News Details

TDS reports third quarter 2016 results

11/04/2016

2016 guidance reaffirmed
As previously announced, TDS will hold a teleconference Nov. 4, 2016, at 9:30 a.m. CDT. Listen to the call live via the Events & Presentations page of investors.tdsinc.com.

CHICAGO, Nov. 4, 2016 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,301 million for the third quarter of 2016, versus $1,374 million for the same period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $13 million and $0.11, respectively, for the third quarter of 2016, compared to $51 million and $0.46, respectively, in the same period one year ago.

Note:  In the third quarter of 2016, U.S. Cellular terminated a naming rights agreement and recognized a charge of $13 million while, in the third quarter of 2015, U.S. Cellular discontinued its loyalty rewards program and recognized $58 million in service revenues.

"Each of our businesses continued working toward their long-term objectives," said LeRoy T. Carlson, Jr., TDS president and CEO. "U.S. Cellular achieved strong customer loyalty and TDS Telecom grew residential broadband customers in both wireline and cable.

"U.S. Cellular grew its total customer base with strong prepaid additions. With rising customer adoption of equipment installment plans (EIP), equipment revenue showed solid growth. U.S. Cellular is enhancing its already high-quality network by investing in new technology like Voice over LTE (VoLTE), and is on track to roll out the first commercial launch of VoLTE for some of its customers early next year.

"TDS Telecom's wireline operations drove a significant increase in IPTV subscribers, which combined with growth in broadband data connections and customer demand for faster data speeds, generated higher residential revenues.  TDS Telecom's cable operations rapidly added residential broadband and voice connections, achieving increased operating revenues. OneNeck IT Solutions continues to focus on increasing recurring revenues in hosted and managed services, especially cloud and colocations services."

2016 Estimated Results
Current estimates of full-year 2016 results for U.S. Cellular, TDS Telecom, and TDS, which are unchanged from the previous estimates, are shown below.  Such estimates represent management's view as of November 4, 2016.  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.



2016 Estimated Results
















U.S. Cellular


TDS Telecom


TDS(2)



Current

Previous


Current

Previous


Current

Previous

(Dollars in millions)












Total operating revenues

$3,900-$4,100

Unchanged


$1,130-$1,180

Unchanged


$5,040-$5,290

Unchanged

Operating cash flow (1)

$525-$650

Unchanged


$270-$310

Unchanged


$800-$965

Unchanged

Adjusted EBITDA (1)

$725-$850

Unchanged


$270-$310

Unchanged


$1,000-$1,165

Unchanged

Capital expenditures (Approximately)

$

500

Unchanged


$

180

Unchanged


$

695

Unchanged

 

The following tables provide a reconciliation to Operating Cash Flow and Adjusted EBITDA for 2016 estimated results, and actual results for the nine months ended September 30, 2016 and year ended December 31, 2015. In providing 2016 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.

 






2016 Estimated Results


















U.S. Cellular



TDS Telecom



TDS(2)

(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)


$

(5)-120


$

40-80


$

(25)-140

Add back:











Interest expense



110





165


Depreciation, amortization and accretion expense













615



230



855

EBITDA (Non-GAAP)


$

720-845


$

270-310


$

995-1,160

Add back:











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


















(Gain) loss on license sales and exchanges, net













(15)





(15)


(Gain) loss on asset disposals, net



20





20

Adjusted EBITDA (Non-GAAP) (1)


$

725-850


$

270-310


$

1,000-1,165

Deduct:











Equity in earnings of unconsolidated entities













140





140


Interest and dividend income



60





60

Operating cash flow (Non-GAAP) (1)


$

525-650


$

270-310


$

800-965

 





Actual Results


























Nine Months Ended September 30, 2016


Year ended December 31, 2015





U.S.
Cellular


TDS
Telecom


TDS (2)


U.S.
Cellular*


TDS
Telecom


TDS (2)*

(Dollars in millions)













Net income (GAAP)


$

54


$

32


$

58


$

247


$

46


$

263

Add back:














Income tax expense



39



20



45



156



35



172

Income before income taxes




















(GAAP)


