|
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|
|
|
UNITED STATES
|
||
SECURITIES AND EXCHANGE COMMISSION
|
||
Washington, D.C. 20549
|
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FORM 10-Q
|
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(Mark One)
|
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[x]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended March 31, 2019
|
||
OR
|
||
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from to
|
||
|
|
|
Commission file number 001-14157
|
TELEPHONE AND DATA SYSTEMS, INC.
|
||
(Exact name of Registrant as specified in its charter)
|
||
Delaware
|
|
36-2669023
|
(State or other jurisdiction of incorporation or organization)
|
|
(IRS Employer Identification No.)
|
|
|
|
30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602
|
||
(Address of principal executive offices) (Zip code)
|
||
|
|
|
Registrant’s telephone number, including area code: (312) 630-1900
|
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
|
|
Index
|
Page No.
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Telephone and Data Systems, Inc.
Management’s Discussion and Analysis of
Financial Condition
and Results of Operations
|
▪
|
U.S. Cellular continues to offer economical and competitively priced service plans and devices to its customers, and is focused on increasing revenues from sales of related products such as accessories and device protection plans and from new services such as fixed wireless broadband. In addition, U.S. Cellular is focused on expanding its solutions available to business and government customers, including a growing suite of connected machine-to-machine solutions and software applications across various categories.
|
▪
|
U.S. Cellular continues to devote efforts to enhance its network capabilities. VoLTE technology has been launched successfully in California, Iowa, Oregon, Washington and Wisconsin, and deployments in several additional operating markets will occur in 2019. VoLTE technology allows customers to utilize a 4G LTE network for both voice and data services, and offers enhanced services such as high definition voice and simultaneous voice and data sessions. In addition, the deployment of VoLTE technology expands U.S. Cellular’s ability to offer roaming services to other wireless carriers.
|
▪
|
U.S. Cellular also is committed to continuous technology innovation and has begun to deploy 5G technology. 5G technology is expected to help address customers’ growing demand for data services as well as create opportunities for new services requiring high speed, reliability and low latency. U.S. Cellular is working with leading companies in the wireless infrastructure and handset ecosystem to provide rich 5G experiences for customers. In addition, in the markets where U.S. Cellular commercially deploys 5G technology, customers using U.S. Cellular’s 4G LTE network will experience increased network speed due to U.S. Cellular's modernization efforts.
|
▪
|
U.S. Cellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on capital. As part of this strategy, U.S. Cellular actively seeks attractive opportunities to acquire wireless spectrum, including pursuant to FCC auctions.
|
▪
|
TDS Telecom’s Wireline business continues to focus on driving growth in its broadband and video services by investing in fiber deployment inside existing markets and in new out-of-territory markets. With support from the FCC’s A-CAM program, Wireline will deploy higher speed broadband services to more rural areas.
|
▪
|
TDS Telecom’s Cable business continues to
increase its broadband penetration by making network capacity investments and by offering more advanced services in its markets
.
|
▪
|
TDS Telecom's Wireline and Cable businesses are investing in a next generation cloud-based video platform called TDS TV+ to enhance video services.
|
▪
|
4G LTE
–
fourth generation Long-Term Evolution, which is a wireless technology that enables more network capacity for more data per user as well as faster access to data compared to third generation (3G) technology.
|
▪
|
5G
–
fifth generation wireless technology
that is expected to help address customers’ growing demand for data services as well as create opportunities for new services requiring high speed and reliability as well as low latency.
|
▪
|
Account
– represents an individual or business financially responsible for one or multiple associated connections. An account may include a variety of types of connections such as handsets and connected devices.
|
▪
|
Alternative Connect America Cost Model (A-CAM)
– a USF support mechanism for rate-of-return carriers, which provides revenue support through 2028. This support comes with an obligation to build defined broadband speeds to a certain number of locations.
|
▪
|
Broadband Connections
– refers to the number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies or the Cable billable number of lines into a building for high-speed data services.
|
▪
|
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.
|
▪
|
Connected Devices
– non-handset devices that connect directly to the U.S. Cellular network. Connected devices include products such as tablets, wearables, modems, and hotspots.
|
▪
|
DOCSIS
– Data Over Cable Service Interface Specification is an international telecommunications standard that permits the addition of high-bandwidth data transfer to an existing cable TV (CATV) system. DOCSIS 3.1 is a system specification that increases data transmission rates.
|
▪
|
EBITDA
– refers to earnings before interest, taxes, depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted EBITDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
|
▪
|
Free Cash Flow
– non-GAAP metric defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
|
▪
|
Gross Additions
– represents the total number of new connections added during the period, without regard to connections that were terminated during that period.
|
▪
|
IPTV Connections
– represents the number of Wireline customers provided video services using IP networking technology.
|
▪
|
Machine-to-Machine (M2M)
– technology that involves the transmission of data between networked devices, as well as the performance of actions by devices without human intervention. U.S. Cellular sells and supports M2M solutions to customers, provides connectivity for M2M solutions via the U.S. Cellular network, and has agreements with device manufacturers and software developers which offer M2M solutions.
|
▪
|
ManagedIP Connections
– refers to the number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.
|
▪
|
Net Additions
– represents the total number of new connections added during the period, net of connections that were terminated during that period.
|
▪
|
OIBDA
– refers to operating income before depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted OIBDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
|
▪
|
Partial Economic Areas
– service areas of certain FCC licenses based on geography.
|
▪
|
Postpaid Average Revenue per Account (Postpaid ARPA)
– metric which is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
|
▪
|
Postpaid Average Revenue per User (Postpaid ARPU)
– metric which is calculated by dividing total postpaid service revenues by the average number of postpaid connections and by the number of months in the period.
|
▪
|
Retail Connections
– the sum of U.S. Cellular postpaid connections and U.S. Cellular prepaid connections.
|
▪
|
Tax Act
– refers to comprehensive federal tax legislation enacted on December 22, 2017, which made broad changes to the U.S. tax code. Now titled H.R.1, the Tax Act was originally identified as the Tax Cuts and Jobs Act of 2017.
|
▪
|
Universal Service Fund (USF)
– a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States.
|
▪
|
U.S. Cellular Connections
– individual lines of service associated with each device activated by a customer. Connections include all types of devices that connect directly to the U.S. Cellular network.
|
▪
|
Video Connections
– 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 a hotel, connections are counted based on the number of units/rooms within the building receiving service.
|
▪
|
Voice Connections
– refers to the individual circuits connecting a customer to Wireline’s central office facilities or the Cable billable number of lines into a building for voice services.
|
▪
|
VoLTE
– Voice over Long-Term Evolution is a technology specification that defines the standards and procedures for delivering voice communications and related services over 4G LTE networks.
|
▪
|
Wireline 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.
|
|
Three Months Ended
March 31, |
|||||||||
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||
(Dollars in millions)
|
|
|
|
|
|
|||||
Operating revenues
|
|
|
|
|
|
|||||
U.S. Cellular
|
$
|
966
|
|
|
$
|
942
|
|
|
3
|
%
|
TDS Telecom
|
230
|
|
|
231
|
|
|
–
|
|
||
All other
1
|
61
|
|
|
52
|
|
|
16
|
%
|
||
Total operating revenues
|
1,257
|
|
|
1,225
|
|
|
3
|
%
|
||
Operating expenses
|
|
|
|
|
|
|||||
U.S. Cellular
|
902
|
|
|
877
|
|
|
3
|
%
|
||
TDS Telecom
|
193
|
|
|
205
|
|
|
(6
|
)%
|
||
All other
1
|
68
|
|
|
63
|
|
|
8
|
%
|
||
Total operating expenses
|
1,163
|
|
|
1,145
|
|
|
2
|
%
|
||
Operating income (loss)
|
|
|
|
|
|
|
|
|
||
U.S. Cellular
|
64
|
|
|
65
|
|
|
(1
|
)%
|
||
TDS Telecom
|
37
|
|
|
25
|
|
|
47
|
%
|
||
All other
1
|
(7
|
)
|
|
(10
|
)
|
|
29
|
%
|
||
Total operating income
|
94
|
|
|
80
|
|
|
18
|
%
|
||
Investment and other income (expense)
|
|
|
|
|
|
|||||
Equity in earnings of unconsolidated entities
|
44
|
|
|
38
|
|
|
16
|
%
|
||
Interest and dividend income
|
9
|
|
|
5
|
|
|
60
|
%
|
||
Interest expense
|
(43
|
)
|
|
(43
|
)
|
|
–
|
|
||
Other, net
|
—
|
|
|
1
|
|
|
(55
|
)%
|
||
Total investment and other income
|
10
|
|
|
1
|
|
|
N/M
|
|
||
|
|
|
|
|
|
|||||
Income before income taxes
|
104
|
|
|
81
|
|
|
29
|
%
|
||
Income tax expense
|
34
|
|
|
24
|
|
|
41
|
%
|
||
|
|
|
|
|
|
|||||
Net income
|
70
|
|
|
57
|
|
|
24
|
%
|
||
Less: Net income attributable to noncontrolling interests, net of tax
|
11
|
|
|
18
|
|
|
(40
|
)%
|
||
Net income attributable to TDS shareholders
|
$
|
59
|
|
|
$
|
39
|
|
|
53
|
%
|
|
|
|
|
|
|
|||||
Adjusted OIBDA (Non-GAAP)
2
|
$
|
312
|
|
|
$
|
296
|
|
|
5
|
%
|
Adjusted EBITDA (Non-GAAP)
2
|
$
|
365
|
|
|
$
|
340
|
|
|
7
|
%
|
Capital expenditures
|
$
|
147
|
|
|
$
|
115
|
|
|
28
|
%
|
1
|
Consists of corporate and other operations and intercompany eliminations.
