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Jane McCahon

Senior Vice President - Corporate Relations

Phone: 312.592.5379
jane.mccahon@tdsinc.com
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TDS reports third quarter 2017 results

11/08/2017

U.S. Cellular expands customer base and raises guidance;
Sixth consecutive quarter of double digit cable broadband connection growth

CHICAGO, Nov. 8, 2017 /PRNewswire/ -- 

As previously announced, TDS will hold a teleconference November 8, 2017, at 9:30 a.m. CST. Listen to the call live via the Events & Presentations page of investors.tdsinc.com

Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,251 million for the third quarter of 2017, versus $1,314 million for the same period one year ago. Net loss available to TDS common shareholders and related diluted loss per share were $181 million and $1.64, respectively, as a result of a $262 million ($190 million, net of tax and noncontrolling interests impacts) non-cash charge related to goodwill impairment recorded during the three months ended September 30, 2017.  This compares to Net income available to TDS common shareholders and related diluted earnings per share of $13 million and $0.11, respectively, in the same period one year ago.  Excluding this goodwill impairment charge and other non-controlling interest impacts associated with this charge, Net income available to TDS common shareholders and related diluted earnings per share were $9 million and $0.08, respectively, for the three months ended September 30, 2017.

"TDS' businesses continue on a solid path of achieving their priorities for 2017," said LeRoy T. Carlson Jr., TDS president and CEO. "U.S. Cellular grew its customer base while successfully reducing expenses. TDS Telecom expanded its wireline and cable segments while implementing its long-term broadband strategy of providing the best broadband connection in each market.

"U.S. Cellular added postpaid handset customers and continued to drive an exceptionally low level of postpaid handset churn. This shows that effective promotions and pricing through Total Plan packages, which include unlimited data offerings, are well received by both new and current customers. U.S. Cellular effectively managed cost reductions including lowering expenses in system operations, despite increased data traffic. Reflecting these positive results, U.S. Cellular raised its guidance on profitability.

"Wireline revenues and profitability increased at TDS Telecom, through higher revenues from fiber investments and through support from the Alternative Connect America Cost Model (A-CAM). TDS Telecom's Cable segment continued to see a rise in broadband connections and together with an increase in demand for higher data speeds, generated higher revenues and margin expansion. TDS Telecom recently completed its purchase agreements for Crestview Communications in Central Oregon, and K2 Communications in Mead, Colorado. These acquisitions provide excellent clustering opportunities as we continue to build broadband penetration in these target markets. OneNeck IT Solutions reported lower revenues due to less equipment sales to existing customers. Growing sales continues to be their top priority."

2017 Estimated Results
Current estimates of full-year 2017 results for U.S. Cellular, TDS Telecom, and TDS are shown below.  Such estimates represent management's view as of November 8, 2017.  Such forward-looking statements should not be assumed to be current as of any future date.  TDS undertakes no duty to update such information, whether as a result of new information, future events, or otherwise.  There can be no assurance that final results will not differ materially from such estimated results. 



2017 Estimated Results
















U.S. Cellular


TDS Telecom


TDS(3)



Current

Previous


Current

Previous


Current

Previous

(Dollars in millions)












Total operating revenues (1)

$3,850-$3,950

$3,800-$4,000


$1,125-$1,150

$1,200-$1,250


$4,990-$5,115

$5,015-$5,265

Adjusted OIBDA (1)(2)(4)

$600-$700

$550-$650


$310-$330

$300-$340


$910-$1,030

$855-$955

Adjusted EBITDA (2)

$740-$840

$700-$800


$310-$330

$300-$340


$1,050-$1,170

$1,005-$1,145

Capital expenditures (Approximately)


$500

Unchanged



$225

Unchanged



$735

Unchanged

The following tables provide reconciliations of Net income (loss) to Adjusted OIBDA and Adjusted EBITDA for 2017 estimated results, actual results for the nine months ended September 30, 2017, and actual results for the year ended December 31, 2016. In providing 2017 estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes.  Although potentially significant, TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, TDS is unable to provide such guidance.





