TELEPHONE & DATA SYSTEMS INC /DE/ - FORM 8-K - EX-99.1

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EX-99.2 - EX-99.2 - TELEPHONE & DATA SYSTEMS INC /DE/	tdsexhibit992.htm
8-K - 8-K - TELEPHONE & DATA SYSTEMS INC /DE/	tds8k.htm

Exhibit 99.1 NEWS RELEASE

As previously announced, TDS will hold a teleconference August 4, 2017, at 9:30 a.m. CDT. Listen to the call live via the Events & Presentations page of investors.tdsinc.com.

FOR IMMEDIATE RELEASE

TDS reports second quarter 2017 results

2017 guidance reaffirmed

CHICAGO, (August 4, 2017) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,247 million for the second quarter of 2017, versus $1,295 million for the same period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $10 million and $0.09, respectively, for the second quarter of 2017, compared to $28 million and $0.25 respectively, in the same period one year ago.

“TDS’ businesses achieved good results in the quarter as they continued executing on their strategic priorities for 2017,” said LeRoy T. Carlson Jr., TDS president and CEO. “U.S. Cellular grew its postpaid handset customer base and increased customer loyalty. TDS Telecom drove growth in IPTV and cable connections and increased revenues in both its wireline and cable segments.

“U.S. Cellular grew postpaid handsets and drove an exceptionally low level of handset churn, the lowest in the company’s history. It successfully completed the first commercial deployment of Voice over LTE (VoLTE) technology in Iowa, bringing benefits to customers’ network experience and opening opportunities for greater data roaming revenue. U.S. Cellular effectively managed cost reductions throughout the quarter, lowering expenses in system operations, loss on equipment and other operating expenses.

“TDS Telecom grew its Wireline business through an increase in IPTV connections that generated higher residential revenue per connection. They continue to see growth in service revenues from fiber investments and through support from the Alternative Connect America Cost Model (A-CAM). TDS Telecom’s Cable segment had an excellent quarter, driving significant increases in broadband connections and residential revenues. They continued to keep cash expenses low, driving a strong increase in profitability. OneNeck IT Solutions had lower revenues this quarter due primarily to less equipment sales to existing customers. They are focused on sales execution as their top priority.”

2017 Estimated Results

Current estimates of full-year 2017 results for U.S. Cellular, TDS Telecom, and TDS are shown below. Such estimates represent management’s view as of August 4, 2017. 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.

2017 Estimated Results

U.S. Cellular

TDS Telecom

TDS(3)

Current

(Dollars in millions)

Total operating revenues (1)

$3,800-$4,000

Unchanged

$1,200-$1,250

Unchanged

$5,015-$5,265

Unchanged

Adjusted OIBDA (1)(2)(4)

$550-$650

Unchanged

$300-$340

Unchanged

$855-$995

Unchanged

Adjusted EBITDA (2)

$700-$800

Unchanged

$300-$340

Unchanged

$1,005-$1,145

Unchanged

Capital expenditures (Approximately)

$500

Unchanged

$225

Unchanged

$735

Unchanged

The following tables provide reconciliations of Net income to Adjusted OIBDA and Adjusted EBITDA for 2017 estimated results, actual results for the six months ended June 30, 2017, and actual results for the year ended December 31, 2016. In providing 2017 estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes. Although potentially significant, TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, TDS is unable to provide such guidance.

			2017 Estimated Results

			U.S. Cellular		TDS Telecom		TDS(3)
(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)		$	(30)-70	$	80-120	$	(10)-130
Add back:
	Interest expense		110		–		165
	Depreciation, amortization and accretion expense		620		220		850
EBITDA (Non-GAAP)		$	700-800	$	300-340	$	1,005-1,145
Add back:
	(Gain) loss on sale of business and other exit costs, net		–		–		–
	(Gain) loss on license sales and exchanges, net		(20)		–		(20)
	(Gain) loss on asset disposals, net		20		–		20
Adjusted EBITDA (Non-GAAP) (2)		$	700-800	$	300-340	$	1,005-1,145
Deduct:
	Equity in earnings of unconsolidated entities		140		–		140
	Interest and dividend income(1)		10		–		10
Adjusted OIBDA (Non-GAAP)(1)(2)(4)		$	550-650	$	300-340	$	855-995

			Actual Results

			Six Months Ended June 30, 2017						Year ended December 31, 2016
			U.S. Cellular		TDS Telecom		TDS (3)		U.S. Cellular		TDS Telecom		TDS (3)
(Dollars in millions)
Net income (GAAP)			$	40	$	33	$	55	$	49	$	42	$	52
Add back:
	Income tax expense			33		21		44		33		25		40
Income before income taxes
	(GAAP)		$	73	$	54	$	99	$	82	$	67	$	92
Add back:
	Interest expense			56		2		85		113		3		170
	Depreciation, amortization and
		accretion expense		307		111		422		618		224		850
EBITDA (Non-GAAP)			$	436	$	167	$	606	$	813	$	294	$	1,112
Add back:
	(Gain) loss on sale of business and
		other exit costs, net		–		–		–		–		–		(1)
	(Gain) loss on license sales and
		exchanges, net		(19)		–		(19)		(19)		(1)		(20)
	(Gain) loss on asset disposals, net			9		1		10		22		4		27
Adjusted EBITDA (Non-GAAP) (2)			$	426	$	168	$	597	$	816	$	298	$	1,118
Deduct:
	Equity in earnings of unconsolidated
		entities		66		–		65		140		–		140
	Interest and dividend income(1)			5		2		8		6		3		11
	Other, net			(1)		–		1		1		–		–
Adjusted OIBDA (Non-GAAP) (1)(2)(4)			$	356	$	166	$	523	$	669	$	295	$	967

Note: Totals may not foot due to rounding differences.

(1)		Equipment installment plan interest income is reflected as a component of Service revenues consistent with an accounting policy change effective January 1, 2017. All prior period numbers have been recast to conform to this accounting change.

(2)		Adjusted EBITDA is defined as net income adjusted for the items set forth in the reconciliation above. Adjusted OIBDA is defined as net income adjusted for the items set forth in the reconciliation above. 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 Adjusted EBITDA and Adjusted OIBDA flow to the corresponding GAAP measure, Net income or Income before income taxes.

(3)		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.

(4)		A reconciliation of Adjusted OIBDA (Non-GAAP) to Operating income (GAAP) for June 30, 2017 actual results can be found on TDS' website at investors.tdsinc.com.

Conference Call Information

TDS will hold a conference call on August 4, 2017 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/1145/2198.
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 1000® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6 million connections nationwide through its businesses, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,000 people as of June 30, 2017.

Visit www.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

Contacts

Jane W. McCahon, Senior Vice President - Corporate Relations and Corporate Secretary

312-592-5379

jane.mccahon@tdsinc.com

Julie D. Mathews, IRC, Director - Investor Relations

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: intense competition; the ability to execute TDS’ business strategy; uncertainties in TDS’ future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and U.S. Cellular indebtedness or comply with the terms of debt covenants; impacts of any pending acquisitions/divestitures/exchanges of properties and/or licenses, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the 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 of TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; pending and future litigation; changes in income tax rates, laws, regulations or rulings; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of services and products offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission, which are incorporated by reference herein.

For more information about TDS and its subsidiaries, visit:

TDS: www.tdsinc.com

U.S. Cellular: www.uscellular.com

TDS Telecom: www.tdstelecom.com

OneNeck IT Solutions: www.oneneck.com

United States Cellular Corporation
Summary Operating Data (Unaudited)

As of or for the Quarter Ended					6/30/2017		3/31/2017		12/31/2016			9/30/2016		6/30/2016
Retail Connections
	Postpaid
		Total at end of period				4,478,000		4,455,000		4,482,000		4,484,000		4,490,000
		Gross additions				174,000		146,000		187,000		174,000		197,000
			Feature phones			7,000		7,000		7,000		10,000		8,000
			Smartphones			116,000		88,000		109,000		105,000		107,000
			Connected devices			51,000		51,000		71,000		59,000		82,000
		Net additions (losses)				23,000		(27,000)		(2,000)		(6,000)		36,000
			Feature phones			(15,000)		(19,000)		(21,000)		(20,000)		(21,000)
			Smartphones			34,000		(9,000)		(4,000)		(7,000)		8,000
			Connected devices			4,000		1,000		23,000		21,000		49,000
		ARPU (1)			$	44.60	$	45.42	$	45.19	$	47.08	$	47.37
		ABPU (Non-GAAP)(2)			$	55.19	$	55.82	$	55.43	$	56.79	$	56.09
		ARPA (3)			$	119.73	$	121.88	$	120.67	$	125.31	$	124.91
		ABPA (Non-GAAP)(4)			$	148.15	$	149.78	$	148.02	$	151.16	$	147.90
		Churn rate (5)				1.13%		1.29%		1.41%		1.34%		1.20%
			Handsets			0.91%		1.08%		1.23%		1.22%		1.10%
			Connected devices			2.35%		2.55%		2.49%		2.04%		1.84%
	Prepaid
		Total at end of period				484,000		480,000		484,000		480,000		413,000
		Gross additions				73,000		78,000		83,000		132,000		73,000
		Net additions (losses)				3,000		(4,000)		4,000		67,000		14,000
		ARPU (1)			$	33.52	$	33.66	$	33.25	$	34.39	$	34.58
		Churn rate (5)				4.93%		5.69%		5.44%		4.84%		4.86%
Total connections at end of period (6)						5,023,000		4,996,000		5,031,000		5,030,000		4,973,000
Market penetration at end of period
	Consolidated operating population					32,089,000		32,089,000		31,994,000		31,994,000		31,994,000
	Consolidated operating penetration (7)					16%		16%		16%		16%		16%
Capital expenditures (millions)					$	84	$	61	$	171	$	103	$	93
Total cell sites in service						6,421		6,417		6,415		6,374		6,324
Owned towers						4,044		4,041		4,040		4,015		3,988

(1)		Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:
			▪	Postpaid ARPU consists of total postpaid service revenues and postpaid connections.
			▪	Prepaid ARPU consists of total prepaid service revenues and prepaid connections.
(2)		Average Billings Per User (ABPU) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid connections and by the number of months in the period. Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.
(3)		Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
(4)		Average Billings Per Account (ABPA) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period. Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.
(5)		Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.
(6)		Includes reseller and other connections.
(7)		Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.

TDS Telecom
Summary Operating Data (Unaudited)

As of or for the Quarter Ended			6/30/2017		3/31/2017		12/31/2016		9/30/2016		6/30/2016
TDS Telecom
Wireline
	Residential connections
		Voice (1)		304,600		308,200		310,600		314,600		316,800
		Broadband (2)		230,200		228,500		229,500		232,800		232,200
		IPTV (3)		46,200		45,200		45,300		43,600		41,200
		Wireline residential connections		581,000		581,900		585,400		590,900		590,200

	Total residential revenue per connection (4)		$	46.39	$	45.17	$	44.27	$	44.25	$	43.67

	Commercial connections
		Voice (1)		150,500		154,000		157,400		160,900		164,000
		Broadband (2)		21,000		21,200		21,400		21,700		21,900
		managedIP (5)		149,700		150,300		150,900		151,500		149,000
		Wireline commercial connections		321,200		325,500		329,700		334,000		334,900

	Total Wireline connections			902,200		907,400		915,200		924,900		925,100

Cable
	Cable Connections
		Broadband (6)		140,300		137,800		133,700		130,200		125,700
		Video (7)		97,900		97,600		99,000		101,100		102,900
		Voice (8)		58,700		59,000		59,600		59,800		58,900
		Cable connections		297,000		294,300		292,400		291,000		287,600

Numbers may not foot due to rounding.

(1)		The individual circuits connecting a customer to Wireline’s central office facilities.
(2)		The number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.
(3)		The number of Wireline customers provided video services using IP networking technology.
(4)		Total residential revenue per connection is calculated by dividing total Wireline residential revenue by the average number of 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	6/30/2017		3/31/2017		12/31/2016		9/30/2016		6/30/2016
(Dollars in millions)
Wireline	$	33	$	17	$	26	$	27	$	27
Cable		12		9		13		11		17
HMS		4		6		5		2		2
	$	49	$	33	$	45	$	40	$	46

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
(Unaudited)
				Three Months Ended June 30,
				2017		2016		2017 vs. 2016
				2017		2016		Increase (Decrease)
(Dollars and shares in millions, except per share amounts)
Operating revenues
	U.S. Cellular (1)			$	963	$	992	$	(29)	(3)%
	TDS Telecom				281		300		(18)	(6)%
	All Other (2)				3		3		–	-
					1,247		1,295		(48)	(4)%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and
			accretion		800		812		(12)	(2)%
		Depreciation, amortization and accretion			155		154		1	-
		(Gain) loss on asset disposals, net			5		5		–	6%
		(Gain) loss on license sales and exchanges, net			(2)		(9)		7	81%
					958		962		(4)	(1)%
	TDS Telecom
		Expenses excluding depreciation, amortization and
			accretion		201		221		(20)	(9)%
		Depreciation, amortization and accretion			55		54		1	3%
		(Gain) loss on asset disposals, net			1		1		–	(30)%
					257		275		(19)	(7)%
	All Other (2)
		Expenses excluding depreciation and amortization			3		3		–	40%
		Depreciation and amortization			1		2		–	(9)%
		(Gain) loss on asset disposals, net			–		–		–	>(100)%
					4		5		–	19%
			Total operating expenses		1,219		1,242		(23)	(2)%
Operating income (loss)
	U.S. Cellular (1)				5		30		(25)	(82)%
	TDS Telecom				25		24		–	1%
	All Other (2)				(2)		(1)		–	>(100)%
					28		53		(25)	(47)%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				33		36		(3)	(9)%
	Interest and dividend income (1)				4		3		1	15%
	Interest expense				(43)		(43)		–	-
	Other, net				–		1		(1)	>100%
		Total investment and other income (expense)(1)			(6)		(3)		(3)	(78)%
Income before income taxes					22		50		(28)	(55)%
	Income tax expense				10		18		(8)	(45)%
Net income					12		32		(20)	(62)%
	Less: Net income attributable to noncontrolling
		interests, net of tax			2		4		(2)	(49)%
Net income attributable to TDS shareholders					10		28		(18)	(63)%
	TDS Preferred dividend requirement				–		–		–	N/M
Net income available to common shareholders				$	10	$	28	$	(18)	(63)%

Basic weighted average shares outstanding					111		109		2	1%
Basic earnings per share attributable to TDS shareholders				$	0.09	$	0.25	$	(0.16)	(64)%

Diluted weighted average shares outstanding					112		111		1	1%
Diluted earnings per share attributable to TDS shareholders				$	0.09	$	0.25	$	(0.16)	(64)%

N/M - Percentage change not meaningful

Numbers may not foot due to rounding.

(1)	Equipment installment plan interest income is reflected as a component of Service revenues consistent with an accounting policy change effective January 1, 2017. All prior period numbers have been recast to conform to this accounting change.

(2)	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 Operations Highlights
(Unaudited)
				Six Months Ended June 30,
				2017		2016		2017 vs. 2016
				2017		2016		Increase (Decrease)
(Dollars and shares in millions, except per share amounts)
Operating revenues
	U.S. Cellular(1)			$	1,899	$	1,962	$	(63)	(3)%
	TDS Telecom				580		581		(1)	-
	All Other(2)				6		7		(1)	(4)%
					2,485		2,550		(65)	(3)%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and
			accretion		1,543		1,613		(70)	(4)%
		Depreciation, amortization and accretion			307		307		–	-
		(Gain) loss on asset disposals, net			9		10		(1)	(12)%
		(Gain) loss on license sales and exchanges, net			(19)		(9)		(10)	>(100)%
					1,840		1,921		(81)	(4)%
	TDS Telecom
		Expenses excluding depreciation, amortization and
			accretion		414		426		(12)	(3)%
		Depreciation, amortization and accretion			111		112		(1)	(1)%
		(Gain) loss on asset disposals, net			1		2		(1)	(28)%
					527		540		(13)	(2)%
	All Other(2)
		Expenses excluding depreciation and amortization			5		5		–	2%
		Depreciation and amortization			4		3		–	(10)%
		(Gain) loss on asset disposals, net			–		–		–	57%
					8		8		–	(3)%

			Total operating expenses		2,375		2,469		(94)	(4)%
Operating income (loss)
	U.S. Cellular(1)				59		41		18	45%
	TDS Telecom				53		41		12	29%
	All Other(2)				(2)		(1)		(1)	(1)%
					110		81		29	38%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				65		72		(7)	(9)%
	Interest and dividend income(1)				8		5		3	36%
	Interest expense				(85)		(85)		–	(1)%
	Other, net				1		–		1	>100%
		Total investment and other income (expense)(1)			(11)		(8)		(3)	(53)%
Income before income taxes					99		73		26	36%
	Income tax expense				44		31		13	43%
Net income					55		42		13	31%
	Less: Net income attributable to noncontrolling interests,
		net of tax			8		6		2	24%
Net income attributable to TDS shareholders					47		36		11	32%
	TDS Preferred dividend requirement				–		–		–	(50)%
Net income available to common shareholders				$	47	$	36	$	11	32%

Basic weighted average shares outstanding					110		109		1	1%
Basic earnings per share attributable to TDS shareholders				$	0.43	$	0.33	$	0.10	30%
Diluted weighted average shares outstanding					112		111		1	1%
Diluted earnings per share attributable to TDS shareholders				$	0.42	$	0.32	$	0.10	31%

Numbers may not foot due to rounding.

(1)	Equipment installment plan interest income is reflected as a component of Service revenues consistent with an accounting policy change effective January 1, 2017. All prior period numbers have been recast to conform to this accounting change.

(2)	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)

				Six Months Ended
				June 30,
				2017		2016
(Dollars in millions)
Cash flows from operating activities
	Net income			$	55	$	42
	Add (deduct) adjustments to reconcile net income to net cash flows
	from operating activities
		Depreciation, amortization and accretion			422		422
		Bad debts expense			49		46
		Stock-based compensation expense			22		18
		Deferred income taxes, net			(22)		8
		Equity in earnings of unconsolidated entities			(65)		(72)
		Distributions from unconsolidated entities			65		30
		(Gain) loss on asset disposals, net			10		12
		(Gain) loss on license sales and exchanges, net			(19)		(9)
		Noncash interest expense			1		2
		Other operating activities			–		(3)
	Changes in assets and liabilities from operations
		Accounts receivable			5		(6)
		Equipment installment plans receivable			(107)		(94)
		Inventory			2		(26)
		Accounts payable			(59)		32
		Customer deposits and deferred revenues			(10)		(18)
		Accrued taxes			53		76
		Accrued interest			–		(1)
		Other assets and liabilities			(44)		(59)
			Net cash provided by operating activities		358		400

Cash flows from investing activities
	Cash paid for additions to property, plant and equipment				(242)		(281)
	Cash paid for acquisitions and licenses				(200)		(46)
	Cash received from divestitures and exchanges				17		17
	Federal Communications Commission deposit				–		(143)
	Other investing activities				1		1
			Net cash used in investing activities		(424)		(452)

Cash flows from financing activities
	Repayment of long-term debt				(6)		(6)
	Issuance of long-term debt				–		2
	TDS Common Shares reissued for benefit plans, net of tax payments				(1)		–
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments				–		3
	Repurchase of TDS Common Shares				–		(3)
	Repurchase of U.S. Cellular Common Shares				–		(2)
	Repurchase of TDS Preferred Shares				(1)		–
	Dividends paid to TDS shareholders				(34)		(32)
	Payment of debt issuance costs				–		(4)
	Distributions to noncontrolling interests				(2)		(1)
	Other financing activities				1		9
			Net cash used in financing activities		(43)		(34)

Net decrease in cash and cash equivalents					(109)		(86)

Cash and cash equivalents
	Beginning of period				900		985
	End of period			$	791	$	899

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)

ASSETS


			June 30,		December 31,
			2017		2016
(Dollars in millions)
Current assets
	Cash and cash equivalents		$	791	$	900
	Accounts receivable from customers and others, net			845		851
	Inventory, net			149		151
	Prepaid expenses			111		115
	Income taxes receivable			2		10
	Other current assets			26		32
		Total current assets		1,924		2,059

Assets held for sale				4		8

Licenses				2,235		1,895
Goodwill				770		766
Franchise rights				244		244
Other intangible assets, net				28		33
Investments in unconsolidated entities				452		451
Other investments				–		1

Property, plant and equipment, net				3,373		3,555

Other assets and deferred charges				348		434

Total assets			$	9,378	$	9,446

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)

LIABILITIES AND EQUITY


				June 30,		December 31,
				2017		2016
(Dollars and shares in millions, except per share amounts)
Current liabilities
	Current portion of long-term debt			$	12	$	12
	Accounts payable				295		365
	Customer deposits and deferred revenues				218		229
	Accrued interest				11		11
	Accrued taxes				85		44
	Accrued compensation				78		127
	Other current liabilities				87		99
		Total current liabilities			786		887

Deferred liabilities and credits
	Deferred income tax liability, net				899		922
	Other deferred liabilities and credits				472		453

Long-term debt, net					2,428		2,433

Noncontrolling interests with redemption features					1		1

Equity
	TDS shareholders' equity
		Series A Common and Common Shares, par value $.01			1		1
		Capital in excess of par value			2,393		2,386
		Treasury shares, at cost			(684)		(698)
		Accumulated other comprehensive income			–		1
		Retained earnings			2,457		2,454
			Total TDS shareholders' equity		4,167		4,144

	Preferred shares				–		1
	Noncontrolling interests				625		605

		Total equity			4,792		4,750

Total liabilities and equity				$	9,378	$	9,446

Balance Sheet Highlights
(Unaudited)

		June 30, 2017
		U.S.		TDS		TDS Corporate		Intercompany		TDS
		Cellular		Telecom		& Other		Eliminations		Consolidated
(Dollars in millions)
Cash and cash equivalents		$	472	$	22	$	297	$	–	$	791
Affiliated cash investments			–		499		–		(499)		–
		$	472	$	521	$	297	$	(499)	$	791

Licenses, goodwill and other intangible
	assets	$	2,596	$	820	$	(139)	$	–	$	3,277
Investment in unconsolidated entities			414		4		40		(6)		452
		$	3,010	$	824	$	(99)	$	(6)	$	3,729

Property, plant and equipment, net		$	2,304	$	1,043	$	26	$	–	$	3,373

Long-term debt, net:
	Current portion	$	11	$	–	$	1	$	–	$	12
	Non-current portion		1,613		2		813		–		2,428
		$	1,624	$	2	$	814	$	–	$	2,440

TDS Telecom Highlights
(Unaudited)
			Three Months Ended June 30,
							2017 vs. 2016
			2017		2016		Increase (Decrease)
(Dollars in millions)
Wireline
Operating revenues
	Residential		$	81	$	77	$	4	5%
	Commercial			50		53		(3)	(6)%
	Wholesale			49		44		5	10%
		Total service revenues		180		175		5	3%
	Equipment sales			–		–		–	(36)%
				181		175		5	3%
Operating expenses
	Cost of services			65		64		2	3%
	Cost of equipment sold			1		–		–	22%
	Selling, general and administrative expenses			48		49		(1)	(2)%
	Expenses excluding depreciation, amortization and
		accretion		114		113		1	1%
	Depreciation, amortization and accretion			37		37		–	1%
	(Gain) loss on asset disposals, net			–		1		–	(46)%
				152		151		1	1%

	Operating income		$	29	$	25	$	4	17%

Cable
Operating revenues
	Residential		$	41	$	36	$	5	15%
	Commercial			9		9		–	1%
				51		45		5	12%
Operating expenses
	Cost of services			24		24		–	1%
	Selling, general and administrative expenses			13		12		1	4%
	Expenses excluding depreciation, amortization and
		accretion		37		36		1	2%
	Depreciation, amortization and accretion			11		9		2	18%
	(Gain) loss on asset disposals, net			–		–		–	(5)%
				48		46		2	5%

	Operating income		$	3	$	–	$	3	>100%

HMS
Operating revenues
	Service revenues		$	27	$	33	$	(5)	(16)%
	Equipment sales			23		47		(24)	(51)%
				51		80		(29)	(37)%
Operating expenses
	Cost of services			21		19		2	11%
	Cost of equipment sold			19		39		(20)	(51)%
	Selling, general and administrative expenses			10		15		(4)	(29)%
	Expenses excluding depreciation, amortization and
		accretion		51		73		(22)	(30)%
	Depreciation, amortization and accretion			7		7		(1)	(7)%
				58		80		(22)	(28)%

	Operating loss		$	(7)	$	–	$	(7)	>(100)%

Intercompany revenues			$	(1)	$	(1)	$	–	12%
Intercompany expenses				(1)		(1)		–	12%

Total TDS Telecom operating income			$	25	$	24	$	–	1%

Numbers may not foot due to rounding.

TDS Telecom Highlights
(Unaudited)
			Six Months Ended June 30,
							2017 vs. 2016
			2017		2016		Increase (Decrease)
(Dollars in millions)
Wireline
Operating revenues
	Residential		$	160	$	153	$	7	4%
	Commercial			101		107		(6)	(6)%
	Wholesale			98		87		11	12%
		Total service revenues		359		347		12	3%
	Equipment sales			1		1		–	(37)%
				360		348		11	3%
Operating expenses
	Cost of services			129		126		3	2%
	Cost of equipment sold			1		1		–	13%
	Selling, general and administrative expenses			96		98		(2)	(2)%
	Expenses excluding depreciation, amortization and
		accretion		226		224		1	1%
	Depreciation, amortization and accretion			76		78		(2)	(3)%
	(Gain) loss on asset disposals, net			1		1		–	(40)%
				302		304		(1)	-