$

93


$

53


$

103


$

404


$

81


$

435

Add back:














Interest expense



84



2



127



86



1



142


Depreciation, amortization and





















accretion expense



462



168



636



606



228



844

EBITDA (Non-GAAP)


$

639


$

223


$

866


$

1,096


$

310


$

1,421

Add back:




















(Gain) loss on sale of business and





















other exit costs, net







(1)



(114)



(10)



(136)


(Gain) loss on license sales and





















exchanges, net



(16)





(16)



(147)





(147)


(Gain) loss on asset disposals, net



16



4



20



16



6



22

Adjusted EBITDA (Non-GAAP) (1)


$

639


$

226


$

869


$

852


$

306


$

1,160

Deduct:




















Equity in earnings of unconsolidated





















entities



110





109



140





140


Interest and dividend income



41



2



44



37



2



39


Other, net







1







Operating cash flow (Non-GAAP) (1)(3)


$

488


$

225


$

715


$

675


$

304


$

981






















* Includes $58 million of revenue related to termination of the rewards points program.

Note: Totals may not foot due to rounding differences.


(1)

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) is defined as net income adjusted for the items set forth in the reconciliation above.  Operating cash flow is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted EBITDA and Operating cash flow 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 measure 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 Operating cash flow as measurements of profitability, and therefore reconciliations to applicable GAAP income measures are deemed appropriate.  Management believes Adjusted EBITDA and Operating cash flow are useful measures of TDS' 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 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 Operating cash flow 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 Operating cash flow to the corresponding GAAP measure, Net income or Income (loss) before income taxes.



(2)

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.



(3)

A reconciliation of Operating cash flow (Non-GAAP) to Operating income (GAAP) for September 30, 2016 actual results can be found on the company's website at investors.tdsinc.com.

 

Stock Repurchase Summary
TDS began repurchasing stock under its $250 million repurchase authorization on Aug. 5, 2013.   The following represents repurchases of TDS Common Shares.  

Repurchase Period


# Shares


Cost (in millions)

2016 (year-to-date through September 30, 2016)


111,700


$

3

2015 (full year)



$

Total


111,700


$

3

 

Conference Call Information
TDS will hold a conference call on November 4, 2016 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 500® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6 million customers nationwide through its businesses, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,400 people as of September 30, 2016.

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 overall economy; 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 afforded 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 products and services 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

9/30/2016


6/30/2016


3/31/2016



12/31/2015


9/30/2015

Retail Connections















Postpaid

















Total at end of period


4,484,000



4,490,000



4,454,000



4,409,000



4,341,000



Gross additions


174,000



197,000



215,000



240,000



200,000




Feature phones


10,000



8,000



9,000



10,000



14,000




Smartphones


105,000



107,000



124,000



132,000



119,000




Connected devices


59,000



82,000



82,000



98,000



67,000



Net additions (losses)


(6,000)



36,000



45,000



68,000



17,000




Feature phones


(20,000)



(21,000)



(25,000)



(25,000)



(28,000)




Smartphones


(7,000)



8,000



20,000



23,000



6,000




Connected devices


21,000



49,000



50,000



70,000



39,000



ARPU (1)(8)

$

47.08


$

47.37


$

48.13


$

51.46


$

58.12



ABPU (Non-GAAP)(2)(8)

$

56.79


$

56.09


$

56.06


$

58.57


$

63.88



ARPA (3)(8)

$

125.31


$

124.91


$

125.36


$

131.96


$

147.00



ABPA (Non-GAAP)(4)(8)

$

151.16


$

147.90


$

145.99


$

150.19


$

161.57



Churn rate (5)


1.34%



1.20%



1.28%



1.31%



1.41%




Handsets


1.22%



1.10%



1.18%



1.23%



1.33%




Connected devices


2.04%



1.84%



2.01%



1.95%



2.20%



Smartphone penetration (6)


78%



77%



75%



74%



72%


Prepaid

















Total at end of period


480,000



413,000



399,000



387,000



380,000



Gross additions


132,000



73,000



75,000



69,000



71,000



Net additions (losses)


