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Jane McCahon

Senior Vice President - Corporate Relations

Phone: 312.592.5379
jane.mccahon@tdsinc.com
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TDS reports fourth quarter and full year 2016 results

02/24/2017

Provides 2017 guidance
As previously announced, TDS will hold a teleconference February 24, 2017 at 9:30 a.m. CST. Interested parties may listen to the call live via the Events & Presentations page of investors.tdsinc.com.

CHICAGO, Feb. 24, 2017 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,278 million for the fourth quarter of 2016, versus $1,274 million for the comparable period one year ago. Net loss attributable to TDS shareholders and related diluted loss per share was $5 million and $0.05, respectively, for the fourth quarter of 2016, compared to $1 million and $0.01, respectively, in the comparable period one year ago. 

TDS reported total operating revenues of $5,104 million and $5,176 million for the years ended 2016 and 2015, respectively.  Net income attributable to TDS shareholders and related diluted earnings per share were $43 million and $0.39, respectively, for the year ended 2016, compared to $219 million and $1.98, respectively, for the year ended 2015.

"In 2016, the TDS family of companies continued to execute on our long-term strategic goals," said LeRoy T. Carlson, Jr., TDS President and CEO. "U.S. Cellular worked to strengthen its competitive advantages through network enhancements and other improvements to increase customer satisfaction. TDS Telecom successfully completed two substantial projects to support its broadband strategy: fiber deployment and cable analog reclamation.

"U.S. Cellular continued to invest in its high-quality network by beginning a multi-year roll-out of Voice over LTE technology, and is on track to launch its first commercial deployment early this year. We also made a significant transition by implementing 4G LTE roaming agreements that improve the quality of roaming experiences for U.S. Cellular customers and that lower our costs. U.S. Cellular's commitment to outstanding customer service drove consistently low smartphone churn throughout the year. Increased smartphone adoption and increased per customer data usage helped to offset some of the competitive pricing pressures. In the fourth quarter, as was the case through 2016, we strove to balance customer growth with profitability, which resulted in fewer new customers, and delivered on our earnings targets.

"TDS Telecom successfully completed its planned fiber deployments for 2016, enabling fiber to reach 22 percent of our service addresses. We grew our IPTV connections significantly and, combined with a greater demand for increased data speeds, we increased residential wireline revenues. Recently, we announced that TDS Telecom accepted funding through the FCC's Alternative Connect America Cost Model (A-CAM), funds that will enable us to expand and improve broadband service to nearly 160,000 locations.  In our cable business, we transitioned analog cable markets to all-digital video services to improve customer experience and to reclaim spectrum that enables higher broadband speeds. Cable revenues increased 13 percent in the fourth quarter, compared to the prior year, showing that our cable broadband strategy is working. OneNeck IT Solutions continues to focus on its strategy of growing recurring service revenues through delivering IT cloud, colocation and other services tailored to mid-market businesses.

"TDS continues to return value to shareholders.  During 2016, TDS paid $65 million in regular quarterly cash dividends, and this morning we announced our 43rd consecutive year of increasing cash dividend payments, with a 5 percent increase in our annual dividend."

2017 Estimated Results
Estimates of full-year 2017 results for U.S. Cellular, TDS Telecom, and TDS are shown below.  Such estimates represent management's view as of February 24, 2017.  Such forward-looking statements should not be assumed to be current as of any future date.  TDS undertakes no duty to update such information, whether as a result of new information, future events, or otherwise.  There can be no assurance that final results will not differ materially from such estimated results.