|
2
|
Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
U.S. Cellular noncontrolling public shareholders’
|
$
|
10
|
|
|
$
|
8
|
|
Noncontrolling shareholders’ or partners’
|
1
|
|
|
10
|
|
||
Net income attributable to noncontrolling interests, net of tax
|
$
|
11
|
|
|
$
|
18
|
|
|
|
|
U.S. CELLULAR OPERATIONS
|
|
▪
|
Serves customers with
5.0
million connections including
4.4
million postpaid,
0.5
million prepaid and
0.1
million reseller and other connections
|
▪
|
Operates in
21
states
|
▪
|
Employs approximately
5,500
associates
|
▪
|
6,537
cell sites including
4,106
owned towers in service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
2019
|
|
2018
|
|
Retail Connections – End of Period
|
|
|
|||
|
Postpaid
|
|
4,440,000
|
|
4,481,000
|
|
Prepaid
|
|
503,000
|
|
525,000
|
|
Total
|
|
4,943,000
|
|
5,006,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2019
|
|
Q1 2018
|
|
Q1 2019 vs.
Q1 2018
|
|||
Postpaid Activity and Churn
|
||||||||
Gross Additions
|
|
|
|
|
|
|||
Handsets
|
102,000
|
|
|
96,000
|
|
|
6
|
%
|
Connected Devices
|
35,000
|
|
|
33,000
|
|
|
6
|
%
|
Total Gross Additions
|
137,000
|
|
|
129,000
|
|
|
6
|
%
|
Net (Losses)
|
|
|
|
|
|
|||
Handsets
|
(14,000
|
)
|
|
(16,000
|
)
|
|
13
|
%
|
Connected Devices
|
(18,000
|
)
|
|
(21,000
|
)
|
|
14
|
%
|
Total Net (Losses)
|
(32,000
|
)
|
|
(37,000
|
)
|
|
14
|
%
|
Churn
|
|
|
|
|
|
|||
Handsets
|
0.99
|
%
|
|
0.97
|
%
|
|
|
|
Connected Devices
|
3.08
|
%
|
|
2.79
|
%
|
|
|
|
Total Churn
|
1.26
|
%
|
|
1.23
|
%
|
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Average Revenue Per User (ARPU)
|
$
|
45.44
|
|
|
$
|
44.34
|
|
Average Revenue Per Account (ARPA)
|
$
|
118.84
|
|
|
$
|
118.22
|
|
|
Three Months Ended
March 31, |
|||||||||
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||
(Dollars in millions)
|
|
|
|
|
|
|||||
Retail service
|
$
|
659
|
|
|
$
|
649
|
|
|
2
|
%
|
Inbound roaming
|
34
|
|
|
27
|
|
|
22
|
%
|
||
Other
|
48
|
|
|
48
|
|
|
1
|
%
|
||
Service revenues
|
741
|
|
|
724
|
|
|
2
|
%
|
||
Equipment sales
|
225
|
|
|
218
|
|
|
3
|
%
|
||
Total operating revenues
|
966
|
|
|
942
|
|
|
3
|
%
|
||
|
|
|
|
|
|
|||||
System operations (excluding Depreciation, amortization and accretion reported below)
|
176
|
|
|
179
|
|
|
(1
|
)%
|
||
Cost of equipment sold
|
233
|
|
|
219
|
|
|
7
|
%
|
||
Selling, general and administrative
|
326
|
|
|
326
|
|
|
–
|
|
||
Depreciation, amortization and accretion
|
169
|
|
|
159
|
|
|
6
|
%
|
||
(Gain) loss on asset disposals, net
|
2
|
|
|
1
|
|
|
55
|
%
|
||
(Gain) loss on sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
|
N/M
|
|
||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
(7
|
)
|
|
69
|
%
|
||
Total operating expenses
|
902
|
|
|
877
|
|
|
3
|
%
|
||
|
|
|
|
|
|
|||||
Operating income
|
$
|
64
|
|
|
$
|
65
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|||||
Net income
|
$
|
58
|
|
|
$
|
55
|
|
|
6
|
%
|
Adjusted OIBDA (Non-GAAP)
1
|
$
|
231
|
|
|
$
|
218
|
|
|
6
|
%
|
Adjusted EBITDA (Non-GAAP)
1
|
$
|
281
|
|
|
$
|
259
|
|
|
8
|
%
|
Capital expenditures
|
$
|
102
|
|
|
$
|
70
|
|
|
46
|
%
|
1
|
Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
|
|
▪
|
Retail Service - Charges for access, airtime, recovery of regulatory costs and value added services, including data services and products
|
▪
|
Inbound Roaming - Charges to other wireless carriers whose customers use U.S. Cellular’s wireless systems when roaming
|
▪
|
Other Service - Amounts received from the Federal USF, tower rental revenues, and miscellaneous other service revenues
|
▪
|
Sales of wireless devices and related accessories to new and existing customers, agents, and third-party distributors
|
|
|
TDS TELECOM OPERATIONS
|
|
▪
|
Provides broadband, video and voice services to
1.2 million
connections in
31
states.
|
▪
|
Employs approximately 2,700 employees.
|
▪
|
Wireline operates incumbent local exchange carriers (ILEC) and competitive local exchange carriers (CLEC) in 27 states.
|
▪
|
Cable operates primarily in Colorado, New Mexico, Texas, Utah, and Oregon.
|
|
|
Three Months Ended
March 31, |
|||||||||
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||
(Dollars in millions)
|
|
|
|
|
|
|||||
Operating revenues
|
|
|
|
|
|
|||||
Wireline
|
$
|
171
|
|
|
$
|
175
|
|
|
(3
|
)%
|
Cable
|
60
|
|
|
55
|
|
|
8
|
%
|
||
TDS Telecom operating revenues
1
|
230
|
|
|
231
|
|
|
–
|
|
||
Operating expenses
|
|
|
|
|
|
|||||
Wireline
|
136
|
|
|
149
|
|
|
(9
|
)%
|
||
Cable
|
57
|
|
|
57
|
|
|
1
|
%
|
||
TDS Telecom operating expenses
1
|
193
|
|
|
205
|
|
|
(6
|
)%
|
||
|
|
|
|
|
|
|||||
TDS Telecom operating income
|
$
|
37
|
|
|
$
|
25
|
|
|
47
|
%
|
|
|
|
|
|
|
|||||
Net income
|
$
|
31
|
|
|
$
|
21
|
|
|
47
|
%
|
Adjusted OIBDA (Non-GAAP)
2
|
$
|
80
|
|
|
$
|
80
|
|
|
1
|
%
|
Adjusted EBITDA (Non-GAAP)
2
|
$
|
83
|
|
|
$
|
81
|
|
|
2
|
%
|
Capital expenditures
|
$
|
42
|
|
|
$
|
40
|
|
|
5
|
%
|
1
|
Includes eliminations between the Wireline and Cable segments.
