Delaware | 001-14157 | 36-2669023 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
□ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
□ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
□ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
□ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
□ | Emerging growth company |
□ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
Exhibit Number | Description of Exhibits | |
99.1 | ||
99.2 |
TELEPHONE AND DATA SYSTEMS, INC. | |||
(Registrant) | |||
Date: | February 22, 2019 | By: | /s/ Douglas W. Chambers |
Douglas W. Chambers | |||
Senior Vice President - Finance and Chief Accounting Officer | |||
(principal financial officer and principal accounting officer) | |||
2019 Estimated Results and Actual Results for the Year Ended December 31, 2018 | |||||||||||||||||
U.S. Cellular | TDS Telecom | TDS (1) | |||||||||||||||
Estimate | Actual | Estimate | Actual | Estimate | Actual | ||||||||||||
(Dollars in millions) | |||||||||||||||||
Total operating revenues | $4,100-$4,300 | $ | 3,967 | $900-$950 | $ | 927 | $5,225-$5,475 | $ | 5,109 | ||||||||
Adjusted OIBDA (2) | $725-$875 | $ | 790 | $280-$310 | $ | 303 | $1,000-$1,180 | $ | 1,079 | ||||||||
Adjusted EBITDA (2) | $900-$1,050 | $ | 963 | $290-$320 | $ | 313 | $1,185-$1,365 | $ | 1,267 | ||||||||
Capital expenditures | $625-$725 | $ | 515 | $300-$350 | $ | 232 | $940-$1,090 | $ | 767 |
U.S. Cellular | TDS Telecom | TDS (1) | ||||||||||||||||||
Estimate | Actual | Estimate | Actual | Estimate | Actual | |||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Net income (GAAP) | N/A | $ | 164 | N/A | $ | 89 | N/A | $ | 175 | |||||||||||
Add back: | ||||||||||||||||||||
Income tax expense | N/A | 51 | N/A | 16 | N/A | 46 | ||||||||||||||
Income before income taxes (GAAP) | $60-$210 | $ | 215 | $85-$115 | $ | 105 | $50-$230 | $ | 221 | |||||||||||
Add back: | ||||||||||||||||||||
Interest expense | 115 | 116 | — | (2 | ) | 175 | 172 | |||||||||||||
Depreciation, amortization and accretion expense | 710 | 640 | 205 | 212 | 945 | 883 | ||||||||||||||
EBITDA (Non-GAAP) (2) | $885-$1,035 | $ | 971 | $290-$320 | $ | 315 | $1,170-$1,350 | $ | 1,276 | |||||||||||
Add back or deduct: | ||||||||||||||||||||
(Gain) loss on asset disposals, net | 20 | 10 | — | (2 | ) | 20 | 9 | |||||||||||||
(Gain) loss on license sales and exchanges, net | (5 | ) | (18 | ) | — | — | (5 | ) | (18 | ) | ||||||||||
Adjusted EBITDA (Non-GAAP) (2) | $900-$1,050 | $ | 963 | $290-$320 | $ | 313 | $1,185-$1,365 | $ | 1,267 | |||||||||||
Deduct: | ||||||||||||||||||||
Equity in earnings of unconsolidated entities | 155 | 159 | — | — | 155 | 160 | ||||||||||||||
Interest and dividend income | 20 | 15 | 10 | 8 | 30 | 26 | ||||||||||||||
Other, net | — | (1 | ) | — | 2 | — | 2 | |||||||||||||
Adjusted OIBDA (Non-GAAP) (2) | $725-$875 | $ | 790 | $280-$310 | $ | 303 | $1,000-$1,180 | $ | 1,079 |
(1) | The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments. |
(2) | EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income (loss) before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for December 31, 2018, can be found on TDS' website at investors.tdsinc.com. |
▪ | Access the live call on the Events & Presentations page of investors.tdsinc.com or at |
▪ | Access the call by phone at 877-273-7192 (US/Canada), conference ID: 1858446. |
As of or for the Quarter Ended | 12/31/2018 (1) | 9/30/2018 (1) | 6/30/2018 (1) | 3/31/2018 (1) | 12/31/2017 | ||||||||||||||
Retail Connections | |||||||||||||||||||
Postpaid | |||||||||||||||||||
Total at end of period | 4,472,000 | 4,466,000 | 4,468,000 | 4,481,000 | 4,518,000 | ||||||||||||||
Gross additions | 179,000 | 172,000 | 146,000 | 129,000 | 177,000 | ||||||||||||||
Feature phones | 4,000 | 3,000 | 5,000 | 5,000 | 5,000 | ||||||||||||||
Smartphones | 132,000 | 130,000 | 106,000 | 91,000 | 128,000 | ||||||||||||||
Connected devices | 43,000 | 39,000 | 35,000 | 33,000 | 44,000 | ||||||||||||||
Net additions (losses) | 6,000 | (1,000 | ) | (13,000 | ) | (37,000 | ) | 5,000 | |||||||||||
Feature phones | (11,000 | ) | (14,000 | ) | (12,000 | ) | (15,000 | ) | (15,000 | ) | |||||||||
Smartphones | 31,000 | 29,000 | 17,000 | (1,000 | ) | 33,000 | |||||||||||||
Connected devices | (14,000 | ) | (16,000 | ) | (18,000 | ) | (21,000 | ) | (13,000 | ) | |||||||||
ARPU (2) | $ | 45.58 | $ | 45.31 | $ | 44.74 | $ | 44.34 | $ | 44.12 | |||||||||
ABPU (Non-GAAP) (3) | $ | 60.46 | $ | 59.41 | $ | 57.75 | $ | 57.10 | $ | 56.69 | |||||||||
ARPA (4) | $ | 119.60 | $ | 119.42 | $ | 118.57 | $ | 118.22 | $ | 118.05 | |||||||||
ABPA (Non-GAAP) (5) | $ | 158.66 | $ | 156.57 | $ | 153.03 | $ | 152.26 | $ | 151.68 | |||||||||
Churn rate (6) | 1.29 | % | 1.29 | % | 1.19 | % | 1.23 | % | 1.27 | % | |||||||||
Handsets | 1.00 | % | 1.02 | % | 0.92 | % | 0.97 | % | 1.00 | % | |||||||||
Connected devices | 3.20 | % | 3.04 | % | 2.85 | % | 2.79 | % | 2.84 | % | |||||||||
Prepaid | |||||||||||||||||||
Total at end of period | 516,000 | 528,000 | 527,000 | 525,000 | 519,000 | ||||||||||||||
Gross additions | 66,000 | 80,000 | 78,000 | 88,000 | 83,000 | ||||||||||||||
Net additions (losses) | (12,000 | ) | 1,000 | 2,000 | 6,000 | 4,000 | |||||||||||||
ARPU (2) | $ | 32.80 | $ | 32.09 | $ | 32.32 | $ | 31.78 | $ | 32.42 | |||||||||
Churn rate (6) | 4.98 | % | 4.98 | % | 4.83 | % | 5.27 | % | 5.09 | % | |||||||||
Total connections at end of period (7) | 5,041,000 | 5,050,000 | 5,051,000 | 5,063,000 | 5,096,000 | ||||||||||||||
Market penetration at end of period | |||||||||||||||||||
Consolidated operating population | 31,469,000 | 31,469,000 | 31,469,000 | 31,469,000 | 31,834,000 | ||||||||||||||
Consolidated operating penetration (8) | 16 | % | 16 | % | 16 | % | 16 | % | 16 | % | |||||||||
Capital expenditures (millions) | $ | 242 | $ | 118 | $ | 86 | $ | 70 | $ | 213 | |||||||||
Total cell sites in service | 6,531 | 6,506 | 6,478 | 6,473 | 6,460 | ||||||||||||||
Owned towers | 4,129 | 4,119 | 4,105 | 4,099 | 4,080 |
(1) | As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported. |
(2) | 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. |
(3) | 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. |
(4) | 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. |
(5) | 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. |
(6) | 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. |
(7) | Includes reseller and other connections. |
(8) | 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. |
As of or for the Quarter Ended | 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | ||||||||||||||
TDS Telecom | |||||||||||||||||||
Wireline | |||||||||||||||||||
Residential connections | |||||||||||||||||||
Voice (1) | 274,100 | 278,400 | 282,200 | 286,000 | 290,600 | ||||||||||||||
Broadband (2) | 235,400 | 237,100 | 234,300 | 230,500 | 228,600 | ||||||||||||||
Video (3) | 54,000 | 53,100 | 51,500 | 50,300 | 48,600 | ||||||||||||||
Wireline residential connections | 563,500 | 568,600 | 568,000 | 566,900 | 567,700 | ||||||||||||||
Total residential revenue per connection (4) | $ | 47.39 | $ | 47.30 | $ | 47.22 | $ | 47.04 | $ | 46.21 | |||||||||
Commercial connections | |||||||||||||||||||
Voice (1) | 130,500 | 134,000 | 137,300 | 140,100 | 143,000 | ||||||||||||||
Broadband (2) | 20,600 | 20,700 | 20,600 | 20,600 | 20,600 | ||||||||||||||
managedIP (5) | 134,000 | 138,000 | 141,400 | 143,000 | 146,500 | ||||||||||||||
Video (3) | 400 | 400 | 400 | 400 | — | ||||||||||||||
Wireline commercial connections | 285,400 | 293,100 | 299,600 | 304,000 | 310,100 | ||||||||||||||
Total Wireline connections | 848,900 | 861,700 | 867,700 | 870,900 | 877,800 | ||||||||||||||
Cable | |||||||||||||||||||
Cable Connections | |||||||||||||||||||
Broadband (6) | 167,400 | 163,600 | 159,400 | 156,800 | 153,300 | ||||||||||||||
Video (7) | 102,900 | 102,100 | 101,600 | 100,700 | 101,800 | ||||||||||||||
Voice (8) | 65,200 | 63,600 | 62,000 | 60,600 | 59,700 | ||||||||||||||
managedIP (5) | 1,000 | 700 | 700 | 600 | 400 | ||||||||||||||
Cable connections | 336,500 | 330,100 | 323,700 | 318,700 | 315,100 |
(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. |
(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. |
Quarter Ended | 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | ||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Wireline | $ | 73 | $ | 41 | $ | 33 | $ | 29 | $ | 55 | |||||||||
Cable | 19 | 13 | 13 | 11 | 20 | ||||||||||||||
Total TDS Telecom (1) | $ | 91 | $ | 54 | $ | 46 | $ | 40 | $ | 74 |
(1) | TDS re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, changed its reportable segments. Effective January 1, 2018, HMS is no longer reported under TDS Telecom. Prior periods have been recast to conform to the revised presentation. |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||
2018 (1) | 2017 | 2018 vs. 2017 | 2018 (1) | 2017 | 2018 vs. 2017 | ||||||||||||||||
(Dollars and shares in millions, except per share amounts) | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||
U.S. Cellular | $ | 1,051 | $ | 1,029 | 2 | % | $ | 3,967 | $ | 3,890 | 2 | % | |||||||||
TDS Telecom (2) | 232 | 229 | 1 | % | 927 | 919 | 1 | % | |||||||||||||
All Other (2)(3) | 49 | 50 | (3 | )% | 215 | 235 | (9 | )% | |||||||||||||
1,332 | 1,308 | 2 | % | 5,109 | 5,044 | 1 | % | ||||||||||||||
Operating expenses | |||||||||||||||||||||
U.S. Cellular | |||||||||||||||||||||
Expenses excluding depreciation, amortization and accretion | 881 | 877 | – | 3,177 | 3,215 | (1 | )% | ||||||||||||||
Depreciation, amortization and accretion | 162 | 155 | 5 | % | 640 | 615 | 4 | % | |||||||||||||
Loss on impairment of goodwill (4) | — | — | N/M | — | 370 | N/M | |||||||||||||||
(Gain) loss on asset disposals, net | 5 | 4 | 33 | % | 10 | 17 | (40 | )% | |||||||||||||
(Gain) loss on sale of business and other exit costs, net | — | — | N/M | — | (1 | ) | N/M | ||||||||||||||
(Gain) loss on license sales and exchanges, net | — | (3 | ) | N/M | (18 | ) | (22 | ) | 20 | % | |||||||||||
1,048 | 1,033 | 2 | % | 3,809 | 4,194 | (9 | )% | ||||||||||||||
TDS Telecom (2) | |||||||||||||||||||||
Expenses excluding depreciation, amortization and accretion (5) | 159 | 151 | 5 | % | 624 | 604 | 3 | % | |||||||||||||
Depreciation, amortization and accretion | 52 | 49 | 6 | % | 212 | 195 | 9 | % | |||||||||||||
(Gain) loss on asset disposals, net | — | 1 | (87 | )% | (2 | ) | 3 | N/M | |||||||||||||
211 | 201 | 5 | % | 834 | 803 | 4 | % | ||||||||||||||
All Other (2)(3) | |||||||||||||||||||||
Expenses excluding depreciation and amortization (5) | 53 | 50 | 6 | % | 229 | 229 | – | ||||||||||||||
Depreciation and amortization | 8 | 9 | (8 | )% | 31 | 34 | (6 | )% | |||||||||||||
Loss on impairment of goodwill (4) | — | — | N/M | — | (108 | ) | N/M | ||||||||||||||
(Gain) loss on asset disposals, net | — | — | N/M | 1 | 1 | N/M | |||||||||||||||
60 | 58 | 4 | % | 261 | 155 | 68 | % | ||||||||||||||
Total operating expenses | 1,319 | 1,292 | 2 | % | 4,904 | 5,152 | (5 | )% | |||||||||||||
Operating income (loss) | |||||||||||||||||||||
U.S. Cellular | 3 | (4 | ) | N/M | 158 | (304 | ) | N/M | |||||||||||||
TDS Telecom (2)(5) | 22 | 28 | (22 | )% | 93 | 116 | (20 | )% | |||||||||||||
All Other (2)(3)(5) | (12 | ) | (8 | ) | (45 | )% | (46 | ) | 80 | N/M | |||||||||||
13 | 16 | (21 | )% | 205 | (108 | ) | N/M | ||||||||||||||
Investment and other income (expense) | |||||||||||||||||||||
Equity in earnings of unconsolidated entities | 39 | 36 | 9 | % | 160 | 137 | 17 | % | |||||||||||||
Interest and dividend income | 8 | 4 | N/M | 26 | 15 | 67 | % | ||||||||||||||
Interest expense | (43 | ) | (42 | ) | (3 | )% | (172 | ) | (170 | ) | (1 | )% | |||||||||
Other, net (5) | 1 | 1 | 17 | % | 2 | 4 | (22 | )% | |||||||||||||
Total investment and other income (expense) (5) | 5 | (1 | ) | N/M | 16 | (14 | ) | N/M | |||||||||||||
Income (loss) before income taxes | 18 | 15 | 22 | % | 221 | (122 | ) | N/M | |||||||||||||
Income tax expense (benefit) | (2 | ) | (319 | ) | 99 | % | 46 | (279 | ) | N/M | |||||||||||
Net income | 20 | 334 | (94 | )% | 175 | 157 | 11 | % | |||||||||||||
Less: Net income attributable to noncontrolling interests, net of tax | 4 | 47 | (91 | )% | 40 | 4 | N/M | ||||||||||||||
Net income available to TDS common shareholders | $ | 16 | $ | 287 | (94 | )% | $ | 135 | $ | 153 | (12 | )% | |||||||||
Basic weighted average shares outstanding | 113 | 111 | 2 | % | 112 | 111 | 1 | % | |||||||||||||
Basic earnings per share available to TDS common shareholders | $ | 0.14 | $ | 2.59 | (95 | )% | $ | 1.20 | $ | 1.39 | (14 | )% | |||||||||
Diluted weighted average shares outstanding | 115 | 112 | 3 | % | 114 | 112 | 2 | % | |||||||||||||
Diluted earnings per share available to TDS common shareholders | $ | 0.14 | $ | 2.54 | (94 | )% | $ | 1.17 | $ | 1.37 | (15 | )% |
Year Ended December 31, | 2018 (1) | 2017 | |||||
(Dollars in millions) | |||||||
Cash flows from operating activities | |||||||
Net income | $ | 175 | $ | 157 | |||
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | |||||||
Depreciation, amortization and accretion | 883 | 844 | |||||
Bad debts expense | 101 | 95 | |||||
Stock-based compensation expense | 54 | 46 | |||||
Deferred income taxes, net | 33 | (369 | ) | ||||
Equity in earnings of unconsolidated entities | (160 | ) | (137 | ) | |||
Distributions from unconsolidated entities | 153 | 136 | |||||
Loss on impairment of goodwill | — | 262 | |||||
(Gain) loss on asset disposals, net | 9 | 21 | |||||
(Gain) loss on license sales and exchanges, net | (18 | ) | (22 | ) | |||
Other operating activities | 4 | 2 | |||||
Changes in assets and liabilities from operations | |||||||
Accounts receivable | (39 | ) | (61 | ) | |||
Equipment installment plans receivable | (149 | ) | (261 | ) | |||
Inventory | (5 | ) | 6 | ||||
Accounts payable | 2 | (7 | ) | ||||
Customer deposits and deferred revenues | 8 | (4 | ) | ||||
Accrued taxes | (29 | ) | 37 | ||||
Other assets and liabilities | (5 | ) | 31 | ||||
Net cash provided by operating activities | 1,017 | 776 | |||||
Cash flows from investing activities | |||||||
Cash paid for additions to property, plant and equipment | (776 | ) | (685 | ) | |||
Cash paid for acquisitions and licenses | (16 | ) | (218 | ) | |||
Cash received for investments | 100 | — | |||||
Cash paid for investments | (17 | ) | (100 | ) | |||
Cash received from divestitures and exchanges | 29 | 21 | |||||
Other investing activities | — | 1 | |||||
Net cash used in investing activities | (680 | ) | (981 | ) | |||
Cash flows from financing activities | |||||||
Repayment of long-term debt | (20 | ) | (17 | ) | |||
TDS Common Shares reissued for benefit plans, net of tax payments | 42 | 4 | |||||
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments | 18 | 1 | |||||
Dividends paid to TDS shareholders | (72 | ) | (69 | ) | |||
Distributions to noncontrolling interests | (6 | ) | (4 | ) | |||
Other financing activities | 6 | 8 | |||||
Net cash used in financing activities | (32 | ) | (77 | ) | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | 305 | (282 | ) | ||||
Cash, cash equivalents and restricted cash | |||||||
Beginning of period | 622 | 904 | |||||
End of period | $ | 927 | $ | 622 |
December 31, | 2018 | 2017 | |||||
(Dollars in millions) | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 921 | $ | 619 | |||
Short-term investments | 17 | 100 | |||||
Accounts receivable | 1,099 | 961 | |||||
Inventory, net | 150 | 145 | |||||
Prepaid expenses | 103 | 112 | |||||
Income taxes receivable | 12 | 2 | |||||
Other current assets | 28 | 27 | |||||
Total current assets | 2,330 | 1,966 | |||||
Assets held for sale | 54 | 10 | |||||
