(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)) |
Securities registered pursuant to Section 12(b) of the Act: | ||||||
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||
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 | ||
104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
TELEPHONE AND DATA SYSTEMS, INC. | |||
(Registrant) | |||
Date: | April 30, 2020 | By: | /s/ Peter L. Sereda |
Peter L. Sereda | |||
Executive Vice President and Chief Financial Officer | |||
(principal financial officer) | |||
2020 Estimated Results | ||
U.S. Cellular | Previous | Current |
(Dollars in millions) | ||
Service revenues | $3,000-$3,100 | Unchanged |
Adjusted OIBDA1 | $775-$900 | $725-$850 |
Adjusted EBITDA1 | $950-$1,075 | $900-$1,025 |
Capital expenditures | $850-$950 | Unchanged |
TDS Telecom | Previous | Current |
(Dollars in millions) | ||
Total operating revenues | $950-$1,000 | Unchanged |
Adjusted OIBDA1 | $280-$310 | Unchanged |
Adjusted EBITDA1 | $290-$320 | Unchanged |
Capital expenditures | $300-$350 | Unchanged |
2020 Estimated Results | |||||
U.S. Cellular | TDS Telecom | ||||
(Dollars in millions) | |||||
Net income (GAAP) | N/A | N/A | |||
Add back: | |||||
Income tax expense | N/A | N/A | |||
Income before income taxes (GAAP) | $80-$205 | $80-$110 | |||
Add back: | |||||
Interest expense | 110 | — | |||
Depreciation, amortization and accretion expense | 690 | 210 | |||
EBITDA (Non-GAAP)1 | $880-$1,005 | $290-$320 | |||
Add back or deduct: | |||||
(Gain) loss on asset disposals, net | 20 | — | |||
Adjusted EBITDA (Non-GAAP)1 | $900-$1,025 | $290-$320 | |||
Deduct: | |||||
Equity in earnings of unconsolidated entities | 165 | — | |||
Interest and dividend income | 10 | 10 | |||
Adjusted OIBDA (Non-GAAP)1 | $725-$850 | $280-$310 |
Actual Results | |||||||||||||||
Three Months Ended March 31, 2020 | Year Ended December 31, 2019 | ||||||||||||||
U.S. Cellular | TDS Telecom | U.S. Cellular | TDS Telecom | ||||||||||||
(Dollars in millions) | |||||||||||||||
Net income (GAAP) | $ | 72 | $ | 28 | $ | 133 | $ | 92 | |||||||
Add back: | |||||||||||||||
Income tax expense | 4 | 4 | 52 | 30 | |||||||||||
Income before income taxes (GAAP) | $ | 76 | $ | 31 | $ | 185 | $ | 122 | |||||||
Add back: | |||||||||||||||
Interest expense | 24 | (1 | ) | 110 | (3 | ) | |||||||||
Depreciation, amortization and accretion expense | 177 | 52 | 702 | 200 | |||||||||||
EBITDA (Non-GAAP)1 | $ | 277 | $ | 82 | $ | 997 | $ | 320 | |||||||
Add back or deduct: | |||||||||||||||
(Gain) loss on asset disposals, net | 4 | — | 19 | (7 | ) | ||||||||||
(Gain) loss on sale of business and other exit costs, net | — | — | (1 | ) | — | ||||||||||
Adjusted EBITDA (Non-GAAP)1 | $ | 281 | $ | 82 | $ | 1,015 | $ | 313 | |||||||
Deduct: | |||||||||||||||
Equity in earnings of unconsolidated entities | 45 | — | 166 | — | |||||||||||
Interest and dividend income | 4 | 2 | 17 | 12 | |||||||||||
Other, net | 1 | — | — | — | |||||||||||
Adjusted OIBDA (Non-GAAP)1 | $ | 231 | $ | 80 | $ | 832 | $ | 300 |
1 | EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for March 31, 2020, 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 (833) 968-2187, conference ID: 1267888. |
United States Cellular Corporation | |||||||||||||||||||
Summary Operating Data (Unaudited) | |||||||||||||||||||
As of or for the Quarter Ended | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||||||
Retail Connections | |||||||||||||||||||
Postpaid | |||||||||||||||||||
Total at end of period | 4,359,000 | 4,383,000 | 4,395,000 | 4,414,000 | 4,440,000 | ||||||||||||||
Gross additions | 132,000 | 170,000 | 163,000 | 137,000 | 137,000 | ||||||||||||||
Feature phones | 2,000 | 2,000 | 3,000 | 5,000 | 4,000 | ||||||||||||||
Smartphones | 88,000 | 128,000 | 121,000 | 97,000 | 98,000 | ||||||||||||||
Connected devices | 42,000 | 40,000 | 39,000 | 35,000 | 35,000 | ||||||||||||||
Net additions (losses) | (26,000 | ) | (12,000 | ) | (19,000 | ) | (26,000 | ) | (32,000 | ) | |||||||||
Feature phones | (10,000 | ) | (11,000 | ) | (11,000 | ) | (10,000 | ) | (13,000 | ) | |||||||||
Smartphones | (10,000 | ) | 13,000 | 9,000 | (1,000 | ) | (1,000 | ) | |||||||||||
Connected devices | (6,000 | ) | (14,000 | ) | (17,000 | ) | (15,000 | ) | (18,000 | ) | |||||||||
ARPU1 | $ | 47.23 | $ | 46.57 | $ | 46.16 | $ | 45.90 | $ | 45.44 | |||||||||
ARPA2 | $ | 122.92 | $ | 120.99 | $ | 119.87 | $ | 119.46 | $ | 118.84 | |||||||||
Churn rate3 | 1.21 | % | 1.38 | % | 1.38 | % | 1.23 | % | 1.26 | % | |||||||||
Handsets | 0.95 | % | 1.11 | % | 1.09 | % | 0.97 | % | 0.99 | % | |||||||||
Connected devices | 3.11 | % | 3.44 | % | 3.44 | % | 3.01 | % | 3.08 | % | |||||||||
Prepaid | |||||||||||||||||||
Total at end of period | 494,000 | 506,000 | 510,000 | 500,000 | 503,000 | ||||||||||||||
Gross additions | 57,000 | 63,000 | 70,000 | 61,000 | 61,000 | ||||||||||||||
Net additions (losses) | (12,000 | ) | (3,000 | ) | 9,000 | (2,000 | ) | (13,000 | ) | ||||||||||
ARPU1 | $ | 34.07 | $ | 34.11 | $ | 34.35 | $ | 34.43 | $ | 33.44 | |||||||||
Churn rate3 | 4.67 | % | 4.40 | % | 4.03 | % | 4.20 | % | 4.92 | % | |||||||||
Total connections at end of period4 | 4,903,000 | 4,941,000 | 4,957,000 | 4,967,000 | 4,995,000 | ||||||||||||||
Market penetration at end of period | |||||||||||||||||||
Consolidated operating population | 31,292,000 | 30,740,000 | 31,310,000 | 31,310,000 | 31,310,000 | ||||||||||||||
Consolidated operating penetration5 | 16 | % | 16 | % | 16 | % | 16 | % | 16 | % | |||||||||
Capital expenditures (millions) | $ | 236 | $ | 243 | $ | 170 | $ | 195 | $ | 102 | |||||||||
Total cell sites in service | 6,629 | 6,578 | 6,554 | 6,535 | 6,506 | ||||||||||||||
Owned towers | 4,184 | 4,166 | 4,123 | 4,116 | 4,106 |
1 | Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below: |
• | Postpaid ARPU consists of total postpaid service revenues and postpaid connections. |
• | Prepaid ARPU consists of total prepaid service revenues and prepaid connections. |
2 | Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period. |
3 | Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period. |
4 | Includes reseller and other connections. |
5 | Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen. |
TDS Telecom | |||||||||||||||||||
Summary Operating Data (Unaudited) | |||||||||||||||||||
As of or for the Quarter Ended | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||||||
TDS Telecom | |||||||||||||||||||
Wireline | |||||||||||||||||||
Residential connections | |||||||||||||||||||
Voice1 | 259,100 | 262,100 | 266,100 | 269,000 | 271,100 | ||||||||||||||
Broadband2 | 242,700 | 241,300 | 242,200 | 240,200 | 236,100 | ||||||||||||||
Video3 | 59,000 | 58,500 | 57,300 | 56,200 | 54,300 | ||||||||||||||
Wireline residential connections | 560,700 | 561,900 | 565,600 | 565,500 | 561,500 | ||||||||||||||
Total residential revenue per connection4 | $ | 50.12 | $ | 49.11 | $ | 49.02 | $ | 47.88 | $ | 48.16 | |||||||||
