TDS 8-K
Telephone & Data Systems Inc /De/ (TDS)
8-K
2020-04-30
For: 2020-04-30
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Added on
April 04, 2026
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): April 30, 2020
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
(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 | ||||
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 April 30, 2020, Telephone and Data Systems, Inc. (TDS) issued a news release announcing its results of operations for the period ended March 31, 2020. 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 | ||
99.2 | ||
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. | |||
(Registrant) | |||
Date: | April 30, 2020 | By: | /s/ Peter L. Sereda |
Peter L. Sereda | |||
Executive Vice President and Chief Financial Officer | |||
(principal financial officer) | |||
Exhibit 99.1 NEWS RELEASE
As previously announced, TDS will hold a teleconference May 1, 2020, 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 2020 results
Continuing to provide outstanding communications services to our customers
CHICAGO (April 30, 2020) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,261 million for the first quarter of 2020, versus $1,257 million for the same period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $69 million and $0.59, respectively, for the first quarter of 2020 compared to $59 million and $0.50, respectively, in the same period one year ago.
"The TDS Enterprise and its family of companies remain strong in this time of the COVID-19 pandemic and great economic uncertainty," said LeRoy T. Carlson, Jr., TDS President and CEO. "We are continuing to provide critical communications and data services that our customers and communities, especially in underserved areas, depend on. U.S. Cellular and TDS Telecom have risen to meet the business challenges of this national health crisis, by putting people - our associates, their families and our customers - first, and by keeping our operations and networks performing at very high levels.
"U.S. Cellular continues to provide high-quality wireless connectivity. The majority of our stores remain open, with modified store hours, and safety measures including social distancing implemented. Most of our customer care center employees are now working from home, while still maintaining the exceptional service U.S. Cellular is known for. U.S. Cellular is successfully meeting increased demands for capacity on its network, with both data and voice traffic increasing. Our network modernization program continues, adding capacity and speed, launching 5G services commercially, and preparing for remaining VoLTE deployments. U.S. Cellular’s financial results this quarter were solid, including a tax benefit resulting from the CARES Act, partially offset by an incremental allowance to cover anticipated higher levels of bad debt. There may be near-term impacts from the pandemic, including lower store traffic and customer growth. Our number one priority is to continue to adapt to meet the wireless needs of the communities and customers we serve. At the same time, we are planning for the return to a more stable future environment and continuing to execute on our strategic priorities.
"TDS Telecom is experiencing strong demand for wired broadband services as many customers work from home. At this time TDS Telecom is successfully meeting the significant demand for higher speeds as well as increased network capacity across its footprint. To keep customers and field service technicians safe, procedures have been implemented to minimize the amount of work technicians do within the home and we are using self-service and remote assistance techniques to complete both installs and repairs. TDS Telecom continues to move forward with fiber deployment in our out-of-territory expansion markets.
"At TDS, we have a good financial foundation. We continue to maintain a strong balance sheet with ample liquidity. We closely monitor leading indicators like customer receipts and accounts receivable aging. We have enhanced our liquidity position to provide near term capital spending."
1
2020 Estimated Results
TDS’ current estimates of full-year 2020 results for U.S. Cellular and TDS Telecom are shown below. Such estimates represent management’s view as of April 30, 2020 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, especially in light of the uncertainty created by the COVID-19 pandemic.
2020 Estimated Results | ||
U.S. Cellular | Previous | Current |
(Dollars in millions) | ||
Service revenues | $3,000-$3,100 | Unchanged |
Adjusted OIBDA1 | $775-$900 | $725-$850 |
Adjusted EBITDA1 | $950-$1,075 | $900-$1,025 |
Capital expenditures | $850-$950 | Unchanged |
TDS Telecom | Previous | Current |
(Dollars in millions) | ||
Total operating revenues | $950-$1,000 | Unchanged |
Adjusted OIBDA1 | $280-$310 | Unchanged |
Adjusted EBITDA1 | $290-$320 | Unchanged |
Capital expenditures | $300-$350 | Unchanged |
The following tables provide reconciliations of Net income to Adjusted OIBDA and Adjusted EBITDA for 2020 estimated results, actual results for the three months ended March 31, 2020, and actual results for the year ended December 31, 2019. In providing 2020 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.