Licenses | 2,195 | 2,232 | |||||
Goodwill | 509 | 509 | |||||
Other intangible assets, net | 253 | 279 | |||||
Investments in unconsolidated entities | 480 | 453 | |||||
Property, plant and equipment, net | 3,346 | 3,424 | |||||
Other assets and deferred charges | 616 | 422 | |||||
Total assets | $ | 9,783 | $ | 9,295 |
December 31, | 2018 | 2017 | |||||
(Dollars in millions, except per share amounts) | |||||||
Current liabilities | |||||||
Current portion of long-term debt | $ | 21 | $ | 20 | |||
Accounts payable | 365 | 368 | |||||
Customer deposits and deferred revenues | 197 | 223 | |||||
Accrued interest | 11 | 11 | |||||
Accrued taxes | 44 | 64 | |||||
Accrued compensation | 127 | 126 | |||||
Other current liabilities | 114 | 106 | |||||
Total current liabilities | 879 | 918 | |||||
Liabilities held for sale | 1 | — | |||||
Deferred liabilities and credits | |||||||
Deferred income tax liability, net | 640 | 552 | |||||
Other deferred liabilities and credits | 541 | 495 | |||||
Long-term debt, net | 2,418 | 2,437 | |||||
Noncontrolling interests with redemption features | 11 | 1 | |||||
Equity | |||||||
TDS shareholders' equity | |||||||
Series A Common and Common Shares, par value $.01 | 1 | 1 | |||||
Capital in excess of par value | 2,432 | 2,413 | |||||
Treasury shares, at cost | (519 | ) | (669 | ) | |||
Accumulated other comprehensive loss | (10 | ) | (1 | ) | |||
Retained earnings | 2,656 | 2,525 | |||||
Total TDS shareholders' equity | 4,560 | 4,269 | |||||
Noncontrolling interests | 733 | 623 | |||||
Total equity | 5,293 | 4,892 | |||||
Total liabilities and equity | $ | 9,783 | $ | 9,295 |
(1) | As of January 1, 2018, TDS adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported, except as specifically stated. |
(2) | TDS re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, changed its reportable segments. Effective January 1, 2018, HMS is no longer reported under TDS Telecom. Prior periods have been recast to conform to the revised presentation. |
(3) | Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments. |
(4) | During the third quarter of 2017, U.S. Cellular recorded a goodwill impairment of $370 million while TDS recorded a goodwill impairment of the U.S. Cellular reporting unit of $227 million. Prior to 2009, TDS accounted for U.S. Cellular's share repurchases as step acquisitions, allocating a portion of the share repurchase value to TDS' Goodwill. Further, goodwill of the U.S. Cellular reporting unit was impaired at the TDS level in 2003 but not at U.S. Cellular. Consequently, U.S. Cellular's goodwill on a stand-alone basis and any resulting impairments of goodwill does not equal the TDS consolidated goodwill related to U.S. Cellular. The TDS adjustment of $143 million is included in "All other". During the third quarter of 2017, TDS also recorded a goodwill impairment of $35 million related to its HMS operations included in "All other". |
(5) | ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted January 1, 2018, and applied retrospectively. All prior period numbers have been recast to conform to this standard. |
December 31, 2018 | |||||||||||||||||||
U.S. Cellular | TDS Telecom | TDS Corporate & Other | Intercompany Eliminations | TDS Consolidated | |||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Cash and cash equivalents | $ | 580 | $ | 23 | $ | 318 | $ | — | $ | 921 | |||||||||
Affiliated cash investments | — | 460 | — | (460 | ) | — | |||||||||||||
$ | 580 | $ | 483 | $ | 318 | $ | (460 | ) | $ | 921 | |||||||||
Licenses, goodwill and other intangible assets | $ | 2,186 | $ | 754 | $ | 17 | $ | — | $ | 2,957 | |||||||||
Investment in unconsolidated entities | 441 | 4 | 42 | (7 | ) | 480 | |||||||||||||
$ | 2,627 | $ | 758 | $ | 59 | $ | (7 | ) | $ | 3,437 | |||||||||
Property, plant and equipment, net | $ | 2,202 | $ | 1,017 | $ | 127 | $ | — | $ | 3,346 | |||||||||
Long-term debt, net: | |||||||||||||||||||
