TDS reports second quarter 2017 results

2017 Estimated Results

U.S. Cellular

TDS Telecom

TDS⁽³⁾

Current

Previous

Current

Previous

Current

Previous

(Dollars in millions)

Total operating revenues ⁽¹⁾

$3,800-$4,000

Unchanged

$1,200-$1,250

Unchanged

$5,015-$5,265

Unchanged

Adjusted OIBDA ^(1)(2)(4)

$550-$650

Unchanged

$300-$340

Unchanged

$855-$995

Unchanged

Adjusted EBITDA ⁽²⁾

$700-$800

Unchanged

$300-$340

Unchanged

$1,005-$1,145

Unchanged

Capital expenditures (Approximately)

$500

Unchanged

$225

Unchanged

$735

Unchanged

2017 Estimated Results

U.S. Cellular

TDS Telecom

TDS⁽³⁾

(Dollars in millions)

Net income (loss) (GAAP)

N/A

N/A

N/A

Add back:

Income tax expense (benefit)

N/A

N/A

N/A

Income (loss) before income taxes (GAAP)

$

(30)-70

$

80-120

$

(10)-130

Add back:

Interest expense

110

–

165

Depreciation, amortization and accretion expense

620

220

850

EBITDA (Non-GAAP)

$

700-800

$

300-340

$

1,005-1,145

Add back:

(Gain) loss on sale of business and other exit costs, net

–

–

–

(Gain) loss on license sales and exchanges, net

(20)

–

(20)

(Gain) loss on asset disposals, net

20

–

20

Adjusted EBITDA (Non-GAAP) ⁽²⁾

$

700-800

$

300-340

$

1,005-1,145

Deduct:

Equity in earnings of unconsolidated entities

140

–

140

Interest and dividend income⁽¹⁾

10

–

10

Adjusted OIBDA (Non-GAAP)^(1)(2)(4)

$

550-650

$

300-340

$

855-995

Actual Results

Six Months Ended June 30, 2017

Year ended December 31, 2016

U.S.
Cellular

TDS

Telecom

TDS ⁽³⁾

U.S.
Cellular

TDS

Telecom

TDS ⁽³⁾

(Dollars in millions)

Net income (GAAP)

$

40

$

33

$

55

$

49

$

42

$

52

Add back:

Income tax expense

33

21

44

33

25

40

Income before income taxes

(GAAP)

$

73

$

54

$

99

$

82

$

67

$

92

Add back:

Interest expense

56

2

85

113

3

170

Depreciation, amortization and accretion expense

307

111

422

618

224

850

EBITDA (Non-GAAP)

$

436

$

167

$

606

$

813

$

294

$

1,112

Add back:

(Gain) loss on sale of business and other exit costs, net

–

–

–

–

–

(1)

(Gain) loss on license sales and exchanges, net

(19)

–

(19)

(19)

(1)

(20)

(Gain) loss on asset disposals, net

9

1

10

22

4

27

Adjusted EBITDA (Non-GAAP) ⁽²⁾

$

426

$

168

$

597

$

816

$

298

$

1,118

Deduct:

Equity in earnings of unconsolidated entities

66

–

65

140

–

140

Interest and dividend income⁽¹⁾

5

2

8

6

3

11

Other, net

(1)

–

1

1

–

–

Adjusted OIBDA (Non-GAAP) ^(1)(2)(4)

$

356

$

166

$

523

$

669

$

295

$

967

Note: Totals may not foot due to rounding differences.

(1)

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

(2)

Adjusted EBITDA is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted OIBDA is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.  TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future.  Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate.  Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS' financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance.  Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.  The table above reconciles Adjusted EBITDA and Adjusted OIBDA flow to the corresponding GAAP measure, Net income or Income before income taxes.

(3)

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.

