TDS reports third quarter 2019 results

CHICAGO, Oct. 31, 2019 /PRNewswire/ --

As previously announced, TDS will hold a teleconference November 1, 2019, at 9:00 a.m. CDT. Listen to the call live via the Events & Presentations page of investors.tdsinc.com.

Telephone and Data Systems, Inc. TDS reported total operating revenues of $1,321 million for the third quarter of 2019, versus $1,297 million for the same period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $18 million and $0.15, respectively, for the third quarter of 2019 compared to $46 million and $0.41, respectively, in the same period one year ago.

"Our results for the third quarter reflect the investments we are making throughout the TDS Family of Companies," said LeRoy T. Carlson, Jr., TDS President and CEO. "U.S. Cellular is continuing to make improvements to its high-performing network and TDS Telecom is making progress deploying fiber in its new out-of-territory fiber markets.

"At U.S. Cellular subscriber activity built momentum throughout the quarter. Higher inbound roaming revenue and increased postpaid average revenue per user (ARPU) drove revenue growth. U.S. Cellular is progressing with network modernization. U.S. Cellular is readying its network for 5G and many customers with 4G devices are experiencing better network quality and improved speeds. U.S. Cellular is on track to launch 5G service in Iowa and Wisconsin during the first quarter of 2020.

"At TDS Telecom, customer demand for faster broadband speeds and for video connections generated higher residential revenue per connection. The Wireline segment saw growth in revenues from fiber investments which helped offset declines in legacy voice revenue. Wireline continued to expand fiber even deeper into its ILEC markets while also expanding its fiber footprint to attractive out-of-territory markets. Cable operations produced another strong quarter, generating 8% growth in revenues through increased broadband connections, which contributed to a 14% year-over-year increase in Adjusted EBITDA."

2019 Estimated Results

TDS' current estimates of full-year 2019 results for U.S. Cellular, TDS Telecom, and TDS are shown below. Such estimates represent management's view as of October 31, 2019 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.

	2019 Estimated Results
	U.S. Cellular		TDS Telecom		TDS¹
	Previous	Current	Previous	Current	Previous	Current
(Dollars in millions)
Total operating revenues	$3,900-$4,100	$3,950-$4,050	$900-$950	Unchanged	$5,025-$5,275	$5,075-$5,225
Adjusted OIBDA²	$725-$875	$750-$850	$280-$310	Unchanged	$1,000-$1,180	$1,025-$1,155
Adjusted EBITDA²	$900-$1,050	$925-$1,025	$290-$320	Unchanged	$1,185-$1,365	$1,210-$1,340
Capital expenditures	$625-$725	Unchanged	$300-$350	Unchanged	$940-$1,090	Unchanged

The following tables provide reconciliations of Net income to Adjusted OIBDA and Adjusted EBITDA for 2019 estimated results, actual results for the nine months ended September 30, 2019, and actual results for the year ended December 31, 2018. In providing 2019 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.

	2019 Estimated Results
	U.S. Cellular	TDS Telecom	TDS¹
(Dollars in millions)
Net income (GAAP)	N/A	N/A	N/A
Add back:
Income tax expense (benefit)	N/A	N/A	N/A
Income before income taxes (GAAP)	$80-$180	$85-$115	$70-$200
Add back:
Interest expense	115x	—	175
Depreciation, amortization and accretion expense	710	205	945
EBITDA (Non-GAAP)²	$905-$1,005	$290-$320	$1,190-$1,320
Add back or deduct:
(Gain) loss on asset disposals, net	20	—	20
Adjusted EBITDA (Non-GAAP)²	$925-$1,025	$290-$320	$1,210-$1,340
Deduct:
Equity in earnings of unconsolidated entities	160	—	160
Interest and dividend income	15	10	25
Adjusted OIBDA (Non-GAAP)²	$750-$850	$280-$310	$1,025-$1,155