67,000



14,000



12,000



7,000



12,000



ARPU (1)

$

34.39


$

34.58


$

35.51


$

35.54


$

35.64



Churn rate (5)


4.84%



4.86%



5.37%



5.40%



5.24%

Total connections at end of period (9)


5,030,000



4,973,000



4,926,000



4,876,000



4,807,000

Smartphones sold as a percent of total

handsets sold
















92%



91%



92%



91%



87%

Market penetration at end of period
















Consolidated operating population


31,994,000



31,994,000



31,994,000



31,967,000



31,814,000


Consolidated operating penetration (7)


16%



16%



15%



15%



15%

Capital expenditures (millions)

$

103


$

93


$

79


$

198


$

135

Total cell sites in service


6,374



6,324



6,306



6,297



6,246

Owned towers


4,015



3,988



3,989



3,978



3,957





















(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)

Smartphone penetration is calculated by dividing postpaid smartphone connections by postpaid handset 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.

(8)

The quarter ended September 30, 2015 results include the recognition of $58 million in revenue due to the discontinuation of the loyalty rewards points program.  The discontinuation had the effect of increasing ARPU/ABPU and ARPA/ABPA by $4.48 and $11.34 for the three months ended September 2015, respectively.

(9)

Includes reseller and other connections.

 

TDS Telecom

Summary Operating Data (Unaudited)


Quarter Ended

9/30/2016


6/30/2016


3/31/2016


12/31/2015


9/30/2015

TDS Telecom















Wireline
















Residential connections

















Voice (1)


314,600



316,800



318,400



319,800



325,900



Broadband (2)


232,800



232,200



229,100



228,500



231,600



IPTV (3)


43,600



41,200



38,300



34,400



30,300



   Wireline residential connections


590,900



590,200



585,800



582,700



587,800



















Total residential revenue per connection (4)

$

44.25


$

43.67


$

43.28


$

41.24


$

42.83



















Commercial connections

















Voice (1)


160,900



164,000



167,400



171,500



176,700



Broadband (2)


21,700



21,900



22,000



22,400



23,000



managedIP (5)


151,500



149,000



148,500



147,100



145,900



   Wireline commercial connections


334,000



334,900



337,900



341,000



345,600



















Total Wireline connections


924,900



925,100



923,700



923,700



933,400


















Cable
















Cable Connections

















Video (6)


101,100



102,900



104,600



106,800



108,300



Broadband (7)


130,200



125,700



121,700



117,100



114,600



Voice (8)


59,800



58,900



58,100



56,400



54,000



   Cable connections


291,000



287,600



284,400



280,300



276,900


















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 total 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)

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.

(7)

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

(8)

Billable number of lines into a building for voice services.

 

TDS Telecom

Capital Expenditures (millions)











Quarter Ended

9/30/2016


6/30/2016


3/31/2016


12/31/2015


9/30/2015

Wireline

$

27


$

27


$

27


$

50


$

38

Cable


11



17



13



15



13

HMS


2



2



2



8



5


$

40


$

46


$

42


$

73


$

56

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)





Three Months Ended September 30,





2016


2015


2016 vs. 2015







Increase (Decrease)

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











Operating revenues












U.S. Cellular

$

1,010


$

1,069


$

(59)


(6)%


TDS Telecom


287



299



(12)


(4)%


All Other (1)


4



6



(2)


(37)%






1,301



1,374



(73)


(5)%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and

accretion














846



861



(15)


(2)%



Depreciation, amortization and accretion


155



152



3


2%



(Gain) loss on asset disposals, net


7



3



4


>100%



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




(1)



1


N/M



(Gain) loss on license sales and exchanges, net


(7)



(24)



17


70%






1,001



991



10


1%


TDS Telecom













Expenses excluding depreciation, amortization and

accretion














217



224



(6)


(3)%



Depreciation, amortization and accretion


57



57




-



(Gain) loss on asset disposals, net


2



2



(1)


(30)%



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







N/M






276



282



(7)