2017 Estimated Results
















U.S. Cellular



TDS Telecom



TDS(3)

(Dollars in millions)









Net income (loss) (GAAP)


N/A



N/A



N/A

Add back:










Income tax expense (benefit)


N/A



N/A



N/A

Income (loss) before income taxes (GAAP)

$

(350)-(250)


$

50-70


$

(220)-(100)

Add back:










Interest expense


110



5



170


Depreciation, amortization and accretion expense


610



220



835

EBITDA (Non-GAAP)

$

370-470


$

275-295


$

785-905

Add back:










Loss on impairment of goodwill


370



35



265


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







(Gain) loss on license sales and exchanges, net


(20)





(20)


(Gain) loss on asset disposals, net


20





20

Adjusted EBITDA (Non-GAAP) (2)

$

740-840


$

310-330


$

1,050-1,170

Deduct:










Equity in earnings of unconsolidated entities


130





130


Interest and dividend income(1)


10





10

Adjusted OIBDA (Non-GAAP)(1)(2)(4)

$

600-700


$

310-330


$

910-1,030

 




Actual Results
























Nine Months Ended September 30, 2017


Year ended December 31, 2016




U.S.
Cellular


TDS

Telecom


TDS (3)


U.S.
Cellular


TDS

Telecom


TDS (3)

(Dollars in millions)












Net income (loss) (GAAP)

$

(259)


$

18


$

(176)


$

49


$

42


$

52

Add back:













Income tax expense (benefit)


(19)



24



39



33



25



40

Income (loss) before income taxes (GAAP)

$

(278)


$

42


$

(137)


$

82


$

67


$

92

Add back:













Interest expense


85



3



128



113



3



170


Depreciation, amortization and accretion expense


460



166



632



618



224



850

EBITDA (Non-GAAP)

$

267


$

211


$

623


$

813


$

294


$

1,112

Add back:



















Loss on impairment of goodwill


370



35



262








(Gain) loss on sale of business and

other exit costs, net


(1)





(1)







(1)


(Gain) loss on license sales and exchanges, net


(19)





(19)



(19)



(1)



(20)


(Gain) loss on asset disposals, net


14



2



16



22



4



27

Adjusted EBITDA (Non-GAAP) (2)

$

631


$

248


$

881


$

816


$

298


$

1,118

Deduct:



















Equity in earnings of unconsolidated entities


101





101



140





140


Interest and dividend income(1)


6



4



12



6



3



11


Other, net


1







1





Adjusted OIBDA (Non-GAAP) (1)(2)(4)

$

523


$

244


$

768


$

669


$

295


$

967





















Note: Totals may not foot due to rounding differences.






















(1)

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






















(2)

Adjusted EBITDA is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted OIBDA is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.  TDS 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 TDS' 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 TDS' financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance.  Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.  The table above reconciles Adjusted EBITDA and Adjusted OIBDA flow to the corresponding GAAP measure, Net income or Income before income taxes.





(3)

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.






















(4)

A reconciliation of Adjusted OIBDA (Non-GAAP) to Operating income (GAAP) for September 30, 2017 actual results can be found on TDS' website at investors.tdsinc.com.

Conference Call Information
TDS will hold a conference call on November 8, 2017 at 9:30 a.m. Central Time.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.tdsinc.com. The call will be archived on the Events & Presentations page of investors.tdsinc.com

About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 1000® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6 million connections nationwide through its businesses, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 9,900 people as of September 30, 2017.

Visit www.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: intense competition; the ability to execute TDS' business strategy; uncertainties in TDS' future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and U.S. Cellular indebtedness or comply with the terms of debt covenants; impacts of any pending acquisitions/divestitures/exchanges of properties and/or licenses,  including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings of TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; pending and future litigation; changes in income tax rates, laws, regulations or rulings; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of services and products offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission, which are incorporated by reference herein.    

For more information about TDS and its subsidiaries, visit:
TDS: www.tdsinc.com 
U.S. Cellular: www.uscellular.com
TDS Telecom: www.tdstelecom.com 
OneNeck IT Solutions: www.oneneck.com


United States Cellular Corporation

Summary Operating Data (Unaudited)
















As of or for the Quarter Ended

9/30/2017


6/30/2017


3/31/2017



12/31/2016



9/30/2016

Retail Connections
















Postpaid

















Total at end of period


4,513,000



4,478,000



4,455,000



4,482,000



4,484,000



Gross additions


191,000



174,000



146,000



187,000



174,000




Feature phones


7,000



7,000



7,000



7,000



10,000




Smartphones


132,000



116,000



88,000



109,000



105,000




Connected devices


52,000



51,000



51,000



71,000



59,000



Net additions (losses)


