TDS reports first 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

Operating cash flow ^(1)(2)(4)

$550-$650

$500-$650

$300-$340

Unchanged

$855-$995

$805-$995

Adjusted EBITDA ⁽²⁾

$700-$800

$650-$800

$300-$340

Unchanged

$1,005-$1,145

$955-$1,145

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)

$

(45)-55

$

80-120

$

(25)-115

Add back:

Interest expense

110

–

165

Depreciation, amortization and

accretion expense

630

220

860

EBITDA (Non-GAAP)

$

695-795

$

300-340

$

1,000-1,140

Add back:

(Gain) loss on sale of business and

other exit costs, net

–

–

–

(Gain) loss on license sales and

exchanges, net

(15)

–

(15)

(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;

other income⁽¹⁾

10

–

10

Operating cash flow (Non-GAAP)^(1)(2)(4)

$

550-650

$

300-340

$

855-995

Actual Results

Three Months Ended March 31, 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)

$

28

$

18

$

43

$

49

$

42

$

52

Add back:

Income tax expense

33

11

34

33

25

40

Income before income taxes

(GAAP)

$

61

$

29

$

77

$

82

$

67

$

92

Add back:

Interest expense

28

1

42

113

3

170

Depreciation, amortization and

accretion expense

153

56

211

618

224

850

EBITDA (Non-GAAP)

$

242

$

86

$

330

$

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

(17)

–

(17)

(19)

(1)

(20)

(Gain) loss on asset disposals, net

4

1

4

22

4

27

Adjusted EBITDA (Non-GAAP) ⁽²⁾

$

229

$

86

$

317

$

816

$

298

$

1,118

Deduct:

Equity in earnings of unconsolidated

entities

33

–

32

140

–

140

Interest and dividend income;

other income ⁽¹⁾

3

1

4

6

3

11

Other, net

(1)

–

1

1

–

–

Operating cash flow (Non-GAAP) ^(1)(2)(4)

$

194

$

85

$

280

$

669

$

295

$

967

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

3/31/2017

12/31/2016

9/30/2016

6/30/2016

3/31/2016

Retail Connections

Postpaid

Total at end of period

4,455,000

4,482,000

4,484,000

4,490,000

4,454,000

Gross additions

146,000

187,000

174,000

197,000

215,000

Feature phones

7,000

7,000

10,000

8,000

9,000

Smartphones

88,000

109,000

105,000

107,000

124,000

Connected devices

51,000

71,000

59,000

82,000

82,000

Net additions (losses)

(27,000)

(2,000)

(6,000)

36,000

45,000

Feature phones

(19,000)

(21,000)

(20,000)

(21,000)

(25,000)

Smartphones

(9,000)

(4,000)

(7,000)

8,000

20,000

Connected devices

1,000

23,000

21,000

49,000

50,000

ARPU ⁽¹⁾

$

45.42

$

45.19

$

47.08

$

47.37

$

48.13

ABPU (Non-GAAP)⁽²⁾

$

55.82

$

55.43

$

56.79

$

56.09

$

56.06

ARPA ⁽³⁾

$

121.88

$

120.67

$

125.31

$

124.91

$

125.36

ABPA (Non-GAAP)⁽⁴⁾

$

149.78

$

148.02

$

151.16

$

147.90

$

145.99

Churn rate ⁽⁵⁾

1.29%

1.41%

1.34%

1.20%

1.28%

Handsets

1.08%

1.23%

1.22%

1.10%

1.18%

Connected devices

2.55%

2.49%

2.04%

1.84%

2.01%

Prepaid

Total at end of period

480,000

484,000

480,000

413,000

399,000

Gross additions

78,000

83,000

132,000

73,000

75,000

Net additions (losses)

(4,000)

4,000

67,000

14,000

12,000

ARPU ⁽¹⁾

$

33.66

$

33.25

$

34.39

$

34.58

$

35.51

Churn rate ⁽⁵⁾

5.69%

5.44%

4.84%

4.86%

5.37%

Total connections at end of period ⁽⁶⁾

4,996,000

5,031,000

5,030,000

4,973,000

4,926,000

Market penetration at end of period

Consolidated operating population

32,089,000

31,994,000

31,994,000

31,994,000

31,994,000

Consolidated operating penetration ⁽⁷⁾

16%

16%

16%

16%

15%

Capital expenditures (millions)

$

61

$

171

$

103

$

93

$

79

Total cell sites in service

6,417

6,415

6,374

6,324

6,306

Owned towers

4,041

4,040

4,015

3,988

3,989

(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)

Quarter Ended

3/31/2017

12/31/2016

9/30/2016

6/30/2016

3/31/2016

TDS Telecom

Wireline

Residential connections

Voice ⁽¹⁾

308,200

310,600

314,600

316,800

318,400

Broadband ⁽²⁾

228,500

229,500

232,800

232,200

229,100

IPTV ⁽³⁾

45,200

45,300

43,600

41,200

38,300

   Wireline residential connections

581,900

585,400

590,900

590,200

585,800

Total residential revenue per connection ⁽⁴⁾

$

45.17

$

44.27

$

44.25

$

43.67

$

43.28

Commercial connections

Voice ⁽¹⁾

154,000

157,400

160,900

164,000

167,400

Broadband ⁽²⁾

21,200

21,400

21,700

21,900

22,000

managedIP ⁽⁵⁾

150,300

150,900

151,500

149,000

148,500

   Wireline commercial connections

325,500

329,700

334,000

334,900

337,900

Total Wireline connections

907,400

915,200

924,900

925,100

923,700

Cable

Cable Connections

Broadband ⁽⁶⁾

137,800

133,700

130,200

125,700

121,700

Video ⁽⁷⁾

97,600

99,000

101,100

102,900

104,600

Voice ⁽⁸⁾

59,000

59,600

59,800

58,900

58,100

   Cable connections

294,300

292,400

291,000

287,600

284,400

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 (millions)

Quarter Ended

3/31/2017

12/31/2016

9/30/2016

6/30/2016

3/31/2016

Wireline

$

17

$

26

$

27

$

27

$

27

Cable

9

13

11

17

13

HMS

6

5

2

2

2

$

33

$

45

$

40

$

46

$

42

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months Ended March 31,

2017

2016

2017 vs. 2016

Increase (Decrease)

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

Operating revenues

U.S. Cellular ⁽¹⁾

$

936

$

969

$

(33)

(3)%

TDS Telecom

299

281

17

6%

All Other ⁽²⁾

3

4

(1)

(8)%

1,238

1,254

(16)

(1)%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and

accretion

742

801

(59)

(7)%

Depreciation, amortization and accretion

153

153

–

1%

(Gain) loss on asset disposals, net

4

5

(1)

(28)%

(Gain) loss on license sales and exchanges, net

(17)

–

(17)

N/M

882

959

(77)

(8)%

TDS Telecom

Expenses excluding depreciation, amortization and

accretion

213

205

8

4%

Depreciation, amortization and accretion

56

58

(2)

(4)%

(Gain) loss on asset disposals, net

1

1

–

(27)%

270

264

6

2%

All Other ⁽¹⁾

Expenses excluding depreciation and amortization

3

4

(1)

(42)%

Depreciation and amortization

2

1

1

(11)%

(Gain) loss on asset disposals, net

(1)

–

(1)

90%

4

5

(1)

(27)%

Total operating expenses

1,156

1,228

(72)

(6)%

Operating income (loss)

U.S. Cellular ⁽¹⁾

54

10

44

>100%

TDS Telecom

29

17

12

70%

All Other ⁽²⁾

(1)

(1)

–

97%

82

26

56

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

32

35

(3)

(8)%

Interest and dividend income ⁽¹⁾

4

3

1

63%

Interest expense

(42)

(41)

(1)

(1)%

Other, net

1

–

1

>100%

Total investment and other income ⁽¹⁾

(5)

(3)

(2)

(33)%

Income before income taxes

77

23

54

>100%

Income tax expense

34

13

21

>100%

Net income

43

10

33

>100%

Less: Net income attributable to noncontrolling

interests, net of tax

6

2

4

>100%

Net income attributable to TDS shareholders

37

8

29

>100%

TDS Preferred dividend requirement

–

–

–

-

Net income available to common shareholders

$

37

$

8

$

29

>100%

Basic weighted average shares outstanding

110

109

1

1%

Basic earnings per share attributable to TDS shareholders

$

0.34

$

0.07

$

0.26

>100%

Diluted weighted average shares outstanding

112

110

2

1%

Diluted earnings per share attributable to TDS shareholders

$

0.33

$

0.07

$

0.26

>100%

N/M – Percentage change not meaningful

(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 Cash Flows
(Unaudited)

Three Months Ended

March 31,

2017

2016

(Dollars in millions)

Cash flows from operating activities

Net income

$

43

$

10

Add (deduct) adjustments to reconcile net income to net cash flows

  from operating activities

Depreciation, amortization and accretion

211

212

Bad debts expense

24

19

Stock-based compensation expense

11

9

Deferred income taxes, net

(1)

5

Equity in earnings of unconsolidated entities

(32)

(35)

Distributions from unconsolidated entities

11

14

(Gain) loss on asset disposals, net

4

6

(Gain) loss on license sales and exchanges, net

(17)

–

Noncash interest expense

1

1

Changes in assets and liabilities from operations

Accounts receivable

28

20

Equipment installment plans receivable

(44)

(41)

Inventory

–

(1)

Accounts payable

(75)

39

Customer deposits and deferred revenues

(12)

(6)

Accrued taxes

33

63

Accrued interest

9

9

Other assets and liabilities

(57)

(78)

Net cash provided by operating activities

137

246

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(127)

(159)

Cash paid for acquisitions and licenses

(14)

–

Cash received from divestitures and exchanges

16

2

Net cash used in investing activities

(125)

(157)

Cash flows from financing activities

Repayment of long-term debt

(3)

(3)

TDS Common Shares reissued for benefit plans, net of tax payments

1

–

U.S. Cellular Common Shares reissued for benefit plans, net of tax payments

3

1

Repurchase of TDS Common Shares

–

(3)

Repurchase of U.S. Cellular Common Shares

–

(2)

Dividends paid to TDS shareholders

(17)

(16)

Other financing activities

–

3

Net cash used in financing activities

(16)

(20)

Net increase (decrease) in cash and cash equivalents

(4)

69

Cash and cash equivalents

Beginning of period

900

985

End of period

$

896

$

1,054

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

March 31,

December 31,

2017

2016

(Dollars in millions)

Current assets

Cash and cash equivalents

$

896

$

900

Accounts receivable from customers and others, net

829

851