2017 Estimated Results and Actual Results for the Year Ended December 31, 2016



















U.S. Cellular


TDS Telecom


TDS(3)



Estimate


Actual


Estimate


Actual


Estimate


Actual

(Dollars in millions)
















Total operating revenues (1)


$3,800-$4,000

$

3,939


$1,200-$1,250

$

1,151


$5,015-$5,265

$

5,104

Operating cash flow (2)


$500-$650

$

618


$300-$340

$

295


$805-$995

$

916

Adjusted EBITDA (2)


$650-$800

$

816


$300-$340

$

298


$955-$1,145

$

1,118

Capital expenditures

Approx. $

500

$

446

Approx. $

225

$

173

Approx. $

735

$

630

 

The following table provides a reconciliation to Operating Cash Flow and Adjusted EBITDA for 2017 estimated results, and actual results for the year ended December 31, 2016.  In providing 2017 estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes.  Although potentially significant, TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, TDS is unable to provide such guidance.  Accordingly, a reconciliation to net income is not available without unreasonable effort.





U.S. Cellular


TDS Telecom


TDS (3)





Estimate


Actual


Estimate


Actual


Estimate


Actual

(Dollars in millions)













Net income (loss) (GAAP)


N/A


49


N/A


42


N/A


52

Add back:














Income tax expense (benefit)


N/A


33


N/A


25


N/A


40

Income (loss) before income taxes














(GAAP)

$

(110)-40

$

82

$

75-115

$

67

$

(95)-95

$

92

Add back:














Interest expense


110


113



3


170


170


Depreciation, amortization and















accretion expense


630


618


225


224


860


850

EBITDA (Non-GAAP)

$

630-780

$

813

$

300-340

$

294

$

935-1,125

$

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)



(1)



(20)


(Gain) loss on asset disposals, net


20


22



4


20


27

Adjusted EBITDA (Non-GAAP)(2)

$

650-800

$

816

$

300-340

$

298

$

955-1,145

$

1,118

Deduct:














Equity in earnings of















unconsolidated entities


140


140




140


140


Interest and dividend income;















other income(1)


10


57



3


10


62


Other, net



1





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

$

500-650

$

618

$

300-340

$

295

$

805-995

$

916
















Note: Totals may not foot due to rounding differences.



(1)

In 2016, Imputed interest related to equipment installment plans was recorded in Interest and dividend income.  Beginning in 2017, imputed interest will be recorded in service revenues.  The company recorded $51 million in imputed interest in 2016.



(2)

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) is defined as net income adjusted for the items set forth in the reconciliation above.  Operating cash flow is defined as net income adjusted for the items set forth in the reconciliation above.  Adjusted EBITDA and Operating cash flow 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 Operating cash flow as measurements of profitability, and therefore reconciliations to applicable GAAP income measures are deemed appropriate.  Management believes Adjusted EBITDA and Operating cash flow 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 Operating cash flow 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 Operating cash flow to the corresponding GAAP measure, Net income or Income (loss) 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 Operating cash flow (Non-GAAP) to operating income (GAAP) for full year 2016, 2015 and 2014 actual results can be found on the Guidance and Reconciliation page of the company's website at investors.tdsinc.com.

Stock Repurchase Summary
TDS began repurchasing stock under its $250 million repurchase authorization on August 5, 2013.   The following represents repurchases of TDS Common Shares.

Repurchase Period


# Shares


Cost (in millions)

2016 (full year)


111,700


$

3

2015 (full year)



$

Total


111,700


$

3

 

Conference Call Information
TDS will hold a conference call on February 24, 2017 at 9:30 a.m. Central Time.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.tdsinc.com. The call will be archived on the Events & Presentations page of investors.tdsinc.com

About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6 million customers nationwide through its businesses, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, and TDS Broadband Service LLC.  Founded in 1969 and headquartered in Chicago, TDS employed 10,300 people as of December 31, 2016.

Visit www.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: intense competition; the ability to execute TDS' business strategy; uncertainties in TDS' future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and U.S. Cellular indebtedness or comply with the terms of debt covenants; impacts of any pending acquisitions/divestures/exchanges of properties and/or licenses,  including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; pending and future litigation; changes in income tax rates, laws, regulations or rulings; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission ("SEC"), which are incorporated by reference herein.    

