TDS reports third quarter 2015 results

U.S. Cellular updates guidance; raises profitability forecast

As previously announced, TDS will hold a teleconference October 30, 2015 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.tdsinc.com.

Oct 30, 2015, 07:47 ET from Telephone and Data Systems, Inc.

CHICAGO, Oct. 30, 2015 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE: TDS) reported total operating revenues of $1,373.8 million for the third quarter of 2015, versus $1,280.0 million for the comparable period one year ago. Net income (loss) attributable to TDS shareholders and related diluted earnings per share were $51.1 million and $0.46, respectively, for the third quarter of 2015, compared to $(116.0) million and $(1.07), respectively, in the comparable period one year ago. 

Effective September 1, 2015, U.S. Cellular discontinued it loyalty rewards program.  All unredeemed rewards points expired and the deferred revenue related to the expired points was recognized as $58.2 million in service revenues in the quarter.  

"Our businesses showed continued success in the quarter, in an ever-changing and highly competitive environment," said LeRoy T. Carlson Jr., TDS president and CEO.  "U.S. Cellular and TDS Telecom made significant investments in their networks and continued to enhance their systems, to elevate their competitive positioning and to build even stronger customer loyalty.

"U.S. Cellular grew its customer base for the fifth consecutive quarter with strong sales of connected devices and low levels of churn. It completed the 4G LTE rollout, a milestone in deploying high quality networks in our footprint. This investment will continue to drive growth in smartphones, connected devices, and data usage, all of which we plan to monetize.

"TDS Telecom's targeted fiber deployments enabled IPTV in more of our key wireline markets and generated an increase in residential revenue per customer. Our hosted and managed services company, OneNeck IT Solutions, increased its equipment sales growth.  TDS Telecom continues to build OneNeck IT Solution's capabilities to grow revenues from mid-sized businesses looking to outsource their IT services."

2015 Estimated Results Estimates of full-year 2015 results for U.S. Cellular, TDS Telecom, and TDS are shown below.  Such estimates represent management's view as of October 30, 2015.  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.

2015 Estimated Results

U.S. Cellular

TDS Telecom

TDS(2)

Current

Previous

Current

Previous

Current

Previous

(Dollars in millions)

Total operating revenues

Approx. $

4,000

$4,000-$4,100

$1,130-$1,180

Unchanged

$5,145-$5,195

$5,145-$5,295

Operating cash flow (1)

$540-$620

$440-$540

$280-$310

Unchanged

$825-$935

$725-$855

Adjusted EBITDA (1)

$710-$790

$600-$700

$280-$310

Unchanged

$1,000-$1,110

$890-$1,020

Capital expenditures

Approx. $

600

Unchanged

Approx. $

220

Unchanged

Approx. $

825

$   830

The following tables provide a reconciliation to Operating Cash Flow and Adjusted EBITDA for 2015 estimated results, and actual results for the nine months ended September 30, 2015 and year ended December 31, 2014:

2015 Estimated Results (3)

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)

$

275-355

$

45-75

$

275-385

Add back:

Interest expense

80

140

Depreciation, amortization and

   accretion expense

600

235

845

EBITDA

$

955-1,035

$

280-310

$

1,260-1,370

Add back:

(Gain) loss on sale of business and

   other exit costs, net

(115)

(5)

(135)

(Gain) loss on license sales and

   exchanges, net

(145)

(145)

(Gain) loss on asset disposals, net

15

5

20

Adjusted EBITDA

$

710-790

$

280-310

$

1,000-1,110

Deduct:

Equity in earnings of unconsolidated

   entities

(135)

(135)

Interest and dividend income

(35)

(40)

Operating cash flow (4)

$

540-620

$

280-310

$

825-935

 

Actual Results

Nine Months Ended September 30, 2015

Year ended December 31, 2014

U.S. Cellular

TDS

Telecom

TDS (2)

U.S. Cellular

TDS

Telecom

TDS (2)

(Dollars in millions)

Net income (loss) (GAAP)

$

250

$

38

$

265

$

(47)

$

(24)

$

(147)

Add back:

Income tax expense (benefit)

161

27

179

(12)

18

(5)

Income (loss) before income taxes

(GAAP)

$

411

$

65

$

444

$

(59)

$

(7)

$

(153)