2020 Estimated Results | |||||
U.S. Cellular | 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) | $80-$205 | $80-$110 | |||
Add back: | |||||
Interest expense | 110 | — | |||
Depreciation, amortization and accretion expense | 690 | 210 | |||
EBITDA (Non-GAAP)1 | $880-$1,005 | $290-$320 | |||
Add back or deduct: | |||||
(Gain) loss on asset disposals, net | 20 | — | |||
Adjusted EBITDA (Non-GAAP)1 | $900-$1,025 | $290-$320 | |||
Deduct: | |||||
Equity in earnings of unconsolidated entities | 165 | — | |||
Interest and dividend income | 10 | 10 | |||
Adjusted OIBDA (Non-GAAP)1 | $725-$850 | $280-$310 | |||
2
Actual Results | |||||||||||||||
Three Months Ended March 31, 2020 | Year Ended December 31, 2019 | ||||||||||||||
U.S. Cellular | TDS Telecom | U.S. Cellular | TDS Telecom | ||||||||||||
(Dollars in millions) | |||||||||||||||
Net income (GAAP) | $ | 72 | $ | 28 | $ | 133 | $ | 92 | |||||||
Add back: | |||||||||||||||
Income tax expense | 4 | 4 | 52 | 30 | |||||||||||
Income before income taxes (GAAP) | $ | 76 | $ | 31 | $ | 185 | $ | 122 | |||||||
Add back: | |||||||||||||||
Interest expense | 24 | (1 | ) | 110 | (3 | ) | |||||||||
Depreciation, amortization and accretion expense | 177 | 52 | 702 | 200 | |||||||||||
EBITDA (Non-GAAP)1 | $ | 277 | $ | 82 | $ | 997 | $ | 320 | |||||||
Add back or deduct: | |||||||||||||||
(Gain) loss on asset disposals, net | 4 | — | 19 | (7 | ) | ||||||||||
(Gain) loss on sale of business and other exit costs, net | — | — | (1 | ) | — | ||||||||||
Adjusted EBITDA (Non-GAAP)1 | $ | 281 | $ | 82 | $ | 1,015 | $ | 313 | |||||||
Deduct: | |||||||||||||||
Equity in earnings of unconsolidated entities | 45 | — | 166 | — | |||||||||||
Interest and dividend income | 4 | 2 | 17 | 12 | |||||||||||
Other, net | 1 | — | — | — | |||||||||||
Adjusted OIBDA (Non-GAAP)1 | $ | 231 | $ | 80 | $ | 832 | $ | 300 | |||||||
Numbers may not foot due to rounding.
1 | EBITDA, 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, 2020, can be found on TDS' website at investors.tdsinc.com. |
3
Conference Call Information
TDS will hold a conference call on May 1, 2020 at 9:00 a.m. Central Time.
▪ | Access the live call on the Events & Presentations page of investors.tdsinc.com or at |
https://www.webcaster4.com/Webcast/Page/1145/34504
▪ | Access the call by phone at (833) 968-2187, conference ID: 1267888. |
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; cable and wireline broadband, video and voice; and hosted and managed services to approximately 6 million connections nationwide through its businesses, U.S. Cellular, TDS Telecom, BendBroadband and OneNeck IT Solutions. Founded in 1969 and headquartered in Chicago, TDS employed 9,400 people as of March 31, 2020.
Visit investors.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Contacts
Jane W. McCahon, Senior Vice President - Corporate Relations and Corporate Secretary
312-592-5379
Julie D. Mathews, IRC, Director - Investor Relations
312-592-5341
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: the impact, duration and severity of the COVID-19 pandemic; 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/divestitures/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 of 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 services and products 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, which are incorporated by reference herein.