Current portion | $ | 19 | $ | 1 | $ | 1 | $ | — | $ | 21 | |||||||||
Non-current portion | 1,605 | 2 | 811 | — | 2,418 | ||||||||||||||
$ | 1,624 | $ | 3 | $ | 812 | $ | — | $ | 2,439 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||
2018 (1) | 2017 | 2018 vs. 2017 | 2018 (1) | 2017 | 2018 vs. 2017 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||
Wireline | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||
Residential | $ | 80 | $ | 79 | 2 | % | $ | 321 | $ | 319 | 1 | % | |||||||||
Commercial | 45 | 48 | (8 | )% | 184 | 199 | (7 | )% | |||||||||||||
Wholesale | 48 | 48 | (1 | )% | 191 | 195 | (2 | )% | |||||||||||||
Total service revenues | 173 | 175 | (2 | )% | 697 | 713 | (2 | )% | |||||||||||||
Equipment and product sales | — | — | 53 | % | 2 | 1 | 35 | % | |||||||||||||
173 | 176 | (2 | )% | 699 | 714 | (2 | )% | ||||||||||||||
Operating expenses | |||||||||||||||||||||
Cost of services | 67 | 64 | 5 | % | 266 | 258 | 3 | % | |||||||||||||
Cost of equipment and products | — | — | (20 | )% | 1 | 2 | (31 | )% | |||||||||||||
Selling, general and administrative expenses (2) | 51 | 47 | 9 | % | 197 | 194 | 1 | % | |||||||||||||
Expenses excluding depreciation, amortization and accretion | 118 | 111 | 6 | % | 465 | 454 | 2 | % | |||||||||||||
Depreciation, amortization and accretion | 35 | 37 | (6 | )% | 142 | 151 | (5 | )% | |||||||||||||
(Gain) loss on asset disposals, net | — | — | N/M | (3 | ) | 1 | N/M | ||||||||||||||
153 | 149 | 3 | % | 604 | 606 | – | |||||||||||||||
Operating income (2) | $ | 20 | $ | 27 | (27 | )% | $ | 95 | $ | 108 | (13 | )% | |||||||||
Cable | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||
Residential | $ | 48 | $ | 44 | 10 | % | $ | 188 | $ | 169 | 11 | % | |||||||||
Commercial | 12 | 10 | 19 | % | 42 | 37 | 13 | % | |||||||||||||
60 | 54 | 11 | % | 230 | 206 | 12 | % | ||||||||||||||
Operating expenses | |||||||||||||||||||||
Cost of services | 26 | 25 | 3 | % | 104 | 98 | 6 | % | |||||||||||||
Selling, general and administrative expenses | 15 | 15 | (1 | )% | 57 | 54 | 6 | % | |||||||||||||
Expenses excluding depreciation, amortization and accretion | 41 | 40 | 1 | % | 161 | 151 | 6 | % | |||||||||||||
Depreciation, amortization and accretion | 17 | 12 | 42 | % | 69 | 44 | 57 | % | |||||||||||||
(Gain) loss on asset disposals, net | — | 1 | (72 | )% | 1 | 2 | (33 | )% | |||||||||||||
58 | 53 | 9 | % | 231 | 198 | 17 | % | ||||||||||||||
Operating income (loss) | $ | 2 | $ | 1 | N/M | $ | (2 | ) | $ | 8 | N/M | ||||||||||
Total TDS Telecom operating income (2)(3) | $ | 22 | $ | 28 | (22 | )% | $ | 93 | $ | 116 | (20 | )% |
(1) | As of January 1, 2018, TDS adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported, except as specifically stated. |
(2) | ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted as of January 1, 2018, and applied retrospectively. All prior period numbers have been recast to conform to this standard. |
(3) | TDS re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, changed its reportable segments. Effective January 1, 2018, HMS is no longer reported under TDS Telecom. Prior periods have been recast to conform to the revised presentation. |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(Dollars in millions) | |||||||||||||||
Cash flows from operating activities (GAAP) | $ | 205 | $ | 155 | $ | 1,017 | $ | 776 | |||||||
Less: Cash paid for additions to property, plant and equipment | 330 | 287 | 776 | 685 | |||||||||||
Free cash flow (Non-GAAP) (1) | $ | (125 | ) | $ | (132 | ) | $ | 241 | $ | 91 |
(1) | 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. |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(Dollars in millions, except per share amounts) | |||||||||||||||
Net income available to TDS common shareholders (GAAP) | $ | 16 | $ | 287 | $ | 135 | $ | 153 | |||||||
Adjustments: | |||||||||||||||
Loss on impairment of goodwill | — | — | — | 262 | |||||||||||