(2)%


All Other (1)













Expenses excluding depreciation and amortization


4



6



(2)


(41)%



Depreciation and amortization


2



2




(6)%



(Gain) loss on asset disposals, net


(1)





(1)


>100%



(Gain) loss on sale of business and other exit costs, net (2)







>(100)%






5



8



(3)


(38)%


















Total operating expenses


1,281



1,281




-

Operating income (loss)












U.S. Cellular


9



78



(69)


(88)%


TDS Telecom


12



17



(5)


(32)%


All Other (1)


(1)



(2)



1


41%






20



93



(73)


(79)%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


38



40



(2)


(5)%


Interest and dividend income


15



10



5


56%


Interest expense


(42)



(35)



(7)


(20)%


Other, net


(1)





(1)


>100%



Total investment and other income


10



15



(5)


(25)%

Income before income taxes


30



108



(78)


(72)%


Income tax expense


14



46



(32)


(69)%

Net income


16



62



(46)


(74)%


Less: Net income attributable to noncontrolling

interests, net of tax













3



11



(8)


(70)%

Net income attributable to TDS shareholders


13



51



(38)


(75)%


TDS Preferred dividend requirement







-

Net income available to common shareholders

$

13


$

51


$

(38)


(75)%















Basic weighted average shares outstanding


110



109



1


1%

Basic earnings per share attributable to TDS shareholders

$

0.12


$

0.47


$

(0.35)


(75)%















Diluted weighted average shares outstanding


111



110



1


1%

Diluted earnings per share attributable to TDS shareholders

$

0.11


$

0.46


$

(0.35)


(75)%















(1)

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

N/M – Percentage change not meaningful

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)





Nine Months Ended September 30,





2016


2015


2016 vs. 2015







Increase (Decrease)

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











Operating revenues












U.S. Cellular

$

2,948


$

3,010


$

(62)


(2)%


TDS Telecom


868



874



(6)


(1)%


All Other (1)


10



18



(8)


(43)%






3,826



3,902



(76)


(2)%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and

accretion














2,460



2,472



(12)


-



Depreciation, amortization and accretion


462



450



12


3%



(Gain) loss on asset disposals, net


16



12



4


33%



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




(114)



114


100%



(Gain) loss on license sales and exchanges, net


(16)



(147)



131


89%






2,922



2,673



249


9%


TDS Telecom













Expenses excluding depreciation, amortization and accretion














644



640



3


1%



Depreciation, amortization and accretion


168



170



(2)


(1)%



(Gain) loss on asset disposals, net


4



3



1


28%



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




(3)



3


>100%






816



810



5


1%


All Other (1)













Expenses excluding depreciation and amortization


8



16



(8)


(50)%



Depreciation and amortization


6



8



(2)


(32)%



(Gain) loss on sale of business and other exit costs, net (2)


(1)



(13)



12


96%






13



11



2


25%


















Total operating expenses


3,750



3,494



256


7%

Operating income (loss)












U.S. Cellular (3)


26



337



(311)


(92)%


TDS Telecom


53



64



(11)


(17)%


All Other (1)


(3)



7



(10)


>(100)%






76



408



(332)


(81)%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


109



110



(1)


(1)%


Interest and dividend income


44



28



16


57%


Interest expense


(127)



(103)



(24)


(23)%


Other, net


1





1


>(100)%



Total investment and other income


27



35



(8)


(24)%

Income before income taxes


103



443



(340)


(77)%


Income tax expense


45



178



(133)


(75)%

Net income


58



265



(207)


(78)%


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













9



45



(36)


(79)%

Net income attributable to TDS shareholders


49



220



(171)


(78)%


TDS Preferred dividend requirement







-

Net income available to common shareholders

$

49


$

220


$

(171)


(78)%















Basic weighted average shares outstanding


110



109



1


N/M

Basic earnings per share attributable to TDS shareholders

$

0.44


$

2.03


$

(1.58)


(78)%

Diluted weighted average shares outstanding


111



110



1


N/M

Diluted earnings per share attributable to TDS shareholders

$

0.44


$

1.99


$

(1.55)


(78)%















(1)

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

(2)

Compared to U.S. Cellular, TDS recognized an incremental gain of $12 million on the tower sale as a result of a lower basis in the assets disposed in 2015.