Commercial connections | |||||||||||||||||||
Voice1 | 114,400 | 117,800 | 121,200 | 124,200 | 127,300 | ||||||||||||||
Broadband2 | 20,500 | 20,400 | 20,600 | 20,600 | 20,400 | ||||||||||||||
managedIP5 | 118,300 | 121,200 | 124,500 | 128,300 | 132,000 | ||||||||||||||
Video3 | 100 | 100 | 400 | 400 | 400 | ||||||||||||||
Wireline commercial connections | 253,400 | 259,600 | 266,600 | 273,500 | 280,100 | ||||||||||||||
Total Wireline connections | 814,200 | 821,500 | 832,300 | 839,000 | 841,500 | ||||||||||||||
Cable | |||||||||||||||||||
Cable residential and commercial connections | |||||||||||||||||||
Broadband6 | 196,800 | 193,500 | 174,900 | 172,600 | 171,100 | ||||||||||||||
Video7 | 105,100 | 106,600 | 98,000 | 100,300 | 101,400 | ||||||||||||||
Voice8 | 68,900 | 69,500 | 63,900 | 64,800 | 65,400 | ||||||||||||||
managedIP5 | 1,400 | 1,300 | 1,200 | 1,100 | 1,100 | ||||||||||||||
Total Cable connections | 372,300 | 370,900 | 338,000 | 338,900 | 339,000 |
1 | The individual circuits connecting a customer to Wireline’s central office facilities that provide voice services. |
2 | The number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies. |
3 | The number of Wireline customers provided video services. |
4 | Total residential revenue per connection is calculated by dividing total Wireline residential revenue by the average number of Wireline residential connections and by the number of months in the period. |
5 | The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology. |
6 | Billable number of lines into a building for high-speed data services. |
7 | Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service. |
8 | Billable number of lines into a building for voice services. |
TDS Telecom | |||||||||||||||||||
Capital Expenditures (Unaudited) | |||||||||||||||||||
Quarter Ended | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Wireline | $ | 39 | $ | 98 | $ | 61 | $ | 55 | $ | 29 | |||||||||
Cable | 15 | 26 | 20 | 15 | 13 | ||||||||||||||
Total TDS Telecom | $ | 54 | $ | 124 | $ | 81 | $ | 70 | $ | 42 |
Telephone and Data Systems, Inc. | ||||||||||
Consolidated Statement of Operations Highlights | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended March 31, | ||||||||||
2020 | 2019 | 2020 vs. 2019 | ||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||
Operating revenues | ||||||||||
U.S. Cellular | $ | 963 | $ | 966 | – | |||||
TDS Telecom | 240 | 230 | 4 | % | ||||||
All Other1 | 58 | 61 | (5 | )% | ||||||
1,261 | 1,257 | – | ||||||||
Operating expenses | ||||||||||
U.S. Cellular | ||||||||||
Expenses excluding depreciation, amortization and accretion | 732 | 735 | – | |||||||
Depreciation, amortization and accretion | 177 | 169 | 5 | % | ||||||
(Gain) loss on asset disposals, net | 4 | 2 | 72 | % | ||||||
(Gain) loss on sale of business and other exit costs, net | — | (2 | ) | N/M | ||||||
(Gain) loss on license sales and exchanges, net | — | (2 | ) | N/M | ||||||
913 | 902 | 1 | % | |||||||
TDS Telecom | ||||||||||
Expenses excluding depreciation, amortization and accretion | 160 | 150 | 7 | % | ||||||
Depreciation, amortization and accretion | 52 | 50 | 2 | % | ||||||
(Gain) loss on asset disposals, net | — | (7 | ) | N/M | ||||||
212 | 193 | 10 | % | |||||||
All Other1 | ||||||||||
Expenses excluding depreciation and amortization | 58 | 60 | (4 | )% | ||||||
Depreciation and amortization | 6 | 8 | (23 | )% | ||||||