35,000



23,000



(27,000)



(2,000)



(6,000)




Feature phones


(15,000)



(15,000)



(19,000)



(21,000)



(20,000)




Smartphones


44,000



34,000



(9,000)



(4,000)



(7,000)




Connected devices


6,000



4,000



1,000



23,000



21,000



ARPU (1)

$

43.41


$

44.60


$

45.42


$

45.19


$

47.08



ABPU (Non-GAAP)(2)

$

54.71


$

55.19


$

55.82


$

55.43


$

56.79



ARPA (3)

$

116.36


$

119.73


$

121.88


$

120.67


$

125.31



ABPA (Non-GAAP)(4)

$

146.65


$

148.15


$

149.78


$

148.02


$

151.16



Churn rate (5)


1.16%



1.13%



1.29%



1.41%



1.34%




Handsets


0.96%



0.91%



1.08%



1.23%



1.22%




Connected devices


2.33%



2.35%



2.55%



2.49%



2.04%


Prepaid

















Total at end of period


515,000



484,000



480,000



484,000



480,000



Gross additions


102,000



73,000



78,000



83,000



132,000



Net additions (losses)


31,000



3,000



(4,000)



4,000



67,000



ARPU (1)

$

33.12


$

33.52


$

33.66


$

33.25


$

34.39



Churn rate (5)


4.75%



4.93%



5.69%



5.44%



4.84%

Total connections at end of period (6)


5,089,000



5,023,000



4,996,000



5,031,000



5,030,000

Market penetration at end of period
















Consolidated operating population


31,834,000



32,089,000



32,089,000



31,994,000



31,994,000


Consolidated operating penetration (7)


16%



16%



16%



16%



16%

Capital expenditures (millions)

$

112


$

84


$

61


$

171


$

103

Total cell sites in service


6,436



6,421



6,417



6,415



6,374

Owned towers


4,051



4,044



4,041



4,040



4,015






















(1)

Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period.  These revenue bases and connection populations are shown below:




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




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


(2)

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


(3)

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


(4)

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


(5)

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


(6)

Includes reseller and other connections.


(7)

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


 

TDS Telecom

Summary Operating Data (Unaudited)


As of or for the Quarter Ended

9/30/2017


6/30/2017


3/31/2017


12/31/2016


9/30/2016

TDS Telecom















Wireline
















Residential connections

















Voice (1)


298,200



304,600



308,200



310,600



314,600



Broadband (2)


229,900



230,200



228,500



229,500



232,800



IPTV (3)


47,200



46,200



45,200



45,300



43,600



   Wireline residential connections


575,300



581,000



581,900



585,400



590,900



















Total residential revenue per connection (4)

$

46.07


$

46.39


$

45.17


$

44.27


$

44.25



















Commercial connections

















Voice (1)


146,900



150,500



154,000



157,400



160,900



Broadband (2)


20,900



21,000



21,200



21,400



21,700



managedIP (5)


147,600



149,700



150,300



150,900



151,500



   Wireline commercial connections


315,300



321,200



325,500



329,700



334,000



















Total Wireline connections


890,700



902,200



907,400



915,200



924,900


















Cable
















Cable Connections

















Broadband (6)


143,800



140,300



137,800



133,700



130,200



Video (7)


97,900



97,900



97,600



99,000



101,100



Voice (8)


58,900



58,700



59,000



59,600



59,800



   Cable connections


300,600



297,000



294,300



292,400



291,000



















Numbers may not foot due to rounding.


















(1)

The individual circuits connecting a customer to Wireline's central office facilities.

(2)

The number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.

(3)

The number of Wireline customers provided video services using IP networking technology.

(4)

Total residential revenue per connection is calculated by dividing total Wireline residential revenue by the average number of Wireline residential connections and by the number of months in the period.

(5)

The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.

(6)

Billable number of lines into a building for high-speed data services.

(7)

Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.

(8)

Billable number of lines into a building for voice services.

 

TDS Telecom

Capital Expenditures (Unaudited)











Quarter Ended

9/30/2017


6/30/2017


3/31/2017


12/31/2016


9/30/2016

(Dollars in millions)















Wireline

$

41


$

33


$

17


$

26


$

27

Cable


14



12



9



13



11

HMS


2



4



6



5



2


$

58


$

49


$

33


$

45


$

40
















Numbers may not foot due to rounding.

