TELEPHONE & DATA SYSTEMS INC /DE/ - FORM 8-K - EX-99.1 - October 30, 2015

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Exhibit 99.l   NEWS RELEASE                                                                                    

 

 

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.   

 FOR IMMEDIATE RELEASE

 TDS reports third quarter 2015 results

U.S. Cellular updates guidance; raises profitability forecast

 

 

 

CHICAGO, (Oct. 30, 2015) — 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.”



1

 

 


 


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 

 

 


2

 

 


 


 

 

 

 

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.

 



3

 

 


 


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 

 



4

 

 


 


Conference Call Information

TDS will hold a conference call on October 30, 2015 at 9:30 a.m. Central Time.

  •  Access the live call on the Events & Presentations page of investors.tdsinc.com or at https://www.webcaster4.com/Webcast/Page/1145/11364.   
  • Access the call by phone at 877/407-8029 (US/Canada), no pass code required. 

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 1000TM 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.

Contacts     

Jane McCahon, Vice President, Corporate Relations and Corporate Secretary

312-592-5379

jane.mccahon@tdsinc.com

 

Julie Mathews, Investor Relations Director

312-592-5341

julie.mathews@tdsinc.com 

 

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


5

 

 



 


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.


6

 

 



 


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 

 

  


7

 

 


 


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

 



8

 

 


 


 

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

 



9

 

 


 


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 

 

 

 


10

 

 


 


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 

 

 


11

 

 


 


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 

 

 


12

 

 


 


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 

 

 


13

 

 


 


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%

 


14

 

 


 


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%

 


15

 

 


 


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.

 

 


16

 

 


TELEPHONE & DATA SYSTEMS INC /DE/ Reports