TDS reports third quarter 2019 results

2019 Estimated Results

U.S. Cellular

TDS Telecom

TDS¹

Previous

Current

Previous

Current

Previous

Current

(Dollars in millions)

Total operating revenues

$3,900-$4,100

$3,950-$4,050

$900-$950

Unchanged

$5,025-$5,275

$5,075-$5,225

Adjusted OIBDA²

$725-$875

$750-$850

$280-$310

Unchanged

$1,000-$1,180

$1,025-$1,155

Adjusted EBITDA²

$900-$1,050

$925-$1,025

$290-$320

Unchanged

$1,185-$1,365

$1,210-$1,340

Capital expenditures

$625-$725

Unchanged

$300-$350

Unchanged

$940-$1,090

Unchanged

2019 Estimated Results

U.S. Cellular

TDS Telecom

TDS¹

(Dollars in millions)

Net income (GAAP)

N/A

N/A

N/A

Add back:

Income tax expense (benefit)

N/A

N/A

N/A

Income before income taxes (GAAP)

$80-$180

$85-$115

$70-$200

Add back:

Interest expense

115x

—

175

Depreciation, amortization and accretion expense

710

205

945

EBITDA (Non-GAAP)²

$905-$1,005

$290-$320

$1,190-$1,320

Add back or deduct:

(Gain) loss on asset disposals, net

20

—

20

Adjusted EBITDA (Non-GAAP)²

$925-$1,025

$290-$320

$1,210-$1,340

Deduct:

Equity in earnings of unconsolidated entities

160

—

160

Interest and dividend income

15

10

25

Adjusted OIBDA (Non-GAAP)²

$750-$850

$280-$310

$1,025-$1,155

Actual Results

Nine Months Ended
September 30, 2019

Year Ended
December 31, 2018

U.S.

Cellular

TDS

Telecom

TDS¹

U.S.

Cellular

TDS

Telecom

(Dollars in millions)

Net income (GAAP)

$

115

$

74

$

132

$

164

$

89

$

175

Add back or deduct:

Income tax expense

55

23

64

51

16

46

Income before income taxes (GAAP)

$

170

$

97

$

196

$

215

$

105

$

221

Add back:

Interest expense

87

(2)

128

116

(2)

172

Depreciation, amortization and accretion expense

524

150

697

640

212

883

EBITDA (Non-GAAP)²

$

781

$

245

$

1,021

$

971

$

315

$

1,276

Add back or deduct:

(Gain) loss on asset disposals, net

13

(7)

5

10

(2)

9

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

(1)

—

(1)

—

—

—

(Gain) loss on license sales and exchanges, net

—

—

—

(18)

—

(18)

Adjusted EBITDA (Non-GAAP)²

$

793

$

238

$

1,025

$

963

$

313

$

1,267

Deduct:

Equity in earnings of unconsolidated entities

128

—

129

159

—

160

Interest and dividend income

14

9

24

15

8

26

Other, net

—

—

—

(1)

2

2

Adjusted OIBDA (Non-GAAP)²

$

651

$

228

$

872

$

790

$

303

$

1,079

Numbers may not foot due to rounding.

¹

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments.

²

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.  TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future.  Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate.  Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS' financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance.  Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.  The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for September 30, 2019, can be found on TDS' website at investors.tdsinc.com.

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

Retail Connections

Postpaid

Total at end of period

4,395,000

4,414,000

4,440,000

4,472,000

4,466,000

Gross additions

163,000

137,000

137,000

179,000

172,000

Feature phones

3,000

5,000

4,000

4,000

3,000

Smartphones

121,000

97,000

98,000

132,000

130,000

Connected devices

39,000

35,000

35,000

43,000

39,000

Net additions (losses)

(19,000)

(26,000)

(32,000)

6,000

(1,000)

Feature phones

(11,000)

(10,000)

(13,000)

(11,000)

(14,000)

Smartphones

9,000

(1,000)

(1,000)

31,000

29,000

Connected devices

(17,000)

(15,000)

(18,000)

(14,000)

(16,000)

ARPU¹

$

46.16

$

45.90

$

45.44

$

45.58

$

45.31

ARPA²

$

119.87

$

119.46

$

118.84

$

119.60

$

119.42

Churn rate³

1.38

%

1.23

%

1.26

%

1.29

%

1.29

%

Handsets

1.09

%

0.97

%

0.99

%

1.00

%

1.02

%

Connected devices

3.44

%

3.01

%

3.08

%

3.20

%

3.04

%

Prepaid

Total at end of period

510,000

500,000

503,000

516,000

528,000

Gross additions

70,000

61,000

61,000

66,000

80,000

Net additions (losses)