|
2
|
Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
|
|
|
|
WIRELINE OPERATIONS
|
|
|
|
Three Months Ended
March 31, |
|||||||||
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||
(Dollars in millions)
|
|
|
|
|
|
|||||
Residential
|
$
|
81
|
|
|
$
|
80
|
|
|
1
|
%
|
Commercial
|
43
|
|
|
48
|
|
|
(9
|
)%
|
||
Wholesale
|
46
|
|
|
47
|
|
|
(3
|
)%
|
||
Service revenues
|
170
|
|
|
175
|
|
|
(3
|
)%
|
||
Equipment and product sales
|
—
|
|
|
—
|
|
|
(18
|
)%
|
||
Total operating revenues
|
171
|
|
|
175
|
|
|
(3
|
)%
|
||
|
|
|
|
|
|
|||||
Cost of services (excluding Depreciation, amortization and accretion reported below)
|
63
|
|
|
65
|
|
|
(3
|
)%
|
||
Cost of equipment and products
|
—
|
|
|
—
|
|
|
(24
|
)%
|
||
Selling, general and administrative
|
47
|
|
|
47
|
|
|
–
|
|
||
Depreciation, amortization and accretion
|
34
|
|
|
37
|
|
|
(9
|
)%
|
||
(Gain) loss on asset disposals, net
|
(7
|
)
|
|
—
|
|
|
N/M
|
|
||
Total operating expenses
|
136
|
|
|
149
|
|
|
(9
|
)%
|
||
|
|
|
|
|
|
|||||
Operating income
|
$
|
34
|
|
|
$
|
26
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
||
Income before income taxes
|
$
|
38
|
|
|
$
|
28
|
|
|
33
|
%
|
Adjusted OIBDA (Non-GAAP)
1
|
$
|
61
|
|
|
$
|
63
|
|
|
(4
|
)%
|
Adjusted EBITDA (Non-GAAP)
1
|
$
|
63
|
|
|
$
|
65
|
|
|
(3
|
)%
|
Capital expenditures
|
$
|
29
|
|
|
$
|
29
|
|
|
2
|
%
|
1
|
Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
|
|
▪
|
Broadband services, including fiber-based and other digital, premium and enhanced data services
|
▪
|
IPTV and satellite video services
|
▪
|
Voice services
|
▪
|
High-speed and dedicated business internet services
|
▪
|
Voice services
|
▪
|
Network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom’s network
|
▪
|
Federal and State USF support, including A-CAM support
|
|
|
CABLE OPERATIONS
|
|
|
|
Three Months Ended
March 31, |
|||||||||
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||
(Dollars in millions)
|
|
|
|
|
|
|||||
Residential
|
$
|
49
|
|
|
$
|
46
|
|
|
8
|
%
|
Commercial
|
10
|
|
|
10
|
|
|
8
|
%
|
||
Total operating revenues
|
60
|
|
|
55
|
|
|
8
|
%
|
||
|
|
|
|
|
|
|
|
|
||
Cost of services (excluding Depreciation, amortization and accretion reported below)
|
26
|
|
|
26
|
|
|
–
|
|
||
Selling, general and administrative
|
14
|
|
|
13
|
|
|
7
|
%
|
||
Depreciation, amortization and accretion
|
17
|
|
|
17
|
|
|
(2
|
)%
|
||
Total operating expenses
|
57
|
|
|
57
|
|
|
1
|
%
|
||
|
|
|
|
|
|
|
|
|
||
Operating income (loss)
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
N/M
|
|
|
|
|
|
|
|
|
|
|
||
Income (loss) before income taxes
|
$
|
3
|
|
|
$
|
(1
|
)
|
|
N/M
|
|
Adjusted OIBDA (Non-GAAP)
1
|
$
|
20
|
|
|
$
|
16
|
|
|
21
|
%
|
Adjusted EBITDA (Non-GAAP)
1
|
$
|
20
|
|
|
$
|
16
|
|
|
22
|
%
|
Capital expenditures
|
$
|
13
|
|
|
$
|
11
|
|
|
14
|
%
|
1
|
Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
|
|
▪
|
Broadband services, including high-speed internet, security and support services
|
▪
|
Video services including premium programming in HD, multi-room and TV Everywhere offerings
|
▪
|
Voice services
|
|
|
|
|
▪
|
Enhance and maintain U.S. Cellular's network coverage, including continuing to deploy VoLTE technology in certain markets and providing additional speed and capacity to accommodate increased data usage by current customers;
|
▪
|
Deploy 5G technology; and
|
▪
|
Invest in information technology to support existing and new services and products.
|
▪
|
Expand fiber deployment inside and outside of current footprint;
|
▪
|
Maintain and enhance existing infrastructure including build-out requirements to meet state broadband and A-CAM programs;
|
▪
|
Upgrade broadband capacity and speeds;
|
▪
|
Support success-based spending to sustain IPTV, broadband, and Cable growth; and
|
▪
|
Build TDS TV+, a cloud-based video platform
|
|
▪
|
EBITDA
|
▪
|
Adjusted EBITDA
|
▪
|
Adjusted OIBDA
|
▪
|
Free cash flow
|
|
Three Months Ended
March 31, |
||||||
TDS - CONSOLIDATED
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Net income (GAAP)
|
$
|
70
|
|
|
$
|
57
|
|
Add back:
|
|
|
|
|
|
||
Income tax expense
|
34
|
|
|
24
|
|
||
Interest expense
|
43
|
|
|
43
|
|
||
Depreciation, amortization and accretion
|
227
|
|
|
221
|
|
||
EBITDA (Non-GAAP)
|
374
|
|
|
345
|
|
||
Add back or deduct:
|
|
|
|
|
|
||
(Gain) loss on asset disposals, net
|
(5
|
)
|
|
2
|
|
||
(Gain) loss on sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
(7
|
)
|
||
Adjusted EBITDA (Non-GAAP)
|
365
|
|
|
340
|
|
||
Deduct:
|
|
|
|
|
|
||
Equity in earnings of unconsolidated entities
|
44
|
|
|
38
|
|
||
Interest and dividend income
|
9
|
|
|
5
|
|
||
Other, net
|
—
|
|
|
1
|
|
||
Adjusted OIBDA (Non-GAAP)
|
312
|
|
|
296
|
|
||
Deduct:
|
|
|
|
|
|
||
Depreciation, amortization and accretion
|
227
|
|
|
221
|
|
||
(Gain) loss on asset disposals, net
|
(5
|
)
|
|
2
|
|
||
(Gain) loss on sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
(7
|
)
|
||
Operating income (GAAP)
|
$
|
94
|
|
|
$
|
80
|
|
|
Three Months Ended
March 31, |
||||||
U.S. CELLULAR
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Net income (GAAP)
|
$
|
58
|
|
|
$
|
55
|
|
Add back:
|
|
|
|
|
|
||
Income tax expense
|
27
|
|
|
22
|
|
||
Interest expense
|
29
|
|
|
29
|
|
||
Depreciation, amortization and accretion
|
169
|
|
|
159
|
|
||
EBITDA (Non-GAAP)
|
283
|
|
|
265
|
|
||
Add back or deduct:
|
|
|
|
|
|
||
(Gain) loss on asset disposals, net
|
2
|
|
|
1
|
|
||
(Gain) loss on sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
(7
|
)
|
||
Adjusted EBITDA (Non-GAAP)
|
281
|
|
|
259
|
|
||
Deduct:
|
|
|
|
||||
Equity in earnings of unconsolidated entities
|
44
|
|
|
38
|
|
||
Interest and dividend income
|
6
|
|
|
4
|
|
||
Other, net
|
—
|
|
|
(1
|
)
|
||
Adjusted OIBDA (Non-GAAP)
|
231
|
|
|
218
|
|
||
Deduct:
|
|
|
|
|
|
||
Depreciation, amortization and accretion
|
169
|
|
|
159
|
|
||
(Gain) loss on asset disposals, net
|
2
|
|
|
1
|
|
||
(Gain) loss on sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
(7
|
)
|
||
Operating income (GAAP)
|
$
|
64
|
|
|
$
|
65
|
|
|
Three Months Ended
March 31, |
||||||
TDS TELECOM
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Net income (GAAP)
|
$
|
31
|
|
|
$
|
21
|
|
Add back:
|
|
|
|
||||
Income tax expense
|
10
|
|
|
6
|
|
||
Depreciation, amortization and accretion
|
50
|
|
|
54
|
|
||
EBITDA (Non-GAAP)
|
90
|
|
|
81
|
|
||
Add back or deduct:
|
|
|
|
|
|
||
(Gain) loss on asset disposals, net
|
(7
|
)
|
|
—
|
|
||
Adjusted EBITDA (Non-GAAP)
|
83
|
|
|
81
|
|
||
Deduct:
|
|
|
|
|
|
||
Interest and dividend income
|
3
|
|
|
1
|
|
||
Other, net
|
—
|
|
|
1
|
|
||
Adjusted OIBDA (Non-GAAP)
|
80
|
|
|
80
|
|
||
Deduct:
|
|
|
|
|
|
||
Depreciation, amortization and accretion
|
50
|
|
|
54
|
|
||
(Gain) loss on asset disposals, net
|
(7
|
)
|
|
—
|
|
||
Operating income (GAAP)
|
$
|
37
|
|
|
$
|
25
|
|
|
Three Months Ended
March 31, |
||||||
WIRELINE
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Income before income taxes (GAAP)
|
$
|
38
|
|
|
$
|
28
|
|
Add back:
|
|
|
|
|
|
||
Interest expense
|
(1
|
)
|
|
—
|
|
||
Depreciation, amortization and accretion
|
34
|
|
|
37
|
|
||
EBITDA (Non-GAAP)
|
71
|
|
|
65
|
|
||
Add back or deduct:
|
|
|
|
||||
(Gain) loss on asset disposals, net
|
(7
|
)
|
|
—
|
|
||
Adjusted EBITDA (Non-GAAP)
|
63
|
|
|
65
|
|
||
Deduct:
|
|
|
|
||||
Interest and dividend income
|
3
|
|
|
1
|
|
||