(3)

Year-over-year comparisons are affected by gains of $252 million from sales and exchanges of businesses and licenses in 2015.

N/M – Percentage change not meaningful

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)







Nine Months Ended September 30,







2016


2015

(Dollars in millions)






Cash flows from operating activities







Net income

$

58


$

265



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










Depreciation, amortization and accretion


636



628





Bad debts expense


72



83





Stock-based compensation expense


29



29





Deferred income taxes, net


11



(40)





Equity in earnings of unconsolidated entities


(109)



(110)





Distributions from unconsolidated entities


55



45





(Gain) loss on asset disposals, net


20



15





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


(1)



(130)





(Gain) loss on license sales and exchanges, net


(16)



(147)





Noncash interest expense


2



2





Other operating activities


(3)



(1)



Changes in assets and liabilities from operations










Accounts receivable


(9)



(94)





Equipment installment plans receivable


(160)



(96)





Inventory


3



90





Accounts payable


47



125





Customer deposits and deferred revenues


(41)



(50)





Accrued taxes


77



212





Accrued interest


7



11





Other assets and liabilities


(40)



(110)






Net cash provided by operating activities


638



727












Cash flows from investing activities







Cash used for additions to property, plant and equipment


(426)



(558)


Cash paid for acquisitions and licenses


(46)



(287)


Cash received from divestitures and exchanges


20



325


Federal Communications Commission deposit


(143)




Other investing activities


1



6






Net cash used in investing activities


(594)



(514)












Cash flows from financing activities







Issuance of long-term debt


2



225


Repayment of long-term debt


(9)



(1)


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


7



11


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


4



(1)


Repurchase of TDS Common Shares


(3)




Repurchase of U.S. Cellular Common Shares


(2)



(4)


Dividends paid to TDS shareholders


(49)



(46)


Payment of debt issuance costs


(4)



(3)


Distributions to noncontrolling interests


(1)



(6)


Other financing activities


11



5






Net cash provided by (used in) financing activities


(44)



180












Net increase (decrease) in cash and cash equivalents




393












Cash and cash equivalents







Beginning of period


985



472


End of period

$

985


$

865

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)







ASSETS
















September 30,


December 31,




2016


2015

(Dollars in millions)






Current assets







Cash and cash equivalents

$

985


$

985


Accounts receivable from customers and others, net


824



803


Inventory, net


148



158


Prepaid expenses


113



112


Income taxes receivable


6



70


Other current assets


34



30



Total current assets


2,110



2,158









Assets held for sale


16











Licenses


1,876



1,844

Goodwill


766



766

Franchise rights


244



244

Other intangible assets, net


36



47

Investments in unconsolidated entities


459



402

Other investments


1











Property, plant and equipment, net


3,549



3,764









Other assets and deferred charges


392



197









Total assets

$

9,449


$

9,422

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)








LIABILITIES AND EQUITY



















September 30,


December 31,





2016


2015

(Dollars in millions)






Current liabilities







Current portion of long-term debt

$

12


$

14


Accounts payable


366



349


Customer deposits and deferred revenues


242



288


Accrued interest


19



12


Accrued taxes


48



41


Accrued compensation


115



113


Other current liabilities


85



127



Total current liabilities


887



944










Deferred liabilities and credits







Deferred income tax liability, net


910



900


Other deferred liabilities and credits


461



433










Long-term debt


2,436



2,440










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


2,373



2,365



Treasury shares, at cost


(703)



(727)



Accumulated other comprehensive income (loss)






Retained earnings


2,477



2,487




   Total TDS shareholders' equity


4,148



4,126











Preferred shares


1



1


Noncontrolling interests


605



577












Total equity


4,754



4,704










Total liabilities and equity

$

9,449


$

9,422

 

Balance Sheet Highlights

(Unaudited)




September 30, 2016



U.S.