64 | 68 | (6 | )% | |||||||
Total operating expenses | 1,189 | 1,163 | 2 | % | ||||||
Operating income (loss) | ||||||||||
U.S. Cellular | 50 | 64 | (22 | )% | ||||||
TDS Telecom | 28 | 37 | (23 | )% | ||||||
All Other1 | (6 | ) | (7 | ) | 10 | % | ||||
72 | 94 | (23 | )% | |||||||
Investment and other income (expense) | ||||||||||
Equity in earnings of unconsolidated entities | 45 | 44 | 3 | % | ||||||
Interest and dividend income | 6 | 9 | (30 | )% | ||||||
Interest expense | (37 | ) | (43 | ) | 14 | % | ||||
Total investment and other income | 14 | 10 | 41 | % | ||||||
Income before income taxes | 86 | 104 | (17 | )% | ||||||
Income tax expense | 3 | 34 | (89 | )% | ||||||
Net income | 83 | 70 | 18 | % | ||||||
Less: Net income attributable to noncontrolling interests, net of tax | 14 | 11 | 25 | % | ||||||
Net income attributable to TDS shareholders | $ | 69 | $ | 59 | 17 | % | ||||
Basic weighted average shares outstanding | 115 | 114 | 1 | % | ||||||
Basic earnings per share attributable to TDS shareholders | $ | 0.60 | $ | 0.52 | 16 | % | ||||
Diluted weighted average shares outstanding | 116 | 116 | – | |||||||
Diluted earnings per share attributable to TDS shareholders | $ | 0.59 | $ | 0.50 | 17 | % |
1 | Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments. |
Telephone and Data Systems, Inc. | |||||||
Consolidated Statement of Cash Flows | |||||||
(Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in millions) | |||||||
Cash flows from operating activities | |||||||
Net income | $ | 83 | $ | 70 | |||
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | |||||||
Depreciation, amortization and accretion | 235 | 227 | |||||
Bad debts expense | 34 | 25 | |||||
Stock-based compensation expense | 11 | 13 | |||||
Deferred income taxes, net | 75 | 25 | |||||
Equity in earnings of unconsolidated entities | (45 | ) | (44 | ) | |||
Distributions from unconsolidated entities | 25 | 19 | |||||
(Gain) loss on asset disposals, net | 4 | (5 | ) | ||||
(Gain) loss on sale of business and other exit costs, net | — | (2 | ) | ||||
(Gain) loss on license sales and exchanges, net | — | (2 | ) | ||||
Other operating activities | — | 1 | |||||
Changes in assets and liabilities from operations | |||||||
Accounts receivable | 43 | 28 | |||||
Equipment installment plans receivable | 23 | (10 | ) | ||||
Inventory | (52 | ) | (15 | ) | |||
Accounts payable | 87 | 46 | |||||
Customer deposits and deferred revenues | (9 | ) | 5 | ||||
Accrued taxes | (74 | ) | 9 | ||||
Accrued interest | 9 | 11 | |||||
Other assets and liabilities | (82 | ) | (74 | ) | |||
Net cash provided by operating activities | 367 | 327 | |||||
Cash flows from investing activities | |||||||
Cash paid for additions to property, plant and equipment | (377 | ) | (155 | ) | |||
Cash paid for licenses | (26 | ) | (1 | ) | |||
Cash received from investments | — | 2 | |||||
Cash paid for investments | (1 | ) | (1 | ) | |||
Cash received from divestitures and exchanges | — | 31 | |||||
Advance payments for license acquisitions | — | (135 | ) | ||||
Net cash used in investing activities | (404 | ) | (259 | ) | |||
Cash flows from financing activities | |||||||
Issuance of long-term debt | 50 | — | |||||
Repayment of long-term debt | (2 | ) | (5 | ) | |||
TDS Common Shares reissued for benefit plans, net of tax payments | (1 | ) | (3 | ) | |||
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments | — | (1 | ) | ||||