 


Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)





Three Months Ended September 30,





2017


2016


2017 vs. 2016







Increase (Decrease)

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











Operating revenues












U.S. Cellular (1)

$

963


$

1,023


$

(60)


(6)%


TDS Telecom


285



287



(3)


(1)%


All Other (2)


3



4



(1)


-






1,251



1,314



(63)


(5)%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


796



846



(50)


(6)%



Depreciation, amortization and accretion


153



155



(2)


(2)%



Loss on impairment of goodwill


370





370


N/M



(Gain) loss on asset disposals, net


5



7



(2)


(26)%



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


(1)





(1)


N/M



(Gain) loss on license sales and exchanges, net




(7)



7


100%






1,323



1,001



322


32%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


206



217



(11)


(5)%



Depreciation, amortization and accretion


56



57



(1)


(2)%



Loss on impairment of goodwill


35





35


N/M



(Gain) loss on asset disposals, net


1



2



(1)


(51)%






297



276



21


8%


All Other (2)













Expenses excluding depreciation and amortization


5



4



1


64%



Depreciation and amortization




2



(2)


(9)%



Loss on impairment of goodwill(3)


(143)





(143)


N/M



(Gain) loss on asset disposals, net




(1)



1


(100)%






(137)



5



(143)


(100)%



        Total operating expenses


1,483



1,281



202


16%

Operating income (loss)












U.S. Cellular (1)


(360)



22



(382)


>(100)%


TDS Telecom


(13)



12



(24)


>(100)%


All Other (2)


141



(1)



142


>100%






(232)



33



(265)


>(100)%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


35



38



(3)


(6)%


Interest and dividend income (1)


4



2



2


>100%


Interest expense


(43)



(42)



(1)


(2)%


Other, net




(1)



1


>100%



Total investment and other income (expense)(1)


(4)



(3)



(1)


(38)%

Income (loss) before income taxes


(236)



30



(266)


>(100)%


Income tax expense (benefit)


(5)



14



(19)


>(100)%

Net income (loss)


(231)



16



(247)


>(100)%


Less: Net income (loss) attributable to noncontrolling













interests, net of tax


(50)



3



(53)


>(100)%

Net income (loss) attributable to TDS shareholders


(181)



13



(194)


>(100)%


TDS Preferred dividend requirement







-

Net income (loss) available to TDS common shareholders

$

(181)


$

13


$

(194)


>(100)%















Basic weighted average shares outstanding


111



110



1


1%

Basic earnings (loss) per share available to TDS common shareholders

$

(1.64)


$

0.12


$

(1.76)


N/M















Diluted weighted average shares outstanding


111



111




(1)%

Diluted earnings (loss) per share available to TDS common shareholders

$

(1.64)


$

0.11


$

(1.75)


>(100)%















N/M - Percentage change not meaningful















Numbers may not foot due to rounding.















End Notes (1) (2) (3)  ̶  Explained on page 11 of the release





























 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)





Nine Months Ended September 30,





2017


2016


2017 vs. 2016







Increase (Decrease)

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











Operating revenues












U.S. Cellular(1)

$

2,862


$

2,985


$

(123)


(4)%


TDS Telecom


865



868



(4)


-


All Other(2)


9



10



(1)


(2)%






3,736



3,863



(127)


(3)%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


2,339



2,460



(121)


(5)%



Depreciation, amortization and accretion


460



462



(2)


-



Loss on impairment of goodwill


370





370


N/M



(Gain) loss on asset disposals, net


14



16



(2)


(17)%



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


(1)





(1)


>(100)%



(Gain) loss on license sales and exchanges, net


(19)



(16)



(3)


(16)%






3,163



2,922



241


8%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


621



644



(23)


(4)%



Depreciation, amortization and accretion


166



168



(2)


(1)%



Loss on impairment of goodwill


35





35


N/M



(Gain) loss on asset disposals, net


2



4



(1)


(38)%






824



816



9


1%


All Other(2)













Expenses excluding depreciation and amortization


8



8




25%



Depreciation and amortization


6



6




(10)%



Loss on impairment of goodwill(3)


(143)





(143)


N/M



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




(1)



1


N/M






(129)



13



(142)


>(100)%




Total operating expenses


3,858



3,750



108


3%

Operating income (loss)