The impact of the COVID-19 pandemic on TDS' business is uncertain, but depending on its duration and severity it could have a material adverse effect on TDS' business, financial condition or results of operations.
The impact of the recent global spread of COVID-19 on TDS' future operations is uncertain. Public health emergencies, such as COVID-19, pose the risk that TDS or its associates, agents, partners and suppliers may be unable to conduct business activities for an extended period of time and/or provide the level of service expected. TDS' ability to attract customers, maintain adequate supply chain and execute on its business strategies and initiatives could be negatively impacted by this outbreak. Additionally, COVID-19 has caused and could continue to cause increased unemployment, economic downturn and credit market deterioration, all of which could negatively impact TDS. The extent of the impact of COVID-19 on TDS' business, financial condition and results of operations will depend on future circumstances, including the severity of the disease, the duration of the outbreak, actions taken by governmental authorities and other possible direct and indirect consequences, all of which are uncertain and cannot be predicted.
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
4
United States Cellular Corporation | |||||||||||||||||||
Summary Operating Data (Unaudited) | |||||||||||||||||||
As of or for the Quarter Ended | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||||||
Retail Connections | |||||||||||||||||||
Postpaid | |||||||||||||||||||
Total at end of period | 4,359,000 | 4,383,000 | 4,395,000 | 4,414,000 | 4,440,000 | ||||||||||||||
Gross additions | 132,000 | 170,000 | 163,000 | 137,000 | 137,000 | ||||||||||||||
Feature phones | 2,000 | 2,000 | 3,000 | 5,000 | 4,000 | ||||||||||||||
Smartphones | 88,000 | 128,000 | 121,000 | 97,000 | 98,000 | ||||||||||||||
Connected devices | 42,000 | 40,000 | 39,000 | 35,000 | 35,000 | ||||||||||||||
Net additions (losses) | (26,000 | ) | (12,000 | ) | (19,000 | ) | (26,000 | ) | (32,000 | ) | |||||||||
Feature phones | (10,000 | ) | (11,000 | ) | (11,000 | ) | (10,000 | ) | (13,000 | ) | |||||||||
Smartphones | (10,000 | ) | 13,000 | 9,000 | (1,000 | ) | (1,000 | ) | |||||||||||
Connected devices | (6,000 | ) | (14,000 | ) | (17,000 | ) | (15,000 | ) | (18,000 | ) | |||||||||
ARPU1 | $ | 47.23 | $ | 46.57 | $ | 46.16 | $ | 45.90 | $ | 45.44 | |||||||||
ARPA2 | $ | 122.92 | $ | 120.99 | $ | 119.87 | $ | 119.46 | $ | 118.84 | |||||||||
Churn rate3 | 1.21 | % | 1.38 | % | 1.38 | % | 1.23 | % | 1.26 | % | |||||||||
Handsets | 0.95 | % | 1.11 | % | 1.09 | % | 0.97 | % | 0.99 | % | |||||||||
Connected devices | 3.11 | % | 3.44 | % | 3.44 | % | 3.01 | % | 3.08 | % | |||||||||
Prepaid | |||||||||||||||||||
Total at end of period | 494,000 | 506,000 | 510,000 | 500,000 | 503,000 | ||||||||||||||
Gross additions | 57,000 | 63,000 | 70,000 | 61,000 | 61,000 | ||||||||||||||