Add back:

Interest expense

61

103

57

(1)

111

Depreciation, amortization and accretion expense

450

170

628

606

220

837

EBITDA

$

922

$

236

$

1,175

$

605

$

212

$

796

Add back:

Loss on impairment of assets

84

88

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

(114)

(3)

(130)

(33)

(2)

(16)

(Gain) loss on license sales and exchanges, net

(147)

(147)

(113)

(113)

(Gain) loss on asset disposals, net

12

3

15

21

5

27

Adjusted EBITDA

$

674

$

236

$

913

$

480

$

298

$

781

Deduct:

Equity in earnings of unconsolidated

entities

(110)

(110)

(130)

(132)

Interest and dividend income

(26)

(2)

(28)

(12)

(2)

(17)

Operating cash flow (4)

$

538

$

234

$

775

$

338

$

296

$

632

Note: Totals may not foot due to rounding differences.

(1)

Operating cash flow is defined as net income, adjusted for the items set forth in the reconciliation below.  Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation below.  Operating cash flow and Adjusted EBITDA exclude these items in order to show operating results on a more comparable basis from period to period. From time to time, TDS may exclude other items from Operating cash flow and/or Adjusted EBITDA if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future.  Operating cash flow and Adjusted EBITDA 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 as indicators of the company's operating performance or as alternatives to cash flows from operating activities, determined in accordance with GAAP, as indicators of cash flows or as measures of liquidity. TDS believes Operating cash flow and Adjusted EBITDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as indicated above.

(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)

In providing 2015 Estimated Results, TDS has not completed the above reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance.

(4)

A reconciliation of Operating cash flow (Non-GAAP) to operating income (GAAP) for September 30, 2015 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 August 5, 2013.   The following represents repurchases of TDS Common Shares.  

Repurchase Period

# Shares

Cost (in millions)

2015 (year to date)

$

2014 (full year)

1,541,850

$

39.1

Total

1,541,850

$

39.1

Conference Call Information TDS will hold a conference call on October 30, 2015 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 6.0 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 10,600 people as of September 30, 2015.

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: 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; competition; 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; uncertainty of access to the capital markets;  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 ("SEC"), 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

9/30/2015

6/30/2015

3/31/2015

12/31/2014

9/30/2014

Retail Customers

Postpaid

Total at end of period

4,341,000

4,324,000

4,307,000

4,298,000

4,200,000

Gross additions

200,000

191,000

200,000

302,000

251,000

Net additions (losses)

17,000

17,000

9,000

98,000

52,000

ARPU (1)

$

58.12

$

53.62

$

54.87

$

56.51

$

56.37

ARPA (2)

$

147.00

$

133.85

$

134.94

$

136.13

$

132.99

Churn rate (3)

1.4%

1.3%

1.5%

1.6%

1.6%

Smartphone penetration (4)

72%

69%

67%

65%

62%

Prepaid

Total at end of period

380,000

368,000

360,000

348,000

350,000

Gross additions

71,000

65,000

73,000

60,000

64,000

Net additions (losses)

12,000

8,000

12,000

(2,000)

(2,000)

ARPU (1)

$

35.64

$

35.98

$

35.72

$

35.33

$

34.40

Churn rate (3)

5.2%

5.2%

5.8%

5.9%

6.3%

Total customers at end of period

4,807,000

4,779,000

4,775,000

4,760,000

4,674,000

Billed ARPU (1)

$

55.42

$

51.29

$

52.29

$

53.63

$

53.24

Service revenue ARPU (1)

$

62.31

$

57.55

$

58.01

$

60.10

$

60.92

Smartphones sold as a percent of total

  handsets sold

87%

87%

86%

87%

81%

Total population

Consolidated markets (5) (8)

50,313,000

52,809,000

52,822,000

58,840,000

60,136,000

Consolidated operating markets (5)

31,814,000

31,814,000

31,814,000

31,729,000

31,729,000

Market penetration at end of period

Consolidated markets (6)

10%

9%

9%

8%

8%

Consolidated operating markets (6)

15%

15%

15%

15%

15%

Capital expenditures (000s)

$

134,816

$

133,666

$

66,460

$

181,655

$

142,452

Total cell sites in service

6,246

6,223

6,219

6,220

6,209

Owned towers (7)

3,957

3,940

3,936

4,280

4,487

(1)

Average Revenue Per User ("ARPU") metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period.  These revenue bases and customer populations are shown below:

a.