TDS


TDS Corporate


Intercompany


TDS



Cellular


Telecom


& Other


Eliminations


Consolidated

(Dollars in millions)















Cash and cash equivalents

$

674


$

41


$

270


$


$

985

Affiliated cash investments




392





(392)





$

674


$

433


$

270


$

(392)


$

985

















Licenses, goodwill and other intangible

assets















$

2,236


$

824


$

(138)


$


$

2,922

Investment in unconsolidated entities


420



4



40



(5)



459



$

2,656


$

828


$

(98)


$

(5)


$

3,381

































Property, plant and equipment, net

$

2,458


$

1,067


$

25


$

(1)


$

3,549

















Long-term debt:
















Current portion

$

11


$


$

1


$


$

12


Non-current portion


1,621



2



813





2,436



$

1,632


$

2


$

814


$


$

2,448

 

TDS Telecom Highlights

(Unaudited)





Three Months Ended September 30,





2016


2015


2016 vs. 2015







Increase (Decrease)

Wireline











Operating revenues












Residential

$

78


$

76


$

3


4%


Commercial


53



55



(2)


(4)%


Wholesale


43



44



(1)


(2)%



Total service revenues


174



175




-


Equipment sales







(9)%






175



175




-

Operating expenses












Cost of services


67



64



3


4%


Cost of equipment sold


1



1




25%


Selling, general and administrative expenses


50



50




-


Depreciation, amortization and accretion


41



41



(1)


(1)%


(Gain) loss on asset disposals, net


1



2



(1)


(65)%






159



157



1


1%
















Operating income

$

16


$

18


$

(2)


(10)%















Cable











Operating revenues












Residential

$

37


$

35


$

2


6%


Commercial


9



9




4%



Total operating revenues


46



44



2


5%















Operating expenses












Cost of services


23



20



4


20%


Selling, general and administrative expenses


13



14



(1)


(10)%


Depreciation, amortization and accretion


9



9




6%


(Gain) loss on asset disposals, net


1






>100%






46



43



3


8%
















Operating income

$


$

1


$

(1)


(98)%















HMS











Operating revenues












Service revenues

$

29


$

30


$

(1)


(5)%


Equipment sales


39



51



(13)


(25)%






68



82



(14)


(17)%

Operating expenses












Cost of services


21



21




(1)%


Cost of equipment sold


33



43



(11)


(25)%


Selling, general and administrative expenses


12



12



(1)


(7)%


Depreciation, amortization and accretion


7



7




5%






72



84



(11)


(14)%
















Operating (loss)

$

(5)


$

(2)


$

(3)


>(100)%















Intercompany revenues

$

(1)


$

(1)


$


1%

Intercompany expenses


(1)



(1)




1%















Total TDS Telecom operating income

$

12


$

17


$

(5)


(32)%















Numbers may not foot due to rounding.

 

TDS Telecom Highlights

(Unaudited)





Nine Months Ended September 30,





2016


2015


2016 vs. 2015







Increase (Decrease)

(Dollars in millions)











Wireline











Operating revenues












Residential

$

232


$

224


$

7


3%


Commercial


160



166



(6)


(4)%


Wholesale


130



135



(5)


(3)%



Total service revenues


522



526



(4)


(1)%


Equipment sales


1



1




(1)%






523



527



(4)


(1)%

Operating expenses












Cost of services


192



189



3


2%


Cost of equipment sold


2



2




(3)%


Selling, general and administrative expenses


148



145



3


2%


Depreciation, amortization and accretion


119



124



(5)


(4)%


(Gain) loss on asset disposals, net


2



3



(2)


(52)%


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




(3)



3


>100%






462



460



2


-
















Operating income

$

61


$

67


$

(6)


(9)%















Cable











Operating revenues












Residential

$

108


$

105


$

4


3%


Commercial


28



27



1


4%



Total operating revenues


137



132



4


3%















Operating expenses












Cost of services


69



59



10


17%


Selling, general and administrative expenses


37



41



(3)