Net additions (losses) | (12,000 | ) | (3,000 | ) | 9,000 | (2,000 | ) | (13,000 | ) | ||||||||||
ARPU1 | $ | 34.07 | $ | 34.11 | $ | 34.35 | $ | 34.43 | $ | 33.44 | |||||||||
Churn rate3 | 4.67 | % | 4.40 | % | 4.03 | % | 4.20 | % | 4.92 | % | |||||||||
Total connections at end of period4 | 4,903,000 | 4,941,000 | 4,957,000 | 4,967,000 | 4,995,000 | ||||||||||||||
Market penetration at end of period | |||||||||||||||||||
Consolidated operating population | 31,292,000 | 30,740,000 | 31,310,000 | 31,310,000 | 31,310,000 | ||||||||||||||
Consolidated operating penetration5 | 16 | % | 16 | % | 16 | % | 16 | % | 16 | % | |||||||||
Capital expenditures (millions) | $ | 236 | $ | 243 | $ | 170 | $ | 195 | $ | 102 | |||||||||
Total cell sites in service | 6,629 | 6,578 | 6,554 | 6,535 | 6,506 | ||||||||||||||
Owned towers | 4,184 | 4,166 | 4,123 | 4,116 | 4,106 | ||||||||||||||
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 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. |
3 | 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. |
4 | Includes reseller and other connections. |
5 | 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. |
5
TDS Telecom | |||||||||||||||||||
Summary Operating Data (Unaudited) | |||||||||||||||||||
As of or for the Quarter Ended | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||||||
TDS Telecom | |||||||||||||||||||
Wireline | |||||||||||||||||||
Residential connections | |||||||||||||||||||
Voice1 | 259,100 | 262,100 | 266,100 | 269,000 | 271,100 | ||||||||||||||
Broadband2 | 242,700 | 241,300 | 242,200 | 240,200 | 236,100 | ||||||||||||||
Video3 | 59,000 | 58,500 | 57,300 | 56,200 | 54,300 | ||||||||||||||
Wireline residential connections | 560,700 | 561,900 | 565,600 | 565,500 | 561,500 | ||||||||||||||
Total residential revenue per connection4 | $ | 50.12 | $ | 49.11 | $ | 49.02 | $ | 47.88 | $ | 48.16 | |||||||||
Commercial connections | |||||||||||||||||||
Voice1 | 114,400 | 117,800 | 121,200 | 124,200 | 127,300 | ||||||||||||||
Broadband2 | 20,500 | 20,400 | 20,600 | 20,600 | 20,400 | ||||||||||||||
managedIP5 | 118,300 | 121,200 | 124,500 | 128,300 | 132,000 | ||||||||||||||
Video3 | 100 | 100 | 400 | 400 | 400 | ||||||||||||||
Wireline commercial connections | 253,400 | 259,600 | 266,600 | 273,500 | 280,100 | ||||||||||||||
Total Wireline connections | 814,200 | 821,500 | 832,300 | 839,000 | 841,500 | ||||||||||||||
Cable | |||||||||||||||||||
Cable residential and commercial connections | |||||||||||||||||||
Broadband6 | 196,800 | 193,500 | 174,900 | 172,600 | 171,100 | ||||||||||||||
Video7 | 105,100 | 106,600 | 98,000 | 100,300 | 101,400 | ||||||||||||||
Voice8 | 68,900 | 69,500 | 63,900 | 64,800 | 65,400 | ||||||||||||||
managedIP5 | 1,400 | 1,300 | 1,200 | 1,100 | 1,100 | ||||||||||||||
Total Cable connections | 372,300 | 370,900 | 338,000 | 338,900 | 339,000 | ||||||||||||||
Numbers may not foot due to rounding.