For more information about TDS and its subsidiaries, visit:
TDS: www.tdsinc.com 
U.S. Cellular: www.uscellular.com 
TDS Telecom: www.tdstelecom.com 
OneNeck IT Solutions: www.oneneck.com


United States Cellular Corporation

Summary Operating Data (Unaudited)
















Quarter Ended

12/31/2016


9/30/2016


6/30/2016


3/31/2016


12/31/2015

Retail Connections
















Postpaid

















Total at end of period


4,482,000



4,484,000



4,490,000



4,454,000



4,409,000



Gross additions


187,000



174,000



197,000



215,000



240,000




Feature phones


7,000



10,000



8,000



9,000



10,000




Smartphones


109,000



105,000



107,000



124,000



132,000




Connected devices


71,000



59,000



82,000



82,000



98,000



Net additions (losses)


(2,000)



(6,000)



36,000



45,000



68,000




Feature phones


(21,000)



(20,000)



(21,000)



(25,000)



(25,000)




Smartphones


(4,000)



(7,000)



8,000



20,000



23,000




Connected devices


23,000



21,000



49,000



50,000



70,000



ARPU (1)

$

45.19


$

47.08


$

47.37


$

48.13


$

51.46



ABPU (Non-GAAP)(2)

$

55.43


$

56.79


$

56.09


$

56.06


$

58.57



ARPA (3)

$

120.67


$

125.31


$

124.91


$

125.36


$

131.96



ABPA (Non-GAAP)(4)

$

148.02


$

151.16


$

147.90


$

145.99


$

150.19



Churn rate (5)


1.41%



1.34%



1.20%



1.28%



1.31%




Handsets


1.23%



1.22%



1.10%



1.18%



1.23%




Connected devices


2.49%



2.04%



1.84%



2.01%



1.95%



Smartphone penetration (6)


79%



78%



77%



75%



74%


Prepaid

















Total at end of period


484,000



480,000



413,000



399,000



387,000



Gross additions


83,000



132,000



73,000



75,000



69,000



Net additions


4,000



67,000



14,000



12,000



7,000



ARPU (1)

$

33.25


$

34.39


$

34.58


$

35.51


$

35.54



Churn rate (5)


5.44%



4.84%



4.86%



5.37%



5.40%

Total connections at end of period (7)


5,031,000



5,030,000



4,973,000



4,926,000



4,876,000

Smartphones sold as a percent of total
















handsets sold


93%



92%



91%



92%



91%

Market penetration at end of period
















Consolidated operating population


31,994,000



31,994,000



31,994,000



31,994,000



31,967,000


Consolidated operating penetration (8)


16%



16%



16%



15%



15%

Capital expenditures (millions)

$

171


$

103


$

93


$

79


$

198

Total cell sites in service


6,415



6,374



6,324



6,306



6,297

Owned towers


4,040



4,015



3,988



3,989



3,978





















(1)

Average Revenue Per User ("ARPU") - metric 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 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 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 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)

Smartphone penetration is calculated by dividing postpaid smartphone connections by postpaid handset connections.

(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.

 

TDS Telecom

Summary Operating Data (Unaudited)


Quarter Ended

12/31/2016


9/30/2016


6/30/2016


3/31/2016


12/31/2015

TDS Telecom















Wireline
















Residential connections

















Voice (1)


310,600



314,600



316,800



318,400



319,800



Broadband (2)


229,500



232,800



232,200



229,100



228,500



IPTV (3)


45,300



43,600



41,200



38,300



34,400



   Wireline residential connections


585,400



590,900



590,200



585,800



582,700



















Total residential revenue per connection (4)

$

44.27


$

44.25


$

43.67


$

43.28


$

41.24



















Commercial connections

















Voice (1)


157,400



160,900



164,000



167,400



171,500



Broadband (2)


21,400



21,700



21,900



22,000



22,400



managedIP (5)


150,900



151,500



149,000



148,500



147,100



   Wireline commercial connections


329,700



334,000



334,900



337,900



341,000



















Total Wireline connections


915,200



924,900



925,100



923,700



923,700


















Cable
















Cable Connections

















Broadband (2)


133,700



130,200



125,700



121,700



117,100



Video (6)


99,000



101,100



102,900



104,600



106,800



Voice (1)


59,600



59,800



58,900



58,100



56,400



   Cable connections


292,400



291,000



287,600



284,400



280,300


















Numbers may not foot due to rounding.


















(1)

Refers to the individual circuits connecting a customer to Wireline's central office facilities or the Cable billable number of lines into a building for voice services.

(2)

Refers to the number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies or the Cable billable number of lines into a building for high-speed data services.

(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 total 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)

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.

 

TDS Telecom

Capital Expenditures (millions)











Quarter Ended

12/31/2016


9/30/2016


6/30/2016


3/31/2016


12/31/2015

Wireline

$

26


$

27


$

27


$

27


$

50

Cable


13



11



17



13



15

HMS


5



2



2



2



8


$

45


$

40


$

46


$

42


$

73

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)





Three Months Ended December 31,





2016


2015


2016 vs. 2015







Increase (Decrease)

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











Operating revenues












U.S. Cellular

$

991


$

987


$

4


-


TDS Telecom


283



284



(1)


-


All Other (1)


4



3



1


>100%






1,278



1,274



4


-

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and














accretion


861



851



10


1%



Depreciation, amortization and accretion


156



156




-



(Gain) loss on asset disposals, net


6



4



2


43%



(Gain) loss on license sales and exchanges, net


(3)





(3)


N/M






1,020



1,011



9


1%


TDS Telecom













Expenses excluding depreciation, amortization and














accretion


212



214



(1)


(1)%



Depreciation, amortization and accretion


56



58



(2)


(3)%



(Gain) loss on asset disposals, net


1



3



(2)


(71)%



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




(6)



6


N/M



(Gain) loss on license sales and exchanges, net


(1)





(1)


N/M






269



268




-


All Other (1)













Expenses excluding depreciation and amortization


2



4



(2)


17%



Depreciation and amortization


2



2




(4)%






5



6



(1)


25%


















Total operating expenses


1,294



1,285



9


1%















Operating income (loss)












U.S. Cellular


(29)



(24)



(5)


(21)%


TDS Telecom


14



16



(1)


(7)%


All Other (1)


(1)



(3)



2


36%






(16)



(11)



(5)


(44)%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


30



30




-


Interest and dividend income


18



11



7


68%


Interest expense


(43)



(39)



(4)


(12)%



Total investment and other income


5



2



3


>100%

Loss before income taxes


(11)



(9)



(2)


(25)%


Income tax expense (benefit)


(6)



(7)



1


24%

Net loss


(5)



(2)



(3)


>(100)%


Less:  Net income attributable to noncontrolling













interests, net of tax




(1)



1


(65)%

Net loss attributable to TDS shareholders


(5)



(1)



(4)


>(100)%


TDS Preferred dividend requirement







-

Net loss available to TDS common shareholders

$

(5)


$

(1)


$

(4)


>(100)%















Basic weighted average shares outstanding


110



109



1


1%

Basic loss per share available to TDS common

 shareholders

$

(0.05)


$

(0.01)


$

(0.04)


>(100)%















Diluted weighted average shares outstanding


110



109



1


1%

Diluted loss per share available to TDS common

 shareholders

$

(0.05)


$

(0.01)


$

(0.04)


>(100)%















(1)

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

N/M – Percentage change not meaningful

Numbers may not foot due to rounding.

