Document
false0001051512 0001051512 2020-08-06 2020-08-06 0001051512 tds:SixPointSixTwoFivePercentSeniorNotesMember 2020-08-06 2020-08-06 0001051512 tds:FivePointEightSevenFivePercentSeniorNotesMember 2020-08-06 2020-08-06 0001051512 tds:SevenPointZeroPercentSeniorNotesMember 2020-08-06 2020-08-06 0001051512 tds:SixPointEightSevenFivePercentSeniorNotesMember 2020-08-06 2020-08-06 0001051512 us-gaap:CommonClassBMember 2020-08-06 2020-08-06
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): August 6, 2020
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
6.625% Senior Notes due 2045
 
TDI
 
New York Stock Exchange
6.875% Senior Notes due 2059
 
TDE
 
New York Stock Exchange
7.000% Senior Notes due 2060
 
TDJ
 
New York Stock Exchange
5.875% Senior Notes due 2061
 
TDA
 
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 August 6, 2020, Telephone and Data Systems, Inc. (TDS) issued a news release announcing its results of operations for the period ended June 30, 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
 
 
 
 
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:
August 6, 2020
By:
/s/ Peter L. Sereda
 
 
 
Peter L. Sereda
 
 
 
Executive Vice President and Chief Financial Officer
 
 
 
(principal financial officer)
 
 
 
 
 
 
 
 


 Exhibit


Exhibit 99.1   NEWS RELEASE

As previously announced, TDS will hold a teleconference August 7, 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 second quarter 2020 results
Continuing to provide outstanding communications services to our customers


CHICAGO (August 6, 2020) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,263 million for the second quarter of 2020, versus $1,261 million for the same period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $65 million and $0.56, respectively, for the second quarter of 2020 compared to $33 million and $0.28, respectively, in the same period one year ago.
"The TDS Enterprise and its family of companies remains strong through the ongoing challenges of the COVID-19 pandemic," said LeRoy T. Carlson, Jr., TDS President and CEO. "U.S. Cellular and TDS Telecom continue to provide essential communication and high-quality data services to our customers and communities. Our associates have shown exceptional dedication and resiliency in keeping our operations and networks performing at top levels. TDS also is maintaining a strong and flexible financial foundation.
"At U.S. Cellular, LT Therivel has moved seamlessly into his new role as CEO. He is focused on observing, learning and understanding all facets of the organization, meeting with U.S. Cellular associates and identifying new opportunities and ways to accelerate growth. I am confident LT's leadership, experience and collaborative style will build upon the many successes that U.S. Cellular has already achieved. U.S. Cellular's top priority remains to continuously adapt to fully meet the wireless needs of the communities and customers we serve. Despite COVID-19, most U.S. Cellular stores are now open and they continue to follow strong safety measures to keep our customers and associates safe. Exceptionally low levels of churn have offset lower store traffic and enabled U.S. Cellular to increase smartphone connections in the quarter. Our network modernization program continues, adding capacity and speed, launching 5G services commercially, and preparing for remaining VoLTE deployments. In these unprecedented times, our high-quality network has remained strong. I am pleased U.S. Cellular ranked #1 in the North Central Region in the J.D. Power 2020 Wireless Network Quality Performance Study.
"TDS Telecom continues to successfully meet significant demand for higher data speeds and increased network capacity across its footprint. Growth in Wireline video and broadband connections, coupled with demand for higher broadband speeds, drove increases in average residential revenue per connection. Cable connections also grew rapidly driven by strong increases in broadband connections. TDS Telecom continues to move forward with fiber deployment in out-of-territory expansion markets. A total of 25,000 service addresses in the out-of-territory markets were added in the first half of the year increasing total fiber service addresses to 265,000. In rolling out new markets, the safety of our customers, field service technicians and sales representatives remains a top priority. We have implemented our safety procedures that minimize the amount of work technicians do within the home through encouraging self-service and remote customer assistance techniques."


