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Jane McCahon

Senior Vice President - Corporate Relations

Phone: 312.592.5379
jane.mccahon@tdsinc.com
Full Contact Info

TDS reports strong third quarter 2018 results

11/02/2018
U.S. Cellular raises profitability guidance

CHICAGO, Nov. 2, 2018 /PRNewswire/ --

As previously announced, TDS will hold a teleconference November 2, 2018, at 9:30 a.m. CDT. 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 $1,297 million for the third quarter of 2018, versus $1,251 million for the same period one year ago. Net income available to TDS common shareholders and related diluted earnings per share were $46 million and $0.41, respectively, for the third quarter of 2018.  Excluding a $262 million ($190 million, net of tax and noncontrolling interests impacts) non-cash charge related to goodwill impairment recorded during the quarter ended September 30, 2017, net income available to TDS common shareholders and related diluted earnings per share were $9 million and $0.08, respectively.  Including the goodwill impairment charge recorded during the quarter ended September 30, 2017, TDS recorded a net loss available to TDS common shareholders and related diluted loss per share of $181 million and $1.64, respectively.

"We are pleased with the TDS Family of Companies' results this quarter," said LeRoy T. Carlson, Jr., TDS President and CEO. "U.S. Cellular increased revenues and profitability while continuing to make enhancements to its high-performing network. TDS Telecom grew total operating revenues through strong increases in broadband connections.

"Due to the continued success of the Total Plans, U.S. Cellular added postpaid handset customers in the quarter. Increased inbound roaming, higher device sales and increased postpaid average revenue per user (ARPU) drove revenue growth. During the quarter, more and more customers continued to choose unlimited plans, contributing to increased average revenue per user (ARPU).  Adjusted EBITDA increased 19% in the quarter, compared to a year ago, and U.S. Cellular raised its profitability guidance for the year. U.S. Cellular has enhanced its network with further commercial rollouts of VoLTE and it plans to deploy this technology in additional markets in 2019.

"At TDS Telecom, customer demand for faster broadband speeds and video connections generated higher wireline residential revenue per connection. The Wireline segment continued to see growth in revenues from fiber investments and through Federal A-CAM support. Cable operations produced another outstanding quarter, generating higher revenues through a continued increase in broadband connections - achieving the tenth consecutive quarter of double-digit cable broadband growth. TDS Telecom continues to advocate for full funding of the A-CAM program which will further close the digital divide. "

2018 Estimated Results

TDS' current estimates of full-year 2018 results for U.S. Cellular, TDS Telecom, and TDS are shown below.  Such estimates represent management's view as of November 2, 2018.  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.


2018 Estimated Results




U.S. Cellular


TDS Telecom (1)


TDS (1)(2)


Current (3)

Previous


Current (3)

Previous


Current (3)

Previous

(Dollars in millions)









Total operating revenues

$3,950-$4,000

$3,925-$4,025


$900-$950

Unchanged


$5,080-$5,180

$5,055-$5,205

Adjusted OIBDA (4)(5)

$760-$810

$700-$800


$290-$320

Unchanged


$1,045-$1,125

$985-$1,115

Adjusted EBITDA (4)

$925-$1,000

$850-$950


$300-$330

Unchanged


$1,220-$1,325

$1,145-$1,275

Capital expenditures

$500

$500-$550


$250

$270


$770

$790-$840

The following tables provide reconciliations of Net income to Adjusted OIBDA and Adjusted EBITDA for 2018 estimated results, actual results for the nine months ended September 30, 2018, and actual results for the year ended December 31, 2017. In providing 2018 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.


2018 Estimated Results




U.S. Cellular (3)


TDS Telecom (1)(3)


TDS (1)(2)(3)

(Dollars in millions)






Net income (GAAP)

N/A


N/A


N/A

Add back:






Income tax expense (benefit)

N/A


N/A


N/A

Income before income taxes (GAAP)

$175-$250


$80-$110


$155-$260

Add back:






Interest expense

115



175

Depreciation, amortization and accretion expense

645


220


900

EBITDA (Non-GAAP) (4)

$935-$1,010


$300-$330


$1,230-$1,335

Add back or deduct:






(Gain) loss on asset disposals, net

10



10

(Gain) loss on license sales and exchanges, net

(20)



(20)

Adjusted EBITDA (Non-GAAP) (4)

$925-$1,000


$300-$330


$1,220-$1,325

Deduct:






Equity in earnings of unconsolidated entities

150-175



150-175

Interest and dividend income

15


5


20

Other, net (6)


5


5

Adjusted OIBDA (Non-GAAP) (4)(5)

$760-$810


$290-$320


$1,045-$1,125

 


Actual Results



Nine Months Ended
September 30, 2018 (3)


Year Ended
December 31, 2017


U.S.

