021$88 $1,678 $(68)$2,849 $4,547 $16 $4,563 
Net income attributable to UScellular shareholders— — — 49 49 — 49 
Net income attributable to noncontrolling interests classified as equity
— — — —  1 1 
Repurchase of Common Shares— — (10)— (10)— (10)
Incentive and compensation plans— 7 1 (1)7 — 7 
Distributions to noncontrolling interests— — — —  (1)(1)
March 31, 2022$88 $1,685 $(77)$2,897 $4,593 $16 $4,609 
The accompanying notes are an integral part of these consolidated financial statements.
24

United States Cellular Corporation
Consolidated Statement of Changes in Equity
(Unaudited)
UScellular Shareholders
Series A
Common and
Common
shares
Additional
paid-in
capital
Treasury
shares
Retained
earnings
Total
UScellular
shareholders'
equity
Noncontrolling
interests
Total equity
(Dollars in millions)
December 31, 2020$88 $1,651 $(67)$2,739 $4,411 $15 $4,426 
Net income attributable to UScellular shareholders— — — 60 60 — 60 
Net income attributable to noncontrolling interests classified as equity
— — — —  1 1 
Repurchase of Common Shares— — (2)— (2)— (2)
Incentive and compensation plans— 6 3 (3)6 — 6 
Distributions to noncontrolling interests— — — —  (1)(1)
March 31, 2021$88 $1,657 $(66)$2,796 $4,475 $15 $4,490 

The accompanying notes are an integral part of these consolidated financial statements.
25

United States Cellular Corporation
Notes to Consolidated Financial Statements

Note 1 Basis of Presentation
United States Cellular Corporation (UScellular), a Delaware Corporation, is an 83%-owned subsidiary of Telephone and Data Systems, Inc. (TDS).
The accounting policies of UScellular conform to accounting principles generally accepted in the United States of America (GAAP) as set forth in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of UScellular, subsidiaries in which it has a controlling financial interest, general partnerships in which UScellular has a majority partnership interest and certain entities in which UScellular has a variable interest that requires consolidation under GAAP. Intercompany accounts and transactions have been eliminated.
The unaudited consolidated financial statements included herein have been prepared by UScellular pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, UScellular believes that the disclosures included herein are adequate to make the information presented not misleading. Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in UScellular’s Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2021.
The accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring items, unless otherwise disclosed) necessary for the fair statement of UScellular’s financial position as of March 31, 2022 and December 31, 2021 and its results of operations, cash flows and changes in equity for the three months ended March 31, 2022 and 2021. The Consolidated Statement of Comprehensive Income was not included because comprehensive income for the three months ended March 31, 2022 and 2021, equaled net income. These results are not necessarily indicative of the results to be expected for the full year. UScellular has not changed its significant accounting and reporting policies from those disclosed in its Form 10-K for the year ended December 31, 2021.
Restricted Cash
UScellular presents restricted cash with cash and cash equivalents in the Consolidated Statement of Cash Flows. Restricted cash primarily consists of balances required under the receivables securitization agreement. See Note 8 — Debt for additional information related to the receivables securitization agreement. The following table provides a reconciliation of Cash and cash equivalents and restricted cash reported in the Consolidated Balance Sheet to the total of the amounts in the Consolidated Statement of Cash Flows.
March 31, 2022December 31, 2021
(Dollars in millions)
Cash and cash equivalents$300 $156 
Restricted cash included in Other current assets44 43 
Cash, cash equivalents and restricted cash in the statement of cash flows$344 $199 
26

Note 2 Revenue Recognition
Disaggregation of Revenue
In the following table, UScellular's revenues are disaggregated by type of service, which represents the relevant categorization of revenues for UScellular, and timing of recognition. Service revenues are recognized over time and Equipment sales are point in time.  
Three Months Ended
March 31,
20222021
(Dollars in millions)
Revenues from contracts with customers:
Retail service1
$702 $683 
Inbound roaming21 28 
Other service1
42 40 
Service revenues from contracts with customers765 751 
Equipment sales223 252 
Total revenues from contracts with customers988 1,003 
Operating lease income22 20 
Total operating revenues$1,010 $1,023 
12021 amounts have been adjusted to reclassify $2 million of Internet of Things (IoT) and Reseller revenues from Retail service to Other service.
Contract Balances
The following table provides balances for contract assets from contracts with customers, which are recorded in Other current assets and Other assets and deferred charges in the Consolidated Balance Sheet, and contract liabilities from contracts with customers, which are recorded in Customer deposits and deferred revenues and Other deferred liabilities and credits in the Consolidated Balance Sheet.
 March 31, 2022December 31, 2021
(Dollars in millions) 
Contract assets$6 $7 
Contract liabilities$257 $243 

Revenue recognized related to contract liabilities existing at January 1, 2022 was $109 million for the three months ended March 31, 2022.