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 August 6, 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
$725-$850
Unchanged
Adjusted EBITDA1
$900-$1,025
Unchanged
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 six months ended June 30, 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)
$95-$220

 
$80-$110

Add back:
 

 
 

Interest expense
100

 
—

Depreciation, amortization and accretion expense
685

 
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
 
Six Months Ended
June 30, 2020
 
Year Ended
December 31, 2019
 
U.S.
Cellular
 
TDS
Telecom
 
U.S.
Cellular
 
TDS
Telecom 
(Dollars in millions)
 
 
 
 
 
 
 
Net income (GAAP)
$
141

 
$
56

 
$
133

 
$
92

Add back:
 
 
 
 
 
 
 
Income tax expense
8

 
8

 
52

 
30

Income before income taxes (GAAP)
$
149

 
$
64

 
$
185

 
$
122

Add back:
 
 
 
 
 
 
 
Interest expense
49

 
(2
)
 
110

 
(3
)
Depreciation, amortization and accretion expense
354

 
103

 
702

 
200

EBITDA (Non-GAAP)1
$
552

 
$
165

 
$
997

 
$
320

Add back or deduct:
 

 
 

 
 

 
 

(Gain) loss on asset disposals, net
8

 
—

 
19

 
(7
)
(Gain) loss on sale of business and other exit costs, net
—

 
—

 
(1
)
 
—

Adjusted EBITDA (Non-GAAP)1
$
560

 
$
165

 
$
1,015

 
$
313

Deduct:
 

 
 

 
 

 
 

Equity in earnings of unconsolidated entities
89

 
—

 
166

 
—

Interest and dividend income
5

 
4

 
17

 
12

Other, net
—

 
(1
)
 
—

 
—

Adjusted OIBDA (Non-GAAP)1
$
466

 
$
162

 
$
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 June 30, 2020, can be found on TDS' website at investors.tdsinc.com.

3


Conference Call Information
TDS will hold a conference call on August 7, 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/1145/36390.
▪
Access the call by phone at (833) 968-2187, conference ID: 3255207. 

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 9,300 people as of June 30, 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
jane.mccahon@tdsinc.com
 
Julie D. Mathews, IRC, Director - Investor Relations
312-592-5341
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: 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; 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 state and federal regulatory environment; the ability to attract people of outstanding talent throughout all levels of the organization; conditions in the U.S. telecommunications industry; TDS’ smaller scale relative to larger competitors; changes in demand, consumer preferences, price competition, or churn rates; advances in technology; the value of assets and investments; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of TDS’ businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties; cyber-attacks or other breaches of network or information technology security; changes in facts and circumstances that could require TDS to record adjustments to amounts reflected in the financial statements; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; pending and future litigation. 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.    
 
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 an 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
6/30/2020
 
3/31/2020
 
12/31/2019
 
9/30/2019
 
6/30/2019
Retail Connections
 
 
 
 
 
 
 
 
 
Postpaid
 
 
 
 
 
 
 
 
 
Total at end of period
4,372,000

 
4,359,000

 
4,383,000

 
4,395,000

 
4,414,000

Gross additions
129,000

 
132,000

 
170,000

 
163,000

 
137,000

Feature phones
3,000

 
2,000

 
2,000

 
3,000

 
5,000

Smartphones
82,000

 
88,000

 
128,000

 
121,000

 
97,000

Connected devices
44,000

 
42,000

 
40,000

 
39,000

 
35,000

Net additions (losses)
12,000

 
(26,000
)
 
(12,000
)
 
(19,000
)
 
(26,000
)
Feature phones
(8,000
)
 
(10,000
)
 
(11,000
)
 
(11,000
)
 
(10,000
)
Smartphones
11,000

 
(10,000
)
 
13,000

 
9,000

 
(1,000
)
Connected devices
9,000

 
(6,000
)
 
(14,000
)
 
(17,000
)
 
(15,000
)
ARPU1
$
46.24

 
$
47.23

 
$
46.57

 
$
46.16

 
$
45.90

ARPA2
$
120.70

 
$
122.92

 
$
120.99

 
$
119.87

 
$
119.46

Churn rate3
0.89
%
 
1.21
%
 
1.38
%
 
1.38
%
 
1.23
%
Handsets
0.71
%
 
0.95
%
 
1.11
%
 
1.09
%
 
0.97
%
Connected devices
2.24
%
 
3.11
%
 
3.44
%
 
3.44
%
 
3.01
%
Prepaid
 
 
 
 
 
 
 
 
 
Total at end of period
496,000

 
494,000

 
506,000

 
510,000

 
500,000

Gross additions
62,000

 
57,000

 
63,000

 
70,000

 
61,000

Net additions (losses)
2,000

 
(12,000
)
 
(3,000
)
 
9,000

 
(2,000
)
ARPU1
$
34.89

 
$
34.07

 
$
34.11

 
$
34.35

 
$
34.43

Churn rate3
4.05
%
 
4.67
%
 
4.40
%
 
4.03
%
 
4.20
%
Total connections at end of period4
4,919,000

 
4,903,000

 
4,941,000

 
4,957,000

 
4,967,000

Market penetration at end of period
 
 
 
 
 
 
 
 
 
Consolidated operating population
31,292,000

 
31,292,000

 
30,740,000

 
31,310,000

 
31,310,000

Consolidated operating penetration5
16
%
 
16
%
 
16
%
 
16
%
 
16
%
Capital expenditures (millions)
$
168

 
$
236

 
$
243

 
$
170

 
$
195

Total cell sites in service
6,673

 
6,629

 
6,578

 
6,554

 
6,535

Owned towers
4,208

 
4,184

 
4,166

 
4,123

 
4,116

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
6/30/2020
 
3/31/2020
 
12/31/2019
 
9/30/2019
 
6/30/2019
TDS Telecom
 

 
 

 
 

 
 

 
 

Wireline
 

 
 

 
 

 
 

 
 

Residential connections
 

 
 

 
 

 
 

 
 

Voice1
261,800

 
259,100

 
262,100

 
266,100

 
269,000

Broadband2
255,100

 
242,700

 
241,300

 
242,200

 
240,200

Video3
61,400

 
59,000

 
58,500

 
57,300

 
56,200

Wireline residential connections
578,300

 
560,700

 
561,900

 
565,600

 
565,500

 
 
 
 
 
 
 
 
 
 
Total residential revenue per connection4
$
49.73

 
$
50.12

 
$
49.11

 
$
49.02

 
$
47.88

 
 
 
 
 
 
 
 
 
 
Commercial connections
 
 
 
 
 
 
 
 
 
Voice1
112,400

 
114,400

 
117,800

 
121,200

 
124,200

Broadband2
20,700

 
20,500

 
20,400

 
20,600

 
20,600

managedIP5
115,500

 
118,300

 
121,200

 
124,500

 
128,300

Video3
200

 
100

 
100

 
400

 
400

Wireline commercial connections
248,700

 
253,400

 
259,600

 
266,600

 
273,500

 
 
 
 
 
 
 
 
 
 
Total Wireline connections
827,000

 
814,200

 
821,500

 
832,300

 
839,000

 
 
 
 
 
 
 
 
 
 
Cable
 
 
 
 
 
 
 
 
 
Cable residential and commercial connections
 
 
 
 
 
 
 
 
 
Broadband6
203,700

 
196,800

 
193,500

 
174,900

 
172,600

Video7
103,400

 
105,100

 
106,600

 
98,000

 
100,300

Voice8
69,000

 
68,900

 
69,500

 
63,900

 
64,800

managedIP5
1,800

 
1,400

 
1,300

 
1,200

 
1,100

Total Cable connections
378,000

 
372,300

 
370,900

 
338,000

 
338,900

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
6/30/2020
 
3/31/2020
 
12/31/2019
 
9/30/2019
 
6/30/2019
(Dollars in millions)
 
 
 
 
 
 
 
 
 
Wireline
$
58

 
$
39

 
$
98

 
$
61

 
$
55

Cable
17

 
15

 
26

 
20

 
15

Total TDS Telecom
$
75

 
$
54

 
$
124

 
$
81

 
$
70



6


Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
(Unaudited)
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
vs. 2019
 
2020
 
2019
 
2020
vs. 2019
(Dollars and shares in millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
 
 
 
 
 
 
 
 
 
 
U.S. Cellular
$
973

 
$
973

 
–

 
$
1,937

 
$
1,939

 
–

TDS Telecom
241

 
233

 
3
 %
 
481

 
464

 
4
 %
All Other1
49

 
55

 
(10
)%
 
106

 
115

 
(7
)%
 
1,263

 
1,261

 
–

 
2,524

 
2,518

 
–

Operating expenses
 

 
 

 
 

 
 

 
 

 
 

U.S. Cellular
 

 
 

 
 

 
 

 
 

 
 

Expenses excluding depreciation, amortization and accretion
738

 
761

 
(3
)%
 
1,471

 
1,496

 
(2
)%
Depreciation, amortization and accretion
178

 
177

 
1
 %
 
354

 
345

 
3
 %
(Gain) loss on asset disposals, net
4

 
5

 
(19
)%
 
8

 
7

 
7
 %
(Gain) loss on sale of business and other exit costs, net
—

 
—

 
N/M

 
—

 
(2
)
 
N/M

(Gain) loss on license sales and exchanges, net
—

 
—

 
N/M

 
—

 
(2
)
 
N/M

 
920

 
943

 
(2
)%
 
1,833

 
1,844

 
(1
)%
TDS Telecom
 

 
 

 
 

 
 

 
 

 
 

Expenses excluding depreciation, amortization and accretion
158

 
155

 
2
 %
 
319

 
305

 
4
 %
Depreciation, amortization and accretion
51

 
50

 
3
 %
 
103

 
100

 
3
 %
(Gain) loss on asset disposals, net
—

 
(1
)
 
N/M

 
—

 
(8
)
 
N/M

 
210

 
204

 
3
 %
 
422

 
398

 
6
 %
All Other1
 

 
 

 
 

 
 

 
 

 
 

Expenses excluding depreciation and amortization
49

 
58

 
(16
)%
 
105

 
119

 
(10
)%
Depreciation and amortization
7

 
7

 
(22
)%
 
13

 
15

 
(23
)%
(Gain) loss on asset disposals, net
—

 
1

 
N/M

 
—

 
1

 
N/M

 
55

 
66

 
(17
)%
 
118

 
134

 
(11
)%
Total operating expenses
1,185

 
1,213

 
(2
)%
 
2,373

 
2,376

 
–

Operating income (loss)
 

 
 

 
 

 
 

 
 

 
 

U.S. Cellular
53

 
30

 
74
 %
 
104

 
95

 
9
 %
TDS Telecom
31

 
29

 
6
 %
 
59

 
66

 
(10
)%
All Other1
(6
)
 
(11
)
 
51
 %
 
(12
)
 
(19
)
 
35
 %
 
78

 
48

 
63
 %
 
151

 
142

 
6
 %
Investment and other income (expense)
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
44

 
41

 
8
 %
 
90

 
85

 
5
 %
Interest and dividend income
2

 
9

 
(76
)%
 
8

 
17

 
(53
)%
Interest expense
(38
)
 
(43
)
 
10
 %
 
(75
)
 
(86
)
 
12
 %
Other, net
—

 
—

 
59
 %
 
(1
)
 