	Actual Results
	Nine Months Ended September 30, 2019						Year Ended December 31, 2018
	U.S. Cellular		TDS Telecom		TDS¹		U.S. Cellular		TDS Telecom		TDS¹
(Dollars in millions)
Net income (GAAP)	$	115	$	74	$	132	$	164	$	89	$	175
Add back or deduct:
Income tax expense	55		23		64		51		16		46
Income before income taxes (GAAP)	$	170	$	97	$	196	$	215	$	105	$	221
Add back:
Interest expense	87		(2)		128		116		(2)		172
Depreciation, amortization and accretion expense	524		150		697		640		212		883
EBITDA (Non-GAAP)²	$	781	$	245	$	1,021	$	971	$	315	$	1,276
Add back or deduct:
(Gain) loss on asset disposals, net	13		(7)		5		10		(2)		9
(Gain) loss on sale of business and other exit costs, net	(1)		—		(1)		—		—		—
(Gain) loss on license sales and exchanges, net	—		—		—		(18)		—		(18)
Adjusted EBITDA (Non-GAAP)²	$	793	$	238	$	1,025	$	963	$	313	$	1,267
Deduct:
Equity in earnings of unconsolidated entities	128		—		129		159		—		160
Interest and dividend income	14		9		24		15		8		26
Other, net	—		—		—		(1)		2		2
Adjusted OIBDA (Non-GAAP)²	$	651	$	228	$	872	$	790	$	303	$	1,079


Numbers may not foot due to rounding.

¹	The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments.

²	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 September 30, 2019, can be found on TDS' website at investors.tdsinc.com.

Conference Call Information

TDS will hold a conference call on November 1, 2019 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/1145/32152.
Access the call by phone at 877-273-7192 (US/Canada), conference ID: 4119859.

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 September 30, 2019.

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: intense competition; the ability to execute TDS' business strategy; uncertainties in TDS' future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and U.S. Cellular indebtedness or comply with the terms of debt covenants; impacts of any pending acquisitions/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.

For more information about TDS and its subsidiaries, visit:

TDS: www.tdsinc.com

U.S. Cellular: www.uscellular.com

TDS Telecom: www.tdstelecom.com

OneNeck IT Solutions: www.oneneck.com

United States Cellular Corporation
Summary Operating Data (Unaudited)
As of or for the Quarter Ended	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
Retail Connections
Postpaid
Total at end of period	4,395,000			4,414,000			4,440,000			4,472,000			4,466,000
Gross additions	163,000			137,000			137,000			179,000			172,000
Feature phones	3,000			5,000			4,000			4,000			3,000
Smartphones	121,000			97,000			98,000			132,000			130,000
Connected devices	39,000			35,000			35,000			43,000			39,000
Net additions (losses)	(19,000)			(26,000)			(32,000)			6,000			(1,000)
Feature phones	(11,000)			(10,000)			(13,000)			(11,000)			(14,000)
Smartphones	9,000			(1,000)			(1,000)			31,000			29,000
Connected devices	(17,000)			(15,000)			(18,000)			(14,000)			(16,000)
ARPU¹	$	46.16		$	45.90		$	45.44		$	45.58		$	45.31
ARPA²	$	119.87		$	119.46		$	118.84		$	119.60		$	119.42
Churn rate³	1.38		%	1.23		%	1.26		%	1.29		%	1.29		%
Handsets	1.09		%	0.97		%	0.99		%	1.00		%	1.02		%
Connected devices	3.44		%	3.01		%	3.08		%	3.20		%	3.04		%
Prepaid
Total at end of period	510,000			500,000			503,000			516,000			528,000
Gross additions	70,000			61,000			61,000			66,000			80,000
Net additions (losses)	9,000			(2,000)			(13,000)			(12,000)			1,000
ARPU¹	$	34.35		$	34.43		$	33.44		$	32.80		$	32.09
Churn rate³	4.03		%	4.20		%	4.92		%	4.98		%	4.98		%
Total connections at end of period⁴	4,957,000			4,967,000			4,995,000			5,041,000			5,050,000
Market penetration at end of period
Consolidated operating population	31,310,000			31,310,000			31,310,000			31,469,000			31,469,000
Consolidated operating penetration⁵	16		%	16		%	16		%	16		%	16		%
Capital expenditures (millions)	$	170		$	195		$	102		$	242		$	118
Total cell sites in service	6,554			6,535			6,506			6,531			6,506
Owned towers	4,123			4,116			4,106			4,129			4,119


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.