U.S. Cellular(1)


(301)



63



(364)


>(100)%


TDS Telecom


41



53



(12)


(23)%


All Other(2)


138



(3)



141


>100%






(122)



113



(235)


>(100)%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


101



109



(8)


(8)%


Interest and dividend income(1)


12



7



5


53%


Interest expense


(128)



(127)



(1)


(1)%


Other, net




1



(1)


>100%



Total investment and other income (expense)(1)


(15)



(10)



(5)


(50)%

Income (loss) before income taxes


(137)



103



(240)


>(100)%


Income tax expense


39



45



(6)


(12)%

Net income (loss)


(176)



58



(234)


>(100)%


Less: Net income (loss) attributable to noncontrolling













interests, net of tax


(42)



9



(51)


>(100)%

Net income (loss) attributable to TDS shareholders


(134)



49



(183)


>(100)%


TDS Preferred dividend requirement







(67)%

Net income (loss) available to TDS common shareholders

$

(134)


$

49


$

(183)


>(100)%















Basic weighted average shares outstanding


111



110



1


1%

Basic earnings (loss) per share available to TDS common shareholders

$

(1.21)


$

0.44


$

(1.65)


>(100)%

Diluted weighted average shares outstanding


111



111




1%

Diluted earnings (loss) per share available to TDS common shareholders

$

(1.21)


$

0.44


$

(1.65)


>(100)%















N/M - Percentage change not meaningful















Numbers may not foot due to rounding.















End Notes (1) (2) (3)  ̶̶  Explained on page 11 of the release

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)







Nine Months Ended






September 30,


2017


2016

(Dollars in millions)






Cash flows from operating activities







Net income (loss)

$

(176)


$

58


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







  from operating activities









Depreciation, amortization and accretion


632



636




Bad debts expense


68



72




Stock-based compensation expense


34



29




Deferred income taxes, net


(23)



11




Equity in earnings of unconsolidated entities


(101)



(109)




Distributions from unconsolidated entities


85



55




Loss on impairment of goodwill


262






(Gain) loss on asset disposals, net


16



20




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


(1)



(1)




(Gain) loss on license sales and exchanges, net


(19)



(16)




Noncash interest


2



2




Other operating activities




(3)


Changes in assets and liabilities from operations









Accounts receivable


(6)



(9)




Equipment installment plans receivable


(164)



(160)




Inventory


44



3




Accounts payable


(59)



47




Customer deposits and deferred revenues


(16)



(41)




Accrued taxes


41



77




Accrued interest


11



7




Other assets and liabilities


(9)



(40)





Net cash provided by operating activities


621



638











Cash flows from investing activities







Cash paid for additions to property, plant and equipment


(398)



(426)


Cash paid for acquisitions and licenses


(200)



(46)


Cash paid for investments


(100)




Cash received from divestitures and exchanges


19



20


Federal Communications Commission deposit




(143)


Other investing activities


1



1





Net cash used in investing activities


(678)



(594)











Cash flows from financing activities







Repayment of long-term debt


(9)



(9)


Issuance of long-term debt




2


TDS Common Shares reissued for benefit plans, net of tax payments


(1)



7


U.S. Cellular Common Shares reissued for benefit plans, net of tax payments




4


Repurchase of TDS Common Shares




(3)


Repurchase of U.S. Cellular Common Shares




(2)


Repurchase of TDS Preferred Shares


(1)




Dividends paid to TDS shareholders


(51)



(49)


Payment of debt issuance costs




(4)


Distributions to noncontrolling interests


(2)



(1)


Other financing activities


5



11





Net cash used in financing activities


(59)



(44)











Net increase (decrease) in cash and cash equivalents


(116)













Cash and cash equivalents







Beginning of period


900



985


End of period

$

784


$

985











 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)







ASSETS
















September 30,


December 31,




2017


2016

(Dollars in millions)






Current assets







Cash and cash equivalents

$

784


$

900


Short-term investments


100




Accounts receivable from customers and others, net


871



851


Inventory, net


107



151


Prepaid expenses


109



115


Income taxes receivable


2



10


Other current assets


31



32



Total current assets


2,004



2,059









Assets held for sale


5



8









Licenses


2,234



1,895

Goodwill


508



766

Franchise rights


244



244

Other intangible assets, net


26



33

Investments in unconsolidated entities


467



451

Other investments




1









Property, plant and equipment, net


3,337



3,555









Other assets and deferred charges


385



434









Total assets

$

9,210


$

9,446


 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)