1

 
(57
)%
Total investment and other income
8

 
7

 
22
 %
 
22

 
17

 
34
 %
Income before income taxes
86

 
55

 
58
 %
 
173

 
159

 
9
 %
Income tax expense
8

 
16

 
(47
)%
 
12

 
50

 
(76
)%
Net income
78

 
39

 
N/M

 
161

 
109

 
47
 %
Less: Net income attributable to noncontrolling interests, net of tax
13

 
6

 
100
 %
 
26

 
17

 
53
 %
Net income attributable to TDS shareholders
$
65

 
$
33

 
N/M

 
$
135

 
$
92

 
46
 %

 
 
 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
114

 
114

 
–

 
115

 
114

 
–

Basic earnings per share attributable to TDS shareholders
$
0.57

 
$
0.29

 
N/M

 
$
1.18

 
$
0.81

 
46
 %

 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
115

 
116

 
(1
)%
 
115

 
116

 
–

Diluted earnings per share attributable to TDS shareholders
$
0.56

 
$
0.28

 
N/M

 
$
1.15

 
$
0.78

 
47
 %
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)
 
 
Six Months Ended
June 30,
 
2020
 
2019
(Dollars in millions)
 
 
 
Cash flows from operating activities
 
 
 
Net income
$
161

 
$
109

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
 
 
 
Depreciation, amortization and accretion
470

 
460

Bad debts expense
48

 
50

Stock-based compensation expense
25

 
33

Deferred income taxes, net
150

 
40

Equity in earnings of unconsolidated entities
(90
)
 
(85
)
Distributions from unconsolidated entities
91

 
76

(Gain) loss on asset disposals, net
8

 
—

(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

 
3

Changes in assets and liabilities from operations
 
 
 
Accounts receivable
21

 
(2
)
Equipment installment plans receivable
22

 
(11
)
Inventory
15

 
(4
)
Accounts payable
49

 
(9
)
Customer deposits and deferred revenues
(8
)
 
8

Accrued taxes
(115
)
 
2

Accrued interest
—

 
2

Other assets and liabilities
(42
)
 
(76
)
Net cash provided by operating activities
806

 
592

 
 

 
 

Cash flows from investing activities
 
 
 
Cash paid for additions to property, plant and equipment
(610
)
 
(393
)
Cash paid for licenses
(144
)
 
(255
)
Cash received from investments
1

 
11

Cash paid for investments
(1
)
 
(11
)
Cash received from divestitures and exchanges
1

 
32

Advance payments for license acquisitions
(16
)
 
—

Net cash used in investing activities
(769
)
 
(616
)
 
 

 
 

Cash flows from financing activities
 
 
 
Issuance of long-term debt
175

 
—

Repayment of long-term debt
(5
)
 
(11
)
TDS Common Shares reissued for benefit plans, net of tax payments
(3
)
 
(6
)
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments
(8
)
 
(8
)
Repurchase of TDS Common Shares
(14
)
 
—

Repurchase of U.S. Cellular Common Shares
(23
)
 
—

Dividends paid to TDS shareholders
(39
)
 
(38
)
Payment of debt issuance costs
(7
)
 
—

Distributions to noncontrolling interests
(1
)
 
(2
)
Other financing activities
—

 
3

Net cash provided by (used in) financing activities
75

 
(62
)
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
112

 
(86
)
 
 
 
 
Cash, cash equivalents and restricted cash
 
 
 
Beginning of period
474

 
927

End of period
$
586

 
$
841


8


Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)
 
ASSETS
 
 
 
 
 
June 30, 2020
 
December 31, 2019
(Dollars in millions)
 
 
 
Current assets
 

 
 

Cash and cash equivalents
$
565

 
$
465

Accounts receivable, net
1,064

 
1,124

Inventory, net
152

 
169

Prepaid expenses
106

 
98

Income taxes receivable
160

 
36

Other current assets
39

 
29

Total current assets
2,086

 
1,921

 
 
 
 
Licenses
2,630

 
2,480

 
 
 
 
Goodwill
547

 
547

 
 
 
 
Other intangible assets, net
226

 
239

 
 
 
 
