-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SlG4SBpSJMlbDYuqMB6vQdIS4kwProWPiGthLzZX/HIxwqDHudr9wpEB1w3siyme 5HxhU43bn/fWoLbyk22x+w== 0000096966-98-000017.txt : 19980424 0000096966-98-000017.hdr.sgml : 19980424 ACCESSION NUMBER: 0000096966-98-000017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980421 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980423 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEPHONE & DATA SYSTEMS INC CENTRAL INDEX KEY: 0000096966 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 362669023 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08251 FILM NUMBER: 98599770 BUSINESS ADDRESS: STREET 1: 8401 GREENWAY BLVD STREET 2: PO BOX 628010 CITY: MIDDLETON STATE: WI ZIP: 535628010 BUSINESS PHONE: 3126301900 MAIL ADDRESS: STREET 1: 30 NORTH LASALLE STREET SUITE 400 CITY: CHICAGO STATE: IL ZIP: 60602 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC STOCK OPTION PLANS DATE OF NAME CHANGE: 19741118 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC DATE OF NAME CHANGE: 19740509 8-K 1 FORM 8-K FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 21, 1998 -------------- TELEPHONE AND DATA SYSTEMS, INC. -------------------------------- (Exact name of registrant as specified in its charter) Iowa 1-8251 36-2669023 ---- ------ ---------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification incorporation) No.) 30 North LaSalle Street, Chicago, Illinois 60602 - ------------------------------------------------ -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 630-1900 Not Applicable -------------- (Former name or former address, if changed since last report) Item 5. Other Events. ------------- On April 21, 1998, Telephone and Data Systems, Inc. announced its first quarter financial results. This Current Report on Form 8-K is being filed for the purpose of filing the news release issued by the Company relating to such announcement as an exhibit. Item 7. Financial Statements and Exhibits --------------------------------- Exhibits -------- The exhibits accompanying this report are listed in the accompanying Exhibit Index. 2 SIGNATURES 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) Date: April 23, 1998 By: /s/ GREGORY J. WILKINSON ---------------------------- Gregory J. Wilkinson Vice President and Controller (principal accounting officer) 3 EXHIBIT INDEX Exhibit Number Description of Exhibit - -------------- ---------------------- 99 News Release dated April 21, 1998 4 EX-99 2 EXHIBIT 99 Exhibit 99 Contact: Mark A. Steinkrauss, Vice President - Corporate Relations (312) 630-1900 email: mark.steinkrauss@teldta.com FOR RELEASE: IMMEDIATE TDS REPORTS STRONG CUSTOMER AND REVENUE GROWTH; CASH FLOW AND NET INCOME REDUCED BY AERIAL START-UP COSTS April 21, 1998 - Chicago, Illinois - Telephone and Data Systems, Inc., [AMEX:TDS] reported strong customer and revenue growth for its first fiscal quarter as both U.S. Cellular and Aerial Communications posted strong growth in subscriber units. Start-up costs at Aerial continued to reduce cash flow and operating income during the first quarter. Loss per share from operations, excluding gains, totaled $(.64) for the quarter compared to diluted earnings per share of $.15, excluding gains, in the first quarter of 1997. First Quarter Highlights: o Revenues grew 35% over the first quarter of 1997 to $392 million fueled by a 33% jump in cellular revenues and a 56% increase in cellular customer units. o Operating cash flow, excluding the effects of Aerial's start-up activity, increased 20% to $125.6 million in the first quarter of 1998. Including Aerial, operating cash flow declined 27% to $75.9 million. o Net (loss) available to common, excluding gains from asset sales, was $(38.8) million in the first quarter compared to net income available to common of $9.1 million in the first quarter of 1997. First quarter 1998 results reflect Aerial losses which reduced net income available to common by $45.3 million in the quarter and $11.6 million in the first quarter of 1997. o Primarily due to the effects of Aerial's operating losses, TDS reported a loss per share of $(.64) in the first quarter of 1998, excluding gains