8-K
TELEPHONE & DATA SYSTEMS INC /DE/ (TDS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 2022
TELEPHONE AND DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-14157 | 36-2669023 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (312) 630-1900
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
|---|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | Securities registered pursuant to Section 12(b) of the Act: | |||
| --- | --- | --- | |||
| Title of each class | Trading Symbol | Name of each exchange on which registered | |||
| Common Shares, $.01 par value | TDS | New York Stock Exchange | |||
| Depositary Shares each representing a 1/1000th interest in a share of 6.625% Series UU Cumulative Redeemable Perpetual Preferred Stock, $.01 par value | TDSPrU | New York Stock Exchange | |||
| Depositary Shares each representing a 1/1000th interest in a share of 6.000% Series VV Cumulative Redeemable Perpetual Preferred Stock, $.01 par value | TDSPrV | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| ☐ | Emerging growth company | | --- | --- || ☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | --- | --- |
Item 2.02. Results of Operations and Financial Condition
On May 5, 2022, Telephone and Data Systems, Inc. (TDS) issued a news release announcing its results of operations for the period ended March 31, 2022. A copy of the news release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
The information in this Item 2.02 of Form 8-K is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor will any such information or exhibits be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
(d) The following exhibits are being filed herewith:
| Exhibit Number | Description of Exhibits |
|---|---|
| 99.1 | Earnings Press Release dated May 5, 2022 |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
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 hereunto duly authorized.
| TELEPHONE AND DATA SYSTEMS, INC. | |||
|---|---|---|---|
| Date: | May 5, 2022 | By: | /s/ Peter L. Sereda |
| Peter L. Sereda | |||
| Executive Vice President and Chief Financial Officer |
Document
Exhibit 99.1 NEWS RELEASE
As previously announced, TDS will hold a teleconference on May 6, 2022, at 9:00 a.m. CDT. Listen to the call live via the Events & Presentations page of investors.tdsinc.com.
FOR IMMEDIATE RELEASE
TDS reports first quarter 2022 results
2022 guidance reaffirmed
CHICAGO (May 5, 2022) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,315 million for the first quarter of 2022, versus $1,318 million for the same period one year ago. Net income attributable to TDS common shareholders and related diluted earnings per share were $44 million and $0.37, respectively, for the first quarter of 2022 compared to $57 million and $0.48, respectively, in the same period one year ago.
"The TDS Family of Companies is making meaningful progress on our strategic priorities," said LeRoy T. Carlson, Jr., TDS President and CEO. “UScellular is continuing to make improvements in its high-performing network and TDS Telecom is seeing good and increasing success in its fiber expansion program.
"UScellular’s first quarter results delivered growth in retail service revenue, driven by the positive impact of higher ARPU. We continue to focus on growth areas of the business, including prepaid, business and government, and fixed wireless. Fixed wireless gross additions increased year-over-year, and momentum continues to build in our tower business, which produced double-digit revenue growth for the first quarter.
"TDS Telecom increased residential broadband connections, which contributed to strong residential broadband revenue growth in the quarter. TDS Telecom announced new fiber-to-the-home expansion markets in Montana and Wisconsin, as it continues to deploy fiber outside as well as inside of our traditional markets.”
2022 Estimated Results
TDS’ current estimates of full-year 2022 results for UScellular and TDS Telecom are shown below. Such estimates represent management’s view as of May 5, 2022 and should not be assumed to be current as of any future date. TDS undertakes no duty to update such estimates, whether as a result of new information, future events, or otherwise. There can be no assurance that final results will not differ materially from estimated results.