Investments in unconsolidated entities
486

 
488

 
 
 
 
Property, plant and equipment, net
3,615

 
3,527

 
 
 
 
Operating lease right-of-use assets
985

 
972

 
 
 
 
Other assets and deferred charges
586

 
607

 
 
 
 
Total assets
$
11,161

 
$
10,781



9


Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)
 
LIABILITIES AND EQUITY
 
 
 
 
 
June 30, 2020
 
December 31, 2019
(Dollars in millions, except per share amounts)
 
 
 
Current liabilities
 

 
 

Current portion of long-term debt
$
5

 
$
10

Accounts payable
349

 
374

Customer deposits and deferred revenues
181

 
189

Accrued interest
11

 
11

Accrued taxes
41

 
41

Accrued compensation
85

 
121

Short-term operating lease liabilities
124

 
116

Other current liabilities
86

 
100

Total current liabilities
882

 
962

 
 
 
 
Deferred liabilities and credits
 

 
 

Deferred income tax liability, net
825

 
676

Long-term operating lease liabilities
938

 
931

Other deferred liabilities and credits
515

 
481

 
 
 
 
Long-term debt, net
2,487

 
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
2,472

 
2,468

Treasury shares, at cost
(479
)
 
(479
)
Accumulated other comprehensive loss
(7
)
 
(9
)
Retained earnings
2,751

 
2,672

Total TDS shareholders' equity
4,738

 
4,653

 
 
 
 
Noncontrolling interests
765

 
751

 
 
 
 
Total equity
5,503

 
5,404

 
 
 
 
Total liabilities and equity
$
11,161

 
$
10,781



10


Balance Sheet Highlights
(Unaudited)
 
 
 
June 30, 2020
 
U.S.
 
TDS
 
TDS Corporate
 
Intercompany
 
TDS
 
Cellular
 
Telecom
 
& Other
 
Eliminations
 
Consolidated
(Dollars in millions)
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
418

 
$
—

 
$
147

 
$
—

 
$
565

Affiliated cash investments
—

 
550

 
—

 
(550
)
 
—

 
$
418

 
$
550

 
$
147

 
$
(550
)
 
$
565

 
 
 
 
 
 
 
 
 
 
Licenses, goodwill and other intangible assets
$
2,621

 
$
772

 
$
10

 
$
—

 
$
3,403

Investment in unconsolidated entities
445

 
4

 
47

 
(10
)
 
486

 
$
3,066

 
$
776

 
$
57

 
$
(10
)
 
$
3,889

 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
$
2,258

 
$
1,253

 
$
104

 
$
—

 
$
3,615

 
 
 
 
 
 
 
 
 
 
Long-term debt, net:
 
 
 
 
 
 
 
 
 
Current portion
$
4

 
$
1

 
$
1

 
$
—

 
$
5

Non-current portion
1,625

 
4

 
858

 
—

 
2,487

 
$
1,629

 
$
4

 
$
859

 
$
—

 
$
2,492

Numbers may not foot due to rounding.


11


TDS Telecom Highlights
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020 vs. 2019
 
2020
 
2019
 
2020 vs. 2019
(Dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
Wireline
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
 
 
 
 
 
 
 
 
 
 
Residential
$
85

 
$
81

 
6
 %
 
$
170

 
$
162

 
5
 %
Commercial
38

 
42

 
(10
)%
 
77

 
86

 
(10
)%
Wholesale
46

 
49

 
(6
)%
 
91

 
94

 
(3
)%
Total service revenues
169

 
172

 
(2
)%
 
338

 
342

 
(1
)%
Equipment and product sales
—

 
—

 
(48
)%
 
—

 
1

 
(45
)%
 
169

 
172

 
(2
)%
 
339

 
343

 
(1
)%
Operating expenses
 

 
 

 
 

 
 

 
 

 
 