9,000

(2,000)

(13,000)

(12,000)

1,000

ARPU¹

$

34.35

$

34.43

$

33.44

$

32.80

$

32.09

Churn rate³

4.03

%

4.20

%

4.92

%

4.98

%

4.98

%

Total connections at end of period⁴

4,957,000

4,967,000

4,995,000

5,041,000

5,050,000

Market penetration at end of period

Consolidated operating population

31,310,000

31,310,000

31,310,000

31,469,000

31,469,000

Consolidated operating penetration⁵

16

%

16

%

16

%

16

%

16

%

Capital expenditures (millions)

$

170

$

195

$

102

$

242

$

118

Total cell sites in service

6,554

6,535

6,506

6,531

6,506

Owned towers

4,123

4,116

4,106

4,129

4,119

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 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.

³

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.

⁴

Includes reseller and other connections.

⁵

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

TDS Telecom

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

TDS Telecom

Wireline

Residential connections

Voice¹

266,100

269,000

271,100

274,100

278,400

Broadband²

242,200

240,200

236,100

235,400

237,100

Video³

57,300

56,200

54,300

54,000

53,100

Wireline residential connections

565,600

565,500

561,500

563,500

568,600

Total residential revenue per connection⁴

$

49.02

$

47.88

$

48.16

$

47.39

$

47.30

Commercial connections

Voice¹

121,200

124,200

127,300

130,500

134,000

Broadband²

20,600

20,600

20,400

20,600

20,700

managedIP⁵

124,500

128,300

132,000

134,000

138,000

Video³

400

400

400

400

400

Wireline commercial connections

266,600

273,500

280,100

285,400

293,100

Total Wireline connections

832,300

839,000

841,500

848,900

861,700

Cable

Cable residential and commercial connections

Broadband⁶

174,900

172,600

171,100

167,400

163,600

Video⁷

98,000

100,300

101,400

102,900

102,100

Voice⁸

63,900

64,800

65,400

65,200

63,600

managedIP⁵

1,200

1,100

1,100

1,000

700

Total Cable connections

338,000

338,900

339,000

336,500

330,100

Numbers may not foot due to rounding.

¹

The individual circuits connecting a customer to Wireline's central office facilities that provide voice services.

²

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

³

The number of Wireline customers provided video services.

⁴

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

⁵

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

⁶

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

⁷

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

⁸

Billable number of lines into a building for voice services.

TDS Telecom

Capital Expenditures (Unaudited)

Quarter Ended

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

(Dollars in millions)

Wireline

$

61

$

55

$

29

$

73

$

41

Cable

20

15

13

19

13

Total TDS Telecom

$

81

$

70

$

42

$

91

$

54

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

vs. 2018

2019

2018

2019

vs. 2018

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

Operating revenues

U.S. Cellular

$

1,031

$

1,001

3

%

$

2,970

$

2,916

2

%

TDS Telecom

231

234

(1)

%

695

695

–

All Other¹

59

62

(4)

%

175

166

5

%

1,321

1,297

2

%

3,840

3,777

2

%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

823

804

2

%

2,319

2,296

1

%

Depreciation, amortization and accretion

181

160

13

%

524

478

10

%

(Gain) loss on asset disposals, net

5

3

66

%

13

5

N/M

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

—

—

N/M

(1)

—

N/M

(Gain) loss on license sales and exchanges, net

2

—

N/M

—

(18)

98

%

1,011

967

5

%

2,855

2,761

3

%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

162

157

3

%

467

466

–

Depreciation, amortization and accretion

50

53

(6)

%

150

160

(6)

%

(Gain) loss on asset disposals, net

—

(3)

N/M

(7)

(2)

N/M

212

206

3

%

609

624

(2)

%

All Other¹

Expenses excluding depreciation and amortization

62

65

(3)

%

182

176

3

%

Depreciation and amortization

6

7

(5)

%

23

24

(5)

%

(Gain) loss on asset disposals, net

1

—

N/M

(1)

—

N/M

69

73

(3)

%

205

200

2

%

Total operating expenses

1,292

1,246

4

%

3,669

3,585

2

%

Operating income (loss)