Other, net
|
—
|
|
|
1
|
|
||
Adjusted OIBDA (Non-GAAP)
|
61
|
|
|
63
|
|
||
Deduct:
|
|
|
|
|
|
||
Depreciation, amortization and accretion
|
34
|
|
|
37
|
|
||
(Gain) loss on asset disposals, net
|
(7
|
)
|
|
—
|
|
||
Operating income (GAAP)
|
$
|
34
|
|
|
$
|
26
|
|
|
Three Months Ended
March 31, |
||||||
CABLE
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Income (loss) before income taxes (GAAP)
|
$
|
3
|
|
|
$
|
(1
|
)
|
Add back:
|
|
|
|
|
|
||
Depreciation, amortization and accretion
|
17
|
|
|
17
|
|
||
EBITDA (Non-GAAP)
|
20
|
|
|
16
|
|
||
Add back or deduct:
|
|
|
|
|
|
||
(Gain) loss on asset disposals, net
|
—
|
|
|
—
|
|
||
Adjusted EBITDA (Non-GAAP)
|
20
|
|
|
16
|
|
||
Deduct:
|
|
|
|
||||
Interest and dividend income
|
—
|
|
|
—
|
|
||
Adjusted OIBDA (Non-GAAP)
|
20
|
|
|
16
|
|
||
Deduct:
|
|
|
|
||||
Depreciation, amortization and accretion
|
17
|
|
|
17
|
|
||
(Gain) loss on asset disposals, net
|
—
|
|
|
—
|
|
||
Operating income (loss) (GAAP)
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Cash flows from operating activities (GAAP)
|
$
|
327
|
|
|
$
|
214
|
|
Less: Cash paid for additions to property, plant and equipment
|
155
|
|
|
131
|
|
||
Free cash flow (Non-GAAP)
|
$
|
172
|
|
|
$
|
83
|
|
▪
|
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 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, customer 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.
|
▪
|
Performance under device purchase agreements could have a material adverse impact on TDS' business, financial condition or results of operations.
|
▪
|
Changes in TDS’ enterprise value, changes in the market supply or demand for wireless 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 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 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.
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
(Dollars and shares in millions, except per share amounts)
|
|
|
|
||||
Operating revenues
|
|
|
|
||||
Service
|
$
|
995
|
|
|
$
|
978
|
|
Equipment and product sales
|
262
|
|
|
247
|
|
||
Total operating revenues
|
1,257
|
|
|
1,225
|
|
||
|
|
|
|
||||
Operating expenses
|
|
|
|
||||
Cost of services (excluding Depreciation, amortization and accretion reported below)
|
284
|
|
|
288
|
|
||
Cost of equipment and products
|
264
|
|
|
246
|
|
||
Selling, general and administrative
|
397
|
|
|
395
|
|
||
Depreciation, amortization and accretion
|
227
|
|
|
221
|
|
||
(Gain) loss on asset disposals, net
|
(5
|
)
|
|
2
|
|
||
(Gain) loss on sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
(7
|
)
|
||
Total operating expenses
|
1,163
|
|
|
1,145
|
|
||
|
|
|
|
||||
Operating income
|
94
|
|
|
80
|
|
||
|
|
|
|
||||
Investment and other income (expense)
|
|
|
|
||||
Equity in earnings of unconsolidated entities
|
44
|
|
|
38
|
|
||
Interest and dividend income
|
9
|
|
|
5
|
|
||
Interest expense
|
(43
|
)
|
|
(43
|
)
|
||
Other, net
|
—
|
|
|
1
|
|
||
Total investment and other income
|
10
|
|
|
1
|
|
||
|
|
|
|
||||
Income before income taxes
|
104
|
|
|
81
|
|
||
Income tax expense
|
34
|
|
|
24
|
|
||
Net income
|
70
|
|
|
57
|
|
||
Less: Net income attributable to noncontrolling interests, net of tax
|
11
|
|
|
18
|
|
||
Net income attributable to TDS shareholders
|
$
|
59
|
|
|
$
|
39
|
|
|
|
|
|
||||
Basic weighted average shares outstanding
|
114
|
|
|
111
|
|
||
Basic earnings per share attributable to TDS shareholders
|
$
|
0.52
|
|
|
$
|
0.35
|
|
|
|
|
|
|
|
||
Diluted weighted average shares outstanding
|
116
|
|
|
113
|
|
||
Diluted earnings per share attributable to TDS shareholders
|
$
|
0.50
|
|
|
$
|
0.34
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Net income
|
$
|
70
|
|
|
$
|
57
|
|
Net change in accumulated other comprehensive income
|
|
|
|
|
|
||
Change related to retirement plan
|
|
|
|
|
|
||
Amounts included in net periodic benefit cost for the period
|
|
|
|
|
|
||
Amortization of prior service cost
|
—
|
|
|
(1
|
)
|
||
Comprehensive income
|
70
|
|
|
56
|
|
||
Less: Net income attributable to noncontrolling interests, net of tax
|
11
|
|
|
18
|
|
||
Comprehensive income attributable to TDS shareholders
|
$
|
59
|
|
|
$
|
38
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
70
|
|
|
$
|
57
|
|
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
|
|
|
|
||||
Depreciation, amortization and accretion
|
227
|
|
|
221
|
|
||
Bad debts expense
|
25
|
|
|
20
|
|
||
Stock-based compensation expense
|
13
|
|
|
10
|
|
||
Deferred income taxes, net
|
25
|
|
|
26
|
|
||
Equity in earnings of unconsolidated entities
|
(44
|
)
|
|
(38
|
)
|
||
Distributions from unconsolidated entities
|
19
|
|
|
17
|
|
||
(Gain) loss on asset disposals, net
|
(5
|
)
|
|
2
|
|
||
(Gain) loss on sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
(7
|
)
|
||
Noncash interest
|
1
|
|
|
1
|
|
||
Changes in assets and liabilities from operations
|
|
|
|
||||
Accounts receivable
|
28
|
|
|
77
|
|
||
Equipment installment plans receivable
|
(10
|
)
|
|
(17
|
)
|
||
Inventory
|
(15
|
)
|
|
(8
|
)
|
||
Accounts payable
|
46
|
|
|
(32
|
)
|
||
Customer deposits and deferred revenues
|
5
|
|
|
(28
|
)
|
||
Accrued taxes
|
9
|
|
|
(24
|
)
|
||
Accrued interest
|
11
|
|
|
11
|
|
||
Other assets and liabilities
|
(74
|
)
|
|
(74
|
)
|
||
Net cash provided by operating activities
|
327
|
|
|
214
|
|
||
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
||||
Cash paid for additions to property, plant and equipment
|
(155
|
)
|
|
(131
|
)
|
||
Cash paid for acquisitions and licenses
|
(1
|
)
|
|
(9
|
)
|
||
Cash received from investments
|
2
|
|
|
100
|
|
||
Cash paid for investments
|
(1
|
)
|
|
—
|
|
||
Cash received from divestitures and exchanges
|
31
|
|
|
4
|
|
||
Advance payments for license acquisitions
|
(135
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(259
|
)
|
|
(36
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
||||
Repayment of long-term debt
|
(5
|
)
|
|
(5
|
)
|
||
TDS Common Shares reissued for benefit plans, net of tax payments
|
(3
|
)
|
|
9
|
|
||
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments
|
(1
|
)
|
|
2
|
|
||
Dividends paid to TDS shareholders
|
(19
|
)
|
|
(18
|
)
|
||
Distributions to noncontrolling interests
|
(1
|
)
|
|
—
|
|
||
Other financing activities
|
—
|
|
|
(5
|
)
|
||
Net cash used in financing activities
|
(29
|
)
|
|
(17
|
)
|
||
|
|
|
|
||||
Net increase in cash, cash equivalents and restricted cash
|
39
|
|
|
161
|
|
||
|
|
|
|
||||
Cash, cash equivalents and restricted cash
|
|
|
|
||||
Beginning of period
|
927
|
|
|
622
|
|
||
End of period
|
$
|
966
|
|
|
$
|
783
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
959
|
|
|
$
|
921
|
|
Short-term investments
|
17
|
|
|
17
|
|
||
Accounts receivable
|
|
|
|
||||
Customers and agents, less allowances of $70 and $71, respectively
|
968
|
|
|
992
|
|
||
Other, less allowances of $2 and $2, respectively
|
99
|
|
|
107
|
|
||
Inventory, net
|
165
|
|
|
150
|
|
||
Prepaid expenses
|
91
|
|
|
103
|
|
||
Income taxes receivable
|
8
|
|
|
12
|
|
||
Other current assets
|
28
|
|
|
28
|
|
||
Total current assets
|
2,335
|
|
|
2,330
|
|
||
|
|
|
|
||||
Assets held for sale
|
—
|
|
|
54
|
|
||
|
|
|
|
||||
Licenses
|
2,222
|
|
|
2,195
|
|
||
|
|
|
|
||||
Goodwill
|
509
|
|
|
509
|
|
||
|
|
|
|
||||
Other intangible assets, net of accumulated amortization of $174 and $168, respectively
|
247
|
|
|
253
|
|
||
|
|
|
|
||||
Investments in unconsolidated entities
|
507
|
|
|
480
|
|
||
|
|
|
|
||||
Property, plant and equipment
|
|
|
|
||||
In service and under construction
|
12,189
|
|
|
12,074
|
|
||
Less: Accumulated depreciation and amortization
|
8,907
|
|
|
8,728
|
|
||
Property, plant and equipment, net
|
3,282
|
|
|
3,346
|
|
||
|
|
|
|
||||
Operating lease right-of-use assets
|
965
|
|
|
—
|
|
||
|
|
|
|
||||
Other assets and deferred charges
|
720
|
|
|
616
|
|
||
|
|
|
|
||||
Total assets
1
|
$
|
10,787
|
|
|
$
|
9,783
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
(Dollars and shares in millions, except per share amounts)
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Current portion of long-term debt
|
$
|
21
|
|
|
$
|
21
|
|
Accounts payable
|
400
|
|
|
365
|
|
||
Customer deposits and deferred revenues
|
203
|
|
|
197
|
|
||
Accrued interest
|
22
|
|
|
11
|
|
||
Accrued taxes
|
44
|
|
|
44
|
|
||
Accrued compensation
|
73
|
|
|
127
|
|
||
Short-term operating lease liabilities
|
110
|
|
|
—
|
|
||
Other current liabilities
|
92
|
|
|
114
|
|
||
Total current liabilities
|
965
|
|
|
879
|
|
||
|
|
|
|
||||
Liabilities held for sale
|
—
|
|
|
1
|
|
||
|
|
|
|
||||
Deferred liabilities and credits
|
|
|
|
||||
Deferred income tax liability, net
|
665
|
|
|
640
|
|
||
Long-term operating lease liabilities
|
929
|
|
|
—
|
|
||
Other deferred liabilities and credits
|
446
|
|
|
541
|
|
||
|
|
|
|
||||
Long-term debt, net
|
2,414
|
|
|
2,418
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
|
|
||
|
|
|
|
||||
Noncontrolling interests with redemption features
|
11
|
|
|
11
|
|
||
|
|
|
|
||||
Equity
|
|
|
|
||||
TDS shareholders’ equity
|
|
|
|
||||
Series A Common and Common Shares
|
|
|
|
||||
Authorized 290 shares (25 Series A Common and 265 Common Shares)
|
|
|
|
||||
Issued 133 shares (7 Series A Common and 126 Common Shares)
|
|
|
|
||||
Outstanding 114 shares (7 Series A Common and 107 Common Shares)
|
|
|
|
||||
Par Value ($.01 per share)
|
1
|
|
|
1
|
|
||
Capital in excess of par value
|
2,442
|
|
|
2,432
|
|
||
Treasury shares, at cost, 19 Common Shares
|
(505
|
)
|
|
(519
|
)
|
||
Accumulated other comprehensive loss
|
(10
|
)
|
|
(10
|
)
|
||
Retained earnings
|
2,683
|
|
|
2,656
|
|
||
Total TDS shareholders' equity
|
4,611
|
|
|
4,560
|
|
||
|
|
|
|
||||
Noncontrolling interests
|
746
|
|
|
733
|
|
||
|
|
|
|
||||
Total equity
|
5,357
|
|
|
5,293
|
|
||
|
|
|
|
||||
Total liabilities and equity
1
|
$
|
10,787
|
|
|
$
|
9,783
|
|
|
1
|
The consolidated total assets as of
March 31, 2019
and
December 31, 2018
, include assets held by consolidated variable interest entities (VIEs) of
$895 million
and
$848 million
, respectively, which are not available to be used to settle the obligations of TDS. The consolidated total liabilities as of
March 31, 2019
and
December 31, 2018
, include certain liabilities of consolidated VIEs of
$19 million
and
$21 million
, respectively, for which the creditors of the VIEs have no recourse to the general credit of TDS. See Note
9
—
Variable Interest Entities
for additional information.
|
|
TDS Shareholders
|
|
|
|
|
||||||||||||||||||||||||||
|
Series A
Common and
Common
shares
|
|
Capital in
excess of
par value
|
|
Treasury
shares
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Retained
earnings
|
|
Total TDS
shareholders'
equity
|
|
Noncontrolling
interests
|
|
Total equity
|
||||||||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
December 31, 2018
|
$
|
1
|
|
|
$
|
2,432
|
|
|
$
|
(519
|
)
|
|
$
|
(10
|
)
|
|
$
|
2,656
|
|
|
$
|
4,560
|
|
|
$
|
733
|
|
|
$
|
5,293
|
|
Net income attributable to TDS shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
59
|
|
|
59
|
|
|
—
|
|
|
59
|
|
||||||||
Net income attributable to noncontrolling interests classified as equity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
||||||||
TDS Common and Series A Common share dividends ($0.165 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
(19
|
)
|
|
—
|
|
|
(19
|
)
|
||||||||
Dividend reinvestment plan
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(1
|
)
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||||
Incentive and compensation plans
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
(12
|
)
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||||||
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
3
|
|
|
9
|
|
||||||||
Stock-based compensation awards
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||||
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||||
March 31, 2019
|
$
|
1
|
|
|
$
|
2,442
|
|
|
$
|
(505
|
)
|
|
$
|
(10
|
)
|
|
$
|
2,683
|
|
|
$
|
4,611
|
|
|
$
|
746
|
|
|
$
|
5,357
|
|
|
TDS Shareholders
|
|
|
|
|
||||||||||||||||||||||||||
|
Series A
Common and
Common
shares
|
|
Capital in
excess of
par value
|
|
Treasury
shares
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Retained
earnings
|
|
Total TDS
shareholders'
equity
|
|
Noncontrolling
interests
|
|
Total equity
|
||||||||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
December 31, 2017
|
$
|
1
|
|
|
$
|
2,413
|
|
|
$
|
(669
|
)
|
|
$
|
(1
|
)
|
|
$
|
2,525
|
|
|
$
|
4,269
|
|
|
$
|
623
|
|
|
$
|
4,892
|
|
Cumulative effect of accounting changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
165
|
|
|
164
|
|
|
31
|
|
|
195
|
|
||||||||
Net income attributable to TDS shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
39
|
|
|
—
|
|
|
39
|
|
||||||||
Net income attributable to noncontrolling interests classified as equity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
||||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||||
TDS Common and Series A Common share dividends ($0.160 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
(18
|
)
|
|
—
|
|
|
(18
|
)
|
||||||||
Dividend reinvestment plan
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
(4
|
)
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||||
Incentive and compensation plans
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
(11
|
)
|
|
9
|
|
|
—
|
|
|
9
|
|
||||||||
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|
10
|
|
||||||||
Stock-based compensation awards
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||||||
March 31, 2018
|
$
|
1
|
|
|
$
|
2,421
|
|
|
$
|
(643
|
)
|
|
$
|
(3
|
)
|
|
$
|
2,696
|
|
|
$
|
4,472
|
|
|
$
|
667
|
|
|
$
|
5,139
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Cash and cash equivalents
|
$
|
959
|
|
|
$
|
921
|
|
Restricted cash included in Other current assets
|
7
|
|
|
6
|
|
||
Cash, cash equivalents and restricted cash in the statement of cash flows
|
$
|
966
|
|
|
$
|
927
|
|
|
|
|
TDS Telecom
|
|
|
|
|
||||||||||||||||
Three Months Ended March 31, 2019
|
U.S. Cellular
|
|
Wireline
|
|
Cable
|
|
TDS Telecom Total
1
|
|
Corporate, Eliminations and Other
|
|
Total
|
||||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Revenues from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Type of service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Retail service
|
$
|
659
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
659
|
|
Inbound roaming
|
34
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
||||||
Residential
|
—
|
|
|
81
|
|
|
49
|
|
|
131
|
|
|
—
|
|
|
131
|
|
||||||
Commercial
|
—
|
|
|
43
|
|
|
10
|
|
|
54
|
|
|
—
|
|
|
54
|
|
||||||
Wholesale
|
—
|
|
|
45
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
45
|
|
||||||
Other service