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

b.

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

c.

Billed ARPU consists of total postpaid, prepaid and reseller service revenues and postpaid, prepaid and reseller customers.

d.

Service revenue ARPU consists of total postpaid, prepaid and reseller service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)

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

(3)

Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

(4)

Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid handset customers.

(5)

During the third quarter of 2015 U.S. Cellular reassessed population statistics with respect to markets which U.S. Cellular consolidates and revised its calculations to more accurately accumulate such population statistics.  As a result, prior period population data and corresponding market penetration ratios were revised for markets that U.S. Cellular currently consolidates, or previously consolidated in the periods presented.  The decrease in the population of Consolidated markets is due primarily to the license exchange transactions of certain non-operating licenses in North Carolina in December 2014 and Illinois and Indiana in March 2015. Total Population is used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively.  See footnote (6) below.

(6)

Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.

(7)

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

(8)

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

 

TDS Telecom

Summary Operating Data (Unaudited)

Quarter Ended

9/30/2015

6/30/2015

3/31/2015

12/31/2014

9/30/2014

TDS Telecom

Wireline

Residential connections

Voice (1)

325,900

329,000

333,400

335,900

340,300

Broadband (2)

231,600

231,200

229,400

229,200

231,600

IPTV (3)

30,300

27,900

25,600

23,400

20,700

   Wireline residential connections

587,800

588,100

588,400

588,500

592,600

Total residential revenue per connection (4)

$

42.83

$

42.10

$

42.32

$

41.56

$

41.47

Commercial connections

Voice (1)

176,700

181,800

187,500

193,200

199,300

Broadband (2)

23,000

23,700

24,300

24,700

25,300

managedIP (5)

145,900

145,100

143,200

140,200

137,700

   Wireline commercial connections

345,600

350,600

355,000

358,100

362,300

Total Wireline connections

933,400

938,700

943,400

946,600

954,900

Cable

Cable Connections

Video (6)

108,300

109,100

109,700

110,400

109,100

Broadband (7)

114,600

112,300

112,200

110,900

106,400

Voice (7)

54,000

51,500

49,100

46,000

41,800

   Cable connections

276,900

272,900

271,000

267,300

257,300

(1)

The individual circuit connecting customers to TDS Telecom's central office facilities.

(2)

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

(3)

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

(4)

Total residential revenue per connection is calculated by dividing the average residential revenue for the period by the average number of residential connections for 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)

Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively.

 

TDS Telecom

Capital Expenditures (000s)

Quarter Ended

9/30/2015

6/30/2015

3/31/2015

12/31/2014

9/30/2014

Wireline

$

38,400

$

31,700

$

20,400

$

51,400

$

34,200

Cable

13,000

11,900

11,600

14,600

7,600

HMS

5,100

9,400

4,900

13,400

9,800

$

56,500

$

53,000

$

36,900

$

79,400

$

51,600

 

  

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

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

Change

2015

2014

Amount

Percent

Operating revenues

U.S. Cellular

$

1,068,906

$

1,000,419

$

68,487

7%

TDS Telecom

299,374

273,157

26,217

10%

All Other (1)

5,518

6,447

(929)

(14)%

1,373,798

1,280,023

93,775

7%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

860,823

905,157

(44,334)

(5)%

Depreciation, amortization and accretion

152,369

148,952

3,417

2%

(Gain) loss on asset disposals, net

2,618

7,947

(5,329)

(67)%

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

(643)

(10,283)

9,640

94%

(Gain) loss on license sales and exchanges, net

(23,986)

(23,986)

N/M

991,181

1,051,773

(60,592)

(6)%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

223,695

199,132

24,563

12%

Depreciation, amortization and accretion

56,548

54,255

2,293

4%

Loss on impairment of assets

84,000

(84,000)

N/M

(Gain) loss on asset disposals, net

2,292

1,367

925

68%

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

(105)

(2,201)

2,096

95%

282,430

336,553

(54,123)

(16)%

All Other (1)

Expenses excluding depreciation and amortization

4,708

7,117

(2,409)

(34)%

Depreciation and amortization

1,847

2,322

(475)