Repurchase of TDS Common Shares | (6 | ) | — | ||||
Repurchase of U.S. Cellular Common Shares | (21 | ) | — | ||||
Dividends paid to TDS shareholders | (19 | ) | (19 | ) | |||
Distributions to noncontrolling interests | (1 | ) | (1 | ) | |||
Other financing activities | (3 | ) | — | ||||
Net cash used in financing activities | (3 | ) | (29 | ) | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | (40 | ) | 39 | ||||
Cash, cash equivalents and restricted cash | |||||||
Beginning of period | 474 | 927 | |||||
End of period | $ | 434 | $ | 966 |
Telephone and Data Systems, Inc. | |||||||
Consolidated Balance Sheet Highlights | |||||||
(Unaudited) | |||||||
ASSETS | |||||||
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in millions) | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 421 | $ | 465 | |||
Accounts receivable, net | 1,052 | 1,124 | |||||
Inventory, net | 218 | 169 | |||||
Prepaid expenses | 115 | 98 | |||||
Income taxes receivable | 111 | 36 | |||||
Other current assets | 33 | 29 | |||||
Total current assets | 1,950 | 1,921 | |||||
Licenses | 2,511 | 2,480 | |||||
Goodwill | 547 | 547 | |||||
Other intangible assets, net | 232 | 239 | |||||
Investments in unconsolidated entities | 509 | 488 | |||||
Property, plant and equipment, net | 3,595 | 3,527 | |||||
Operating lease right-of-use assets | 975 | 972 | |||||
Other assets and deferred charges | 576 | 607 | |||||
Total assets | $ | 10,895 | $ | 10,781 |
Telephone and Data Systems, Inc. | |||||||
Consolidated Balance Sheet Highlights | |||||||
(Unaudited) | |||||||
LIABILITIES AND EQUITY | |||||||
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in millions, except per share amounts) | |||||||
Current liabilities | |||||||
Current portion of long-term debt | $ | 8 | $ | 10 | |||
Accounts payable | 378 | 374 | |||||
Customer deposits and deferred revenues | 181 | 189 | |||||
Accrued interest | 19 | 11 | |||||
Accrued taxes | 38 | 41 | |||||
Accrued compensation | 77 | 121 | |||||
Short-term operating lease liabilities | 121 | 116 | |||||
Other current liabilities | 78 | 100 | |||||
Total current liabilities | 900 | 962 | |||||
Deferred liabilities and credits | |||||||
Deferred income tax liability, net | 750 | 676 | |||||
Long-term operating lease liabilities | 929 | 931 | |||||
Other deferred liabilities and credits | 491 | 481 | |||||
Long-term debt, net | 2,365 | 2,316 | |||||
Noncontrolling interests with redemption features | 11 | 11 | |||||
Equity | |||||||
TDS shareholders' equity | |||||||
Series A Common and Common Shares, par value $.01 per share | 1 | 1 | |||||
Capital in excess of par value | 2,489 | 2,468 | |||||
Treasury shares, at cost | (480 | ) | (479 | ) | |||
Accumulated other comprehensive loss | (8 | ) | (9 | ) | |||
Retained earnings | 2,718 | 2,672 | |||||
Total TDS shareholders' equity | 4,720 | 4,653 | |||||
Noncontrolling interests | 729 | 751 | |||||
Total equity | 5,449 | 5,404 | |||||
Total liabilities and equity | $ | 10,895 | $ | 10,781 |
Balance Sheet Highlights | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
March 31, 2020 | |||||||||||||||||||
U.S. | TDS | TDS Corporate | Intercompany | TDS | |||||||||||||||
Cellular | Telecom | & Other | Eliminations | Consolidated | |||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Cash and cash equivalents | $ | 258 | $ | 26 | $ | 137 | $ | — | $ | 421 | |||||||||
Affiliated cash investments | — | 488 | — | (488 | ) | — | |||||||||||||