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
50
|
|
||||||
Service revenues from contracts with customers
|
725
|
|
|
170
|
|
|
60
|
|
|
229
|
|
|
18
|
|
|
973
|
|
||||||
Equipment and product sales
|
225
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
262
|
|
||||||
Total revenues from contracts with customers
2
|
$
|
950
|
|
|
$
|
170
|
|
|
$
|
60
|
|
|
$
|
230
|
|
|
$
|
55
|
|
|
$
|
1,235
|
|
|
|
|
TDS Telecom
|
|
|
|
|
||||||||||||||||
Three Months Ended March 31, 2018
|
U.S. Cellular
|
|
Wireline
|
|
Cable
|
|
TDS Telecom Total
1
|
|
Corporate, Eliminations and Other
|
|
Total
|
||||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Revenues from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Type of service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Retail service
|
$
|
649
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
649
|
|
Inbound roaming
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
||||||
Residential
|
—
|
|
|
80
|
|
|
46
|
|
|
126
|
|
|
—
|
|
|
126
|
|
||||||
Commercial
|
—
|
|
|
48
|
|
|
10
|
|
|
57
|
|
|
—
|
|
|
57
|
|
||||||
Wholesale
|
—
|
|
|
47
|
|
|
—
|
|
|
47
|
|
|
—
|
|
|
47
|
|
||||||
Other service
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
50
|
|
||||||
Service revenues from contracts with customers
|
708
|
|
|
175
|
|
|
55
|
|
|
230
|
|
|
18
|
|
|
956
|
|
||||||
Equipment and product sales
|
218
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
247
|
|
||||||
Total revenues from contracts with customers
2
|
$
|
926
|
|
|
$
|
175
|
|
|
$
|
55
|
|
|
$
|
230
|
|
|
$
|
47
|
|
|
$
|
1,203
|
|
1
|
TDS Telecom Total includes eliminations between the Wireline and Cable segments.
|
2
|
Revenue line items in this table will not agree to amounts presented in the Consolidated Statement of Operations as the balances do not include all sources of revenues.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Accounts receivable
|
|
|
|
||||
Customer and agents
|
$
|
963
|
|
|
$
|
987
|
|
Other
|
71
|
|
|
73
|
|
||
Total
1
|
$
|
1,034
|
|
|
$
|
1,060
|
|
1
|
Accounts receivable line items presented in this table will not agree to amounts presented in the Consolidated Balance Sheet as certain receivables are excluded from these balances.
|
|
Contract Assets
|
||
(Dollars in millions)
|
|
||
Balance at December 31, 2018
|
$
|
11
|
|
Contract additions
|
5
|
|
|
Reclassified to receivables
|
(5
|
)
|
|
Balance at March 31, 2019
|
$
|
11
|
|
|
Contract Liabilities
|
||
(Dollars in millions)
|
|
||
Balance at December 31, 2018
|
$
|
203
|
|
Contract additions
|
79
|
|
|
Terminated contracts
|
(2
|
)
|
|
Revenue recognized
|
(70
|
)
|
|
Balance at March 31, 2019
|
$
|
210
|
|
|
Service Revenue
|
||
(Dollars in millions)
|
|
||
Remainder of 2019
|
$
|
335
|
|
2020
|
157
|
|
|
Thereafter
|
79
|
|
|
Total
|
$
|
571
|
|
|
Level within the Fair Value Hierarchy
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||
|
Book Value
|
|
Fair Value
|
|
Book Value
|
|
Fair Value
|
||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
1
|
|
$
|
959
|
|
|
$
|
959
|
|
|
$
|
921
|
|
|
$
|
921
|
|
Short-term investments
|
1
|
|
17
|
|
|
17
|
|
|
17
|
|
|
17
|
|
||||
Long-term debt
|
|
|
|
|
|
|
|
|
|
||||||||
Retail
|
2
|
|
1,753
|
|
|
1,768
|
|
|
1,753
|
|
|
1,596
|
|
||||
Institutional
|
2
|
|
534
|
|
|
585
|
|
|
534
|
|
|
531
|
|
||||
Other
|
2
|
|
179
|
|
|
179
|
|
|
182
|
|
|
182
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Equipment installment plan receivables, gross
|
$
|
975
|
|
|
$
|
974
|
|
Allowance for credit losses
|
(77
|
)
|
|
(77
|
)
|
||
Equipment installment plan receivables, net
|
$
|
898
|
|
|
$
|
897
|
|
|
|
|
|
||||
Net balance presented in the Consolidated Balance Sheet as:
|
|
|
|
||||
Accounts receivable — Customers and agents (Current portion)
|
$
|
571
|
|
|
$
|
560
|
|
Other assets and deferred charges (Non-current portion)
|
327
|
|
|
337
|
|
||
Equipment installment plan receivables, net
|
$
|
898
|
|
|
$
|
897
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Lower Risk
|
|
Higher Risk
|
|
Total
|
|
Lower Risk
|
|
Higher Risk
|
|
Total
|
||||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unbilled
|
$
|
901
|
|
|
$
|
13
|
|
|
$
|
914
|
|
|
$
|
904
|
|
|
$
|
17
|
|
|
$
|
921
|
|
Billed — current
|
41
|
|
|
1
|
|
|
42
|
|
|
35
|
|
|
1
|
|
|
36
|
|
||||||
Billed — past due
|
17
|
|
|
2
|
|
|
19
|
|
|
15
|
|
|
2
|
|
|
17
|
|
||||||
Equipment installment plan receivables, gross
|
$
|
959
|
|
|
$
|
16
|
|
|
$
|
975
|
|
|
$
|
954
|
|
|
$
|
20
|
|
|
$
|
974
|
|
|
March 31, 2019
|
|
March 31, 2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Allowance for credit losses, beginning of period
|
$
|
77
|
|
|
$
|
65
|
|
Bad debts expense
|
18
|
|
|
14
|
|
||
Write-offs, net of recoveries
|
(18
|
)
|
|
(13
|
)
|
||
Allowance for credit losses, end of period
|
$
|
77
|
|
|
$
|
66
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
(Dollars and shares in millions, except per share amounts)
|
|
|
|
|
|
||
Basic earnings per share attributable to TDS shareholders:
|
|
|
|
|
|
||
Net income attributable to TDS shareholders used in basic earnings per share
|
$
|
59
|
|
|
$
|
39
|
|
Adjustments to compute diluted earnings:
|
|
|
|
||||
Noncontrolling interest adjustment
|
(1
|
)
|
|
—
|
|
||
Net income attributable to TDS shareholders used in diluted earnings per share
|
$
|
58
|
|
|
$
|
39
|
|
|
|
|
|
||||
Weighted average number of shares used in basic earnings per share:
|
|
|
|
||||
Common Shares
|
107
|
|
|
104
|
|
||
Series A Common Shares
|
7
|
|
|
7
|
|
||
Total
|
114
|
|
|
111
|
|
||
|
|
|
|
||||
Effects of dilutive securities
|
2
|
|
|
2
|
|
||
Weighted average number of shares used in diluted earnings per share
|
116
|
|
|
113
|
|
||
|
|
|
|
||||
Basic earnings per share attributable to TDS shareholders
|
$
|
0.52
|
|
|
$
|
0.35
|
|
|
|
|
|
||||
Diluted earnings per share attributable to TDS shareholders
|
$
|
0.50
|
|
|
$
|
0.34
|
|
|
Licenses
|
||
(Dollars in millions)
|
|
||
Balance at December 31, 2018
|
$
|
2,195
|
|
Acquisitions
|
1
|
|
|
Exchanges - Licenses received
|
26
|
|
|
Balance at March 31, 2019
|
$
|
2,222
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
(Dollars in millions)
|
|
|
|
|
|
||
Equity method investments
|
$
|
485
|
|
|
$
|
459
|
|
Measurement alternative method investments
|
22
|
|
|
21
|
|
||
Total investments in unconsolidated entities
|
$
|
507
|
|
|
$
|
480
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
|
|
||
Revenues
|
$
|
1,696
|
|
|
$
|
1,663
|
|
Operating expenses
|
1,221
|
|
|
1,213
|
|
||
Operating income
|
475
|
|
|
450
|
|
||
Other income (expense), net
|
(6
|
)
|
|
(1
|
)
|
||
Net income
|
$
|
469
|
|
|
$
|
449
|
|
|
December 31, 2018
|
ASC 842 Adjustment
|
January 1, 2019
|
||||||
(Dollars in millions)
|
|
|
|
||||||
Prepaid expenses
|
$
|
103
|
|
$
|
(13
|
)
|
$
|
90
|
|
Operating lease right-of-use assets
|
—
|
|
975
|
|
975
|
|
|||
Other assets and deferred charges
|
616
|
|
(12
|
)
|
604
|
|
|||
Short-term operating lease liabilities
|
—
|
|
112
|
|
112
|
|
|||
Other current liabilities
|
114
|
|
(8
|
)
|
106
|
|
|||
Long-term operating lease liabilities
|
—
|
|
949
|
|
949
|
|
|||
Other deferred liabilities and credits
|
541
|
|
(103
|
)
|
438
|
|
|
Three Months Ended
March 31, 2019 |
||
(Dollars in millions)
|
|
||
Operating lease cost
|
$
|
43
|
|
Variable lease cost
|
2
|
|
|
Total lease cost
|
$
|
45
|
|
|
Three Months Ended
March 31, 2019 |
||