from asset sales, compared to diluted earnings per share of $.15 in 1997. The net loss associated with Aerial's operations reduced earnings per share by $.75 in the quarter and $.19 in the first quarter of 1997. o Gains from asset sales contributed $112.5 million or diluted earnings per share of $1.84 per share in the first quarter of 1998. LeRoy T. Carlson, Jr., President and Chief Executive Officer commented: "U.S. Cellular added 107,000 customers during the first quarter of 1998 and is well on its way to achieving its aggressive full year targets. With continued investment in the Company's network and business systems, U.S. Cellular is well positioned to become first choice in a very competitive market sector. "TDS Telecom reported solid increases in access lines and minutes during the first quarter. The advent of CLEC Service combined with growth in its structured wiring program and its internet service has TDS Telecom and its customers excited about its expanding array of communications offerings. "Aerial Communications added 40,000 customers during the first quarter. This represents a 32% increase over year-end figures. Just one year after launching its first market in Columbus, Ohio, Aerial is already serving over 165,000 customers. We are also encouraged by the reduction in its cost of acquisition per gross addition, and by Aerial's average revenue per unit which remains higher than the 1997 cellular industry average. "In 1998, we anticipate strong customer and revenue growth as well as strong cash flow and earnings performance in our U.S. Cellular and TDS Telecom groups. We also expect that the costs of Aerial's operations will continue to reduce cash flow and earnings during 1998. Thereafter, we currently anticipate a return to strong positive growth in cash flow and earnings for TDS." United States Cellular Corporation [AMEX:USM] TDS's 81.1% - owned subsidiary reported 56% customer growth since March 31, 1997. U.S. Cellular's customer units in service totaled 1,817,000. Net customer unit activations from marketing channels increased 18% to 107,000 from 91,000 activations during the first quarter of 1997. U.S. Cellular's service revenues increased 32% to $236.3 million in the first quarter compared to $179.6 million for the first quarter of 1997. Operating cash flow increased 46% to $78.4 million in the quarter compared to $53.6 million in the first quarter of 1997. USM plans to invest approximately $330 million in capital equipment and business system upgrades during 1998. TDS Telecommunications Corporation ("TDS Telecom"), a wholly owned subsidiary, reported a 10% increase in revenues in the first quarter versus the same period a year ago. TDS Telecom's landline telephone revenues increased 9%, based on a 7% increase in access lines and a strong increase in minutes of use. Operating cash flow from the landline business was essentially unchanged at $50.2 million. TDS Telecom's operating margin on its landline business was 23% during the first quarter compared to 27% in the first quarter of 1997. The reduced margin reflects the impact of higher expenses for the company's data network and increased sales and customer service costs. TDS Telecom is experiencing some downward pressure on certain revenue streams, and smaller margins on new non-traditional product offerings such as DBS (Direct Broadcast Satellite). TDS Telecom generated approximately $3.7 million in revenues and $5.9 million in expenses during the first quarter of 1998 related to its internet and structured wiring service offerings. The company anticipates that these products will produce increasing revenues during the next several quarters. Additionally, Telecom reported approximately $2.0 million in expenses during the quarter related to the commencement of service in its CLEC 2 operation in Madison, Wisconsin. TDS Telecom plans to invest approximately $140 million in capital spending in 1998. Aerial Communications, Inc. [NASDAQ:AERL], TDS's 82.4% - owned subsidiary reported 40,000 net customer activations during the first quarter of 1998. Aerial reported revenues of $30.7 million. Aerial's operating cash flow for the first quarter of 1998 