 


Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)





Year Ended December 31,







2016 vs. 2015





2016


2015


Increase (Decrease)

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











Operating revenues












U.S. Cellular

$

3,939


$

3,997


$

(58)


(1)%


TDS Telecom


1,151



1,158



(7)


(1)%


All Other (1)


14



21



(7)


(35)%






5,104



5,176



(72)


(1)%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and














accretion


3,321



3,322



(1)


-



Depreciation, amortization and accretion


618



607



11


2%



(Gain) loss on asset disposals, net


22



16



6


36%



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




(114)



114


100%



(Gain) loss on license sales and exchanges, net


(19)



(147)



128


87%






3,942



3,684



258


7%


TDS Telecom













Expenses excluding depreciation, amortization and














accretion


856



854



2


-



Depreciation, amortization and accretion


224



228



(4)


(2)%



(Gain) loss on asset disposals, net


4



6



(2)


(24)%



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




(10)



10


>100%



(Gain) loss on license sales and exchanges, net


(1)





(1)


N/M






1,084



1,079



6


1%


All Other (1)













Expenses excluding depreciation and amortization


10



19



(9)


(42)%



Depreciation and amortization


8



9



(1)


(27)%



(Gain) loss on asset disposals, net


1





1


>100%



(Gain) loss on sale of business and other exit costs, net (2)


(1)



(12)



11


96%






18



16



2


9%


















Total operating expenses


5,044



4,779



265


6%















Operating income (loss)












U.S. Cellular


(3)



313



(316)


>(100)%


TDS Telecom


67



79



(12)


(15)%


All Other (1)


(4)



5



(9)


>(100)%






60



397



(337)


(85)%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


140



140




-


Interest and dividend income


62



39



23


60%


Interest expense


(170)



(142)



(28)


(20)%


Other, net




1



(1)


(98)%



Total investment and other income


32



38



(6)


(16)%

Income before income taxes


92



435



(343)


(79)%


Income tax expense


40



172



(132)


(77)%

Net income


52



263



(211)


(80)%


Less:  Net income attributable to noncontrolling













interest, net of tax


9



44



(35)


79%

Net income attributable to TDS shareholders


43



219



(176)


(80)%


TDS Preferred dividend requirement







-

Net income available to TDS common shareholders

$

43


$

219


$

(176)


(80)%















Basic weighted average shares outstanding


110



109



1


1%

Basic earnings per share available to TDS common












shareholders

$

0.39


$

2.02


$

(1.62)


(80)%

Diluted weighted average shares outstanding


111



110



1


1%

Diluted earnings per share available to TDS common












shareholders

$

0.39


$

1.98


$

(1.59)


(80)%















(1)

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

(2)

Compared to U.S. Cellular, TDS recognized an incremental gain of $12 million on the tower sale as a result of a lower basis in the assets disposed in 2015.

N/M – Percentage change not meaningful

Numbers may not foot due to rounding.

 


Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)





Year Ended December 31,





2016


2015

(Dollars in millions)






Cash flows from operating activities







Net income

$

52


$

263


Add (deduct) adjustments to reconcile net income (loss) to net







   cash flows from operating activities








Depreciation, amortization and accretion


850



844



Bad debts expense


102



112



Stock-based compensation expense


42



40



Deferred income taxes, net


22



71



Equity in earnings of unconsolidated entities


(140)



(140)



Distributions from unconsolidated entities


93



60



(Gain) loss on asset disposals, net


27



22



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


(1)



(136)



(Gain) loss on license sales and exchanges, net


(20)



(147)



Noncash interest expense


3



3



Other operating activities


(3)



(1)


Changes in assets and liabilities from operations








Accounts receivable


(23)



(120)



Equipment installment plans receivable


(246)



(134)



Inventory


4



115



Accounts payable


36



7



Customer deposits and deferred revenues


(52)



(36)



Accrued taxes


60



38



Accrued interest


(1)



4



Other assets and liabilities


(23)



(75)




Net cash provided by operating activities


782



790










Cash flows from investing activities







Cash used for additions to property, plant and equipment


(636)



(801)


Cash paid for acquisitions and licenses


(53)



(287)


Cash received from divestitures and exchanges


21



343


Cash received for investments





Federal Communications Commission deposit


(143)




Other investing activities


3



7




Net cash used in investing activities


(808)



(738)










Cash flows from financing activities







Issuance of long-term debt


2



525


Repayment of long-term debt


(12)