(20)%

(Gain) loss on asset disposals, net

9

(21)

30

>100%

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

189

7,694

(7,505)

(98)%

6,753

17,112

(10,359)

(61)%

Total operating expenses

1,280,364

1,405,438

(125,074)

(9)%

Operating income (loss)

U.S. Cellular

77,725

(51,354)

129,079

>100%

TDS Telecom

16,944

(63,396)

80,340

>100%

All Other (1)

(1,235)

(10,665)

9,430

88%

93,434

(125,415)

218,849

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

39,770

36,081

3,689

10%

Interest and dividend income

9,617

4,526

5,091

>100%

Interest expense

(35,043)

(27,170)

(7,873)

(29)%

Other, net

(56)

69

(125)

>(100)%

Total investment and other income

14,288

13,506

782

6%

Income (loss) before income taxes

107,722

(111,909)

219,631

>100%

Income tax expense (benefit)

45,327

9,290

36,037

>100%

Net income (loss)

62,395

(121,199)

183,594

>100%

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

11,312

(5,169)

16,481

>100%

Net income (loss) attributable to TDS shareholders

51,083

(116,030)

167,113

>100%

TDS Preferred dividend requirement

(12)

(12)

-

Net income (loss) available to common shareholders

$

51,071

$

(116,042)

$

167,113

>100%

Basic weighted average shares outstanding

108,848

108,252

596

1%

Basic earnings (loss) per share attributable to TDS shareholders

$

0.47

$

(1.07)

$

1.54

>100%

Diluted weighted average shares outstanding

110,214

108,252

1,962

2%

Diluted earnings (loss) per share attributable to TDS shareholders

$

0.46

$

(1.07)

$

1.53

>100%

(1)

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

(2)

Due to Airadigm Transaction, TDS recognized expenses of $7.7 million related to exit and disposal activities in 2014.

N/M – Percentage change not meaningful

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

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

Change

2015

2014

Amount

Percent

Operating revenues

U.S. Cellular

$

3,009,818

$

2,884,003

$

125,815

4%

TDS Telecom

874,172

806,423

67,749

8%

All Other (1)

17,796

21,951

(4,155)

(19)%

3,901,786

3,712,377

189,409

5%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

2,471,687

2,615,163

(143,476)

(5)%

Depreciation, amortization and accretion

450,035

465,042

(15,007)

(3)%

(Gain) loss on asset disposals, net

12,268

16,774

(4,506)

(27)%

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

(113,825)

(27,694)

(86,131)

>(100)%

(Gain) loss on license sales and exchanges, net

(146,884)

(91,446)

(55,438)

(61)%

2,673,281

2,977,839

(304,558)

(10)%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

640,315

586,862

53,453

9%

Depreciation, amortization and accretion

170,347

161,205

9,142

6%

Loss on impairment of assets

84,000

(84,000)

N/M

(Gain) loss on asset disposals, net

2,791

2,694

97

4%

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

(3,159)

(2,201)

(958)

810,294

832,560

(22,266)

(3)%

All Other (1)

Expenses excluding depreciation and amortization

14,924

26,056

(11,132)

(43)%

Depreciation and amortization

8,061

8,768

(707)

(8)%

(Gain) loss on asset disposals, net

(11)

158

(169)

>(100)%

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

(12,947)

20,816

(33,763)

>(100)%

10,027

55,798

(45,771)

(82)%

Total operating expenses

3,493,602

3,866,197

(372,595)

(10)%

Operating income (loss)

U.S. Cellular

336,537

(93,836)

430,373

>100%

TDS Telecom

63,878

(26,137)

90,015

>100%

All Other (1)

7,769

(33,847)

41,616

>100%

408,184

(153,820)

562,004

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

109,823

108,198

1,625

2%

Interest and dividend income

28,119

9,763

18,356

>100%

Interest expense

(102,792)

(83,775)

(19,017)

(23)%

Other, net

142

279

(137)

(49)%

Total investment and other income

35,292

34,465

827

2%

Income (loss) before income taxes

443,476

(119,355)

562,831

>100%

Income tax expense (benefit)

178,780

7,276

171,504

>100%

Net income (loss)

264,696

(126,631)

391,327

>100%

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

44,827

(6,817)