Transaction price allocated to the remaining performance obligations
The following table includes estimated service revenues expected to be recognized related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. These estimates represent service revenues to be recognized when wireless services are delivered to customers pursuant to service plan contracts and under certain roaming agreements with other carriers. These estimates are based on contracts in place as of March 31, 2022 and may vary from actual results. As practical expedients, revenue related to contracts of less than one year, generally month-to-month contracts, and contracts with a fixed per-unit price and variable quantity, are excluded from these estimates. 
Service Revenues
(Dollars in millions)
Remainder of 2022$216 
2023131 
Thereafter92 
Total
$439 
27

Contract Cost Assets
UScellular expects that commission fees paid as a result of obtaining contracts are recoverable and therefore UScellular defers and amortizes these costs. As a practical expedient, costs with an amortization period of one year or less are expensed as incurred. The contract cost asset balance related to commission fees and other costs was $122 million at March 31, 2022, and $126 million at December 31, 2021, and was recorded in Other assets and deferred charges in the Consolidated Balance Sheet. Deferred commission fees are amortized based on the timing of transfer of the goods or services to which the assets relate, typically the contract term. Amortization of contract cost assets was $25 million for both the three months ended March 31, 2022 and 2021 and was included in Selling, general and administrative expenses.
Note 3 Fair Value Measurements
As of March 31, 2022 and December 31, 2021, UScellular did not have any material financial or nonfinancial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP.
The provisions of GAAP establish a fair value hierarchy that contains three levels for inputs used in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.
UScellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.
Level within the Fair Value Hierarchy
March 31, 2022December 31, 2021
Book Value
Fair Value
Book Value
Fair Value
(Dollars in millions)
Long-term debt
Retail2$1,500 $1,399 $1,500 $1,594 
Institutional2535 488 535 659 
Other21,243 1,243 746 746 
Long-term debt excludes lease obligations, the current portion of Long-term debt and debt financing costs. The fair value of “Retail” Long-term debt was estimated using market prices for UScellular Senior Notes, which are traded on the New York Stock Exchange. UScellular’s “Institutional” debt consists of the 6.7% Senior Notes which are traded over the counter. UScellular’s “Other” debt consists of term loan credit agreements, receivables securitization agreement and in 2022, export credit financing agreement. UScellular estimated the fair value of its Institutional and Other debt through a discounted cash flow analysis using the interest rates or estimated yield to maturity for each borrowing, which ranged from 1.24% to 5.54% and 1.31% to 4.40% at March 31, 2022 and December 31, 2021, respectively.
The fair values of Cash and cash equivalents, restricted cash and short-term debt approximate their book values due to the short-term nature of these financial instruments.
28

Note 4 Equipment Installment Plans
UScellular sells devices to customers under equipment installment plans over a specified time period. For certain equipment installment plans, after a specified period of time or amount of payments, the customer may have the right to upgrade to a new device and have the remaining unpaid equipment installment contract balance waived, subject to certain conditions, including trading in the original device in good working condition and signing a new equipment installment contract.
The following table summarizes equipment installment plan receivables.
March 31, 2022December 31, 2021
(Dollars in millions)
Equipment installment plan receivables, gross$1,069 $1,085 
Allowance for credit losses(73)(72)
Equipment installment plan receivables, net$996 $1,013 
Net balance presented in the Consolidated Balance Sheet as:
Accounts receivable — Customers and agents (Current portion)$637 $639 
Other assets and deferred charges (Non-current portion)359 374 
Equipment installment plan receivables, net$996 $1,013 
UScellular uses various inputs, including internal data, information from credit bureaus and other sources, to evaluate the credit profiles of its customers. From this evaluation, a credit class is assigned to the customer that determines the number of eligible lines, the amount of credit available, and the down payment requirement, if any. These credit classes are grouped into four credit categories: lowest risk, lower risk, slight risk and higher risk. A customer's assigned credit class is reviewed periodically and a change is made, if appropriate. An equipment installment plan billed amount is considered past due if not paid within 30 days. The balance and aging of the equipment installment plan receivables on a gross basis by credit category were as follows:
March 31, 2022December 31, 2021
Lowest Risk
Lower Risk
Slight Risk
Higher Risk
Total
Lowest Risk
Lower Risk
Slight Risk
Higher Risk
Total
(Dollars in millions)
Unbilled$881 $93 $23 $5 $1,002 $896 $94 $24 $5 $1,019 
Billed — current40 5 2  47 40 5 1 1 47 
Billed — past due10 6 3 1 20 10 6 2 1 19 
Total$931 $104 $28 $6 $1,069 $946 $105 $27 $7 $1,085 
The balance of the equipment installment plan receivables as of March 31, 2022 on a gross basis by year of origination were as follows: