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UNITED STATES |
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SECURITIES AND EXCHANGE COMMISSION |
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Washington, D.C. 20549 |
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FORM 8-K |
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CURRENT REPORT |
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Date of Report (Date of earliest event reported): May 6, 2016 |
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TELEPHONE AND DATA SYSTEMS, INC. |
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(Exact name of registrant as specified in its charter) |
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Delaware |
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001-14157 |
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36-2669023 |
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(State or other jurisdiction of |
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(Commission |
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(I.R.S. Employer Identification No.) |
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incorporation or organization) |
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File Number) |
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30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602 |
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(Address of principal executive offices) (Zip code) |
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Registrant's telephone number, including area code: (312) 630-1900 |
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Not Applicable |
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(Former name or former address, if changed since last report) |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |
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□ |
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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□ |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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□ |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 2.02. Results of Operations and Financial Condition
On May 6, 2016, Telephone and Data Systems, Inc. (“TDS”) issued a news release announcing its results of operations for the period ended March 31, 2016. A copy of the news release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
The information in this Item 2.02 of Form 8-K is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor will any such information or exhibits be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
In accordance with the provisions of Item 601 of Regulation S-K, any Exhibits filed or furnished herewith are set forth on the Exhibit Index attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
Telephone and Data Systems, Inc.
(Registrant)
May 6, 2016 |
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By: |
/s/ Douglas D. Shuma |
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Douglas D. Shuma |
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Senior Vice President – Finance and Chief Accounting Officer |
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(principal financial officer and principal accounting officer) |
As previously announced, TDS will hold a teleconference May 6, 2016 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 first quarter 2016 results
2016 guidance reaffirmed;
2015 gains affect year-over-year comparisons
CHICAGO, (May 6, 2016) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,243 million for the first quarter of 2016, versus $1,252 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $8 million and $0.07, respectively, for the first quarter of 2016, compared to $146 million and $1.33, respectively, in the comparable period one year ago. Year-over-year comparisons are affected by pre-tax gains of $247 million ($155 million after-tax) from sales and exchanges of businesses and licenses in 2015.
“Building on the successes of 2015, our businesses started the year with a solid first quarter,” said LeRoy T. Carlson Jr., TDS president and CEO. “U.S. Cellular grew its postpaid customer base and improved customer loyalty. TDS Telecom experienced growth in both IPTV and cable connections, and we continued to move forward in our broadband and hosted and managed services strategies.
“U.S. Cellular increased sales of smartphones and connected devices through offering competitive products and devices priced to offer the best value in the industry. We continue to see strong customer adoption of Equipment Installment Plans, which increased equipment sales revenues.
“TDS Telecom maintained the momentum of IPTV growth by adding new connections and increasing average revenue per connection. Our cable segment increased connections, generating higher revenue from both residential and commercial broadband services. Our hosted and managed services company, OneNeck IT Solutions, achieved growth in recurring service and equipment revenues as more companies and organizations selected OneNeck IT to outsource their IT needs.”
Current estimates of full-year 2016 results for U.S. Cellular, TDS Telecom, and TDS, which are unchanged from the previous estimates, are shown below. Such estimates represent management’s view as of May 6, 2016. 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.
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2016 Estimated Results |
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U.S. Cellular |
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TDS Telecom |
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TDS(2) |
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Current |
Previous |
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Current |
Previous |
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Current |
Previous |
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(Dollars in millions) |
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Total operating revenues |
$3,900-$4,100 |
Unchanged |
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$1,130-$1,180 |
Unchanged |
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$5,040-$5,290 |
Unchanged |
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Operating cash flow (1) |
$525-$650 |
Unchanged |
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$270-$310 |
Unchanged |
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$800-$965 |
Unchanged |
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Adjusted EBITDA (1) |
$725-$850 |
Unchanged |
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$270-$310 |
Unchanged |
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$1,000-$1,165 |
Unchanged |
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Capital expenditures |
Approx. $ |
500 |
Unchanged |
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Approx. $ |
180 |
Unchanged |
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Approx. $ |
695 |
Unchanged |
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The following tables provide a reconciliation to Operating Cash Flow and Adjusted EBITDA for 2016 estimated results, and actual results for the three months ended March 31, 2016 and year ended December 31, 2015:
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Estimated Results (3) |
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U.S. Cellular |
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TDS Telecom |
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TDS(2) |
(Dollars in millions) |
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Net income (loss) (GAAP) |
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N/A |
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N/A |
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N/A |
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Add back: |
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Income tax expense (benefit) |
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N/A |
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N/A |
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Income (loss) before income taxes |
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(GAAP) |
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$ |
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Interest expense |
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Depreciation, amortization and |
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accretion expense |
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EBITDA |
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$ |
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$ |
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$ |
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Add back: |
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(Gain) loss on sale of business and |
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other exit costs, net |
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(Gain) loss on license sales and |
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exchanges, net |
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(Gain) loss on asset disposals, net |
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Adjusted EBITDA (1) |
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$ |
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Equity in earnings of unconsolidated |
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entities |
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Interest and dividend income |
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Operating cash flow (1)(4) |
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$ |
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$ |
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Actual Results |
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Three Months Ended March 31, 2016 |
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Year ended December 31, 2015 |
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U.S. Cellular |
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TDS Telecom |
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TDS (2) |
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U.S. Cellular* |
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TDS Telecom |
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TDS (2)* |
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(Dollars in millions) |
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Net income (loss) (GAAP) |
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$ |
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$ |
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$ |
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$ |
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$ |
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Add back: |
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Income tax expense (benefit) |
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Income (loss) before income taxes |
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(GAAP) |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Add back: |
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Interest expense |
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Depreciation, amortization and |
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accretion expense |
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EBITDA |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Add back: |
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(Gain) loss on sale of business and |
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other exit costs, net |
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(Gain) loss on license sales and |
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exchanges, net |
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(Gain) loss on asset disposals, net |
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Adjusted EBITDA (1) |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Deduct: |
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Equity in earnings of unconsolidated |
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entities |
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Interest and dividend income |
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Other, net |
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Operating cash flow (1)(4) |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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* Includes $58 million of revenue related to termination of the rewards points program. |
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Note: Totals may not foot due to rounding differences. |
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TDS began repurchasing stock under its $250 million repurchase authorization on August 5, 2013. The following represents repurchases of TDS Common Shares.
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# Shares |
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Cost (in millions) |
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2016 (year-to-date through March 31, 2016) |
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$ |
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2015 (full year) |
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$ |
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Total |
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$ |
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TDS will hold a conference call on May 6, 2016 at 9:30 a.m. Central Time.
Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.tdsinc.com. The call will be archived on the Events & Presentations page of investors.tdsinc.com.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 1000TM company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6 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 March 31, 2016.
Visit www.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Contacts
Jane McCahon, Senior Vice President, Corporate Relations and Corporate Secretary
312-592-5379
jane.mccahon@tdsinc.com
Julie Mathews, IRC, 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: 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/divestures/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; 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; 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, 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
Summary Operating Data (Unaudited) |
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As of or for the Quarter Ended |
3/31/2016 |
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12/31/2015 |
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9/30/2015 |
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6/30/2015 |
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3/31/2015 |
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Retail Customers |
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Postpaid |
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Total at end of period |
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Gross additions |
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Feature phones |
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Smartphones |
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Connected devices |
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Net additions (losses) |
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Feature phones |
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Smartphones |
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Connected devices |
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ARPU (1)(8) |
$ |
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$ |
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$ |
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$ |
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$ |
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ABPU (2)(8) |
$ |
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$ |
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$ |
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$ |
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$ |
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ARPA (3)(8) |
$ |
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$ |
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$ |
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$ |
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$ |
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ABPA (4)(8) |
$ |
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$ |
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$ |
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$ |
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$ |
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|
Churn rate (5) |
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1.28% |
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1.31% |
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1.41% |
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1.34% |
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1.48% |
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Smartphone penetration (6) |
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75% |
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74% |
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72% |
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69% |
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67% |
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Prepaid |
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Total at end of period |
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Gross additions |
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Net additions (losses) |
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ARPU (1) |
$ |
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$ |
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$ |
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$ |
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$ |
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Churn rate (5) |
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5.37% |
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5.40% |
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5.24% |
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5.22% |
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5.76% |
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Total customers at end of period |
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Smartphones sold as a percent of total |
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handsets sold |
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92% |
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91% |
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87% |
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87% |
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86% |
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Market penetration at end of period |
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Consolidated operating population |
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|||||||||
|
Consolidated operating penetration (7) |
|
15% |
|
|
15% |
|
|
15% |
|
|
15% |
|
|
15% |
||||
Capital expenditures (millions) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
||||||||||
Total cell sites in service |
|
|
|
|
|
|
|
|
|
||||||||||
Owned towers |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Average Revenue Per User (“ARPU”) are metrics calculated by dividing a revenue base by an average number of customers and by the number of months in the period. These revenue bases and customer populations are shown below: |
||||||||||||||||||
|
|
|
▪ |
Postpaid ARPU consists of total postpaid service revenues and postpaid customers. |
|||||||||||||||
|
|
|
▪ |
Prepaid ARPU consists of total prepaid service revenues and prepaid customers. |
|||||||||||||||
(2) |
Average Billings Per User (“ABPU”) metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid customers and by the number of months in the period. |
||||||||||||||||||
(3) |
Average Revenue Per Account (“ARPA”) metric is calculated by dividing total postpaid service revenue by the average number of postpaid accounts and by the number of months in the period. |
||||||||||||||||||
(4) |
Average Billings Per Account (“ABPA”) 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. |
||||||||||||||||||
(5) |
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. |
||||||||||||||||||
(6) |
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 handsets. |
||||||||||||||||||
(7) |
Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated operating markets as estimated by Nielsen. |
||||||||||||||||||
(8) |
The quarter ended September 30, 2015 results include the recognition of $58 million in revenue due to the termination of the awards program. |
||||||||||||||||||
Summary Operating Data (Unaudited) |
||||||||||||||||
|
||||||||||||||||
Quarter Ended |
3/31/2016 |
|
12/31/2015 |
|
9/30/2015 |
|
6/30/2015 |
|
3/31/2015 |
|||||||
TDS Telecom |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Wireline |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Residential connections |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice (1) |
|
|
|
|
|
|
|
|
|
|||||
|
|
Broadband (2) |
|
|
|
|
|
|
|
|
|
|||||
|
|
IPTV (3) |
|
|
|
|
|
|
|
|
|
|||||
|
|
Wireline residential connections |
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential revenue per connection (4) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial connections |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice (1) |
|
|
|
|
|
|
|
|
|
|||||
|
|
Broadband (2) |
|
|
|
|
|
|
|
|
|
|||||
|
|
managedIP (5) |
|
|
|
|
|
|
|
|
|
|||||
|
|
Wireline commercial connections |
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wireline connections |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Cable Connections |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video (6) |
|
|
|
|
|
|
|
|
|
|||||
|
|
Broadband (7) |
|
|
|
|
|
|
|
|
|
|||||
|
|
Voice (7) |
|
|
|
|
|
|
|
|
|
|||||
|
|
Cable connections |
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 monthly 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. |
|||||||||||||||
|
|
|||||||||||||||
Capital Expenditures (millions) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||
Quarter Ended |
3/31/2016 |
|
12/31/2015 |
|
9/30/2015 |
|
6/30/2015 |
|
3/31/2015 |
|||||
Wireline |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|||||
Cable |
|
|
|
|
|
|
|
|
|
|||||
HMS |
|
|
|
|
|
|
|
|
|
|||||
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|||||
Consolidated Statement of Operations Highlights |
|||||||||||||
(Unaudited) |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|||||||||
|
|
|
|
2016 |
|
2015 |
|
2016 vs. 2015 |
|||||
(Dollars and shares in millions, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|||
|
U.S. Cellular |
$ |
|
$ |
|
$ |
|
(1)% |
|||||
|
TDS Telecom |
|
|
|
|
|
|
- |
|||||
|
All Other (1) |
|
|
|
|
|
|
(51)% |
|||||
|
|
|
|
|
|
|
|
|
|
(1)% |
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|||
|
U.S. Cellular |
|
|
|
|
|
|
|
|
|
|
||
|
|
Expenses excluding depreciation, amortization and |
|
|
|
|
|
|
|
||||
|
|
|
accretion |
|
|
|
|
|
|
- |
|||
|
|
Depreciation, amortization and accretion |
|
|
|
|
|
|
4% |
||||
|
|
(Gain) loss on asset disposals, net |
|
|
|
|
|
|
19% |
||||
|
|
(Gain) loss on sale of business and other exit costs, net |
|
|
|
|
|
|
100% |
||||
|
|
(Gain) loss on license sales and exchanges, net |
|
|
|
|
|
|
N/M |
||||
|
|
|
|
|
|
|
|
|
|
34% |
|||
|
TDS Telecom |
|
|
|
|
|
|
|
|
|
|
||
|
|
Expenses excluding depreciation, amortization and |
|
|
|
|
|
|
|
||||
|
|
|
accretion |
|
|
|
|
|
|
2% |
|||
|
|
Depreciation, amortization and accretion |
|
|
|
|
|
|
1% |
||||
|
|
(Gain) loss on asset disposals, net |
|
|
|
|
|
|
(14)% |
||||
|
|
|
|
|
|
|
|
|
|
2% |
|||
|
All Other (1) |
|
|
|
|
|
|
|
|
|
|
||
|
|
Expenses excluding depreciation and amortization |
|
|
|
|
|
|
(59)% |
||||
|
|
Depreciation and amortization |
|
|
|
|
|
|
(19)% |
||||
|
|
(Gain) loss on sale of business and other exit costs, net (2) |
|
|
|
|
|
|
100% |
||||
|
|
|
|
|
|
|
|
|
|
>100% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
|
27% |
|||
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|||
|
U.S. Cellular (3) |
|
|
|
|
|
|
>(100)% |
|||||
|
TDS Telecom |
|
|
|
|
|
|
(21)% |
|||||
|
All Other (1) |
|
|
|
|
|
|
>(100)% |
|||||
|
|
|
|
|
|
|
|
|
|
(95)% |
|||
Investment and other income (expense) |
|
|
|
|
|
|
|
|
|
|
|||
|
Equity in earnings of unconsolidated entities |
|
|
|
|
|
|
2% |
|||||
|
Interest and dividend income |
|
|
|
|
|
|
65% |
|||||
|
Interest expense |
|
|
|
|
|
|
(24)% |
|||||
|
|
Total investment and other income |
|
|
|
|
|
|
(22)% |
||||
Income before income taxes |
|
|
|
|
|
|
(92)% |
||||||
|
Income tax expense (benefit) |
|
|
|
|
|
|
(89)% |
|||||
Net income |
|
|
|
|
|
|
(94)% |
||||||
|
Less: Net income attributable to noncontrolling interests, net of tax |
|
|
|
|
|
|
(94)% |
|||||
Net income attributable to TDS shareholders |
|
|
|
|
|
|
(94)% |
||||||
|
TDS Preferred dividend requirement |
|
|
|
|
|
|
- |
|||||
Net income available to common shareholders |
$ |
|
$ |
|
$ |
|
(94)% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
|
|
|
|
|
1% |
||||||
Basic earnings per share attributable to TDS shareholders |
$ |
|
$ |
|
$ |
|
(95)% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
|
|
|
|
1% |
||||||
Diluted earnings per share attributable to TDS shareholders |
$ |
|
$ |
|
$ |
|
(95)% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||
(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 $12 million on the tower sale as a result of a lower basis in the assets disposed in 2015. |
||||||||||||
(3) |
Year-over-year comparisons are affected by gains of $247 million from sales and exchanges of businesses and licenses in 2015. |
||||||||||||
N/M – Percentage change not meaningful |
|||||||||||||
Consolidated Statement of Cash Flows |
||||||||||
(Unaudited) |
||||||||||
|
|
|
|
|
|
Three Months Ended March 31, |
||||
|
|
|
|
|
|
2016 |
|
2015 |
||
(Dollars in millions) |
|
|
|
|
|
|||||
Cash flows from operating activities |
|
|
|
|
|
|||||
|
Net income (loss) |
$ |
|
$ |
||||||
|
|
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities |
|
|
|
|||||
|
|
|
|
Depreciation, amortization and accretion |
|
|
|
|||
|
|
|
|
Bad debts expense |
|
|
|
|||
|
|
|
|
Stock-based compensation expense |
|
|
|
|||
|
|
|
|
Deferred income taxes, net |
|
|
|
|||
|
|
|
|
Equity in earnings of unconsolidated entities |
|
|
|
|||
|
|
|
|
Distributions from unconsolidated entities |
|
|
|
|||
|
|
|
|
(Gain) loss on asset disposals, net |
|
|
|
|||
|
|
|
|
(Gain) loss on sale of business and other exit costs, net |
|
|
|
|||
|
|
|
|
(Gain) loss on license sales and exchanges, net |
|
|
|
|||
|
|
|
|
Noncash interest expense |
|
|
|
|||
|
|
Changes in assets and liabilities from operations |
|
|
|
|||||
|
|
|
|
Accounts receivable |
|
|
|
|||
|
|
|
|
Equipment installment plans receivable |
|
|
|
|||
|
|
|
|
Inventory |
|
|
|
|||
|
|
|
|
Accounts payable |
|
|
|
|||
|
|
|
|
Customer deposits and deferred revenues |
|
|
|
|||
|
|
|
|
Accrued taxes |
|
|
|
|||
|
|
|
|
Accrued interest |
|
|
|
|||
|
|
|
|
Other assets and liabilities |
|
|
|
|||
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|||||||
|
Cash used for additions to property, plant and equipment |
|
|
|
||||||
|
Cash paid for acquisitions and licenses |
|
|
|
||||||
|
Cash received from divestitures and exchanges |
|
|
|
||||||
|
Other investing activities |
|
|
|
||||||
|
|
|
|
|
Net cash used in investing activities |
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Cash flows from financing activities |
|
|
|
|||||||
|
Repayment of long-term debt |
|
|
|
||||||
|
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments |
|
|
|
||||||
|
Repurchase of TDS Common Shares |
|
|
|
||||||
|
Repurchase of U.S. Cellular Common Shares |
|
|
|
||||||
|
Dividends paid to TDS shareholders |
|
|
|
||||||
|
Payment of debt issuance costs |
|
|
|
||||||
|
Other financing activities |
|
|
|
||||||
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Net increase in cash and cash equivalents |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|||||||
|
Beginning of period |
|
|
|
||||||
|
End of period |
$ |
|
$ |
||||||
Consolidated Balance Sheet Highlights |
||||||
(Unaudited) |
||||||
|
|
|
|
|
||
ASSETS |
||||||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
March 31, |
|
December 31, |
||
|
|
2016 |
|
2015 |
||
(Dollars in millions) |
|
|
|
|
|
|
Current assets |
|
|
|
|||
|
Cash and cash equivalents |
$ |
|
$ |
||
|
Accounts receivable from customers and others, net |
|
|
|
||
|
Inventory, net |
|
|
|
||
|
Prepaid expenses |
|
|
|
||
|
Income taxes receivable |
|
|
|
||
|
Other current assets |
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
|
|
Assets held for sale |
|
|
|
|||
|
|
|
|
|
|
|
Licenses |
|
|
|
|||
Goodwill |
|
|
|
|||
Franchise rights |
|
|
|
|||
Other intangible assets, net |
|
|
|
|||
Investments in unconsolidated entities |
|
|
|
|||
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|||
|
|
|
|
|
|
|
Other assets and deferred charges |
|
|
|
|||
|
|
|
|
|
|
|
Total assets |
$ |
|
$ |
|||
Consolidated Balance Sheet Highlights |
||||||||
(Unaudited) |
||||||||
|
|
|
|
|
|
|
||
LIABILITIES AND EQUITY |
||||||||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
March 31, |
|
December 31, |
||
|
|
|
|
2016 |
|
2015 |
||
(Dollars in millions) |
|
|
|
|
|
|||
Current liabilities |
|
|
|
|
|
|||
|
|
Current portion of long-term debt |
$ |
|
$ |
|||
|
|
Accounts payable |
|
|
|
|||
|
|
Customer deposits and deferred revenues |
|
|
|
|||
|
|
Accrued interest |
|
|
|
|||
|
|
Accrued taxes |
|
|
|
|||
|
|
Accrued compensation |
|
|
|
|||
|
|
Other current liabilities |
|
|
|
|||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Deferred liabilities and credits |
|
|
|
|
|
|||
|
|
Net deferred income tax liability |
|
|
|
|||
|
|
Other deferred liabilities and credits |
|
|
|
|||
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|||||
|
|
|
|
|
|
|
|
|
Noncontrolling interests with redemption features |
|
|
|
|||||
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|||
|
TDS shareholders' equity |
|
|
|
|
|
||
|
|
Series A Common and Common Shares, par value $.01 |
|
|
|
|||
|
|
Capital in excess of par value |
|
|
|
|||
|
|
Treasury shares, at cost |
|
|
|
|||
|
|
Accumulated other comprehensive income (loss) |
|
|
|
|||
|
|
Retained earnings |
|
|
|
|||
|
|
|
Total TDS shareholders' equity |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
Preferred shares |
|
|
|
||||
|
Noncontrolling interests |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|||
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
$ |
|
$ |
|||||
(Unaudited) |
|||||||||||||||
|
|||||||||||||||
|
|
March 31, 2016 |
|||||||||||||
|
|
U.S. |
|
TDS |
|
TDS Corporate |
|
Intercompany |
|
TDS |
|||||
|
|
Cellular |
|
Telecom |
|
& Other |
|
Eliminations |
|
Consolidated |
|||||
(Dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
||||||
Affiliated cash investments |
|
|
|
|
|
|
|
|
|
||||||
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses, goodwill and other intangible |
|
|
|
|
|
|
|
|
|
||||||
|
assets |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|||||
Investment in unconsolidated entities |
|
|
|
|
|
|
|
|
|
||||||
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|||||
|
Non-current portion |
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|||||
(Unaudited) |
|||||||||||||
|
|||||||||||||
|
|
|
|
Three Months Ended March 31, |
|||||||||
|
|
|
|
2016 |
|
2015 |
|
2016 vs. 2015 |
|||||
(Dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|||
Wireline |
|
|
|
|
|
|
|
|
|
|
|||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|||
|
Residential |
$ |
|
$ |
|
$ |
|
2% |
|||||
|
Commercial |
|
|
|
|
|
|
(4)% |
|||||
|
Wholesale |
|
|
|
|
|
|
(5)% |
|||||
|
|
Total service revenues |
|
|
|
|
|
|
(2)% |
||||
|
Equipment sales |
|
|
|
|
|
|
19% |
|||||
|
|
|
|
|
|
|
|
|
|
(2)% |
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|||
|
Cost of services |
|
|
|
|
|
|
(1)% |
|||||
|
Cost of equipment sold |
|
|
|
|
|
|
(8)% |
|||||
|
Selling, general and administrative expenses |
|
|
|
|
|
|
6% |
|||||
|
Depreciation, amortization and accretion |
|
|
|
|
|
|
(1)% |
|||||
|
|
|
|
|
|
|
|
|
|
1% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
$ |
|
$ |
|
$ |
|
(19)% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable |
|
|
|
|
|
|
|
|
|
|
|||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|||
|
Residential |
$ |
|
$ |
|
$ |
|
1% |
|||||
|
Commercial |
|
|
|
|
|
|
10% |
|||||
|
|
Total service revenues |
|
|
|
|
|
|
3% |
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|||
|
Cost of services |
|
|
|
|
|
|
12% |
|||||
|
Selling, general and administrative expenses |
|
|
|
|
|
|
(4)% |
|||||
|
Depreciation, amortization and accretion |
|
|
|
|
|
|
5% |
|||||
|
(Gain) loss on asset disposals, net |
|
|
|
|
|
|
(20)% |
|||||
|
|
|
|
|
|
|
|
|
|
5% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
$ |
|
$ |
|
$ |
|
(56)% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMS |
|
|
|
|
|
|
|
|
|
|
|||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|||
|
Service revenues |
$ |
|
$ |
|
$ |
|
2% |
|||||
|
Equipment sales |
|
|
|
|
|
|
8% |
|||||
|
|
|
|
|
|
|
|
|
|
5% |
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|||
|
Cost of services |
|
|
|
|
|
|
6% |
|||||
|
Cost of equipment sold |
|
|
|
|
|
|
8% |
|||||
|
Selling, general and administrative expenses |
|
|
|
|
|
|
(16)% |
|||||
|
Depreciation, amortization and accretion |
|
|
|
|
|
|
13% |
|||||
|
|
|
|
|
|
|
|
|
|
3% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) |
$ |
|
$ |
|
$ |
|
21% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany revenues |
$ |
|
$ |
|
$ |
|
(47)% |
||||||
Intercompany expenses |
|
|
|
|
|
|
(47)% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total TDS Telecom operating income |
$ |
|
$ |
|
$ |
|
(21)% |
||||||
Financial Measures and Reconciliations |
||||||||
(Unaudited) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
||||
|
|
2016 |
|
2015 |
||||
(Dollars in millions) |
|
|
|
|
|
|
||
Cash flows from operating activities |
|
$ |
|
$ |
||||
Less: Cash used for additions to property, plant and equipment |
|
|
|
|
||||
|
|
Free cash flow |
|
|
|
|
||
Add: Sprint Cost Reimbursement |
|
|
|
|
||||
|
|
Adjusted free cash flow (1) |
|
$ |
|
$ |
||
|
|
|
|
|
|
|
|
|
(1) |
Free cash flow is defined as Cash flows from operating activities less Cash used for additions to property, plant and equipment. 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 Annual Report on Form 10-K for the year ended December 31, 2015. Free cash flow and Adjusted free cash flow are non-GAAP financial measures 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. |
|||||||
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR CAUTIONARY STATEMENT
This Form 8-K and/or press release attached to this Form 8-K contain statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities, events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include those set forth below, as more fully described under “Risk Factors” in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K. However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. You should carefully consider the Risk Factors in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K, the following factors and other information contained in, or incorporated by reference into, this Form 8-K and/or press release attached to this Form 8-K to understand the material risks relating to TDS’ business.
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