Cellular


TDS

Telecom (1)


TDS (1)(2)


U.S.

Cellular


TDS

Telecom (1)


TDS (1)(2)

(Dollars in millions)












Net income (GAAP)

$

143



$

73



$

155



$

15



$

138



$

157


Add back or deduct:












Income tax expense (benefit)

55



7



48



(287)



(13)



(279)


Income (loss) before income taxes (GAAP)

$

198



$

80



$

203



$

(272)



$

125



$

(122)


Add back:












Interest expense

87



(1)



129



113





170


Depreciation, amortization and accretion expense

478



160



662



615



195



844


EBITDA (Non-GAAP) (4)

$

763



$

238



$

994



$

456



$

319



$

892


Add back or deduct:












Loss on impairment of goodwill







370





262


(Gain) loss on asset disposals, net

5



(2)



3



17



3



21


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







(1)





(1)


(Gain) loss on license sales and exchanges, net

(18)





(18)



(22)





(22)


Adjusted EBITDA (Non-GAAP) (4)

$

750



$

236



$

979



$

820



$

323



$

1,152


Deduct:












Equity in earnings of unconsolidated entities

120





121



137





137


Interest and dividend income

10



5



18



8



5



15


Other, net (6)



2



1





3



4


Adjusted OIBDA (Non-GAAP) (4)(5)

$

620



$

229



$

839



$

675



$

314



$

996



Note: Totals may not foot due to rounding differences.



(1)

TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, has changed its reportable segments.  Effective January 1, 2018, HMS is no longer reported under TDS Telecom.  Prior periods have been recast to conform to the revised presentation.

(2)

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments (including HMS as indicated in Note (1) above).

(3)

As of January 1, 2018, TDS adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach.  Under this method, the new accounting standard is applied only to the most recent period presented.  As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported, except as specifically stated.

(4)

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above.  EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.  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 EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income (loss) before income taxes.

(5)

Additional information and reconciliations related to Non-GAAP financial measures for September 30, 2018, can be found on TDS' website at investors.tdsinc.com.

(6)

ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted as of January 1, 2018, and applied retrospectively.  All prior period numbers have been recast to conform to this standard.

Conference Call Information
TDS will hold a conference call on November 2, 2018 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, BendBroadband and OneNeck IT Solutions. Founded in 1969 and headquartered in Chicago, TDS employed 9,600 people as of September 30, 2018.

Visit investors.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

9/30/2018 (1)


6/30/2018 (1)


3/31/2018 (1)


12/31/2017


9/30/2017

Retail Connections










Postpaid










Total at end of period

4,466,000



4,468,000



4,481,000



4,518,000



4,513,000


Gross additions

172,000



146,000



129,000



177,000



191,000


Feature phones

3,000



5,000



5,000



5,000



7,000


Smartphones

130,000



106,000



91,000



128,000



132,000


Connected devices

39,000



35,000



33,000



44,000



52,000


Net additions (losses)

(1,000)



(13,000)



(37,000)



5,000



35,000


Feature phones

(14,000)



(12,000)



(15,000)



(15,000)



(15,000)


Smartphones

29,000



17,000



(1,000)



33,000



44,000


Connected devices

(16,000)



(18,000)



(21,000)



(13,000)



6,000


ARPU (2)

$

45.31



$

44.74



$

44.34



$

44.12



$

43.41


ABPU (Non-GAAP) (3)

$

59.41



$

57.75



$

57.10



$

56.69



$

54.71


ARPA (4)

$

119.42



$

118.57



$

118.22



$

118.05



$

116.36


ABPA (Non-GAAP) (5)

$

156.57



$

153.03



$

152.26



$

151.68



$

146.65


Churn rate (6)

1.29

%


1.19

%


1.23

%


1.27

%


1.16

%

Handsets

1.02

%


0.92

%


0.97

%


1.00

%


0.96

%

Connected devices

3.04

%


2.85

%


2.79

%


2.84

%


2.33

%

Prepaid










Total at end of period

528,000



527,000



525,000



519,000



515,000


Gross additions

80,000



78,000



88,000



83,000



102,000


Net additions

1,000



2,000



6,000



4,000



31,000


ARPU (2)