$ | 258 | $ | 514 | $ | 137 | $ | (488 | ) | $ | 421 | |||||||||
Licenses, goodwill and other intangible assets | $ | 2,502 | $ | 778 | $ | 10 | $ | — | $ | 3,290 | |||||||||
Investment in unconsolidated entities | 469 | 4 | 46 | (10 | ) | 509 | |||||||||||||
$ | 2,971 | $ | 782 | $ | 56 | $ | (10 | ) | $ | 3,799 | |||||||||
Property, plant and equipment, net | $ | 2,268 | $ | 1,222 | $ | 105 | $ | — | $ | 3,595 | |||||||||
Long-term debt, net: | |||||||||||||||||||
Current portion | $ | 6 | $ | 1 | $ | 1 | $ | — | $ | 8 | |||||||||
Non-current portion | 1,503 | 4 | 858 | — | 2,365 | ||||||||||||||
$ | 1,509 | $ | 5 | $ | 859 | $ | — | $ | 2,373 |
TDS Telecom Highlights | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended March 31, | ||||||||||
2020 | 2019 | 2020 vs. 2019 | ||||||||
(Dollars in millions) | ||||||||||
Wireline | ||||||||||
Operating revenues | ||||||||||
Residential | $ | 84 | $ | 81 | 4 | % | ||||
Commercial | 39 | 43 | (10 | )% | ||||||
Wholesale | 46 | 46 | – | |||||||
Total service revenues | 169 | 170 | (1 | )% | ||||||
Equipment and product sales | — | — | (43 | )% | ||||||
169 | 171 | (1 | )% | |||||||
Operating expenses | ||||||||||
Cost of services | 65 | 63 | 4 | % | ||||||
Cost of equipment and products | — | — | (46 | )% | ||||||
Selling, general and administrative expenses | 48 | 47 | 3 | % | ||||||
Expenses excluding depreciation, amortization and accretion | 114 | 110 | 3 | % | ||||||
Depreciation, amortization and accretion | 32 | 34 | (4 | )% | ||||||
(Gain) loss on asset disposals, net | — | (7 | ) | N/M | ||||||
146 | 136 | 7 | % | |||||||
Operating income | $ | 23 | $ | 34 | (32 | )% | ||||
Cable | ||||||||||
Operating revenues | ||||||||||
Residential | $ | 60 | $ | 49 | 20 | % | ||||
Commercial | 11 | 10 | 11 | % | ||||||
71 | 60 | 19 | % | |||||||
Operating expenses | ||||||||||
Cost of services | 30 | 26 | 17 | % | ||||||
Selling, general and administrative expenses | 17 | 14 | 16 | % | ||||||
Expenses excluding depreciation, amortization and accretion | 47 | 40 | 17 | % | ||||||
Depreciation, amortization and accretion | 19 | 17 | 15 | % | ||||||
(Gain) loss on asset disposals, net | — | — | (87 | )% | ||||||
66 | 57 | 15 | % | |||||||
Operating income (loss) | $ | 5 | $ | 2 | N/M | |||||
Total TDS Telecom operating income | $ | 28 | $ | 37 | (23 | )% |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in millions) | |||||||
Cash flows from operating activities (GAAP) | $ | 367 | $ | 327 | |||
Less: Cash paid for additions to property, plant and equipment | 377 | 155 | |||||
Free cash flow (Non-GAAP)1 | $ | (10 | ) | $ | 172 |
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. |
▪ | The impact of the COVID-19 pandemic on TDS' business is uncertain, but depending on its duration and severity it could have a material adverse effect on TDS' business, financial condition or results of operations. |
▪ | 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 wireless 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, consumer 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. |
▪ | Changes in TDS’ enterprise value, changes in the market supply or demand for wireless spectrum 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 wireless spectrum 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 wireless spectrum 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. |
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