was a negative $49.6 million and Aerial's capital expenditures for 1998 are anticipated to be approximately $75 million. American Paging, Inc. Effective March 31, 1998, TDS contributed substantially all of the assets and certain limited liabilities of American Paging, Inc., ("APP") while TSR Paging, Inc., ("TSR") of Fort Lee, NJ, contributed all its assets and liabilities to a limited liability company called TSR Wireless Holdings, LLC pursuant to a previously announced asset contribution agreement. The asset contribution agreement provides that, subject to adjustment, TDS will have a 30% interest and TSR will have a 70% interest in the new company. This is the final step in the combination of American Paging, Inc., with TSR Paging, Inc. TDS is a Chicago-based telecommunications company with established cellular telephone, established local telephone and developing PCS operations. TDS strives to build value for its shareholders by providing excellent communications services in attractive, closely related segments of the telecommunications industry. Except for historical and factual information contained herein, all other information set forth in this news release represents forward looking statements, including all statements about the Company's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, that involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Investors are encouraged to consider these risks and uncertainties which are discussed in documents filed by the Company with the Securities and Exchange Commission. TDS undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Internet Home Pages: TDS http://www.teldta.com TDS http://www.uscc.com TDS http://www.aerial1.com 3 TELEPHONE AND DATA SYSTEMS, INC. SUMMARY OPERATING DATA
Quarter Ended 3/31/98 12/31/97 9/30/97 6/30/97 3/31/97 U.S. Cellular: Total pops (1) 25,674 25,300 26,012 25,810 25,873 TDS's proportionate share 20,812 20,517 21,044 20,890 20,941 Consolidated Markets: Pops owned (000s) 22,837 22,611 20,578 20,557 20,390 Total population (000s) 24,034 24,034 21,844 21,844 21,712 Customer units 1,817,000 1,710,000 1,357,000 1,263,000 1,164,000 Market penetration 7.56% 7.11% 6.21% 5.78% 5.36% Markets in operation 134 134 132 132 131 Cell sites in service 1,786 1,748 1,556 1,485 1,377 Average monthly revenue per unit $ 44.66 $ 49.88 $ 57.56 $ 58.41 $ 53.50 Churn rate per month 1.7% 2.0% 2.0% 1.8% 2.0% Marketing cost per net customer add $ 579 $ 469 $ 603 $ 531 $ 550 TDS Telecom: Companies 107 106 105 105 105 Access lines 528,900 515,500 506,600 500,000 493,000 Growth in access lines from prior quarter-end: Acquisitions 6,000 3,200 --- --- --- Internal growth 7,400 5,700 6,600 7,000 8,500 Average monthly revenue per access line $ 68 $ 70 $ 70 $ 67 $ 67 Aerial Communications: Total pops (1) 27,601 27,601 27,601 27,601 27,601 TDS's proportionate share 22,749 22,774 22,788 22,803 22,843 Customer units 165,000 125,000 65,000 28,000 --- Market penetration 0.60% 0.45% 0.24% 0.10% --- Telephone and Data Systems: Notes Payable $ 450,615 $ 527,587 $ 451,329 $ 505,206 $ 299,468 Long-term Debt, excluding current $ 1,292,311 $ 1,264,218 $ 1,228,175 $ 983,364 $ 983,911 (1) Population equivalents ("Pops"), owned and acquirable, in thousands. (2) At March 31, 1998, 60.9 million TDS Common and Series A Common Shares were outstanding and approximately 41,000 Common Shares were scheduled to be issued in the future pursuant to definitive acquisition agreements. An additional 926,000 Common Shares are registered for use in connection with the Company's continuing acquisition program.
4 TELEPHONE AND DATA SYSTEMS, INC. FINANCIAL HIGHLIGHTS Three Months Ended March 31, 1998 (Unaudited, dollars in thousands, except per share amounts) Increase (Decrease) ------------------- 1998 1997 Amount Percent --------- ---------- --------- -------- Operating Revenues U.S. Cellular $ 245,157 $ 184,584 $ 60,573 32.8% TDS Telecom 116,215 105,571 * 10,644 10.1% Aerial Communications 30,746 --- 30,746 N/M --------- ---------- --------- 392,118 290,155 101,963 35.1% --------- ---------- --------- Operating Expenses Before Depreciation and Amortization U.S. Cellular 166,735 130,978 35,757 27.3% TDS Telecom 69,085 54,806 * 14,279 26.1% Aerial Communications 80,363 --- 80,363 N/M --------- ---------- --------- 316,183 185,784 130,399 70.2% --------- ---------- --------- Operating Cash Flow (Operating Income Plus Depreciation and Amortization) U.S. Cellular 78,422 53,606 24,816 46.3% TDS Telecom 47,130 50,765 * (3,635) (7.2%) Aerial Communications (49,617) --- (49,617) N/M --------- ---------- --------- 75,935 104,371 (28,436) (27.2%) --------- ---------- --------- Depreciation and Amortization** U.S. Cellular 45,267 30,161 15,106 50.1% TDS Telecom 26,815 23,858 * 2,957 12.4% Aerial Communications 19,696 --- 19,696 N/M --------- ---------- --------- **includes amortization of $12,761 and $10,458, respectively 91,778 54,019 37,759 69.9% --------- ---------- --------- Operating (Loss) Income From Ongoing Operations U.S. Cellular 33,155 23,445 9,710 41.4% TDS Telecom 20,315 26,907 * (6,592) (24.5%) Aerial Communications (69,313) --- (69,313) N/M --------- ---------- --------- (15,843) 50,352 (66,195) (131.5%) American Paging Operating (Loss) (11,406) (8,411) (2,995) 35.6% --------- ---------- --------- Operating (Loss) Income (27,249) 41,941 (69,190) (165.0%) --------- ---------- --------- Investment and Other Income Interest and Dividend Income 3,437 3,418 19 0.6% Minority Share of Income (11,553) (2,759) (8,794) N/M Cellular Investment Income, Net 13,605 17,920 * (4,315) (24.1%) PCS Development Costs --- (21,614) 21,614 (100.0%) Gain on Sale of Cellular and Other Investments 221,442 --- 221,442 N/M Other (Expense), Net (3,049) (1,637) (1,412) 86.3% --------- ---------- --------- 223,882 (4,672) 228,554 N/M --------- ---------- --------- Income Before Interest and Income Taxes 196,633 37,269 159,364 N/M Interest Expense 31,613 13,814 17,799 128.8% Minority interest in income of subsidiary trust 4,896 --- 4,896 N/M --------- ---------- --------- Income Before Income Taxes 160,124 23,455 136,669 N/M Income Tax Expense 85,954 13,838 72,116 N/M --------- ---------- --------- Net Income 74,170 9,617 64,553 N/M Preferred Dividend Requirement (440) (481) 41 (8.5%) --------- ---------- --------- Net Income Available to Common $ 73,730 $ 9,136 $ 64,594 N/M ========= ========== ========= 5 Average Common Shares Outstanding (000s) 60,750 61,184 (434) (0.7%) Earnings Per Common Share (Basic) $ 1.21 $ 0.15 $ 1.06 N/M ========= ========== ========= Earnings Per Common Share (Diluted) $ 1.20 $ 0.15 $ 1.05 N/M ========= ========== ========= Diluted EPS--Operations $ (0.64) $ 0.15 $ (0.79) N/M Diluted EPS--Gains $ 1.84 $ --- $ 1.84 N/M N/M - Percentage change not meaningful. * Amounts reclassified for change in current year presentation. 6 TELEPHONE AND DATA SYSTEMS, INC. BALANCE SHEET HIGHLIGHTS MARCH 31, 1998 (Dollars in thousands) Aerial TDS U.S. TDS Communica- Corporate Cellular Telecom tions & Other --------- --------- --------- ---------- Cash and Cash Equivalents $ 2,521 $ 52,908 $ 1,130 $ 10,242 Affiliated Cash Investments 60,197 161,991 --- --- Temporary Cash Investments 427 15,909 254 839 Notes Receivable - Affiliates --- 1,469 --- 757,908 ----------- --------- --------- ---------- $ 63,145 $ 232,277 $ 1,384 $ 768,989 ----------- --------- --------- ---------- Marketable Equity Securities $ 189,026 $ 59,456 $ --- $ --- Marketable Non-equity Securities 429 15,881 256 3,173 License and Franchise Costs, net 1,142,450 217,665 295,154 23,169 Cellular Minority Interests 97,737 2,118 510 7,734 Other Investments 15,300 11,652 --- 2,163,047 ----------- ---------- --------- ----------- $ 1,444,942 $ 306,772 $ 295,920 $2,197,123 =========== ========== ========= ========== Property, Plant and Equipment, net $ 955,550 $ 840,979 $ 618,937 $ 35,780 =========== ========== ========= ========== Notes Payable: external $ --- $ --- $ --- $ 450,615 intercompany --- 28,852 535,500 417,212 ----------- ---------- --------- ---------- $ --- $ 28,852 $ 535,500 $ 867,827 =========== ========== ========= ========== Long-term Debt: Current Portion $ --- $ 14,833 $ --- $ 241 Non-current Portion 519,300 820,807 219,832 554,397 ----------- ---------- --------- ---------- Total $ 519,300 $ 835,640 $ 219,832 $ 554,638 =========== ========== ========= ========== Preferred Stock $ --- $ --- $ --- $ 28,099 =========== ========== ========= ========== Trusted Originated Preferred Securities $ --- $ --- $ --- $ 300,000 =========== ========== ========= ========== Total outstanding debt and Preferred Stock $ 519,300 $ 864,492 $ 755,332 $1,750,564 =========== ========== ========= ========== Construction Expenditures: Quarter Ended 3/31/98 $ 53,099 $ 28,811 $ 33,064 $ (4,845) 7 TELEPHONE AND DATA SYSTEMS, INC. BALANCE SHEET HIGHLIGHTS MARCH 31, 1998 (Dollars in thousands) (Continued) Intercompany TDS Eliminations Consolidated ------------ ------------ Cash and Cash Equivalents $ --- $ 66,801 Affiliated Cash Investments (222,188) --- Temporary Cash Investments --- 17,429 Notes Receivable - Affiliates (759,377) --- ----------- ---------- $ (981,565) $ 84,230 =========== ========== Marketable Equity Securities $ --- $ 248,482 Marketable Non-equity Securities --- 19,739 License and Franchise Costs, net (14) 1,678,424 Cellular Minority Interests (2,672) 105,427 Other Investments (2,019,482) 170,517 ----------- ---------- $(2,022,168) $2,222,589 =========== ========== Property, Plant and Equipment, net $ --- $2,451,246 ========== ========== Notes Payable: external $ --- $ 450,615 intercompany (981,564) --- ----------- ---------- $ (981,564) $ 450,615 =========== ========== Long-term Debt: Current Portion $ --- $ 15,074 Non-current Portion (822,025) 1,292,311 ----------- ---------- Total $ (822,025) $1,307,385 =========== ========== Preferred Stock $ --- $ 28,099 =========== ========== Trust Originated Preferred Securities $ --- $ 300,000 =========== ========== Total outstanding debt and Preferred Stock $(1,803,589) $2,086,099 =========== ========== Construction Expenditures: Quarter ended 3/31/98 $ --- $ 110,129 8 TDS Telecom Highlights Three Months Ended March 31, 1998 (Unaudited, dollars in thousands) Increase (Decrease) --------------------- 1998 1997 Amount Percent ------------ ---------- ---------- --------- Local Telephone Operating Revenues Local Service $ 32,551 $ 29,861 $ 2,690 9.0% Network Access and Long-Distance 60,846 56,592 4,254 7.5% Miscellaneous 13,897 12,179 1,718 14.1% ----------- ---------- ---------- 107,294 98,632 8,662 8.8% ----------- ---------- ---------- Local Telephone Operating Expenses Network Operations 20,678 18,030 2,648 14.7% Customer Operations 17,509 14,897 2,612 17.5% Corporate Expenses 18,948 15,456 3,492 22.6% ----------- ---------- ---------- 57,135 48,383 8,752 18.1% ----------- ---------- ---------- Local Telephone Operating Cash Flow 50,159 50,249 (90) (0.2%) ----------- ---------- ---------- Local Telephone Depreciation and Amortization Depreciation 24,498 21,502 2,996 13.9% Amortization 1,509 1,791 (282) (15.7%) ----------- ---------- ---------- 26,007 23,293 2,714 11.7% ----------- ---------- ---------- Local Telephone Operating Income 24,152 26,956 (2,804) (10.4%) ----------- ---------- ---------- Long-Distance Operations Revenues 5,584 5,729 (145) (2.5%) Expenses before Depreciation and Amortization 4,931 4,757 174 3.7% ----------- ---------- ---------- Long-Distance Operating Cash Flow 653 972 (319) (32.8%) Long-Distance Depreciation and Amortization 373 391 (18) (4.6%) ----------- ---------- ---------- Long-Distance Operating Income 280 581 (301) (51.8%) ----------- ----------- ---------- Other Services (1) Revenue 3,816 1,442 2,374 164.6% Expenses before Depreciation 7,498 1,898 5,600 N/M ----------- ----------- ---------- Other Services Operating Cash Flow (3,682) (456) (3,226) N/M Other Services Depreciation 435 174 261 150.0% ----------- ----------- ---------- Other Services Operating (Loss) (4,117) (630) (3,487) N/M ----------- ----------- ---------- Intercompany Revenues (479) (232) (247) 106.5% Intercompany Expenses (479) (232) (247) 106.5% ----------- ----------- ---------- --- --- --- N/M ----------- ----------- ---------- Total TDS Telecom Operating Income $ 20,315 $ 26,907 $ (6,592) (24.5%) =========== =========== ========== (1) Cellular revenues and expenses included in prior reports have been reclassified to non-operating income. N/M - Percentage change not meaningful. 9 -----END PRIVACY-ENHANCED MESSAGE-----