(1)


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


9



13


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


6



2


Repurchase of TDS Common Shares


(3)




Repurchase of U.S. Cellular Common Shares


(5)



(6)


Dividends paid to TDS shareholders


(65)



(61)


Payment of debt issuance costs


(4)



(13)


Distributions to noncontrolling interests


(1)



(6)


Payments to acquire additional interest in subsidiaries




(4)


Other financing activities


14



12




Net cash provided by (used in) financing activities


(59)



461










Net increase (decrease) in cash and cash equivalents


(85)



513










Cash and cash equivalents







Beginning of period


985



472


End of period

$

900


$

985





















 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)







ASSETS
















December 31,


December 31,




2016


2015

(Dollars in millions)






Current assets







Cash and cash equivalents

$

900


$

985


Accounts receivable from customers and others, net


851



803


Inventory, net


151



158


Prepaid expenses


115



112


Income taxes receivable


10



70


Other current assets


32



30



Total current assets


2,059



2,158









Assets held for sale


8











Licenses


1,895



1,844

Goodwill


766



766

Franchise rights


244



244

Other intangible assets, net


33



47

Investments in unconsolidated entities


451



402

Other investments


1











Property, plant and equipment, net


3,555



3,764









Other assets and deferred charges


434



197









Total assets

$

9,446


$

9,422









 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)








LIABILITIES AND EQUITY



















December 31,


December 31,





2016


2015

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






Current liabilities








Current portion of long-term debt

$

12


$

14



Accounts payable


365



349



Customer deposits and deferred revenues


229



288



Accrued interest


11



12



Accrued taxes


44



41



Accrued compensation


127



113



Other current liabilities


99



127




Total current liabilities


887



944










Deferred liabilities and credits








Net deferred income tax liability


922



900



Other deferred liabilities and credits


453



433










Long-term debt, net


2,433



2,440










Noncontrolling interests with redemption features


1



1










Equity







TDS shareholders' equity








Series A Common and Common Shares, par value $.01


1



1



Capital in excess of par value


2,386



2,365



Treasury shares, at cost


(698)



(727)



Accumulated other comprehensive income


1





Retained earnings


2,454



2,487




   Total TDS shareholders' equity


4,144



4,126











Preferred shares


1



1


Noncontrolling interests


605



577












Total equity


4,750



4,704










Total liabilities and equity

$

9,446


$

9,422



















 

Telephone and Data Systems, Inc.

Balance Sheet Highlights

(Unaudited)




December 31, 2016



U.S.


TDS


TDS Corporate


Intercompany


TDS



Cellular


Telecom


& Other


Eliminations


Consolidated

(Dollars in millions)















Cash and cash equivalents

$

586


$

18


$

296


$


$

900

Affiliated cash investments




430





(430)





$

586


$

448


$

296


$

(430)


$

900

















Licenses, goodwill and other intangible
















assets

$

2,256


$

821


$

(139)


$


$

2,938

Investment in unconsolidated entities


413



4



40



(6)



451

Long-term and other investments






1





1



$

2,669


$

825


$

(98)


$

(6)


$

3,390

































Property, plant and equipment, net

$

2,470


$

1,059


$

26


$


$

3,555

















Long-term debt:
















Current portion

$

11


$


$

1


$


$

12


Non-current portion, net


1,618



2



813





2,433



$

1,629


$

2


$

814


$


$

2,445

 


TDS Telecom Highlights

(Unaudited)





Three Months Ended December 31,





2016


2015


2016 vs. 2015







Increase (Decrease)

(Dollars in millions)











Wireline











Operating revenues












Residential

$

78


$

72


$

5


8%


Commercial


52



54



(3)


(5)%


Wholesale


44



46



(2)


(5)%



Total service revenues


174



173



1


-


Equipment and product sales







(30)%



Total operating revenues


174



174



1


-

Operating expenses












Cost of services


66



66




-


Cost of equipment and products


1



1




11%


Selling, general and administrative expenses


49



49




-


Expenses excluding depreciation, amortization and accretion


116



116




-


Depreciation, amortization and accretion


40



41



(1)