| 2022 Estimated Results | ||||||
|---|---|---|---|---|---|---|
| UScellular | Previous | Current | ||||
| (Dollars in millions) | ||||||
| Service revenues | $3,100-$3,200 | Unchanged | ||||
| Adjusted OIBDA1 | $750-$900 | Unchanged | ||||
| Adjusted EBITDA1 | $925-$1,075 | Unchanged | ||||
| Capital expenditures | $700-$800 | Unchanged | TDS Telecom | Previous | Current | |
| --- | --- | --- | ||||
| (Dollars in millions) | ||||||
| Total operating revenues | $1,010-$1,040 | Unchanged | ||||
| Adjusted OIBDA1 | $260-$290 | Unchanged | ||||
| Adjusted EBITDA1 | $260-$290 | Unchanged | ||||
| Capital expenditures | $500-$550 | Unchanged |
The following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. In providing 2022 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.
| 2022 Estimated Results | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| UScellular | TDS Telecom | ||||||||
| (Dollars in millions) | |||||||||
| Net income (GAAP) | N/A | N/A | |||||||
| Add back: | |||||||||
| Income tax expense | N/A | N/A | |||||||
| Income before income taxes (GAAP) | $65-$215 | $40-$70 | |||||||
| Add back: | |||||||||
| Interest expense | 135 | — | |||||||
| Depreciation, amortization and accretion expense | 710 | 220 | |||||||
| EBITDA (Non-GAAP)1 | $910-$1,060 | $260-$290 | |||||||
| Add back or deduct: | |||||||||
| (Gain) loss on asset disposals, net | 15 | — | |||||||
| Adjusted EBITDA (Non-GAAP)1 | $925-$1,075 | $260-$290 | |||||||
| Deduct: | |||||||||
| Equity in earnings of unconsolidated entities | 170 | — | |||||||
| Interest and dividend income | 5 | — | |||||||
| Adjusted OIBDA (Non-GAAP)1 | $750-$900 | $260-$290 | |||||||
| Actual Results | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | ||
| Three Months Ended<br>March 31, 2022 | Year Ended<br>December 31, 2021 | ||||||||
| UScellular | TDS <br>Telecom | UScellular | TDS<br><br>Telecom | ||||||
| (Dollars in millions) | |||||||||
| Net income (GAAP) | $ | 52 | $ | 23 | $ | 160 | $ | 90 | |
| Add back: | |||||||||
| Income tax expense | 32 | 8 | 20 | 24 | |||||
| Income before income taxes (GAAP) | $ | 84 | $ | 31 | $ | 180 | $ | 114 | |
| Add back: | |||||||||
| Interest expense | 33 | (2) | 175 | (5) | |||||
| Depreciation, amortization and accretion expense | 171 | 54 | 678 | 198 | |||||
| EBITDA (Non-GAAP)1 | $ | 288 | $ | 83 | $ | 1,033 | $ | 308 | |
| Add back or deduct: | |||||||||
| (Gain) loss on asset disposals, net | 2 | — | 23 | 2 | |||||
| (Gain) loss on sale of business and other exit costs, net | (1) | — | (2) | — | |||||
| Adjusted EBITDA (Non-GAAP)1 | $ | 289 | $ | 83 | $ | 1,054 | $ | 310 | |
| Deduct: | |||||||||
| Equity in earnings of unconsolidated entities | 45 | — | 179 | — | |||||
| Interest and dividend income | 1 | — | 6 | 1 | |||||
| Other, net | — | — | — | (1) | |||||
| Adjusted OIBDA (Non-GAAP)1 | $ | 243 | $ | 83 | $ | 869 | $ | 310 |
Numbers may not foot due to rounding.
1EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for March 31, 2022, can be found on TDS' website at investors.tdsinc.com.
Stock Repurchase
During the first quarter of 2022, TDS repurchased 254,102 of its Common Shares for $5 million and UScellular repurchased 363,821 of its Common Shares for $10 million.
Conference Call Information
TDS will hold a conference call on May 6, 2022 at 9:00 a.m. Central Time.
▪Access the live call on the Events & Presentations page of investors.tdsinc.com or at
https://event.on24.com/wcc/r/3725342/CDC132CA9BF52C2B44DEED054F08A623
▪Access the call by phone at (888)330-2384, conference ID: 1328528.