TDS Telecom
Summary Operating Data (Unaudited)
As of or for the Quarter Ended	9/30/2019		6/30/2019		3/31/2019		12/31/2018		9/30/2018
TDS Telecom
Wireline
Residential connections
Voice¹	266,100		269,000		271,100		274,100		278,400
Broadband²	242,200		240,200		236,100		235,400		237,100
Video³	57,300		56,200		54,300		54,000		53,100
Wireline residential connections	565,600		565,500		561,500		563,500		568,600

Total residential revenue per connection⁴	$	49.02	$	47.88	$	48.16	$	47.39	$	47.30

Commercial connections
Voice¹	121,200		124,200		127,300		130,500		134,000
Broadband²	20,600		20,600		20,400		20,600		20,700
managedIP⁵	124,500		128,300		132,000		134,000		138,000
Video³	400		400		400		400		400
Wireline commercial connections	266,600		273,500		280,100		285,400		293,100

Total Wireline connections	832,300		839,000		841,500		848,900		861,700

Cable
Cable residential and commercial connections
Broadband⁶	174,900		172,600		171,100		167,400		163,600
Video⁷	98,000		100,300		101,400		102,900		102,100
Voice⁸	63,900		64,800		65,400		65,200		63,600
managedIP⁵	1,200		1,100		1,100		1,000		700
Total Cable connections	338,000		338,900		339,000		336,500		330,100


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	9/30/2019		6/30/2019		3/31/2019		12/31/2018		9/30/2018
(Dollars in millions)
Wireline	$	61	$	55	$	29	$	73	$	41
Cable	20		15		13		19		13
Total TDS Telecom	$	81	$	70	$	42	$	91	$	54

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019 vs. 2018		2019		2018		2019 vs. 2018
(Dollars and shares in millions, except per share amounts)
Operating revenues
U.S. Cellular	$	1,031	$	1,001	3	%	$	2,970	$	2,916	2	%
TDS Telecom	231		234		(1)	%	695		695		–
All Other¹	59		62		(4)	%	175		166		5	%
	1,321		1,297		2	%	3,840		3,777		2	%
Operating expenses
U.S. Cellular
Expenses excluding depreciation, amortization and accretion	823		804		2	%	2,319		2,296		1	%
Depreciation, amortization and accretion	181		160		13	%	524		478		10	%
(Gain) loss on asset disposals, net	5		3		66	%	13		5		N/M
(Gain) loss on sale of business and other exit costs, net	—		—		N/M		(1)		—		N/M
(Gain) loss on license sales and exchanges, net	2		—		N/M		—		(18)		98	%
	1,011		967		5	%	2,855		2,761		3	%
TDS Telecom
Expenses excluding depreciation, amortization and accretion	162		157		3	%	467		466		–
Depreciation, amortization and accretion	50		53		(6)	%	150		160		(6)	%
(Gain) loss on asset disposals, net	—		(3)		N/M		(7)		(2)		N/M
	212		206		3	%	609		624		(2)	%
All Other¹
Expenses excluding depreciation and amortization	62		65		(3)	%	182		176		3	%
Depreciation and amortization	6		7		(5)	%	23		24		(5)	%
(Gain) loss on asset disposals, net	1		—		N/M		(1)		—		N/M
	69		73		(3)	%	205		200		2	%
Total operating expenses	1,292		1,246		4	%	3,669		3,585		2	%
Operating income (loss)
U.S. Cellular	20		34		(40)	%	115		155		(26)	%
TDS Telecom	20		28		(29)	%	86		71		21	%
All Other¹	(11)		(11)		(5)	%	(30)		(34)		13	%
	29		51		(43)	%	171		192		(11)	%
Investment and other income (expense)
Equity in earnings of unconsolidated entities	44		42		5	%	129		121		7	%
Interest and dividend income	7		6		15	%	24		18		39	%
Interest expense	(42)		(43)		1	%	(128)		(129)		1	%
Other, net	—		2		N/M		—		1		N/M
Total investment and other income	9		7		34	%	25		11		N/M
Income before income taxes	38		58		(35)	%	196		203		(3)	%
Income tax expense	15		5		N/M		64		48		32	%
Net income	23		53		(57)	%	132		155		(15)	%
Less: Net income attributable to noncontrolling interests, net of tax	5		7		(27)	%	22		36		(39)	%
Net income attributable to TDS shareholders	$	18	$	46	(62)	%	$	110	$	119	(7)	%

Basic weighted average shares outstanding	115		112		2	%	114		112		2	%
Basic earnings per share attributable to TDS shareholders	$	0.15	$	0.41	(63)	%	$	0.96	$	1.06	(9)	%

Diluted weighted average shares outstanding	116		114		2	%	116		113		2	%
Diluted earnings per share attributable to TDS shareholders	$	0.15	$	0.41	(63)	%	$	0.93	$	1.04	(10)	%


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.