Tax benefit on impairment of goodwill (1) | — | — | — | (22 | ) | ||||||||||
Noncontrolling interests impact (2) | — | — | — | (52 | ) | ||||||||||
Subtotal of Non-GAAP goodwill adjustments | — | — | — | 188 | |||||||||||
Effect of the Tax Act | — | (327 | ) | — | (327 | ) | |||||||||
Noncontrolling interests impact (2) | — | 45 | — | 45 | |||||||||||
Subtotal of Non-GAAP tax reform adjustments | — | (282 | ) | — | (282 | ) | |||||||||
Subtotal of Non-GAAP adjustments | — | (282 | ) | — | (94 | ) | |||||||||
Net income available to TDS common shareholders excluding adjustments (Non-GAAP) | $ | 16 | $ | 6 | $ | 135 | $ | 59 | |||||||
Diluted earnings per share available to TDS common shareholders (GAAP) | $ | 0.14 | $ | 2.54 | $ | 1.17 | $ | 1.37 | |||||||
Adjustments: | |||||||||||||||
Loss in impairment of goodwill | — | — | — | 2.34 | |||||||||||
Tax benefit on impairment of goodwill (1) | — | — | — | (0.20 | ) | ||||||||||
Noncontrolling interests impact on goodwill impairment (2) | — | — | — | (0.46 | ) | ||||||||||
Effect of the Tax Act | — | (2.91 | ) | — | (2.92 | ) | |||||||||
Noncontrolling interests impact of the Tax Act (2) | — | 0.42 | — | 0.40 | |||||||||||
Diluted earnings per share available to TDS common shareholders excluding adjustments (Non-GAAP) | $ | 0.14 | $ | 0.05 | $ | 1.17 | $ | 0.53 |
(1) | Tax benefit represents the amount associated with the tax-amortizable portion of the loss on goodwill impairment. |
(2) | Noncontrolling interests, net of tax, includes noncontrolling public shareholders' share in U.S. Cellular for similar adjustments recorded on U.S. Cellular's consolidated financial statements. |
For the Quarter Ended | 12/31/2018(1) | 9/30/2018(1) | 6/30/2018(1) | 3/31/2018(1) | 12/31/2017 | ||||||||||||||
(Dollars and connection counts in millions) | |||||||||||||||||||
Calculation of Postpaid ARPU | |||||||||||||||||||
Postpaid service revenues | $ | 611 | $ | 607 | $ | 600 | $ | 598 | $ | 598 | |||||||||
Average number of postpaid connections | 4.47 | 4.47 | 4.47 | 4.50 | 4.52 | ||||||||||||||
Number of months in period | 3 | 3 | 3 | 3 | 3 | ||||||||||||||
Postpaid ARPU (GAAP metric) | $ | 45.58 | $ | 45.31 | $ | 44.74 | $ | 44.34 | $ | 44.12 | |||||||||
Calculation of Postpaid ABPU | |||||||||||||||||||
Postpaid service revenues | $ | 611 | $ | 607 | $ | 600 | $ | 598 | $ | 598 | |||||||||
Equipment installment plan billings | 199 | 189 | 174 | 172 | 170 | ||||||||||||||
Total billings to postpaid connections | $ | 810 | $ | 796 | $ | 774 | $ | 770 | $ | 768 | |||||||||
Average number of postpaid connections | 4.47 | 4.47 | 4.47 | 4.50 | 4.52 | ||||||||||||||
Number of months in period | 3 | 3 | 3 | 3 | 3 | ||||||||||||||
Postpaid ABPU (Non-GAAP metric) | $ | 60.46 | $ | 59.41 | $ | 57.75 | $ | 57.10 | $ | 56.69 | |||||||||
Calculation of Postpaid ARPA | |||||||||||||||||||
Postpaid service revenues | $ | 611 | $ | 607 | $ | 600 | $ | 598 | $ | 598 | |||||||||
Average number of postpaid accounts | 1.70 | 1.70 | 1.69 | 1.69 | 1.69 | ||||||||||||||
Number of months in period | 3 | 3 | 3 | 3 | 3 | ||||||||||||||
Postpaid ARPA (GAAP metric) | $ | 119.60 | $ | 119.42 | $ | 118.57 | $ | 118.22 | $ | 118.05 | |||||||||
Calculation of Postpaid ABPA | |||||||||||||||||||
Postpaid service revenues | $ | 611 | $ | 607 | $ | 600 | $ | 598 | $ | 598 | |||||||||
Equipment installment plan billings | 199 | 189 | 174 | 172 | 170 | ||||||||||||||
Total billings to postpaid accounts | $ | 810 | $ | 796 | $ | 774 | $ | 770 | $ | 768 | |||||||||
Average number of postpaid accounts | 1.70 | 1.70 | 1.69 | 1.69 | 1.69 | ||||||||||||||
Number of months in period | 3 | 3 | 3 | 3 | 3 | ||||||||||||||
Postpaid ABPA (Non-GAAP metric) | $ | 158.66 | $ | 156.57 | $ | 153.03 | $ | 152.26 | $ | 151.68 |
(1) | As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported. |
▪ | Intense competition in the markets in which TDS operates could adversely affect TDS’ revenues or increase its costs to compete. |