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 1000® company, provides wireless; broadband, video and voice; and hosted and managed services to approximately 6 million connections nationwide through its businesses, UScellular, TDS Telecom, and OneNeck IT Solutions. Founded in 1969 and headquartered in Chicago, TDS employed approximately 8,800 associates as of March 31, 2022.
Visit investors.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Contacts
Colleen Thompson, Vice President - Corporate Relations
colleen.thompson@tdsinc.com
Julie D. Mathews, IRC, Director - Investor Relations
julie.mathews@tdsinc.com
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 obtain or maintain roaming arrangements with other carriers on acceptable terms; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; the ability to attract people of outstanding talent throughout all levels of the organization; TDS' smaller scale relative to larger competitors; changes in demand, consumer preferences and perceptions, price competition, or churn rates; advances in technology; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of TDS’ businesses; the ability of the company to successfully construct and manage its networks; uncertainties in TDS’ future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and UScellular indebtedness or comply with the terms of debt covenants; conditions in the U.S. telecommunications industry; the value of assets and investments; the state and federal regulatory environment; pending and future litigation; cyber-attacks or other breaches of network of information technology security; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; the impact, duration and severity of public health emergencies, such as the COVID-19 pandemic. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under “Risk Factors” in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K.
For more information about TDS and its subsidiaries, visit:
TDS: www.tdsinc.com
UScellular: www.uscellular.com
TDS Telecom: www.tdstelecom.com
OneNeck IT Solutions: www.oneneck.com
| United States Cellular Corporation | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Summary Operating Data (Unaudited) | |||||||||||||||
| As of or for the Quarter Ended | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 3/31/2021 | ||||||||||
| Retail Connections | |||||||||||||||
| Postpaid | |||||||||||||||
| Total at end of period | 4,335,000 | 4,380,000 | 4,391,000 | 4,399,000 | 4,406,000 | ||||||||||
| Gross additions | 126,000 | 165,000 | 145,000 | 141,000 | 143,000 | ||||||||||
| Feature phones | 2,000 | 3,000 | 2,000 | 3,000 | 3,000 | ||||||||||
| Smartphones | 89,000 | 122,000 | 103,000 | 98,000 | 101,000 | ||||||||||
| Connected devices | 35,000 | 40,000 | 40,000 | 40,000 | 39,000 | ||||||||||
| Net additions (losses) | (44,000) | (12,000) | (8,000) | (6,000) | (6,000) | ||||||||||
| Feature phones | (10,000) | (7,000) | (7,000) | (7,000) | (9,000) | ||||||||||
| Smartphones | (26,000) | 5,000 | 2,000 | 6,000 | 6,000 | ||||||||||
| Connected devices | (8,000) | (10,000) | (3,000) | (5,000) | (3,000) | ||||||||||
| ARPU1,2 | $ | 49.71 | $ | 48.62 | $ | 48.12 | $ | 47.74 | $ | 47.65 | |||||
| ARPA1,3 | $ | 129.93 | $ | 127.14 | $ | 125.99 | $ | 125.25 | $ | 125.25 | |||||
| Churn rate4 | 1.30 | % | 1.35 | % | 1.15 | % | 1.11 | % | 1.12 | % | |||||
| Handsets | 1.10 | % | 1.10 | % | 0.95 | % | 0.88 | % | 0.92 | % | |||||
| Connected devices | 2.70 | % | 3.08 | % | 2.59 | % | 2.69 | % | 2.53 | % | |||||
| Prepaid | |||||||||||||||
| Total at end of period | 495,000 | 513,000 | 518,000 | 507,000 | 496,000 | ||||||||||
| Gross additions | 55,000 | 63,000 | 74,000 | 65,000 | 62,000 | ||||||||||
| Net additions (losses) | (18,000) | (5,000) | 11,000 | 10,000 | (3,000) | ||||||||||
| ARPU2 | $ | 34.59 | $ | 34.53 | $ | 35.05 | $ | 35.64 | $ | 35.25 | |||||
| Churn rate4 | 4.84 | % | 4.39 | % | 4.09 | % | 3.66 | % | 4.37 | % | |||||
| Market penetration at end of period | |||||||||||||||
| Consolidated operating population | 32,370,000 | 32,127,000 | 31,865,000 | 31,493,000 | 31,493,000 | ||||||||||
| Consolidated operating penetration5 | 15 | % | 15 | % | 16 | % | 16 | % | 16 | % | |||||
| Capital expenditures (millions) | $ | 137 | $ | 321 | $ | 185 | $ | 148 | $ | 125 | |||||
| Total cell sites in service | 6,899 | 6,898 | 6,857 | 6,819 | 6,802 | ||||||||||
| Owned towers | 4,310 | 4,301 | 4,274 | 4,278 | 4,270 |
1Q3 2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue related to an out-of-period error recorded in that quarter.
2Average 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.
3Average 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.
4Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.
5Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total estimated population of consolidated operating markets.
| TDS Telecom | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Summary Operating Data (Unaudited) | ||||||||||
| As of or for the Quarter Ended | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 3/31/2021 | |||||
| Residential connections | ||||||||||
| Broadband | ||||||||||
| Wireline, Incumbent | 250,100 | 250,200 | 252,100 | 249,200 | 243,700 | |||||
| Wireline, Expansion | 40,600 | 36,900 | 32,600 | 28,300 | 24,100 | |||||
| Cable | 204,600 | 203,200 | 202,700 | 201,200 | 199,500 | |||||
| Total Broadband | 495,200 | 490,300 | 487,400 | 478,700 | 467,300 | |||||
| Video | 140,000 | 141,500 | 143,100 | 143,200 | 142,700 | |||||
| Voice | 301,700 | 303,700 | 306,300 | 308,100 | 308,700 | |||||
| Total Residential connections | 936,900 | 935,600 | 936,800 | 930,100 | 918,700 | |||||
| Commercial connections | 260,000 | 264,300 | 269,000 | 274,400 | 278,800 | |||||
| Total connections | 1,196,900 | 1,199,900 | 1,205,700 | 1,204,500 | 1,197,400 | |||||
| Residential revenue per connection1 | $ | 57.95 | $ | 57.86 | $ | 57.75 | $ | 57.66 | $ | 56.97 |
| Capital expenditures (millions) | $ | 105 | $ | 151 | $ | 91 | $ | 99 | $ | 70 |
Numbers may not foot due to rounding.
1Total residential revenue per connection is calculated by dividing total residential revenue by the average number of residential connections and by the number of months in the period.
| Telephone and Data Systems, Inc. | ||||||
|---|---|---|---|---|---|---|
| Consolidated Statement of Operations Highlights | ||||||
| (Unaudited) | ||||||
| Three Months Ended<br>March 31, | ||||||
| 2022 | 2021 | 2022<br>vs. 2021 | ||||
| (Dollars and shares in millions, except per share amounts) | ||||||
| Operating revenues | ||||||
| UScellular | $ | 1,010 | $ | 1,023 | (1) | % |
| TDS Telecom | 251 | 249 | 1 | % | ||
| All Other2 | 54 | 46 | 17 | % | ||
| 1,315 | 1,318 | – | ||||
| Operating expenses | ||||||
| UScellular | ||||||
| Expenses excluding depreciation, amortization and accretion | 767 | 765 | – | |||
| Depreciation, amortization and accretion | 171 | 170 | 1 | % | ||
| (Gain) loss on asset disposals, net | 2 | 5 | (69) | % | ||
| (Gain) loss on sale of business and other exit costs, net | (1) | (1) | (5) | % | ||
| 939 | 939 | – | ||||
| TDS Telecom | ||||||
| Expenses excluding depreciation, amortization and accretion | 169 | 168 | – | |||
| Depreciation, amortization and accretion | 54 | 49 | 11 | % | ||
| 223 | 217 | 3 | % | |||
| All Other1 | ||||||
| Expenses excluding depreciation and amortization | 54 | 47 | 15 | % | ||
| Depreciation and amortization | 4 | 5 | (17) | % | ||
| 58 | 52 | 12 | % | |||
| Total operating expenses | 1,220 | 1,208 | 1 | % | ||
| Operating income (loss) | ||||||
| UScellular | 71 | 84 | (15) | % | ||
| TDS Telecom | 28 | 32 | (11) | % | ||
| All Other2 | (4) | (6) | 22 | % | ||
| 95 | 110 | (14) | % | |||
| Investment and other income (expense) | ||||||
| Equity in earnings of unconsolidated entities | 45 | 42 | 7 | % | ||
| Interest and dividend income | 2 | 3 | (55) | % | ||
| Interest expense | (33) | (53) | 40 | % | ||
| Total investment and other income (expense) | 14 | (8) | N/M | |||
| Income before income taxes | 109 | 102 | 8 | % | ||
| Income tax expense | 37 | 31 | 24 | % | ||
| Net income | 72 | 71 | 1 | % | ||
| Less: Net income attributable to noncontrolling interests, net of tax | 11 | 12 | (10) | % | ||
| Net income attributable to TDS shareholders | 61 | 59 | 3 | % | ||
| TDS Preferred Share dividends | 17 | 2 | N/M | |||
| Net income attributable to TDS common shareholders | $ | 44 | $ | 57 | (23) | % |
| Basic weighted average shares outstanding | 115 | 114 | – | |||
| Basic earnings per share attributable to TDS common shareholders | $ | 0.38 | $ | 0.49 | (23) | % |
| Diluted weighted average shares outstanding | 116 | 116 | – | |||
| Diluted earnings per share attributable to TDS common shareholders | $ | 0.37 | $ | 0.48 | (23) | % |
N/M - Percentage change not meaningful.
Numbers may not foot due to rounding.
1Consists of TDS corporate, intercompany eliminations and all other business operations not included in the UScellular and TDS Telecom segments.
| Telephone and Data Systems, Inc. | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated Statement of Cash Flows | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended<br>March 31, | ||||||||||
| 2022 | 2021 | |||||||||
| (Dollars in millions) | ||||||||||
| Cash flows from operating activities | ||||||||||
| Net income | $ | 72 | $ | 71 | ||||||
| Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | ||||||||||
| Depreciation, amortization and accretion | 229 | 224 | ||||||||
| Bad debts expense | 26 | 8 | ||||||||
| Stock-based compensation expense | 12 | 10 | ||||||||
| Deferred income taxes, net | 29 | 27 | ||||||||
| Equity in earnings of unconsolidated entities | (45) | (42) | ||||||||
| Distributions from unconsolidated entities | 19 | 23 | ||||||||
| (Gain) loss on asset disposals, net | 2 | 5 | ||||||||
| (Gain) loss on sale of business and other exit costs, net | (1) | (1) | ||||||||
| Other operating activities | — | (1) | ||||||||
| Changes in assets and liabilities from operations | ||||||||||
| Accounts receivable | 14 | 17 | ||||||||
| Equipment installment plans receivable | — | (18) | ||||||||
| Inventory | (5) | 8 | ||||||||
| Accounts payable | (60) | (115) | ||||||||
| Customer deposits and deferred revenues | 9 | 9 | ||||||||
| Accrued taxes | 129 | — | ||||||||
| Accrued interest | 10 | 9 | ||||||||
| Other assets and liabilities | (59) | (69) | ||||||||
| Net cash provided by operating activities | 381 | 165 | ||||||||
| Cash flows from investing activities | ||||||||||
| Cash paid for additions to property, plant and equipment | (271) | (220) | ||||||||
| Cash paid for intangible assets | (568) | (1,261) | ||||||||
| Cash received from divestitures and exchanges | 1 | 1 | ||||||||
| Other investing activities | (10) | — | ||||||||
| Net cash used in investing activities | (848) | (1,480) | ||||||||
| Cash flows from financing activities | ||||||||||
| Issuance of long-term debt | 776 | 567 | ||||||||