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)

	Nine Months Ended September 30,
	2019		2018
(Dollars in millions)
Cash flows from operating activities
Net income	$	132	$	155
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion	697		662
Bad debts expense	80		71
Stock-based compensation expense	47		37
Deferred income taxes, net	23		31
Equity in earnings of unconsolidated entities	(129)		(121)
Distributions from unconsolidated entities	100		91
(Gain) loss on asset disposals, net	5		3
(Gain) loss on sale of business and other exit costs, net	(1)		—
(Gain) loss on license sales and exchanges, net	—		(18)
Other operating activities	4		3
Changes in assets and liabilities from operations
Accounts receivable	(42)		(5)
Equipment installment plans receivable	(42)		(88)
Inventory	3		13
Accounts payable	(4)		13
Customer deposits and deferred revenues	(2)		(7)
Accrued taxes	37		(3)
Accrued interest	9		11
Other assets and liabilities	(43)		(36)
Net cash provided by operating activities	874		812

Cash flows from investing activities
Cash paid for additions to property, plant and equipment	(631)		(447)
Cash paid for acquisitions and licenses	(257)		(10)
Cash received from investments	29		100
Cash paid for investments	(11)		—
Cash received from divestitures and exchanges	32		28
Other investing activities	1		4
Net cash used in investing activities	(837)		(325)

Cash flows from financing activities
Repayment of long-term debt	(16)		(15)
TDS Common Shares reissued for benefit plans, net of tax payments	(6)		27
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments	(8)		7
Repurchase of U.S. Cellular Common Shares	(21)		—
Dividends paid to TDS shareholders	(57)		(54)
Distributions to noncontrolling interests	(3)		(5)
Other financing activities	8		(2)
Net cash used in financing activities	(103)		(42)

Net increase (decrease) in cash, cash equivalents and restricted cash	(66)		445

Cash, cash equivalents and restricted cash
Beginning of period	927		622
End of period	$	861	$	1,067

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)

ASSETS

	September 30, 2019¹		December 31, 2018
(Dollars in millions)
Current assets
Cash and cash equivalents	$	853	$	921
Short-term investments	—		17
Accounts receivable	1,116		1,099
Inventory, net	147		150
Prepaid expenses	98		103
Income taxes receivable	3		12
Other current assets	28		28
Total current assets	2,245		2,330

Assets held for sale	9		54

Licenses	2,470		2,195

Goodwill	509		509

Other intangible assets, net	235		253

Investments in unconsolidated entities	511		480

Property, plant and equipment, net	3,353		3,346

Operating lease right-of-use assets	970		—

Other assets and deferred charges	579		616

Total assets	$	10,881	$	9,783

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)

LIABILITIES AND EQUITY

	September 30, 2019¹		December 31, 2018
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt	$	21	$	21
Accounts payable	386		365
Customer deposits and deferred revenues	195		197
Accrued interest	20		11
Accrued taxes	63		44
Accrued compensation	111		127
Short-term operating lease liabilities	115		—
Other current liabilities	90		114
Total current liabilities	1,001		879

Liabilities held for sale	1		1

Deferred liabilities and credits
Deferred income tax liability, net	664		640
Long-term operating lease liabilities	931		—
Other deferred liabilities and credits	475		541

Long-term debt, net	2,405		2,418

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	2,456		2,432
Treasury shares, at cost	(481)		(519)
Accumulated other comprehensive loss	(10)		(10)
Retained earnings	2,680		2,656
Total TDS shareholders' equity	4,646		4,560

Noncontrolling interests	747		733

Total equity	5,393		5,293

Total liabilities and equity	$	10,881	$	9,783


¹	As of January 1, 2019, TDS adopted the new lease accounting standard, ASC 842, using a modified retrospective method. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2019 amounts include the impacts of ASC 842, but 2018 amounts remain as previously reported.