(4)

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

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

Retail Connections

Postpaid

Total at end of period

4,478,000

4,455,000

4,482,000

4,484,000

4,490,000

Gross additions

174,000

146,000

187,000

174,000

197,000

Feature phones

7,000

7,000

7,000

10,000

8,000

Smartphones

116,000

88,000

109,000

105,000

107,000

Connected devices

51,000

51,000

71,000

59,000

82,000

Net additions (losses)

23,000

(27,000)

(2,000)

(6,000)

36,000

Feature phones

(15,000)

(19,000)

(21,000)

(20,000)

(21,000)

Smartphones

34,000

(9,000)

(4,000)

(7,000)

8,000

Connected devices

4,000

1,000

23,000

21,000

49,000

ARPU ⁽¹⁾

$

44.60

$

45.42

$

45.19

$

47.08

$

47.37

ABPU (Non-GAAP)⁽²⁾

$

55.19

$

55.82

$

55.43

$

56.79

$

56.09

ARPA ⁽³⁾

$

119.73

$

121.88

$

120.67

$

125.31

$

124.91

ABPA (Non-GAAP)⁽⁴⁾

$

148.15

$

149.78

$

148.02

$

151.16

$

147.90

Churn rate ⁽⁵⁾

1.13%

1.29%

1.41%

1.34%

1.20%

Handsets

0.91%

1.08%

1.23%

1.22%

1.10%

Connected devices

2.35%

2.55%

2.49%

2.04%

1.84%

Prepaid

Total at end of period

484,000

480,000

484,000

480,000

413,000

Gross additions

73,000

78,000

83,000

132,000

73,000

Net additions (losses)

3,000

(4,000)

4,000

67,000

14,000

ARPU ⁽¹⁾

$

33.52

$

33.66

$

33.25

$

34.39

$

34.58

Churn rate ⁽⁵⁾

4.93%

5.69%

5.44%

4.84%

4.86%

Total connections at end of period ⁽⁶⁾

5,023,000

4,996,000

5,031,000

5,030,000

4,973,000

Market penetration at end of period

Consolidated operating population

32,089,000

32,089,000

31,994,000

31,994,000

31,994,000

Consolidated operating penetration ⁽⁷⁾

16%

16%

16%

16%

16%

Capital expenditures (millions)

$

84

$

61

$

171

$

103

$

93

Total cell sites in service

6,421

6,417

6,415

6,374

6,324

Owned towers

4,044

4,041

4,040

4,015

3,988

(1)

Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period.  These revenue bases and connection populations are shown below:

▪

Postpaid ARPU consists of total postpaid service revenues and postpaid connections.

▪

Prepaid ARPU consists of total prepaid service revenues and prepaid connections.

(2)

Average Billings Per User (ABPU) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid connections and by the number of months in the period.  Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(3)

Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.

(4)

Average Billings Per Account (ABPA) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.  Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(5)

Churn rate represents the percentage of the connections that disconnect service each month.  These rates represent the average monthly churn rate for each respective period.

(6)

Includes reseller and other connections.

(7)

Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.

TDS Telecom

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

TDS Telecom

Wireline

Residential connections

Voice ⁽¹⁾

304,600

308,200

310,600

314,600

316,800

Broadband ⁽²⁾

230,200

228,500

229,500

232,800

232,200

IPTV ⁽³⁾

46,200

45,200

45,300

43,600

41,200

   Wireline residential connections

581,000

581,900

585,400

590,900

590,200

Total residential revenue per connection ⁽⁴⁾

$

46.39

$

45.17

$

44.27

$

44.25

$

43.67

Commercial connections

Voice ⁽¹⁾

150,500

154,000

157,400

160,900

164,000

Broadband ⁽²⁾

21,000

21,200

21,400

21,700

21,900

managedIP ⁽⁵⁾

149,700

150,300

150,900

151,500

149,000

   Wireline commercial connections

321,200

325,500

329,700

334,000

334,900

Total Wireline connections

902,200

907,400

915,200

924,900

925,100

Cable

Cable Connections

Broadband ⁽⁶⁾

140,300

137,800

133,700

130,200

125,700

Video ⁽⁷⁾

97,900

97,600

99,000

101,100

102,900

Voice ⁽⁸⁾

58,700

59,000

59,600

59,800

58,900

   Cable connections

297,000

294,300

292,400

291,000

287,600

Numbers may not foot due to rounding.

(1)

The individual circuits connecting a customer to Wireline's central office facilities.

(2)

The number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.

(3)

The number of Wireline customers provided video services using IP networking technology.

(4)

Total residential revenue per connection is calculated by dividing total Wireline residential revenue by the average number of Wireline residential connections and by the number of months in the period.