1 | The individual circuits connecting a customer to Wireline’s central office facilities that provide voice services. |
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. |
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 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Wireline | $ | 39 | $ | 98 | $ | 61 | $ | 55 | $ | 29 | |||||||||
Cable | 15 | 26 | 20 | 15 | 13 | ||||||||||||||
Total TDS Telecom | $ | 54 | $ | 124 | $ | 81 | $ | 70 | $ | 42 | |||||||||
6
Telephone and Data Systems, Inc. | ||||||||||
Consolidated Statement of Operations Highlights | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended March 31, | ||||||||||
2020 | 2019 | 2020 vs. 2019 | ||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||
Operating revenues | ||||||||||
U.S. Cellular | $ | 963 | $ | 966 | – | |||||
TDS Telecom | 240 | 230 | 4 | % | ||||||
All Other1 | 58 | 61 | (5 | )% | ||||||
1,261 | 1,257 | – | ||||||||
Operating expenses | ||||||||||
U.S. Cellular | ||||||||||
Expenses excluding depreciation, amortization and accretion | 732 | 735 | – | |||||||
Depreciation, amortization and accretion | 177 | 169 | 5 | % | ||||||
(Gain) loss on asset disposals, net | 4 | 2 | 72 | % | ||||||
(Gain) loss on sale of business and other exit costs, net | — | (2 | ) | N/M | ||||||
(Gain) loss on license sales and exchanges, net | — | (2 | ) | N/M | ||||||
913 | 902 | 1 | % | |||||||
TDS Telecom | ||||||||||
Expenses excluding depreciation, amortization and accretion | 160 | 150 | 7 | % | ||||||
Depreciation, amortization and accretion | 52 | 50 | 2 | % | ||||||
(Gain) loss on asset disposals, net | — | (7 | ) | N/M | ||||||
212 | 193 | 10 | % | |||||||
All Other1 | ||||||||||
Expenses excluding depreciation and amortization | 58 | 60 | (4 | )% | ||||||
Depreciation and amortization | 6 | 8 | (23 | )% | ||||||
64 | 68 | (6 | )% | |||||||
Total operating expenses | 1,189 | 1,163 | 2 | % | ||||||
Operating income (loss) | ||||||||||
U.S. Cellular | 50 | 64 | (22 | )% | ||||||
TDS Telecom | 28 | 37 | (23 | )% | ||||||
All Other1 | (6 | ) | (7 | ) | 10 | % | ||||
72 | 94 | (23 | )% | |||||||
Investment and other income (expense) | ||||||||||
Equity in earnings of unconsolidated entities | 45 | 44 | 3 | % | ||||||
Interest and dividend income | 6 | 9 | (30 | )% | ||||||
Interest expense | (37 | ) | (43 | ) | 14 | % | ||||
Total investment and other income | 14 | 10 | 41 | % | ||||||
Income before income taxes | 86 | 104 | (17 | )% | ||||||
Income tax expense | 3 | 34 | (89 | )% | ||||||
Net income | 83 | 70 | 18 | % | ||||||
Less: Net income attributable to noncontrolling interests, net of tax | 14 | 11 | 25 | % | ||||||
Net income attributable to TDS shareholders | $ | 69 | $ | 59 | 17 | % | ||||
Basic weighted average shares outstanding | 115 | 114 | 1 | % | ||||||
Basic earnings per share attributable to TDS shareholders | $ | 0.60 | $ | 0.52 | 16 | % | ||||
Diluted weighted average shares outstanding | 116 | 116 | – | |||||||
Diluted earnings per share attributable to TDS shareholders | $ | 0.59 | $ | 0.50 | 17 | % | ||||
N/M - Percentage change not meaningful.
Numbers may not foot due to rounding.
1 | Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments. |
7
Telephone and Data Systems, Inc. | |||||||
Consolidated Statement of Cash Flows | |||||||
(Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in millions) | |||||||
Cash flows from operating activities | |||||||
Net income | $ | 83 | $ | 70 | |||
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | |||||||
Depreciation, amortization and accretion | 235 | 227 | |||||
Bad debts expense | 34 | 25 | |||||
Stock-based compensation expense | 11 | 13 | |||||
Deferred income taxes, net | 75 | 25 | |||||
Equity in earnings of unconsolidated entities | (45 | ) | (44 | ) | |||
Distributions from unconsolidated entities | 25 | 19 | |||||
(Gain) loss on asset disposals, net | 4 | (5 | ) | ||||
(Gain) loss on sale of business and other exit costs, net | — | (2 | ) | ||||
(Gain) loss on license sales and exchanges, net | — | (2 | ) | ||||
Other operating activities | — | 1 | |||||
Changes in assets and liabilities from operations | |||||||
Accounts receivable | 43 | 28 | |||||
Equipment installment plans receivable | 23 | (10 | ) | ||||
Inventory | (52 | ) | (15 | ) | |||
Accounts payable | 87 | 46 | |||||
Customer deposits and deferred revenues | (9 | ) | 5 | ||||
Accrued taxes | (74 | ) | 9 | ||||
Accrued interest | 9 | 11 | |||||
Other assets and liabilities | (82 | ) | (74 | ) | |||
Net cash provided by operating activities | 367 | 327 | |||||
Cash flows from investing activities | |||||||
Cash paid for additions to property, plant and equipment | (377 | ) | (155 | ) | |||
Cash paid for licenses | (26 | ) | (1 | ) | |||
Cash received from investments | — | 2 | |||||
Cash paid for investments | (1 | ) | (1 | ) | |||
Cash received from divestitures and exchanges | — | 31 | |||||
Advance payments for license acquisitions | — | (135 | ) | ||||
Net cash used in investing activities | (404 | ) | (259 | ) | |||
Cash flows from financing activities | |||||||
Issuance of long-term debt | 50 | — | |||||
Repayment of long-term debt | (2 | ) | (5 | ) | |||
TDS Common Shares reissued for benefit plans, net of tax payments | (1 | ) | (3 | ) | |||
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments | — | (1 | ) | ||||
Repurchase of TDS Common Shares | (6 | ) | — | ||||
Repurchase of U.S. Cellular Common Shares | (21 | ) | — | ||||
Dividends paid to TDS shareholders | (19 | ) | (19 | ) | |||
Distributions to noncontrolling interests | (1 | ) | (1 | ) | |||
Other financing activities | (3 | ) | — | ||||
Net cash used in financing activities | (3 | ) | (29 | ) | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | (40 | ) | 39 | ||||
Cash, cash equivalents and restricted cash | |||||||
Beginning of period | 474 | 927 | |||||
End of period | $ | 434 | $ | 966 | |||
8
Telephone and Data Systems, Inc. | |||||||
Consolidated Balance Sheet Highlights | |||||||
(Unaudited) | |||||||
ASSETS | |||||||
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in millions) | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 421 | $ | 465 | |||
Accounts receivable, net | 1,052 | 1,124 | |||||
Inventory, net | 218 | 169 | |||||
Prepaid expenses | 115 | 98 | |||||
Income taxes receivable | 111 | 36 | |||||
Other current assets | 33 | 29 | |||||
Total current assets | 1,950 | 1,921 | |||||
Licenses | 2,511 | 2,480 | |||||
Goodwill | 547 | 547 | |||||
Other intangible assets, net | 232 | 239 | |||||
Investments in unconsolidated entities | 509 | 488 | |||||
Property, plant and equipment, net | 3,595 | 3,527 | |||||
Operating lease right-of-use assets | 975 | 972 | |||||
Other assets and deferred charges | 576 | 607 | |||||
Total assets | $ | 10,895 | $ | 10,781 | |||
9
Telephone and Data Systems, Inc. | |||||||
Consolidated Balance Sheet Highlights | |||||||
(Unaudited) | |||||||
LIABILITIES AND EQUITY | |||||||
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in millions, except per share amounts) | |||||||
Current liabilities | |||||||
Current portion of long-term debt | $ | 8 | $ | 10 | |||
Accounts payable | 378 | 374 | |||||
Customer deposits and deferred revenues | 181 | 189 | |||||
Accrued interest | 19 | 11 | |||||
Accrued taxes | 38 | 41 | |||||
Accrued compensation | 77 | 121 | |||||
Short-term operating lease liabilities | 121 | 116 | |||||
Other current liabilities | 78 | 100 | |||||
Total current liabilities | 900 | 962 | |||||
Deferred liabilities and credits | |||||||
Deferred income tax liability, net | 750 | 676 | |||||
Long-term operating lease liabilities | 929 | 931 | |||||
Other deferred liabilities and credits | 491 | 481 | |||||
Long-term debt, net | 2,365 | 2,316 | |||||
Noncontrolling interests with redemption features | 11 | 11 | |||||
Equity | |||||||
TDS shareholders' equity | |||||||
Series A Common and Common Shares, par value $.01 per share | 1 | 1 | |||||
Capital in excess of par value | 2,489 | 2,468 | |||||
Treasury shares, at cost | (480 | ) | (479 | ) | |||
Accumulated other comprehensive loss | (8 | ) | (9 | ) | |||
Retained earnings | 2,718 | 2,672 | |||||
Total TDS shareholders' equity | 4,720 | 4,653 | |||||
Noncontrolling interests | 729 | 751 | |||||
Total equity | 5,449 | 5,404 | |||||
Total liabilities and equity | $ | 10,895 | $ | 10,781 | |||
10
Balance Sheet Highlights | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
March 31, 2020 | |||||||||||||||||||
U.S. | TDS | TDS Corporate | Intercompany | TDS | |||||||||||||||
Cellular | Telecom | & Other | Eliminations | Consolidated | |||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Cash and cash equivalents | $ | 258 | $ | 26 | $ | 137 | $ | — | $ | 421 | |||||||||
Affiliated cash investments | — | 488 | — | (488 | ) | — | |||||||||||||
$ | 258 | $ | 514 | $ | 137 | $ | (488 | ) | $ | 421 | |||||||||
Licenses, goodwill and other intangible assets | $ | 2,502 | $ | 778 | $ | 10 | $ | — | $ | 3,290 | |||||||||
Investment in unconsolidated entities | 469 | 4 | 46 | (10 | ) | 509 | |||||||||||||
$ | 2,971 | $ | 782 | $ | 56 | $ | (10 | ) | $ | 3,799 | |||||||||
Property, plant and equipment, net | $ | 2,268 | $ | 1,222 | $ | 105 | $ | — | $ | 3,595 | |||||||||
Long-term debt, net: | |||||||||||||||||||
Current portion | $ | 6 | $ | 1 | $ | 1 | $ | — | $ | 8 | |||||||||
Non-current portion | 1,503 | 4 | 858 | — | 2,365 | ||||||||||||||
$ | 1,509 | $ | 5 | $ | 859 | $ | — | $ | 2,373 | ||||||||||
11
TDS Telecom Highlights | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended March 31, | ||||||||||
2020 | 2019 | 2020 vs. 2019 | ||||||||
(Dollars in millions) | ||||||||||
Wireline | ||||||||||
Operating revenues | ||||||||||
Residential | $ | 84 | $ | 81 | 4 | % | ||||
Commercial | 39 | 43 | (10 | )% | ||||||
Wholesale | 46 | 46 | – | |||||||
Total service revenues | 169 | 170 | (1 | )% | ||||||
Equipment and product sales | — | — | (43 | )% | ||||||
169 | 171 | (1 | )% | |||||||
Operating expenses | ||||||||||
Cost of services | 65 | 63 | 4 | % | ||||||
Cost of equipment and products | — | — | (46 | )% | ||||||
Selling, general and administrative expenses | 48 | 47 | 3 | % | ||||||
Expenses excluding depreciation, amortization and accretion | 114 | 110 | 3 | % | ||||||
Depreciation, amortization and accretion | 32 | 34 | (4 | )% | ||||||
(Gain) loss on asset disposals, net | — | (7 | ) | N/M | ||||||
146 | 136 | 7 | % | |||||||
Operating income | $ | 23 | $ | 34 | (32 | )% | ||||
Cable | ||||||||||
Operating revenues | ||||||||||
Residential | $ | 60 | $ | 49 | 20 | % | ||||
Commercial | 11 | 10 | 11 | % | ||||||
71 | 60 | 19 | % | |||||||
Operating expenses | ||||||||||
Cost of services | 30 | 26 | 17 | % | ||||||
Selling, general and administrative expenses | 17 | 14 | 16 | % | ||||||
Expenses excluding depreciation, amortization and accretion | 47 | 40 | 17 | % | ||||||
Depreciation, amortization and accretion | 19 | 17 | 15 | % | ||||||
(Gain) loss on asset disposals, net | — | — | (87 | )% | ||||||
66 | 57 | 15 | % | |||||||
Operating income (loss) | $ | 5 | $ | 2 | N/M | |||||
Total TDS Telecom operating income | $ | 28 | $ | 37 | (23 | )% | ||||
N/M - Percentage change not meaningful.