$

32.09



$

32.32



$

31.78



$

32.42



$

33.12


Churn rate (6)

4.98

%


4.83

%


5.27

%


5.09

%


4.75

%

Total connections at end of period (7)

5,050,000



5,051,000



5,063,000



5,096,000



5,089,000


Market penetration at end of period










Consolidated operating population

31,469,000



31,469,000



31,469,000



31,834,000



31,834,000


Consolidated operating penetration (8)

16

%


16

%


16

%


16

%


16

%

Capital expenditures (millions)

$

118



$

86



$

70



$

213



$

112


Total cell sites in service

6,506



6,478



6,473



6,460



6,436


Owned towers

4,119



4,105



4,099



4,080



4,051




(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach.  Under this method, the new accounting standard is applied only to the most recent period presented.  As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.

(2)

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.

(3)

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.

(4)

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.

(5)

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.

(6)

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.

(7)

Includes reseller and other connections.

(8)

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

9/30/2018


6/30/2018


3/31/2018


12/31/2017


9/30/2017

TDS Telecom










Wireline










Residential connections










Voice (1)

278,400



282,200



286,000



290,600



298,200


Broadband (2)

237,100



234,300



230,500



228,600



229,900


Video (3)

53,100



51,500



50,300



48,600



47,200


Wireline residential connections

568,600



568,000



566,900



567,700



575,300












Total residential revenue per connection (4)

$

47.30



$

47.22



$

47.04



$

46.21



$

46.07












Commercial connections










Voice (1)

134,000



137,300



140,100



143,000



146,900


Broadband (2)

20,700



20,600



20,600



20,600



20,900


managedIP (5)

138,000



141,400



143,000



146,500



147,600


Video (3)

400



400



400






Wireline commercial connections

293,100



299,600



304,000



310,100



315,300












Total Wireline connections

861,700



867,700



870,900



877,800



890,700












Cable










Cable Connections










Broadband (6)

163,600



159,400



156,800



153,300



143,800


Video (7)

102,100



101,600



100,700



101,800



97,900


Voice (8)

63,600



62,000



60,600



59,700



58,500


managedIP (5)

700



700



600



400



400


Cable connections

330,100



323,700



318,700



315,100



300,600






















Note: Totals may not foot due to rounding differences.



(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.

(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

9/30/2018


6/30/2018


3/31/2018


12/31/2017


9/30/2017

(Dollars in millions)










Wireline

$

41



$

33



$

29



$

55



$

41


Cable

13



13



11



20



14


Total TDS Telecom (1)

$

54



$

46



$

40



$

74



$

56



Note: Totals may not foot due to rounding differences.



(1)

TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, has changed its reportable segments.  Effective January 1, 2018, HMS is no longer reported under TDS Telecom.  Prior periods have been recast to conform to the revised presentation.

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)



Three Months Ended
September 30


Nine Months Ended
September 30,


2018 (1)


2017


2018

vs. 2017


2018 (1)


2017


2018
vs. 2017

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












Operating revenues












U.S. Cellular

$

1,001



$

963



4

%


$

2,916



$

2,862



2

%

TDS Telecom (2)

234



230



2

%


695



690



1

%

All Other (2)(3)

62



58



6

%


166



184



(10)

%


1,297



1,251



4

%


3,777



3,736



1

%

Operating expenses












U.S. Cellular












Expenses excluding depreciation, amortization and accretion

804



796



1

%


2,296



2,339



(2)

%

Depreciation, amortization and accretion

160



153



4

%


478



460



4

%

Loss on impairment of goodwill (4)



370



N/M




370



N/M

(Gain) loss on asset disposals, net

3



5



(36)

%


5



14



(61)

%

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



(1)



N/M




(1)



N/M

(Gain) loss on license sales and exchanges, net





N/M


(18)



(19)



6

%


967



1,323



(27)

%


2,761



3,163



(13)

%

TDS Telecom (2)












Expenses excluding depreciation, amortization and accretion (5)

157



154



2

%


466



453



3

%

Depreciation, amortization and accretion

53



49



8

%


160



146



10

%

(Gain) loss on asset disposals, net

(3)



1



N/M


(2)