51,644

>100%

Net income (loss) attributable to TDS shareholders

219,869

(119,814)

339,683

>100%

TDS Preferred dividend requirement

(37)

(37)

-

Net income (loss) available to common shareholders

$

219,832

$

(119,851)

$

339,683

>100%

Basic weighted average shares outstanding

108,503

108,650

(147)

-

Basic earnings (loss) per share attributable to TDS shareholders

$

2.03

$

(1.10)

$

3.13

>100%

Diluted weighted average shares outstanding

109,737

108,650

1,087

1%

Diluted earnings (loss) per share attributable to TDS shareholders

$

1.99

$

(1.10)

$

3.09

>100%

(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 $11.9 million on the tower sale as a result of a lower basis in the assets disposed in 2015.  Due to the Airadigm Transaction, TDS recognized expenses of $20.8 million related to exit and disposal activities in 2014.

N/M – Percentage change not meaningful

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

ASSETS

September 30,

December 31,

2015

2014

Current assets

Cash and cash equivalents

$

865,425

$

471,901

Accounts receivable from customers and others, net

775,529

683,681

Inventory, net

183,884

273,707

Net deferred income tax asset

98,343

107,686

Prepaid expenses

119,453

86,506

Income taxes receivable

113,708

Other current assets

30,425

29,766

2,073,059

1,766,955

Assets held for sale

9,018

103,343

Investments

Licenses

1,844,197

1,453,574

Goodwill

765,773

771,352

Franchise rights

244,300

244,300

Other intangible assets, net

50,923

64,499

Investments in unconsolidated entities

386,153

321,729

Other investments

445

508

3,291,791

2,855,962

Property, plant and equipment, net

U.S. Cellular

2,608,438

2,728,217

TDS Telecom

1,076,228

1,093,671

Other

22,021

24,237

3,706,687

3,846,125

Other assets and deferred charges

236,803

334,554

Total assets

$

9,317,358

$

8,906,939

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY

September 30,

December 31,

2015

2014

Current liabilities

Current portion of long-term debt

$

9,102

$

808

Accounts payable

433,620

387,125

Customer deposits and deferred revenues

274,293

324,318

Accrued interest

18,714

7,919

Accrued taxes

143,082

46,734

Accrued compensation

98,134

114,549

Other current liabilities

105,625

181,803

1,082,570

1,063,256

Liabilities held for sale

687

21,643

Deferred liabilities and credits

Net deferred income tax liability

888,499

941,519

Other deferred liabilities and credits

431,874

430,774

Long-term debt

2,209,992

1,993,586

Noncontrolling interests with redemption features

910

1,150

Equity

TDS shareholders' equity

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

1,327

1,327

Capital in excess of par value

2,353,054

2,336,511

Treasury shares, at cost

(731,224)

(748,199)

Accumulated other comprehensive income (loss)

(684)

6,452

Retained earnings

2,503,825

2,330,187

   Total TDS shareholders' equity

4,126,298

3,926,278

Preferred shares

824

824

Noncontrolling interests

575,704

527,909

Total equity

4,702,826

4,455,011

Total liabilities and equity

$

9,317,358

$

8,906,939

 

Balance Sheet Highlights

September 30, 2015

(Unaudited, dollars in thousands)

U.S.

TDS

TDS Corporate

Intercompany

TDS

Cellular

Telecom

& Other

Eliminations

Consolidated

Cash and cash equivalents

$

596,766

$

63,478

$

205,181

$

$

865,425

Affiliated cash investments

411,520

(411,520)

$

596,766

$

474,998

$

205,181

$

(411,520)

$

865,425

Licenses, goodwill and other intangible assets

$

2,203,657

$

839,649

$

(138,113)

$

$

2,905,193

Investment in unconsolidated entities

347,709

3,806

39,977

(5,339)

386,153

Long-term and other investments

1

443

1

445

$

2,551,367

$

843,898

$

(98,135)

$

(5,339)

$

3,291,791

Property, plant and equipment, net

$

2,608,438

$

1,076,228

$

22,161

$

(140)

$

3,706,687

Long-term debt:

Current portion

$

8,501

$

25

$

576

$

$

9,102

Non-current portion

1,368,656

1,399

839,937

2,209,992

$

1,377,157

$

1,424

$

840,513

$

$

2,219,094

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Nine Months Ended September 30,