(Dollars in millions)
|
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
41
|
|
ROU assets obtained in exchange for lease obligations:
|
|
||
Operating leases
|
$
|
25
|
|
Finance leases
|
7
|
|
|
March 31, 2019
|
||
(Dollars in millions)
|
|
||
Operating Leases
|
|
||
Operating lease right-of-use assets
|
$
|
965
|
|
|
|
||
Short-term operating lease liabilities
|
$
|
110
|
|
Long-term operating lease liabilities
|
929
|
|
|
Total operating lease liabilities
|
$
|
1,039
|
|
|
|
||
Finance Leases
|
|
|
|
Property, plant and equipment
|
$
|
17
|
|
Less: Accumulated depreciation and amortization
|
4
|
|
|
Property, plant and equipment, net
|
$
|
13
|
|
Current portion of long-term debt
|
$
|
1
|
|
Long-term debt, net
|
5
|
|
|
Total finance lease liabilities
|
$
|
6
|
|
|
March 31, 2019
|
|
Weighted Average Remaining Lease Term
|
|
|
Operating leases
|
12 years
|
|
Finance leases
|
22 years
|
|
|
|
|
Weighted Average Discount Rate
|
|
|
Operating leases
|
4.5
|
%
|
Finance leases
|
6.9
|
%
|
|
Operating Leases
|
|
Finance Leases
|
||||
(Dollars in millions)
|
|
|
|
||||
Remainder of 2019
|
$
|
118
|
|
|
$
|
1
|
|
2020
|
161
|
|
|
1
|
|
||
2021
|
144
|
|
|
—
|
|
||
2022
|
127
|
|
|
1
|
|
||
2023
|
111
|
|
|
—
|
|
||
Thereafter
|
764
|
|
|
14
|
|
||
Total lease payments
1
|
$
|
1,425
|
|
|
$
|
17
|
|
Less: Imputed interest
|
386
|
|
|
11
|
|
||
Present value of lease liabilities
|
$
|
1,039
|
|
|
$
|
6
|
|
1
|
Lease payments exclude
$11 million
of legally binding lease payments for leases signed but not yet commenced.
|
|
Three Months Ended
March 31, 2019 |
||
(Dollars in millions)
|
|
||
Operating lease income
|
$
|
22
|
|
|
Operating Leases
|
||
(Dollars in millions)
|
|
||
Remainder of 2019
|
$
|
57
|
|
2020
|
70
|
|
|
2021
|
37
|
|
|
2022
|
25
|
|
|
2023
|
13
|
|
|
Thereafter
|
10
|
|
|
Total future lease maturities
|
$
|
212
|
|
|
Operating Leases Future Minimum Rental Payments
|
|
Operating Leases Future Minimum Rental Receipts
|
||||
(Dollars in millions)
|
|
|
|
||||
2019
|
$
|
170
|
|
|
$
|
59
|
|
2020
|
158
|
|
|
48
|
|
||
2021
|
142
|
|
|
35
|
|
||
2022
|
126
|
|
|
23
|
|
||
2023
|
110
|
|
|
10
|
|
||
Thereafter
|
784
|
|
|
7
|
|
||
Total
|
$
|
1,490
|
|
|
$
|
182
|
|
▪
|
Advantage Spectrum, L.P. (Advantage Spectrum) and Sunshine Spectrum, Inc., the general partner of Advantage Spectrum; and
|
▪
|
King Street Wireless, L.P. (King Street Wireless) and King Street Wireless, Inc., the general partner of King Street Wireless.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
8
|
|
|
$
|
9
|
|
Short-term investments
|
17
|
|
|
17
|
|
||
Accounts receivable
|
617
|
|
|
609
|
|
||
Inventory, net
|
4
|
|
|
5
|
|
||
Other current assets
|
5
|
|
|
5
|
|
||
Licenses
|
647
|
|
|
647
|
|
||
Property, plant and equipment, net
|
85
|
|
|
88
|
|
||
Operating lease right-of-use assets
|
37
|
|
|
—
|
|
||
Other assets and deferred charges
|
338
|
|
|
347
|
|
||
Total assets
|
$
|
1,758
|
|
|
$
|
1,727
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Current liabilities
|
$
|
34
|
|
|
$
|
31
|
|
Long-term operating lease liabilities
|
34
|
|
|
—
|
|
||
Deferred liabilities and credits
|
12
|
|
|
15
|
|
||
Total liabilities
|
$
|
80
|
|
|
$
|
46
|
|
Three Months Ended March 31,
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Net income attributable to TDS shareholders
|
$
|
59
|
|
|
$
|
39
|
|
Transfers to noncontrolling interests
|
|
|
|
||||
Change in TDS' Capital in excess of par value from U.S. Cellular's issuance of U.S. Cellular shares
|
(2
|
)
|
|
(2
|
)
|
||
Change in TDS' Capital in excess of par value from U.S. Cellular's repurchases of U.S. Cellular shares
|
—
|
|
|
—
|
|
||
Purchase of ownership in subsidiaries from noncontrolling interests
|
—
|
|
|
—
|
|
||
Net transfers to noncontrolling interests
|
(2
|
)
|
|
(2
|
)
|
||
Change from net income attributable to TDS and transfers to noncontrolling interests
|
$
|
57
|
|
|
$
|
37
|
|
|
|
|
TDS Telecom
|
|
|
|
|
||||||||||||||||
Three Months Ended or as of March 31, 2019
|
U.S. Cellular
|
|
Wireline
|
|
Cable
|
|
TDS Telecom Total
1
|
|
Corporate, Eliminations and Other
|
|
Total
|
||||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service
|
$
|
741
|
|
|
$
|
170
|
|
|
$
|
60
|
|
|
$
|
230
|
|
|
$
|
24
|
|
|
$
|
995
|
|
Equipment and product sales
|
225
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
262
|
|
||||||
Total operating revenues
|
966
|
|
|
171
|
|
|
60
|
|
|
230
|
|
|
61
|
|
|
1,257
|
|
||||||
Cost of services (excluding Depreciation, amortization and accretion reported below)
|
176
|
|
|
63
|
|
|
26
|
|
|
88
|
|
|
20
|
|
|
284
|
|
||||||
Cost of equipment and products
|
233
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
264
|
|
||||||
Selling, general and administrative
|
326
|
|
|
47
|
|
|
14
|
|
|
61
|
|
|
10
|
|
|
397
|
|
||||||
Depreciation, amortization and accretion
|
169
|
|
|
34
|
|
|
17
|
|
|
50
|
|
|
8
|
|
|
227
|
|
||||||
(Gain) loss on asset disposals, net
|
2
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(5
|
)
|
||||||
(Gain) loss sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Operating income (loss)
|
64
|
|
|
34
|
|
|
2
|
|
|
37
|
|
|
(7
|
)
|
|
94
|
|
||||||
Equity in earnings of unconsolidated entities
|
44
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
||||||
Interest and dividend income
|
6
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
9
|
|
||||||
Interest expense
|
(29
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(43
|
)
|
||||||
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Income (loss) before income taxes
|
85
|
|
|
38
|
|
|
3
|
|
|
40
|
|
|
(21
|
)
|
|
104
|
|
||||||
Income tax expense (benefit)
2
|
27
|
|
|
|
|
|
|
|
|
10
|
|
|
(3
|
)
|
|
34
|
|
||||||
Net income (loss)
|
58
|
|
|
|
|
|
|
|
|
31
|
|
|
(19
|
)
|
|
70
|
|
||||||
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Depreciation, amortization and accretion
|
169
|
|
|
34
|
|
|
17
|
|
|
50
|
|
|
8
|
|
|
227
|
|
||||||
(Gain) loss on asset disposals, net
|
2
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(5
|
)
|
||||||
(Gain) loss sale of business and other exit costs, net
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
(Gain) loss on license sales and exchanges, net
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Interest expense
|
29
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
14
|
|
|
43
|
|
||||||
Income tax expense (benefit)
2
|
27
|
|
|
|
|
|
|
|
|
10
|
|
|
(3
|
)
|
|
34
|
|
||||||
Adjusted EBITDA
3
|
$
|
281
|
|
|
$
|
63
|
|
|
$
|
20
|
|
|
$
|
83
|
|
|
$
|
1
|
|
|
$
|
365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Investments in unconsolidated entities
|
$
|
468
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
35
|
|
|
$
|
507
|
|
Total assets
|
$
|
8,229
|
|
|
$
|
1,353
|
|
|
$
|
641
|
|
|
$
|
1,986
|
|
|
$
|
572
|
|
|
$
|
10,787
|
|
Capital expenditures
|
$
|
102
|
|
|
$
|
29
|
|
|
$
|
13
|
|
|
$
|
42
|
|
|
$
|
3
|
|
|
$
|
147
|
|
|
|
|
TDS Telecom
|
|
|
|
|
||||||||||||||||
Three Months Ended or as of March 31, 2018
|
U.S. Cellular
|
|
Wireline
|
|
Cable
|
|
TDS Telecom Total
1
|
|
Corporate, Eliminations and Other
|
|
Total
|
||||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service
|
$
|
724
|
|
|
$
|
175
|
|
|
$
|
55
|
|
|
$
|
230
|
|
|
$
|
24
|
|
|
$
|
978
|
|
Equipment and product sales
|
218
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
247
|
|
||||||
Total operating revenues
|
942
|
|