2



N/M


206



203



2

%


624



601



4

%

All Other (2)(3)












Expenses excluding depreciation and amortization (5)

65



58



10

%


176



179



(2)

%

Depreciation and amortization

7



7



(6)

%


24



26



(5)

%

Loss on impairment of goodwill (4)



(108)



N/M




(108)



N/M


73



(42)



N/M


200



97



N/M

Total operating expenses

1,246



1,484



(16)

%


3,585



3,861



(7)

%

Operating income (loss)












U.S. Cellular

34



(360)



N/M


155



(301)



N/M

TDS Telecom (2)(5)

28



27



1

%


71



88



(20)

%

All Other (2)(3)(5)

(11)



100



N/M


(34)



88



N/M


51



(233)



N/M


192



(125)



N/M

Investment and other income (expense)












Equity in earnings of unconsolidated entities

42



35



19

%


121



101



20

%

Interest and dividend income

6



4



56

%


18



12



51

%

Interest expense

(43)



(43)




(129)



(128)



(1)

%

Other, net (5)

2



1



N/M


1



3



(32)

%

Total investment and other income (expense) (5)

7



(3)



N/M


11



(12)



N/M

Income (loss) before income taxes

58



(236)



N/M


203



(137)



N/M

Income tax expense (benefit)

5



(5)



N/M


48



39



24

%

Net income (loss)

53



(231)



N/M


155



(176)



N/M

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

7



(50)



N/M


36



(42)



N/M

Net income (loss) available to TDS common shareholders

$

46



$

(181)



N/M


$

119



$

(134)



N/M













Basic weighted average shares outstanding

112



111



2

%


112



111



1

%

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

$

0.41



$

(1.64)



N/M


$

1.06



$

(1.21)



N/M













Diluted weighted average shares outstanding

114



111



3

%


113



111



2

%

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

$

0.41



$

(1.64)



N/M


$

1.04



$

(1.21)



N/M


N/M - Percentage change not meaningful.


Note: Totals may not foot due to rounding differences.


End Notes (1) (2) (3) (4) (5) — Explained on page 11 of the release.

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)



Nine Months Ended
September 30,


2018 (1)


2017

(Dollars in millions)




Cash flows from operating activities




Net income (loss)

$

155



$

(176)


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




Depreciation, amortization and accretion

662



632


Bad debts expense

71



68


Stock-based compensation expense

37



34


Deferred income taxes, net

31



(23)


Equity in earnings of unconsolidated entities

(121)



(101)


Distributions from unconsolidated entities

91



85


Loss on impairment of goodwill



262


(Gain) loss on asset disposals, net

3



16


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



(1)


(Gain) loss on license sales and exchanges, net

(18)



(19)


Noncash interest

3



2


Changes in assets and liabilities from operations




Accounts receivable

(5)



(6)


Equipment installment plans receivable

(88)



(164)


Inventory

13



44


Accounts payable

13



(59)


Customer deposits and deferred revenues

(7)



(16)


Accrued taxes

(3)



41


Accrued interest

11



11


Other assets and liabilities

(36)



(9)


Net cash provided by operating activities

812



621






Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(447)



(398)


Cash paid for acquisitions and licenses

(10)



(200)


Cash received for investments

100




Cash paid for investments



(100)


Cash received from divestitures and exchanges

28



19


Other investing activities

4



1


Net cash used in investing activities

(325)



(678)






Cash flows from financing activities




Repayment of long-term debt

(15)



(9)


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

27



(1)


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

7




Repurchase of TDS Preferred Shares



(1)


Dividends paid to TDS shareholders

(54)



(51)


Payment of debt issuance costs

(2)




Distributions to noncontrolling interests

(5)



(2)


Other financing activities



5


Net cash used in financing activities

(42)



(59)






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

445



(116)






Cash, cash equivalents and restricted cash




Beginning of period

622



904


End of period

$

1,067



$

788



End Note (1) — Explained on page 11 of the release.