LIABILITIES AND EQUITY



















September 30,


December 31,





2017


2016

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






Current liabilities







Current portion of long-term debt

$

20


$

12


Accounts payable


308



365


Customer deposits and deferred revenues


211



229


Accrued interest


22



11


Accrued taxes


72



44


Accrued compensation


112



127


Other current liabilities


84



99



Total current liabilities


829



887










Deferred liabilities and credits







Deferred income tax liability, net


898



922


Other deferred liabilities and credits


480



453










Long-term debt, net


2,443



2,433










Noncontrolling interests with redemption features


1



1










Equity







TDS shareholders' equity








Series A Common and Common Shares, par value $.01


1



1



Capital in excess of par value


2,404



2,386



Treasury shares, at cost


(679)



(698)



Accumulated other comprehensive income




1



Retained earnings


2,257



2,454




   Total TDS shareholders' equity


3,983



4,144











Preferred shares




1


Noncontrolling interests


576



605












Total equity


4,559



4,750










Total liabilities and equity

$

9,210


$

9,446










(1)

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










(2)

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.










(3)

During the three months ended September 30, 2017, U.S. Cellular recorded a goodwill impairment of $370 million while TDS recorded a goodwill impairment of the U.S. Cellular reporting unit of $227 million.  Prior to 2009, TDS accounted for U.S. Cellular's share repurchases as step acquisitions, allocating a portion of the share repurchase value to TDS' Goodwill.  Further, goodwill was impaired at the TDS level in 2003 but not at the U.S. Cellular level, effectively resulting in a lower basis of goodwill attributable to the U.S. Cellular reporting unit rather than at U.S. Cellular itself.  Consequently, U.S. Cellular's Goodwill on a stand-alone basis and any resulting impairments of Goodwill does not equal the TDS consolidated Goodwill related to U.S. Cellular.

 

Balance Sheet Highlights

(Unaudited)




September 30, 2017



U.S.


TDS


TDS Corporate


Intercompany


TDS



Cellular


Telecom


& Other


Eliminations


Consolidated

(Dollars in millions)















Cash and cash equivalents

$

498


$

22


$

264


$


$

784

Affiliated cash investments




533





(533)





$

498


$

555


$

264


$

(533)


$

784

















Short-term investments

$

50


$


$

50


$


$

100

















Licenses, goodwill and other intangible assets

$

2,225


$

783


$

4


$


$

3,012

Investment in unconsolidated entities


429



4



41



(7)



467



$

2,654


$

787


$

45


$

(7)


$

3,479

















Property, plant and equipment, net

$

2,263


$

1,052


$

22


$


$

3,337

















Long-term debt, net:
















Current portion

$

18


$

1


$

1


$


$

20


Non-current portion


1,626



4



813





2,443



$

1,644


$

5


$

814


$


$

2,463


 

TDS Telecom Highlights

(Unaudited)










Three Months Ended September 30,











2017 vs. 2016





2017


2016


Increase (Decrease)

(Dollars in millions)











Wireline











Operating revenues












Residential

$

80


$

78


$

1


2%


Commercial


50



53



(3)


(6)%


Wholesale


49



43



6


13%



Total service revenues


178



174



4


2%


Equipment and product sales







(28)%






179



175



4


2%

Operating expenses












Cost of services


66



67



(1)


(1)%


Cost of equipment and products




1




(37)%


Selling, general and administrative expenses


49



50



(2)


(3)%


Expenses excluding depreciation, amortization and accretion


115



117



(3)


(2)%


Depreciation, amortization and accretion


38



41



(3)


(8)%


(Gain) loss on asset disposals, net




1




(76)%






152



159



(6)


(4)%


Operating income

$

26


$

16


$

10


63%















Cable











Operating revenues












Residential

$

43


$

37


$

6


16%


Commercial


9



9




(2)%





52



46



6


12%

Operating expenses












Cost of services


25



23



2


8%


Selling, general and administrative expenses


13



13




2%


Expenses excluding depreciation, amortization and accretion


38



36



2


6%


Depreciation, amortization and accretion


11



9



2


24%


(Gain) loss on asset disposals, net


1



1




(33)%






50



46



4


8%


Operating income

$

2


$


$

2


>100%















HMS











Operating revenues












Service revenues

$

28


$

29


$

(1)