Balance Sheet Highlights
(Unaudited)

	September 30, 2019
	U.S.		TDS		TDS Corporate		Intercompany		TDS
	Cellular		Telecom		& Other		Eliminations		Consolidated
(Dollars in millions)
Cash and cash equivalents	$	570	$	36	$	247	$	—	$	853
Affiliated cash investments	—		509		—		(509)		—
	$	570	$	545	$	247	$	(509)	$	853

Licenses, goodwill and other intangible assets	$	2,461	$	741	$	12	$	—	$	3,214
Investment in unconsolidated entities	471		4		46		(10)		511
	$	2,932	$	745	$	58	$	(10)	$	3,725

Property, plant and equipment, net	$	2,144	$	1,096	$	113	$	—	$	3,353

Long-term debt, net:
Current portion	$	19	$	1	$	1	$	—	$	21
Non-current portion	1,592		3		810		—		2,405
	$	1,611	$	4	$	811	$	—	$	2,426

TDS Telecom Highlights
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019 vs. 2018		2019		2018		2019 vs. 2018
(Dollars in millions)
Wireline
Operating revenues
Residential	$	83	$	81	3	%	$	245	$	241	2	%
Commercial	41		46		(9)	%	127		140		(9)	%
Wholesale	45		50		(11)	%	139		144		(3)	%
Total service revenues	169		176		(4)	%	512		524		(2)	%
Equipment and product sales	—		—		(19)	%	1		1		(25)	%
	169		177		(4)	%	512		526		(3)	%
Operating expenses
Cost of services	68		68		(1)	%	195		200		(2)	%
Cost of equipment and products	—		—		(7)	%	1		1		(26)	%
Selling, general and administrative expenses	52		49		7	%	148		146		2	%
Expenses excluding depreciation, amortization and accretion	120		118		2	%	344		346		(1)	%
Depreciation, amortization and accretion	33		35		(8)	%	99		108		(8)	%
(Gain) loss on asset disposals, net	—		(4)		N/M		(8)		(3)		N/M
	153		149		3	%	435		451		(4)	%
Operating income	$	16	$	28	(41)	%	$	78	$	75	4	%

Cable
Operating revenues
Residential	$	52	$	47	9	%	$	152	$	140	9	%
Commercial	10		10		1	%	32		30		6	%
	62		58		8	%	184		170		8	%
Operating expenses
Cost of services	27		26		4	%	79		78		1	%
Selling, general and administrative expenses	15		14		6	%	44		42		6	%
Expenses excluding depreciation, amortization and accretion	42		40		5	%	124		120		3	%
Depreciation, amortization and accretion	17		17		(2)	%	51		52		(3)	%
(Gain) loss on asset disposals, net	—		1		(86)	%	1		1		(49)	%
	59		58		2	%	175		174		1	%
Operating income (loss)	$	3	$	—	N/M		$	8	$	(4)	N/M

Total TDS Telecom operating income	$	20	$	28	(29)	%	$	86	$	71	21	%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations

Free Cash Flow

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
(Dollars in millions)
Cash flows from operating activities (GAAP)	$	282	$	349	$	874	$	812
Less: Cash paid for additions to property, plant and equipment	238		171		631		447
Free cash flow (Non-GAAP)¹	$	44	$	178	$	243	$	365


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.

EBITDA, Adjusted EBITDA and Adjusted OIBDA

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Income before income taxes and Operating income.

	Three Months Ended September 30,
CABLE	2019		2018
(Dollars in millions)
Income before income taxes (GAAP)	$	4	$	—
Add back:
Depreciation, amortization and accretion	17		17
EBITDA (Non-GAAP)	21		18
Add back or deduct:
(Gain) loss on asset disposals, net	—		1
Adjusted EBITDA (Non-GAAP)	21		18
Deduct:
Interest and dividend income	—		—
Adjusted OIBDA (Non-GAAP)	20		18
Deduct:
Depreciation, amortization and accretion	17		17
(Gain) loss on asset disposals, net	—		1
Operating income (GAAP)	$	3	$	—

Numbers may not foot due to rounding.

View original content:http://www.prnewswire.com/news-releases/tds-reports-third-quarter-2019-results-300949431.html

SOURCE Telephone and Data Systems, Inc.

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