(4)%


(Gain) loss on asset disposals, net




2



(1)


(84)%


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




(6)



6


N/M


(Gain) loss on license sales and exchanges, net


(1)





(1)


N/M






156



152



3


2%
















Operating income

$

19


$

21


$

(3)


(12)%















Cable











Operating revenues












Residential

$

38


$

34


$

4


13%


Commercial


11



9



1


15%



Total operating revenues


49



43



6


13%

Operating expenses












Cost of services


24



19



5


26%


Selling, general and administrative expenses


13



13




1%


Expenses excluding depreciation, amortization and accretion


38



32



5


16%


Depreciation, amortization and accretion


9



9




-


(Gain) loss on asset disposals, net


1



1



(1)


(54)%






47



43



4


10%
















Operating income

$

1


$


$

1


>100%















HMS











Operating revenues












Service revenues

$

28


$

28


$

(1)


(2)%


Equipment and product sales


34



40



(7)


(16)%



Total operating revenues


61



69



(7)


(10)%

Operating expenses












Cost of services


21



22



(1)


(5)%


Cost of equipment and products


28



34



(6)


(19)%


Selling, general and administrative expenses


12



11



1


6%


Expenses excluding depreciation, amortization and accretion


60



67



(7)


(10)%


Depreciation, amortization and accretion


7



7




(3)%






67



74



(7)


(10)%


Operating loss

$

(6)


$

(6)


$


4%















Intercompany revenues

$

(1)


$

(1)


$


(1)%

Intercompany expenses


(1)



(1)




(1)%

Total TDS Telecom operating income

$

14


$

16


$

(1)


(7)%

Numbers may not foot due to rounding.

N/M – Percentage change not meaningful











 


TDS Telecom Highlights

(Unaudited)





Year Ended December 31,





2016


2015


2016 vs. 2015







Increase (Decrease)

(Dollars in millions)











Wireline











Operating revenues












Residential

$

309


$

297


$

13


4%


Commercial


212



221



(9)


(4)%


Wholesale


175



181



(7)


(4)%



Total service revenues


696



699



(3)


-


Equipment and product sales


2



2




(9)%



Total operating revenues


698



701



(3)


-

Operating expenses












Cost of services


258



255



4


1%


Cost of equipment and products


2



2




1%


Selling, general and administrative expenses


197



194



3


2%


Expenses excluding depreciation, amortization and accretion


458



451



7


1%


Depreciation, amortization and accretion


159



166



(7)


(4)%


(Gain) loss on asset disposals, net


2



5



(3)


(62)%


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




(10)



10


>100%


(Gain) loss on license sales and exchanges, net


(1)





(1)


N/M






618



612



6


1%


Operating income

$

80


$

89


$

(9)


(10)%















Cable











Operating revenues












Residential

$

147


$

138


$

8


6%


Commercial


38



36



2


6%



Total operating revenues


185



175



10


6%

Operating expenses












Cost of services


94



79



15


19%


Selling, general and administrative expenses


51



54



(3)


(6)%


Expenses excluding depreciation, amortization and accretion


144



133



12


9%


Depreciation, amortization and accretion


37



35



1


4%


(Gain) loss on asset disposals, net


2



1



2


>100%






183



169



15


9%


Operating income

$

2


$

6


$

(5)


(71)%















HMS











Operating revenues












Service revenues

$

119


$

117


$

2


1%


Equipment and product sales


155



170



(15)


(9)%



Total operating revenues


273



287



(13)


(5)%

Operating expenses












Cost of services


82



85



(3)


(4)%


Cost of equipment and products


128



143



(14)


(10)%


Selling, general and administrative expenses


48



47



1


3%


Expenses excluding depreciation, amortization and accretion


259



275



(16)


(6)%


Depreciation, amortization and accretion


29



27



2


6%






288



302



(15)


(5)%


Operating loss

$

(14)


$

(15)


$

1


7%















Intercompany revenues

$

(5)


$

(5)


$


1%

Intercompany expenses


(5)



(5)




1%

Total TDS Telecom operating income (loss)

$

67


$

79


$

(12)


(15)%

Numbers may not foot due to rounding.