(2)%


Equipment and product sales


27



39



(11)


(30)%






56



68



(12)


(18)%

Operating expenses












Cost of services


21



21




-


Cost of equipment and products


22



33



(10)


(31)%


Selling, general and administrative expenses


11



12




(3)%


Expenses excluding depreciation, amortization and accretion


54



65



(11)


(16)%


Depreciation, amortization and accretion


7



7




(3)%


Loss on impairment of goodwill


35





35


N/M






96



72



24


33%


Operating loss

$

(41)


$

(5)


$

(36)


>(100)%















Intercompany revenues

$

(1)


$

(1)


$


(10)%

Intercompany expenses


(1)



(1)




(10)%

Total TDS Telecom operating income (loss)

$

(13)


$

12


$

(24)


>(100)%















N/M - Percentage change not meaningful















Numbers may not foot due to rounding.


 

TDS Telecom Highlights

(Unaudited)






Nine Months Ended September 30,











2017 vs. 2016





2017


2016


Increase (Decrease)

(Dollars in millions)











Wireline











Operating revenues












Residential

$

240


$

232


$

8


3%


Commercial


151



160



(9)


(6)%


Wholesale


147



130



17


13%



Total service revenues


537



522



16


3%


Equipment and product sales


1



1




(34)%






538



523



15


3%

Operating expenses












Cost of services


194



192



2


1%


Cost of equipment and products


2



2




(7)%


Selling, general and administrative expenses


145



148



(3)


(2)%


Expenses excluding depreciation, amortization and accretion


340



342



(1)


-


Depreciation, amortization and accretion


114



119



(5)


(5)%


(Gain) loss on asset disposals, net


1



2



(1)


(54)%






455



462



(8)


(2)%


Operating income

$

84


$

61


$

23


37%















Cable











Operating revenues












Residential

$

125


$

108


$

16


15%


Commercial


27



28



(1)


(3)%





152



137



15


11%

Operating expenses












Cost of services


73



69



4


5%


Selling, general and administrative expenses


39



37



1


3%


Expenses excluding depreciation, amortization and accretion


112



107



5


5%


Depreciation, amortization and accretion


32



27



5


17%


(Gain) loss on asset disposals, net


1



2




(24)%






145



136



9


7%


Operating income

$

7


$

1


$

6


>100%















HMS











Operating revenues












Service revenues

$

84


$

91


$

(6)


(7)%


Equipment and product sales


93



121



(28)


(23)%






178



212



(34)


(16)%

Operating expenses












Cost of services


63



61



1


2%


Cost of equipment and products


77



101



(24)


(24)%


Selling, general and administrative expenses


32



37



(4)


(12)%


Expenses excluding depreciation, amortization and accretion


172



199



(27)


(13)%


Depreciation, amortization and accretion


21



22



(1)


(6)%


Loss on impairment of goodwill


35





35


N/M






227



221



7


3%


Operating loss

$

(50)


$

(9)


$

(41)


>(100)%















Intercompany revenues

$

(3)


$

(3)


$


-

Intercompany expenses


(3)



(3)




-















Total TDS Telecom operating income

$

41


$

53


$

(12)


(23)%















N/M - Percentage change not meaningful















Numbers may not foot due to rounding.


 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations































Free Cash Flow

























Three Months Ended
September 30,


Nine Months Ended
September 30,



2017


2016


2017


2016

(Dollars in millions)













Cash flows from operating activities (GAAP)


$

263


$

238


$

621


$

638

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



156



145



398



426



Free cash flow (Non-GAAP)(1)



107



93



223



212
















(1)

Management uses Free cash flow as a liquidity measure and it 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 TDS 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.

Net income excluding Goodwill impairment charge

The following non-GAAP financial measures present certain information in the table below excluding the effect of the goodwill impairment charge, related tax effects and noncontrolling interests impacts.  The goodwill impairment charge, which occurred in the third quarter of 2017, is being excluded in this presentation, as it is not related to the current operations of TDS.  TDS believes these measures may be useful to investors and other users of its financial information when comparing the current period financial results with periods that were not impacted by such a charge.