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS



September 30,
2018
(1)


December 31,
2017

(Dollars in millions)




Current assets




Cash and cash equivalents

$

1,062



$

619


Short-term investments



100


Accounts receivable

1,058



961


Inventory, net

132



145


Prepaid expenses

102



112


Income taxes receivable

3



2


Other current assets

30



27


Total current assets

2,387



1,966






Assets held for sale

42



10






Licenses

2,198



2,232


Goodwill

509



509


Other intangible assets, net

260



279


Investments in unconsolidated entities

500



453






Property, plant and equipment, net

3,229



3,424






Other assets and deferred charges

594



422






Total assets

$

9,719



$

9,295


 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY



September 30,
2018
(1)


December 31,
2017

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$

20



$

20


Accounts payable

365



368


Customer deposits and deferred revenues

182



223


Accrued interest

22



11


Accrued taxes

55



64


Accrued compensation

115



126


Other current liabilities

93



106


Total current liabilities

852



918






Deferred liabilities and credits




Deferred income tax liability, net

642



552


Other deferred liabilities and credits

542



495






Long-term debt, net

2,422



2,437






Noncontrolling interests with redemption features

11



1






Equity




TDS shareholders' equity




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

1



1


Capital in excess of par value

2,424



2,413


Treasury shares, at cost

(563)



(669)


Accumulated other comprehensive loss

(3)



(1)


Retained earnings

2,683



2,525


Total TDS shareholders' equity

4,542



4,269






Noncontrolling interests

708



623






Total equity

5,250



4,892






Total liabilities and equity

$

9,719



$

9,295




(1)

As of January 1, 2018, TDS adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported, except as specifically stated.

(2)

TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, has changed its reportable segments.  Effective January 1, 2018, HMS is no longer reported under TDS Telecom.  Prior periods have been recast to conform to the revised presentation.

(3)

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

(4)

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 of the U.S. Cellular reporting unit was impaired at the TDS level in 2003 but not at U.S. Cellular.  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.  The TDS adjustment of $143 million is included in "All other".  During the three months ended September 30, 2017, TDS also recorded a goodwill impairment of $35 million related to its HMS operations included in "All other".

(5)

ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted January 1, 2018, and applied retrospectively.  All prior period numbers have been recast to conform to this standard.

 

Balance Sheet Highlights

(Unaudited)




September 30, 2018


U.S.


TDS


TDS
Corporate


Intercompany


TDS


Cellular


Telecom


& Other


Eliminations


Consolidated

(Dollars in millions)










Cash and cash equivalents

$

730



$

23



$

309



$



$

1,062


Affiliated cash investments



427





(427)





$

730



$

450



$

309



$

(427)



$

1,062












Licenses, goodwill and other intangible assets

$

2,189



$

759



$

19



$



$

2,967


Investment in unconsolidated entities

461



4



42



(7)



500



$

2,650



$

763



$

61



$

(7)



$

3,467












Property, plant and equipment, net

$

2,126



$

973



$

130



$



$

3,229












Long-term debt, net:










Current portion

$

19



$

1



$



$



$

20


Non-current portion

1,609



2



811





2,422



$

1,628



$

3



$

811



$



$

2,442


 

TDS Telecom Highlights

(Unaudited)






Three Months Ended
September 30,


Nine Months Ended
September 30,


2018 (1)


2017


2018 vs.
2017


2018 (1)


2017


2018 vs.
2017

(Dollars in millions)












Wireline












Operating revenues












Residential

$

81



$

80



1

%


$

241



$

240



1

%

Commercial

46



50



(8)

%


140



151



(7)

%

Wholesale

50



49



2

%


144



147



(2)

%

Total service revenues

176



178



(1)

%


524



537



(2)

%

Equipment and product sales





15

%


1



1



31

%


177



179



(1)

%


526



538



(2)

%

Operating expenses












Cost of services

68



66



4

%


200



194



3

%

Cost of equipment and products





(35)

%


1



2



(33)

%

Selling, general and administrative expenses (2)

49



49



(1)

%


146



147



(1)

%

Expenses excluding depreciation, amortization and accretion

118



115



2

%


346



343



1

%

Depreciation, amortization and accretion

35



38



(6)

%


108



114



(5)

%

(Gain) loss on asset disposals, net

(4)





N/M


(3)



1



N/M


149



153



(3)

%


451



457



(1)

%

Operating income (2)

$

28



$

25



9

%


$

75



$

81



(8)

%













Cable












Operating revenues












Residential

$

47



$

43



11

%


$

140



$

125



12

%

Commercial

10



9



14

%


30



27



11

%


58



52



11

%


170



152



12

%

Operating expenses












Cost of services

26



25



2

%


78



73



7

%

Selling, general and administrative expenses

14



13



7

%


42



39



9

%

Expenses excluding depreciation, amortization and accretion

40



38



4

%


120



112



8

%

Depreciation, amortization and accretion

17



11



56

%


52



32



63

%

(Gain) loss on asset disposals, net

1



1



16

%


1



1



(9)

%


58



50



16

%


174



145



20

%

Operating income (loss)

$



$

2



N/M


$

(4)



$

7



N/M













Total TDS Telecom operating income (2)(3)

$

28



$

27



1

%


$

71



$

88



(20)

%


N/M - Percentage change not meaningful.