(Unaudited, dollars in thousands)

2015

2014

Cash flows from operating activities

Net income (loss)

$

264,696

$

(126,631)

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

Depreciation, amortization and accretion

628,443

635,015

Bad debts expense

83,368

79,218

Stock-based compensation expense

28,961

25,715

Deferred income taxes, net

(39,516)

(33,242)

Equity in earnings of unconsolidated entities

(109,823)

(108,198)

Distributions from unconsolidated entities

45,047

74,864

Loss on impairment of assets

84,000

(Gain) loss on asset disposals, net

15,048

19,626

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

(129,931)

(9,079)

(Gain) loss on license sales and exchanges, net

(146,884)

(91,446)

Noncash interest expense

2,058

1,584

Other operating activities

(701)

13

Changes in assets and liabilities from operations

Accounts receivable

(93,540)

70,653

Equipment installment plans receivable

(95,799)

(131,520)

Inventory

89,821

52,078

Accounts payable

125,123

11,034

Customer deposits and deferred revenues

(49,970)

28,684

Accrued taxes

211,803

14,307

Accrued interest

10,798

9,105

Other assets and liabilities

(112,084)

(109,569)

726,918

496,211

Cash flows from investing activities

Cash used for additions to property, plant and equipment

(558,112)

(553,718)

Cash paid for acquisitions and licenses

(286,710)

(284,089)

Cash received from divestitures and exchanges

324,772

151,369

Cash received for investments

10,000

Other investing activities

6,338

5,598

(513,712)

(670,840)

Cash flows from financing activities

Issuance of long-term debt

225,000

Repayment of long-term debt

(615)

(819)

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

11,409

486

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

(868)

1,150

Repurchase of TDS Common Shares

(31,293)

Repurchase of U.S. Cellular Common Shares

(4,070)

(14,698)

Dividends paid to TDS shareholders

(45,859)

(43,575)

Payment of debt issuance costs

(3,101)

(1,019)

Distributions to noncontrolling interests

(6,097)

(439)

Other financing activities

4,519

7,889

180,318

(82,318)

Net increase (decrease) in cash and cash equivalents

393,524

(256,947)

Cash and cash equivalents

Beginning of period

471,901

830,014

End of period

$

865,425

$

573,067

 

TDS Telecom Highlights

Nine Months Ended September 30,

(Unaudited, dollars in thousands)

Change

2015

2014

Amount

Percent

Wireline

Operating revenues

Residential

$

224,470

$

219,766

$

4,704

2%

Commercial

166,197

172,631

(6,434)

(4)%

Wholesale

135,016

142,483

(7,467)

(5)%

Total service revenues

525,683

534,880

(9,197)

(2)%

Equipment sales

1,478

1,409

69

5%

527,161

536,289

(9,128)

(2)%

Operating expenses

Cost of services

188,727

192,777

(4,050)

(2)%

Cost of equipment sold

1,675

1,793

(118)

(7)%

Selling, general and administrative expenses

144,931

140,855

4,076

3%

Depreciation, amortization and accretion

124,440

125,921

(1,481)

(1)%

(Gain) loss on asset disposals, net

3,373

1,502

1,871

>100%

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

(3,159)

(2,201)

(958)

(44)%

459,987

460,647

(660)

-

Operating income

$

67,174

$

75,642

$

(8,468)

(11)%

Cable

Operating revenues

Residential

$

104,847

$

59,396

$

45,451

77%

Commercial

26,920

14,110

12,810

91%

Total service revenues

131,767

73,506

58,261

79%

Equipment sales

277

277

N/M

132,044

73,506

58,538

80%

Operating expenses

Cost of services

59,342

35,000

24,342

70%

Cost of equipment sold

100

100

N/M

Selling, general and administrative expenses

40,735

22,611

18,124

80%

Depreciation, amortization and accretion

26,109

15,089

11,020

73%

(Gain) loss on asset disposals, net

(561)

1,116

(1,677)

>(100)%

125,725

73,816

51,909

70%

Operating income (loss)

$

6,319

$

(310)