U.S. Cellular

20

34

(40)

%

115

155

(26)

%

TDS Telecom

20

28

(29)

%

86

71

21

%

All Other¹

(11)

(11)

(5)

%

(30)

(34)

13

%

29

51

(43)

%

171

192

(11)

%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

44

42

5

%

129

121

7

%

Interest and dividend income

7

6

15

%

24

18

39

%

Interest expense

(42)

(43)

1

%

(128)

(129)

1

%

Other, net

—

2

N/M

—

1

N/M

Total investment and other income

9

7

34

%

25

11

N/M

Income before income taxes

38

58

(35)

%

196

203

(3)

%

Income tax expense

15

5

N/M

64

48

32

%

Net income

23

53

(57)

%

132

155

(15)

%

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

5

7

(27)

%

22

36

(39)

%

Net income attributable to TDS shareholders

$

18

$

46

(62)

%

$

110

$

119

(7)

%

Basic weighted average shares outstanding

115

112

2

%

114

112

2

%

Basic earnings per share attributable to TDS shareholders

$

0.15

$

0.41

(63)

%

$

0.96

$

1.06

(9)

%

Diluted weighted average shares outstanding

116

114

2

%

116

113

2

%

Diluted earnings per share attributable to TDS shareholders

$

0.15

$

0.41

(63)

%

$

0.93

$

1.04

(10)

%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

¹

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

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

Nine Months Ended
September 30,

2019

2018

(Dollars in millions)

Cash flows from operating activities

Net income

$

132

$

155

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

Depreciation, amortization and accretion

697

662

Bad debts expense

80

71

Stock-based compensation expense

47

37

Deferred income taxes, net

23

31

Equity in earnings of unconsolidated entities

(129)

(121)

Distributions from unconsolidated entities

100

91

(Gain) loss on asset disposals, net

5

3

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

(1)

—

(Gain) loss on license sales and exchanges, net

—

(18)

Other operating activities

4

3

Changes in assets and liabilities from operations

Accounts receivable

(42)

(5)

Equipment installment plans receivable

(42)

(88)

Inventory

3

13

Accounts payable

(4)

13

Customer deposits and deferred revenues

(2)

(7)

Accrued taxes

37

(3)

Accrued interest

9

11

Other assets and liabilities

(43)

(36)

Net cash provided by operating activities

874

812

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(631)

(447)

Cash paid for acquisitions and licenses

(257)

(10)

Cash received from investments

29

100

Cash paid for investments

(11)

—

Cash received from divestitures and exchanges

32

28

Other investing activities

1

4

Net cash used in investing activities

(837)

(325)

Cash flows from financing activities

Repayment of long-term debt

(16)

(15)

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

(6)

27

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

(8)

7

Repurchase of U.S. Cellular Common Shares

(21)

—

Dividends paid to TDS shareholders

(57)

(54)

Distributions to noncontrolling interests

(3)

(5)

Other financing activities

8

(2)

Net cash used in financing activities

(103)

(42)

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

(66)

445

Cash, cash equivalents and restricted cash

Beginning of period

927

622

End of period

$

861

$

1,067

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

September 30, 2019¹

December 31, 2018

(Dollars in millions)

Current assets

Cash and cash equivalents

$

853

$

921

Short-term investments

—

17

Accounts receivable

1,116

1,099

Inventory, net

147

150

Prepaid expenses

98

103

Income taxes receivable

3

12

Other current assets

28

28

2,245

2,330

Assets held for sale

9

54

Licenses

2,470

2,195

Goodwill

509

509

Other intangible assets, net

235

253

Investments in unconsolidated entities

511

480

Property, plant and equipment, net

3,353

3,346

Operating lease right-of-use assets

970

—

Other assets and deferred charges

579

616

Total assets

$

10,881

$

9,783

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

LIABILITIES AND EQUITY

September 30, 2019¹

December 31, 2018

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt

$

21

$

21

Accounts payable

386

365

Customer deposits and deferred revenues

195

197

Accrued interest

20

11

Accrued taxes

63

44

Accrued compensation

111

127

Short-term operating lease liabilities

115

—

Other current liabilities

90

114

Total current liabilities

1,001

879

Liabilities held for sale

1

1

Deferred liabilities and credits

Deferred income tax liability, net

664

640

Long-term operating lease liabilities

931

—

Other deferred liabilities and credits

475

541