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