▪ | A failure by TDS to successfully execute its business strategy (including planned acquisitions, spectrum acquisitions, fiber builds, divestitures and exchanges) or allocate resources or capital effectively could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Uncertainty in TDS’ future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, other changes in TDS’ performance or market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs, reduce the amount of spectrum licenses acquired, and/or reduce or cease share repurchases and/or the payment of dividends. |
▪ | TDS has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt. |
▪ | Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | To the extent conducted by the FCC, TDS may participate in FCC auctions for additional spectrum or for funding in certain Universal Service programs in the future directly or indirectly and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on TDS. |
▪ | Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect TDS’ business, financial condition or results of operations. |
▪ | An inability to attract people of outstanding talent throughout all levels of the organization, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on TDS' business, financial condition or results of operations. |
▪ | TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry. Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry. |
▪ | TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations. |
▪ | Changes in various business factors, including changes in demand, customer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business. |
▪ | Complexities associated with deploying new technologies present substantial risk and TDS’ investments in unproven technologies may not produce the benefits that TDS expects. |
▪ | TDS receives regulatory support and is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of the support and fees are subject to great uncertainty, which could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Performance under device purchase agreements could have a material adverse impact on TDS' business, financial condition or results of operations. |
▪ | Changes in TDS’ enterprise value, changes in the market supply or demand for wireless licenses, wireline or cable markets or IT service providers, adverse developments in the businesses or the industries in which TDS is involved and/or other factors could require TDS to recognize impairments in the carrying value of its licenses, goodwill, franchise rights and/or physical assets or require re-evaluation of the indefinite-lived nature of such assets. |
▪ | Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of TDS’ businesses could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations. |
▪ | Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operational difficulties of key suppliers or independent agents and third party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations. |
▪ | TDS has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on TDS’ financial condition or results of operations. |
▪ | A failure by TDS to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | TDS has experienced and, in the future, expects to experience cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations. |
▪ | Changes in facts or circumstances, including new or additional information, could require TDS to record adjustments to amounts reflected in the financial statements, which could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on TDS’ wireless business, financial condition or results of operations. |
▪ | Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences. |
▪ | The market price of TDS’ Common Shares is subject to fluctuations due to a variety of factors. |
▪ | Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from TDS’ forward-looking estimates by a material amount. |