|
175
|
|
|
55
|
|
|
231
|
|
|
52
|
|
|
1,225
|
|
||||||
Cost of services (excluding Depreciation, amortization and accretion reported below)
|
179
|
|
|
65
|
|
|
26
|
|
|
90
|
|
|
19
|
|
|
288
|
|
||||||
Cost of equipment and products
|
219
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
246
|
|
||||||
Selling, general and administrative
|
326
|
|
|
47
|
|
|
13
|
|
|
60
|
|
|
9
|
|
|
395
|
|
||||||
Depreciation, amortization and accretion
|
159
|
|
|
37
|
|
|
17
|
|
|
54
|
|
|
8
|
|
|
221
|
|
||||||
(Gain) loss on asset disposals, net
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
||||||
(Gain) loss on license sales and exchanges, net
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
||||||
Operating income (loss)
|
65
|
|
|
26
|
|
|
(1
|
)
|
|
25
|
|
|
(10
|
)
|
|
80
|
|
||||||
Equity in earnings of unconsolidated entities
|
38
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
||||||
Interest and dividend income
|
4
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
5
|
|
||||||
Interest expense
|
(29
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(43
|
)
|
||||||
Other, net
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||||
Income (loss) before income taxes
|
77
|
|
|
28
|
|
|
(1
|
)
|
|
27
|
|
|
(23
|
)
|
|
81
|
|
||||||
Income tax expense (benefit)
2
|
22
|
|
|
|
|
|
|
|
|
6
|
|
|
(4
|
)
|
|
24
|
|
||||||
Net income (loss)
|
55
|
|
|
|
|
|
|
|
|
21
|
|
|
(19
|
)
|
|
57
|
|
||||||
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Depreciation, amortization and accretion
|
159
|
|
|
37
|
|
|
17
|
|
|
54
|
|
|
8
|
|
|
221
|
|
||||||
(Gain) loss on asset disposals, net
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
||||||
(Gain) loss on license sales and exchanges, net
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
||||||
Interest expense
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
43
|
|
||||||
Income tax expense (benefit)
2
|
22
|
|
|
|
|
|
|
|
|
6
|
|
|
(4
|
)
|
|
24
|
|
||||||
Adjusted EBITDA
3
|
$
|
259
|
|
|
$
|
65
|
|
|
$
|
16
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investments in unconsolidated entities
|
$
|
450
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
34
|
|
|
$
|
488
|
|
Total assets
|
$
|
7,048
|
|
|
$
|
1,264
|
|
|
$
|
644
|
|
|
$
|
1,901
|
|
|
$
|
532
|
|
|
$
|
9,481
|
|
Capital expenditures
|
$
|
70
|
|
|
$
|
29
|
|
|
$
|
11
|
|
|
$
|
40
|
|
|
$
|
5
|
|
|
$
|
115
|
|
1
|
TDS Telecom Total includes eliminations between the Wireline and Cable segments.
|
2
|
Income tax expense (benefit) is not provided at the individual segment level for Wireline and Cable. TDS calculates income tax expense for “TDS Telecom Total”.
|
3
|
Adjusted earnings before interest, taxes, depreciation, amortization and accretion (Adjusted EBITDA) is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation above. TDS believes Adjusted EBITDA is a useful measure 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.
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Exhibit Number
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Description of Documents
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Exhibit 4.1
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Exhibit 10.1
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Exhibit 10.2
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Exhibit 10.3
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Exhibit 31.1
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Exhibit 31.2
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Exhibit 32.1
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Exhibit 32.2
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Exhibit 101.INS
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XBRL Instance Document
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Exhibit 101.SCH
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XBRL Taxonomy Extension Schema Document
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Exhibit 101.PRE
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XBRL Taxonomy Presentation Linkbase Document
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Exhibit 101.CAL
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XBRL Taxonomy Calculation Linkbase Document
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Exhibit 101.LAB
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XBRL Taxonomy Label Linkbase Document
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Exhibit 101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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Item Number
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Page No.
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Part I.
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Financial Information
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Part II.
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Other Information
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TELEPHONE AND DATA SYSTEMS, INC.
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(Registrant)
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Date:
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May 2, 2019
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/s/ LeRoy T. Carlson, Jr.
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LeRoy T. Carlson, Jr.
President and Chief Executive Officer
(principal executive officer)
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Date:
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May 2, 2019
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/s/ Douglas W. Chambers
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Douglas W. Chambers
Senior Vice President - Finance and Chief Accounting Officer
(principal financial officer and principal accounting officer)
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Date:
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May 2, 2019
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/s/ Anita J. Kroll
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Anita J. Kroll
Vice President and Controller
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1.
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I have reviewed this quarterly report on Form 10-Q of Telephone and Data Systems, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ LeRoy T. Carlson, Jr.
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LeRoy T. Carlson, Jr.
President and Chief Executive Officer
(principal executive officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of Telephone and Data Systems, Inc.;
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2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Douglas W. Chambers
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Douglas W. Chambers
Senior Vice President - Finance and Chief Accounting Officer
(principal financial officer and principal accounting officer)
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/s/ LeRoy T. Carlson, Jr.
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LeRoy T. Carlson, Jr.
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May 2, 2019
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/s/ Douglas W. Chambers
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Douglas W. Chambers
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May 2, 2019
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