	Operating income		$	57	$	45	$	13	28%

Cable
Operating revenues
	Residential		$	82	$	72	$	11	15%
	Commercial			18		19		(1)	(4)%
				100		90		10	11%
Operating expenses
	Cost of services			48		46		2	4%
	Selling, general and administrative expenses			25		24		1	3%
	Expenses excluding depreciation, amortization and
		accretion		73		70		3	4%
	Depreciation, amortization and accretion			21		18		3	14%
	(Gain) loss on asset disposals, net			1		1		–	(15)%
				95		90		5	6%

	Operating income		$	5	$	1	$	5	>100%

HMS
Operating revenues
	Service revenues		$	56	$	62	$	(6)	(9)%
	Equipment sales			66		82		(17)	(20)%
				122		144		(22)	(15)%
Operating expenses
	Cost of services			42		40		1	4%
	Cost of equipment sold			55		68		(14)	(20)%
	Selling, general and administrative expenses			21		25		(4)	(16)%
	Expenses excluding depreciation, amortization and
		accretion		118		134		(16)	(12)%
	Depreciation, amortization and accretion			14		15		(1)	(7)%
				131		148		(17)	(12)%

	Operating loss		$	(9)	$	(4)	$	(5)	>(100)%

Intercompany revenues			$	(2)	$	(2)	$	–	5%
Intercompany expenses				(2)		(2)		–	5%

Total TDS Telecom operating income			$	53	$	41	$	12	29%

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations


Free Cash Flow

		Three Months Ended June 30,				Six Months Ended June 30,
		2017		2016		2017		2016
(Dollars in millions)
Cash flows from operating activities (GAAP)		$	221	$	154	$	358	$	400
Less: Cash paid for additions to property, plant and equipment			115		122		242		281
	Free cash flow (Non-GAAP)(1)		106		32		116		119

(1)	Management uses Free cash flow as a liquidity measure and it is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. 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 liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

Postpaid ABPU and Postpaid ABPA

U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment and product sales resulting from the increased adoption of equipment installment plans. Postpaid ABPU and Postpaid ABPA, as previously defined, are non-GAAP financial measures which U.S. Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment and product sales revenues received from customers.


For the Quarter Ended			6/30/2017		3/31/2017		12/31/2016		9/30/2016		6/30/2016
(Dollars and connection counts in millions)
Calculation of Postpaid ARPU
Postpaid service revenues		$	597	$	608	$	607	$	635	$	636
Average number of postpaid connections			4.47		4.46		4.48		4.49		4.48
Number of months in period			3		3		3		3		3
	Postpaid ARPU (GAAP metric)	$	44.60	$	45.42	$	45.19	$	47.08	$	47.37

Calculation of Postpaid ABPU
Postpaid service revenues		$	597	$	608	$	607	$	635	$	636
Equipment installment plan billings			142		139		138		131		118
	Total billings to postpaid connections	$	739	$	747	$	745	$	766	$	754
Average number of postpaid connections			4.47		4.46		4.48		4.49		4.48
Number of months in period			3		3		3		3		3
	Postpaid ABPU (Non-GAAP metric)	$	55.19	$	55.82	$	55.43	$	56.79	$	56.09

Calculation of Postpaid ARPA
Postpaid service revenues		$	597	$	608	$	607	$	635	$	636
Average number of postpaid accounts			1.66		1.66		1.68		1.69		1.70
Number of months in period			3		3		3		3		3
	Postpaid ARPA (GAAP metric)	$	119.73	$	121.88	$	120.67	$	125.31	$	124.91

Calculation of Postpaid ABPA
Postpaid service revenues		$	597	$	608	$	607	$	635	$	636
Equipment installment plan billings			142		139		138		131		118
	Total billings to postpaid accounts	$	739	$	747	$	745	$	766	$	754
Average number of postpaid accounts			1.66		1.66		1.68		1.69		1.70
Number of months in period			3		3		3		3		3
	Postpaid ABPA (Non-GAAP metric)	$	148.15	$	149.78	$	148.02	$	151.16	$	147.90

TELEPHONE & DATA SYSTEMS INC /DE/ - FORM 8-K - EX-99.1 - August 4, 2017

Attached files

TELEPHONE & DATA SYSTEMS INC /DE/ Reports