Cost of services
63

 
64

 
(3
)%
 
128

 
127

 
1
 %
Cost of equipment and products
—

 
—

 
(10
)%
 
—

 
1

 
(33
)%
Selling, general and administrative expenses
48

 
49

 
(2
)%
 
97

 
96

 
1
 %
Expenses excluding depreciation, amortization and accretion
111

 
114

 
(2
)%
 
225

 
224

 
1
 %
Depreciation, amortization and accretion
32

 
33

 
(3
)%
 
64

 
66

 
(4
)%
(Gain) loss on asset disposals, net
—

 
(1
)
 
N/M

 
—

 
(8
)
 
N/M

 
143

 
145

 
(2
)%
 
289

 
282

 
3
 %
Operating income
$
27

 
$
27

 
(1
)%
 
$
50

 
$
61

 
(18
)%
 
 
 
 
 
 
 
 
 
 
 
 
Cable
 

 
 

 
 

 
 

 
 

 
 

Operating revenues
 

 
 

 
 

 
 

 
 

 
 

Residential
$
60

 
$
51

 
19
 %
 
$
119

 
$
100

 
19
 %
Commercial
11

 
11

 
3
 %
 
23

 
21

 
7
 %
 
71

 
62

 
16
 %
 
142

 
121

 
17
 %
Operating expenses
 

 
 

 
 

 
 

 
 

 
 

Cost of services
30

 
27

 
12
 %
 
60

 
52

 
14
 %
Selling, general and administrative expenses
17

 
15

 
14
 %
 
34

 
30

 
15
 %
Expenses excluding depreciation, amortization and accretion
47

 
42

 
13
 %
 
94

 
82

 
15
 %
Depreciation, amortization and accretion
20

 
17

 
15
 %
 
39

 
34

 
15
 %
(Gain) loss on asset disposals, net
—

 
—

 
6
 %
 
—

 
1

 
(62
)%
 
67

 
59

 
13
 %
 
133

 
117

 
14
 %
Operating income (loss)
$
4

 
$
2

 
78
 %
 
$
9

 
$
5

 
90
 %
 
 
 
 
 
 
 
 
 
 
 
 
Total TDS Telecom operating income
$
31

 
$
29

 
6
 %
 
$
59

 
$
66

 
(10
)%
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
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
(Dollars in millions)
 
 
 
 
 
 
 
Cash flows from operating activities (GAAP)
$
440

 
$
265

 
$
806

 
$
592

Less: Cash paid for additions to property, plant and equipment
233

 
239

 
610

 
393

Free cash flow (Non-GAAP)1
$
207

 
$
26

 
$
196

 
$
199

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
v3.20.2
Document and Entity Information Document
Aug. 06, 2020
Entity Central Index Key 0001051512
Document Type 8-K
Document Period End Date Aug. 06, 2020
Entity Registrant Name TELEPHONE AND DATA SYSTEMS, INC.
Entity Incorporation, State or Country Code DE
Entity File Number 001-14157
Entity Tax Identification Number 36-2669023
Entity Address, Address Line One 30 North LaSalle Street, Suite 4000
Entity Address, City or Town Chicago
Entity Address, State or Province IL
Entity Address, Postal Zip Code 60602
City Area Code (312)
Local Phone Number 630-1900
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Amendment Flag false
Common Shares  
Title of 12(b) Security Common Shares, $.01 par value
Trading Symbol TDS
Security Exchange Name NYSE
6.625% Senior Notes  
Title of 12(b) Security 6.625% Senior Notes due 2045
Trading Symbol TDI
Security Exchange Name NYSE
6.875% Senior Notes  
Title of 12(b) Security 6.875% Senior Notes due 2059
Trading Symbol TDE
Security Exchange Name NYSE
7.0% Senior Notes  
Title of 12(b) Security 7.000% Senior Notes due 2060
Trading Symbol TDJ
Security Exchange Name NYSE
5.875% Senior Notes  
Title of 12(b) Security 5.875% Senior Notes due 2061
Trading Symbol TDA
Security Exchange Name NYSE