$

6,629

>100%

HMS

Operating revenues

Service revenues

$

88,311

$

82,757

$

5,554

7%

Equipment sales

129,878

115,830

14,048

12%

218,189

198,587

19,602

10%

Operating expenses

Cost of services

63,145

57,689

5,456

9%

Cost of equipment sold

108,777

98,161

10,616

11%

Selling, general and administrative expenses

36,105

39,935

(3,830)

(10)%

Depreciation, amortization and accretion

19,798

20,195

(397)

(2)%

Loss on impairment of assets

84,000

(84,000)

N/M

(Gain) loss on asset disposals, net

(21)

76

(97)

>(100)%

227,804

300,056

(72,252)

(24)%

Operating (loss)

$

(9,615)

$

(101,469)

$

91,854

91%

Intercompany revenues

$

(3,222)

$

(1,959)

$

(1,263)

(64)%

Intercompany expenses

(3,222)

(1,959)

(1,263)

(64)%

Total TDS Telecom operating income (loss)

$

63,878

$

(26,137)

$

90,015

>100%

 

TDS Telecom Highlights

Three Months Ended September 30,

(Unaudited, dollars in thousands)

Change

2015

2014

Amount

Percent

Wireline

Operating revenues

Residential

$

75,508

$

73,901

$

1,607

2%

Commercial

55,039

57,179

(2,140)

(4)%

Wholesale

44,032

46,570

(2,538)

(5)%

Total service revenues

174,579

177,650

(3,071)

(2)%

Equipment sales

477

425

52

12%

175,056

178,075

(3,019)

(2)%

Operating expenses

Cost of services

63,696

64,072

(376)

(1)%

Cost of equipment sold

515

829

(314)

(38)%

Selling, general and administrative expenses

50,062

46,627

3,435

7%

Depreciation, amortization and accretion

41,228

41,358

(130)

-

(Gain) loss on asset disposals, net

1,845

743

1,102

>100%

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

(105)

(2,201)

2,096

95%

157,241

151,428

5,813

4%

Operating income

$

17,815

$

26,647

$

(8,832)

(33)%

Cable

Operating revenues

Residential

$

34,888

$

22,921

$

11,967

52%

Commercial

8,853

5,598

3,255

58%

Total service revenues

43,741

28,519

15,222

53%

Equipment sales

119

119

N/M

43,860

28,519

15,341

54%

Operating expenses

Cost of services

19,545

12,651

6,894

54%

Cost of equipment

25

25

N/M

Selling, general and administrative expenses

14,346

9,948

4,398

44%

Depreciation, amortization and accretion

8,530

6,171

2,359

38%

(Gain) loss on asset disposals, net

425

626

(201)

(32)%

42,871

29,396

13,475

46%

Operating income (loss)

$

989

$

(877)

$

1,866

>100%

HMS

Operating revenues

Service revenues

$

30,428

$

27,806

$

2,622

9%

Equipment sales

51,214

39,737

11,477

29%

81,642

67,543

14,099

21%

Operating expenses

Cost of services

21,163

19,442

1,721

9%

Cost of equipment sold

43,081

33,819

9,262

27%

Selling, general and administrative expenses

12,446

12,724

(278)

(2)%

Depreciation, amortization and accretion

6,790

6,726

64

1%

Loss on impairment of assets

84,000

(84,000)

N/M

(Gain) loss on asset disposals, net

22

(2)

24

>100%

83,502

156,709

(73,207)

(47)%

Operating (loss)

$

(1,860)

$

(89,166)

$

87,306

98%

Intercompany revenues

$

(1,184)

$

(980)

$

(204)

(21)%

Intercompany expenses

(1,184)

(980)

(204)

(21)%

Total TDS Telecom operating income (loss)

$

16,944

$

(63,396)

$

80,340

>100%

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

TDS Consolidated

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Cash flows from operating activities

$

188,487

$

180,569

$

726,918

$

496,211

Add: Sprint Cost Reimbursement

4,422

17,896

27,596

52,012

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

198,599

213,811

558,112

553,718

Adjusted free cash flow (1)

$

(5,690)

$

(15,346)

$

196,402

$

(5,495)

(1)

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 used for additions to property, plant and equipment.  Sprint decommissioning and Sprint Cost Reimbursement are further defined and discussed in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.  Adjusted 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 the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment.

 

SOURCE Telephone and Data Systems, Inc.



RELATED LINKS

http://www.tdsinc.com