Note: Totals may not foot due to rounding differences.



(1)

As of January 1, 2018, TDS adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported, except as specifically stated.

(2)

ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted as of January 1, 2018, and applied retrospectively.  All prior period numbers have been recast to conform to this standard.

(3)

TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, has changed its reportable segments.  Effective January 1, 2018, HMS is no longer reported under TDS Telecom.  Prior periods have been recast to conform to the revised presentation.

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations


Free Cash Flow


Three Months Ended
September 30,


Nine Months Ended
September 30,


2018


2017


2018


2017

(Dollars in millions)








Cash flows from operating activities (GAAP)

$

349



$

263



$

812



$

621


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

171



156



447



398


Free cash flow (Non-GAAP) (1)

$

178



$

107



$

365



$

223




(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 (loss) 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,


2018


2017


2018


2017

(Dollars in millions, except per share amounts)








Net income (loss) available to TDS common shareholders (GAAP)

$

46



$

(181)



$

119



$

(134)


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)


Subtotal of Non-GAAP adjustments



190





190


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

$

46



$

9



$

119



$

56










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

$

0.41



$

(1.64)



$

1.04



$

(1.21)


Adjustments:








Adjustment to weighted average diluted shares (2)



0.02





0.01


Loss in 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)

$

0.41



$

0.08



$

1.04



$

0.50










Diluted weighted average shares outstanding (GAAP)

114



111



113



111


Adjustment to weighted average diluted shares (2)



1





1


Adjusted diluted weighted average shares (Non-GAAP)

$

114



$

112



$

113



$

112




(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 herein, 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

9/30/2018(1)


6/30/2018(1)


3/31/2018(1)


12/31/2017


9/30/2017

(Dollars and connection counts in millions)










Calculation of Postpaid ARPU










Postpaid service revenues

$

607



$

600



$

598



$

598



$

586


Average number of postpaid connections

4.47



4.47



4.50



4.52



4.50


Number of months in period

3



3



3



3



3


Postpaid ARPU (GAAP metric)

$

45.31



$

44.74



$

44.34



$

44.12



$

43.41












Calculation of Postpaid ABPU










Postpaid service revenues

$

607



$

600



$

598



$

598



$

586


Equipment installment plan billings

189



174



172



170



152


Total billings to postpaid connections

$

796



$

774



$

770



$

768



$

738


Average number of postpaid connections

4.47



4.47



4.50



4.52



4.50


Number of months in period

3



3



3



3



3


Postpaid ABPU (Non-GAAP metric)

$

59.41



$

57.75



$

57.10



$

56.69



$

54.71












Calculation of Postpaid ARPA










Postpaid service revenues

$

607



$

600



$

598



$

598



$

586


Average number of postpaid accounts

1.70



1.69



1.69



1.69



1.68


Number of months in period

3



3



3



3



3


Postpaid ARPA (GAAP metric)

$

119.42



$

118.57



$

118.22



$

118.05



$

116.36












Calculation of Postpaid ABPA










Postpaid service revenues

$

607



$

600



$

598



$

598



$

586


Equipment installment plan billings

189



174



172



170



152


Total billings to postpaid accounts

$

796



$

774



$

770



$

768



$

738


Average number of postpaid accounts

1.70



1.69



1.69



1.69



1.68


Number of months in period

3



3



3



3



3


Postpaid ABPA (Non-GAAP metric)

$

156.57



$

153.03



$

152.26



$

151.68



$

146.65



Numbers may not foot due to rounding.



(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.

 

Cision View original content:http://www.prnewswire.com/news-releases/tds-reports-strong-third-quarter-2018-results-300743024.html

SOURCE Telephone and Data Systems, Inc.

Copyright © 2017 Telephone and Data Systems, Inc. All Rights Reserved.

Stock Quote: NYSE

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Dec 17, 2018 12:35 PM

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Dec 17, 2018 12:35 PM
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