Three Months Ended September 30,


Nine Months Ended September 30,



2017


2016


2017


2016

(Dollars in millions, except per share amounts)












Net income (loss) available to TDS common

  shareholders (GAAP)

$

(181)


$

13


$

(134)


$

49

Adjustments:













Loss on impairment of goodwill


262





262




Tax benefit on impairment of goodwill(1)


(20)





(20)




Net income (loss) attributable to noncontrolling interests, net of tax


(52)





(52)




Total adjustments (Non-GAAP)


190





190



Net income available to TDS common shareholders excluding goodwill impairment charge (Non-GAAP)

$

9


$

13


$

56


$

49














Diluted earnings (loss) per share available to

  TDS common shareholders (GAAP)

$

(1.64)


$

0.11


$

(1.21)


$

0.44

Adjustments:













Adjustment to weighted average diluted

  shares(2)


0.02





0.01




Loss on impairment of goodwill


2.34





2.34




Tax benefit on impairment of goodwill(1)


(0.18)





(0.18)




Net income (loss) attributable to noncontrolling interests, net of tax


(0.46)





(0.46)



Diluted earnings per share available to TDS

  common shareholders excluding goodwill

  impairment charge (Non-GAAP)

$

0.08


$

0.11


$

0.50


$

0.44














Diluted weighted average shares outstanding

  (GAAP)


111



111



111



111


Adjustment to weighted average diluted

  shares(2)


1





1



Adjusted diluted weighted average shares

  (Non-GAAP)


112



111



112



111


























(1)

Tax benefit represents the amount associated with the tax-deductible portion of the loss on goodwill impairment.













(2)

Adjustment to reflect the incremental shares deemed anti-dilutive for GAAP diluted earnings per share.

Postpaid ABPU and Postpaid ABPA

U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment and product sales resulting from the increased adoption of equipment installment plans.  Postpaid ABPU and Postpaid ABPA, as previously defined, are non-GAAP financial measures which U.S. Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment and product sales revenues received from customers.


















For the Quarter Ended


9/30/2017



6/30/2017



3/31/2017



12/31/2016



9/30/2016

(Dollars and connection counts in millions)















Calculation of Postpaid ARPU















Postpaid service revenues

$

586


$

597


$

608


$

607


$

635

Average number of postpaid connections


4.50



4.47



4.46



4.48



4.49

Number of months in period


3



3



3



3



3


Postpaid ARPU (GAAP metric)

$

43.41


$

44.60


$

45.42


$

45.19


$

47.08


















Calculation of Postpaid ABPU















Postpaid service revenues

$

586


$

597


$

608


$

607


$

635

Equipment installment plan billings


152



142



139



138



131


Total billings to postpaid connections

$

738


$

739


$

747


$

745


$

766

Average number of postpaid connections


4.50



4.47



4.46



4.48



4.49

Number of months in period


3



3



3



3



3


Postpaid ABPU (Non-GAAP metric)

$

54.71


$

55.19


$

55.82


$

55.43


$

56.79


















Calculation of Postpaid ARPA















Postpaid service revenues

$

586


$

597


$

608


$

607


$

635

Average number of postpaid accounts


1.68



1.66



1.66



1.68



1.69

Number of months in period


3



3



3



3



3


Postpaid ARPA (GAAP metric)

$

116.36


$

119.73


$

121.88


$

120.67


$

125.31


















Calculation of Postpaid ABPA















Postpaid service revenues

$

586


$

597


$

608


$

607


$

635

Equipment installment plan billings


152



142



139



138



131


Total billings to postpaid accounts

$

738


$

739


$

747


$

745


$

766

Average number of postpaid accounts


1.68



1.66



1.66



1.68



1.69

Number of months in period


3



3



3



3



3


Postpaid ABPA (Non-GAAP metric)

$

146.65


$

148.15


$

149.78


$

148.02


$

151.16

 

View original content:http://www.prnewswire.com/news-releases/tds-reports-third-quarter-2017-results-300551835.html

SOURCE Telephone and Data Systems, Inc.

Jane W. McCahon, Senior Vice President - Corporate Relations and Corporate Secretary, 312-592-5379, jane.mccahon@tdsinc.com; Julie D. Mathews, IRC, Director - Investor Relations, 312-592-5341, julie.mathews@tdsinc.com
Copyright © 2017 Telephone and Data Systems, Inc. All Rights Reserved.

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