N/M – Percentage change not meaningful











 


Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow and Adjusted Free Cash Flow





Three Months Ended December 31,


Year Ended December 31,



2016


2015


2016


2015

(Dollars in millions)









Cash flows from operating activities (GAAP)


$

144


$

63


$

782


$

790

Less: Cash used for additions to property,














plant and equipment



209



243



636



801


Free cash flow



(65)



(180)



146



(11)

Add: Sprint Cost Reimbursement



1



2



7



30


Adjusted free cash flow (Non-GAAP)(1)


$

(64)


$

(178)


$

153


$

19















(1)

Management uses Free cash flow as a liquidity measure and it is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment.  Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash paid for additions to property, plant and equipment.  Sprint decommissioning and Sprint Cost Reimbursement are further defined and discussed in our Annual Report on Form 10-K for the year ended December 31, 2016.  Free cash flow and Adjusted free cash flow are non-GAAP financial measures which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash paid for additions to property, plant and equipment.

Postpaid ABPU and Postpaid ABPA

U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment and product sales resulting from the increased adoption of equipment installment plans.  Postpaid ABPU and Postpaid ABPA, as previously defined, are non-GAAP financial measures which U.S. Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment revenues received from customers.

For the Quarter Ended


12/31/2016



9/30/2016



6/30/2016



3/31/2016



12/31/2015

(Dollars and connection counts in millions)















Calculation of Postpaid ARPU















Postpaid service revenues

$

607


$

635


$

636


$

639


$

674

Average number of postpaid connections


4.48



4.49



4.48



4.43



4.37

Number of months in period


3



3



3



3



3


Postpaid ARPU (GAAP metric)

$

45.19


$

47.08


$

47.37


$

48.13


$

51.46


















Calculation of Postpaid ABPU















Postpaid service revenues

$

607


$

635


$

636


$

639


$

674

Equipment installment plan billings


138



131



118



105



93


Total billings to postpaid connections

$

745


$

766


$

754


$

744


$

767

Average number of postpaid connections


4.48



4.49



4.48



4.43



4.37

Number of months in period


3



3



3



3



3


Postpaid ABPU (Non-GAAP metric)

$

55.43


$

56.79


$

56.09


$

56.06


$

58.57


















Calculation of Postpaid ARPA















Postpaid service revenues

$

607


$

635


$

636


$

639


$

674

Average number of postpaid accounts


1.68



1.69



1.70



1.70



1.70

Number of months in period


3



3



3



3



3


Postpaid ARPA (GAAP metric)

$

120.67


$

125.31


$

124.91


$

125.36


$

131.96


















Calculation of Postpaid ABPA















Postpaid service revenues

$

607


$

635


$

636


$

639


$

674

Equipment installment plan billings


138



131



118



105



93


Total billings to postpaid accounts

$

745


$

766


$

754


$

744


$

767

Average number of postpaid accounts


1.68



1.69



1.70



1.70



1.70

Number of months in period


3



3



3



3



3


Postpaid ABPA (Non-GAAP metric)

$

148.02


$

151.16


$

147.90


$

145.99


$

150.19

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/tds-reports-fourth-quarter-and-full-year-2016-results-300413192.html

SOURCE Telephone and Data Systems, Inc.

Jane McCahon, Senior Vice President - Corporate Relations and Corporate Secretary, 312-592-5379, jane.mccahon@tdsinc.com; Julie Mathews, IRC, Director - Investor Relations, 312-592-5341, julie.mathews@tdsinc.com
Copyright © 2017 Telephone and Data Systems, Inc. All Rights Reserved.

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