(5)

The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.

(6)

Billable number of lines into a building for high-speed data services.

(7)

Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.

(8)

Billable number of lines into a building for voice services.

TDS Telecom

Capital Expenditures (Unaudited)

Quarter Ended

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

(Dollars in millions)

Wireline

$

33

$

17

$

26

$

27

$

27

Cable

12

9

13

11

17

HMS

4

6

5

2

2

$

49

$

33

$

45

$

40

$

46

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months Ended June 30,

2017

2016

2017 vs. 2016

Increase (Decrease)

(Dollars and shares in millions, except per share amounts)

Operating revenues

U.S. Cellular ⁽¹⁾

$

963

$

992

$

(29)

(3)%

TDS Telecom

281

300

(18)

(6)%

All Other ⁽²⁾

3

3

–

-

1,247

1,295

(48)

(4)%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

800

812

(12)

(2)%

Depreciation, amortization and accretion

155

154

1

-

(Gain) loss on asset disposals, net

5

5

–

6%

(Gain) loss on license sales and exchanges, net

(2)

(9)

7

81%

958

962

(4)

(1)%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

201

221

(20)

(9)%

Depreciation, amortization and accretion

55

54

1

3%

(Gain) loss on asset disposals, net

1

1

–

(30)%

257

275

(19)

(7)%

All Other ⁽²⁾

Expenses excluding depreciation and amortization

3

3

–

40%

Depreciation and amortization

1

2

–

(9)%

(Gain) loss on asset disposals, net

–

–

–

>(100)%

4

5

–

19%

Total operating expenses

1,219

1,242

(23)

(2)%

Operating income (loss)

U.S. Cellular ⁽¹⁾

5

30

(25)

(82)%

TDS Telecom

25

24

–

1%

All Other ⁽²⁾

(2)

(1)

–

>(100)%

28

53

(25)

(47)%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

33

36

(3)

(9)%

Interest and dividend income ⁽¹⁾

4

3

1

15%

Interest expense

(43)

(43)

–

-

Other, net

–

1

(1)

>100%

Total investment and other income (expense)⁽¹⁾

(6)

(3)

(3)

(78)%

Income before income taxes

22

50

(28)

(55)%

Income tax expense

10

18

(8)

(45)%

Net income

12

32

(20)

(62)%

Less: Net income attributable to noncontrolling interests, net of tax

2

4

(2)

(49)%

Net income attributable to TDS shareholders

10

28

(18)

(63)%

TDS Preferred dividend requirement

–

–

–

N/M

Net income available to common shareholders

$

10

$

28

$

(18)

(63)%

Basic weighted average shares outstanding

111

109

2

1%

Basic earnings per share attributable to TDS shareholders

$

0.09

$

0.25

$

(0.16)

(64)%

Diluted weighted average shares outstanding

112

111

1

1%

Diluted earnings per share attributable to TDS shareholders

$

0.09

$

0.25

$

(0.16)

(64)%

N/M - Percentage change not meaningful

Numbers may not foot due to rounding.

(1)

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

(2)

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Six Months Ended June 30,

2017

2016

2017 vs. 2016

Increase (Decrease)

(Dollars and shares in millions, except per share amounts)

Operating revenues

U.S. Cellular⁽¹⁾

$

1,899

$

1,962

$

(63)

(3)%

TDS Telecom

580

581

(1)

-

All Other⁽²⁾

6

7

(1)

(4)%

2,485

2,550

(65)

(3)%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

1,543

1,613

(70)

(4)%

Depreciation, amortization and accretion

307

307

–

-

(Gain) loss on asset disposals, net

9

10

(1)

(12)%

(Gain) loss on license sales and exchanges, net

(19)

(9)

(10)

>(100)%

1,840

1,921

(81)

(4)%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

414

426

(12)

(3)%

Depreciation, amortization and accretion

111

112

(1)

(1)%

(Gain) loss on asset disposals, net

1

2

(1)

(28)%

527

540

(13)

(2)%

All Other⁽²⁾

Expenses excluding depreciation and amortization

5

5

–

2%

Depreciation and amortization

4

3

–

(10)%

(Gain) loss on asset disposals, net

–

–

–

57%

8

8

–

(3)%