(8)%


Depreciation, amortization and accretion


27



26



1


5%


(Gain) loss on asset disposals, net


2



(1)



2


>100%






136



126



10


8%
















Operating income

$

1


$

6


$

(6)


(92)%















HMS











Operating revenues












Service revenues

$

91


$

88


$

2


3%


Equipment sales


121



130



(9)


(7)%






212



218



(6)


(3)%

Operating expenses












Cost of services


61



63



(2)


(3)%


Cost of equipment sold


101



109



(8)


(7)%


Selling, general and administrative expenses


37



36



1


2%


Depreciation, amortization and accretion


22



20



2


10%






221



228



(7)


(3)%
















Operating (loss)

$

(9)


$

(10)


$

1


9%















Intercompany revenues

$

(3)


$

(3)


$


(1)%

Intercompany expenses


(3)



(3)




(1)%















Total TDS Telecom operating income

$

53


$

64


$

(11)


(17)%















Numbers may not foot due to rounding.

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited)
















Free Cash Flow and Adjusted Free Cash Flow




















Three Months Ended
September 30,


Nine Months Ended
September 30,



2016


2015


2016


2015

(Dollars in millions)













Cash flows from operating activities (GAAP)


$

238


$

188


$

638


$

727

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



145



199



426



558



Free cash flow



93



(11)



212



169

Add: Sprint Cost Reimbursement



2



4



5



28



Adjusted free cash flow (Non-GAAP)(1)


$

95


$

(7)


$

217


$

197
















(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.  Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash paid for additions to property, plant and equipment.  Sprint decommissioning and Sprint Cost Reimbursement are further defined and discussed in our Annual Report on Form 10-K for the year ended December 31, 2015.  Free cash flow and Adjusted free cash flow are non-GAAP financial measures which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash paid for additions to property, plant and equipment.

 

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 revenues received from customers.


















For the Quarter Ended


9/30/2016



6/30/2016



3/31/2016



12/31/2015



9/30/2015

(Dollars and connection counts in millions)















Calculation of Postpaid ARPU















Postpaid service revenues

$

635


$

636


$

639


$

674


$

755

Average number of postpaid connections


4.49



4.48



4.43



4.37



4.33

Number of months in period


3



3



3



3



3


Postpaid ARPU (GAAP metric)

$

47.08


$

47.37


$

48.13


$

51.46


$

58.12


















Calculation of Postpaid ABPU















Postpaid service revenues

$

635


$

636


$

639


$

674


$

755

Equipment installment plan billings


131



118



105



93



75


Total billings to postpaid connections

$

766


$

754


$

744


$

767


$

830

Average number of postpaid connections


4.49



4.48



4.43



4.37



4.33

Number of months in period


3



3



3



3



3


Postpaid ABPU (Non-GAAP metric)

$

56.79


$

56.09


$

56.06


$

58.57


$

63.88


















Calculation of Postpaid ARPA















Postpaid service revenues

$

635


$

636


$

639


$

674


$

755

Average number of postpaid accounts


1.69



1.70



1.70



1.70



1.71

Number of months in period


3



3



3



3



3


Postpaid ARPA (GAAP metric)

$

125.31


$

124.91


$

125.36


$

131.96


$

147.00


















Calculation of Postpaid ABPA















Postpaid service revenues

$

635


$

636


$

639


$

674


$

755

Equipment installment plan billings


131



118



105



93



75


Total billings to postpaid accounts

$

766


$

754


$

744


$

767


$

830

Average number of postpaid accounts


1.69



1.70



1.70



1.70



1.71

Number of months in period


3



3



3



3



3


Postpaid ABPA (Non-GAAP metric)

$

151.16


$

147.90


$

145.99


$

150.19


$

161.57

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/tds-reports-third-quarter-2016-results-300357596.html

SOURCE Telephone and Data Systems

Jane McCahon, Senior Vice President, Corporate Relations and Corporate Secretary, 312-592-5379, jane.mccahon@tdsinc.com OR Julie Mathews, IRC, Investor Relations Director, 312-592-5341, julie.mathews@tdsinc.com