Numbers may not foot due to rounding.
12
Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in millions) | |||||||
Cash flows from operating activities (GAAP) | $ | 367 | $ | 327 | |||
Less: Cash paid for additions to property, plant and equipment | 377 | 155 | |||||
Free cash flow (Non-GAAP)1 | $ | (10 | ) | $ | 172 | ||
1 | Free 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. |
13
Exhibit 99.2
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR CAUTIONARY STATEMENT
This Form 8-K and/or press release attached to this Form 8-K contain statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities, events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, but are not limited to, those set forth below, as 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. Each of the following risks could have a material adverse effect on TDS’ business, financial condition or results of operations. However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. You should carefully consider the 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, the following factors and other information contained in, or incorporated by reference into, this Form 8-K and/or press release attached to this Form 8-K to understand the material risks relating to TDS’ business, financial condition or results of operations.
▪ | The impact of the COVID-19 pandemic on TDS' business is uncertain, but depending on its duration and severity it could have a material adverse effect on TDS' business, financial condition or results of operations. |
▪ | Intense competition in the markets in which TDS operates could adversely affect TDS’ revenues or increase its costs to compete. |
▪ | A failure by TDS to successfully execute its business strategy (including planned acquisitions, spectrum acquisitions, fiber builds, divestitures and exchanges) or allocate resources or capital effectively could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Uncertainty in TDS’ future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, other changes in TDS’ performance or market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, and/or reduce or cease share repurchases and/or the payment of dividends. |
▪ | TDS has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt. |
▪ | Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | To the extent conducted by the FCC, TDS may participate in FCC auctions for additional spectrum or for funding in certain Universal Service programs in the future directly or indirectly and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on TDS. |
▪ | Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect TDS’ business, financial condition or results of operations. |
▪ | An inability to attract people of outstanding talent throughout all levels of the organization, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on TDS' business, financial condition or results of operations. |
▪ | TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry. Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry. |
▪ | TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations. |
▪ | Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business. |
▪ | Complexities associated with deploying new technologies present substantial risk and TDS’ investments in unproven technologies may not produce the benefits that TDS expects. |
▪ | TDS receives regulatory support and is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of the support and fees are subject to great uncertainty, which could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Changes in TDS’ enterprise value, changes in the market supply or demand for wireless spectrum licenses, wireline or cable markets or IT service providers, adverse developments in the businesses or the industries in which TDS is involved and/or other factors could require TDS to recognize impairments in the carrying value of its wireless spectrum licenses, goodwill, franchise rights and/or physical assets or require re-evaluation of the indefinite-lived nature of such assets. |
▪ | Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of TDS’ businesses could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations. |
▪ | Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operational difficulties of key suppliers or independent agents and third party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations. |
▪ | TDS has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on TDS’ financial condition or results of operations. |
▪ | A failure by TDS to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | TDS has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations. |
▪ | Changes in facts or circumstances, including new or additional information, could require TDS to record adjustments to amounts reflected in the financial statements, which could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on TDS’ wireless business, financial condition or results of operations. |
▪ | Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations. |
▪ | Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences. |
▪ | The market price of TDS’ Common Shares is subject to fluctuations due to a variety of factors. |
▪ | Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from TDS’ forward-looking estimates by a material amount. |