| Repayment of long-term debt | (127) | — | ||||||||
| Issuance of short-term debt | 60 | — | ||||||||
| Issuance of TDS Preferred Shares | — | 420 | ||||||||
| TDS Common Shares reissued for benefit plans, net of tax payments | (2) | (1) | ||||||||
| UScellular Common Shares reissued for benefit plans, net of tax payments | — | (1) | ||||||||
| Repurchase of TDS Common Shares | (4) | (3) | ||||||||
| Repurchase of UScellular Common Shares | (10) | (2) | ||||||||
| Dividends paid to TDS shareholders | (38) | (20) | ||||||||
| Payment of debt and equity issuance costs | (2) | (14) | ||||||||
| Distributions to noncontrolling interests | (1) | (1) | ||||||||
| Other financing activities | (3) | (3) | ||||||||
| Net cash provided by financing activities | 649 | 942 | ||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 182 | (373) | ||||||||
| Cash, cash equivalents and restricted cash | ||||||||||
| Beginning of period | 414 | 1,452 | ||||||||
| End of period | $ | 596 | $ | 1,079 | ||||||
| Telephone and Data Systems, Inc. | ||||||||||
| --- | --- | --- | --- | --- | ||||||
| Consolidated Balance Sheet Highlights | ||||||||||
| (Unaudited) | ||||||||||
| ASSETS | ||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||
| (Dollars in millions) | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | 549 | $ | 367 | ||||||
| Accounts receivable, net | 1,123 | 1,151 | ||||||||
| Inventory, net | 184 | 178 | ||||||||
| Prepaid expenses | 109 | 103 | ||||||||
| Income taxes receivable | 58 | 184 | ||||||||
| Other current assets | 62 | 61 | ||||||||
| Total current assets | 2,085 | 2,044 | ||||||||
| Assets held for sale | 15 | 18 | ||||||||
| Licenses | 4,686 | 4,097 | ||||||||
| Goodwill | 547 | 547 | ||||||||
| Other intangible assets, net | 199 | 197 | ||||||||
| Investments in unconsolidated entities | 506 | 479 | ||||||||
| Property, plant and equipment, net | 4,385 | 4,361 | ||||||||
| Operating lease right-of-use assets | 1,033 | 1,040 | ||||||||
| Other assets and deferred charges | 668 | 710 | ||||||||
| Total assets | $ | 14,124 | $ | 13,493 | ||||||
| Telephone and Data Systems, Inc. | ||||||||||
| --- | --- | --- | --- | --- | ||||||
| Consolidated Balance Sheet Highlights | ||||||||||
| (Unaudited) | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||
| (Dollars in millions, except per share amounts) | ||||||||||
| Current liabilities | ||||||||||
| Current portion of long-term debt | $ | 9 | $ | 6 | ||||||
| Accounts payable | 388 | 481 | ||||||||
| Customer deposits and deferred revenues | 245 | 236 | ||||||||
| Accrued interest | 20 | 10 | ||||||||
| Accrued taxes | 43 | 45 | ||||||||
| Accrued compensation | 77 | 137 | ||||||||
| Short-term operating lease liabilities | 144 | 141 | ||||||||
| Other current liabilities | 189 | 124 | ||||||||
| Total current liabilities | 1,115 | 1,180 | ||||||||
| Deferred liabilities and credits | ||||||||||
| Deferred income tax liability, net | 948 | 921 | ||||||||
| Long-term operating lease liabilities | 951 | 960 | ||||||||
| Other deferred liabilities and credits | 770 | 759 | ||||||||
| Long-term debt, net | 3,567 | 2,928 | ||||||||
| Noncontrolling interests with redemption features | 12 | 11 | ||||||||
| Equity | ||||||||||
| TDS shareholders' equity | ||||||||||
| Series A Common and Common Shares, par value $0.01 per share | 1 | 1 | ||||||||
| Capital in excess of par value | 2,511 | 2,496 | ||||||||
| Preferred Shares, par value $0.01 per share | 1,074 | 1,074 | ||||||||
| Treasury shares, at cost | (456) | (461) | ||||||||
| Accumulated other comprehensive income | 6 | 5 | ||||||||
| Retained earnings | 2,824 | 2,812 | ||||||||
| Total TDS shareholders' equity | 5,960 | 5,927 | ||||||||
| Noncontrolling interests | 801 | 807 | ||||||||
| Total equity | 6,761 | 6,734 | ||||||||
| Total liabilities and equity | $ | 14,124 | $ | 13,493 | ||||||
| Balance Sheet Highlights | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Unaudited) | ||||||||||
| March 31, 2022 | ||||||||||
| TDS | TDS Corporate | Intercompany | TDS | |||||||
| UScellular | Telecom | & Other | Eliminations | Consolidated | ||||||
| (Dollars in millions) | ||||||||||
| Cash and cash equivalents | $ | 300 | $ | 40 | $ | 253 | $ | (44) | $ | 549 |
| Licenses, goodwill and other intangible assets | $ | 4,677 | $ | 749 | $ | 6 | $ | — | $ | 5,432 |
| Investment in unconsolidated entities | 465 | 4 | 45 | (8) | 506 | |||||
| $ | 5,142 | $ | 753 | $ | 51 | $ | (8) | $ | 5,938 | |
| Property, plant and equipment, net | $ | 2,576 | $ | 1,722 | $ | 87 | $ | — | $ | 4,385 |
| Long-term debt, net: | ||||||||||
| Current portion | $ | 6 | $ | — | $ | 3 | $ | — | $ | 9 |
| Non-current portion | 3,220 | 3 | 344 | — | 3,567 | |||||
| $ | 3,226 | $ | 3 | $ | 347 | $ | — | $ | 3,576 | |
| TDS Telecom Highlights | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||
| (Unaudited) | ||||||||||
| Three Months Ended<br>March 31, | ||||||||||
| 2022 | 2021 | 2022<br>vs. 2021 | ||||||||
| (Dollars in millions) | ||||||||||
| Operating revenues | ||||||||||
| Residential | ||||||||||
| Wireline, Incumbent | $ | 85 | $ | 85 | – | |||||
| Wireline, Expansion | 10 | 7 | 54 | % | ||||||
| Cable | 67 | 65 | 3 | % | ||||||
| Total residential | 163 | 157 | 4 | % | ||||||
| Commercial | 44 | 47 | (6) | % | ||||||
| Wholesale | 44 | 45 | (2) | % | ||||||
| Total service revenues | 251 | 249 | 1 | % | ||||||
| Equipment revenues | — | — | 26 | % | ||||||
| Total operating revenues | 251 | 249 | 1 | % | ||||||
| Cost of services | 96 | 97 | (1) | % | ||||||
| Cost of equipment and products | — | — | 28 | % | ||||||
| Selling, general and administrative expenses | 72 | 70 | 3 | % | ||||||
| Depreciation, amortization and accretion | 54 | 49 | 11 | % | ||||||
| (Gain) loss on asset disposals, net | — | — | 3 | % | ||||||
| Total operating expenses | 223 | 217 | 3 | % | ||||||
| Operating income | $ | 28 | $ | 32 | (11) | % |
Numbers may not foot due to rounding.
Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
| Three Months Ended<br>March 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (Dollars in millions) | ||||
| Cash flows from operating activities (GAAP) | $ | 381 | $ | 165 |
| Less: Cash paid for additions to property, plant and equipment | 271 | 220 | ||
| Free cash flow (Non-GAAP)1 | $ | 110 | $ | (55) |
1Free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.
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