TELEPHONE AND DATA SYSTEMS REPORTS THIRD QUARTER RESULTS
CHICAGO, Nov. 12 /PRNewswire/ -- Telephone and Data Systems, Inc. (AMEX: TDS) reported excellent growth in customers served, revenues and operating cash flow for the third quarter and first nine months of 1991. Consolidated cellular telephones in service jumped 74.9 percent, pagers in service increased 21.7 percent and telephone access lines grew 6.6 percent from Sept. 30, 1990. The rapid growth in customers generated robust growth in operating revenues of 23.9 percent and 19.9 percent for the third quarter and first nine months, respectively, of 1991 over 1990. Operating income, net income and earnings per share before the cumulative effect of a change in accounting principle all decreased from the same periods in 1990.
Growth in cellular market development and expansion costs and higher marketing costs outpaced growth in revenues. As a result, the company reported decreases in operating income (10.0 percent), net income (10.1 percent) and earnings per share (19.0 percent) for the third quarter of 1991 compared to the same period in 1990. Similarly, nine-month results show declines in operating income (7.0 percent), net income before the cumulative effect of a change in accounting principle (4.4 percent) and earnings per share before the cumulative effect of a change in accounting principle (10.3 percent) from 1990 levels.
CONSOLIDATED THIRD QUARTER RESULTS
Consolidated revenues increased 23.9 percent to $92.7 million for the third quarter of 1991 from $74.8 million in 1990. Operating income declined 10.0 percent to $11.4 million from $12.7 million in the same period of 1990. Interest expense increased 28.6 percent to $7.7 million in 1991 from $6.0 million in 1990 due to increases in long-term debt and in the average balance of notes payable during the third quarter of 1991 compared with the same period in 1990. Net income available to common declined 10.2 percent to $5.8 million in 1991 from $6.4 million in 1990. Operating results, combined with a 12.8 percent increase in the number of weighted average common shares outstanding, resulted in a 19.0 percent decline in earnings per share to $.17 in 1991 from $.21 in 1990.
CONSOLIDATED NINE MONTHS RESULTS
Results for the nine months ended Sept. 30, 1991, show a 19.9 percent increase in revenues to $256.3 million from $213.8 million in 1990. Operating income declined 7.0 percent to $32.6 million from $35.1 million in 1990. Telephone operating income continued its steady growth, increasing 5.4 percent. Cellular operating loss, reflecting the costs of starting up additional rural service area ("RSA") systems, increased 64.6 percent while the paging operating loss increased 26.8 percent. Interest expense increased 27.3 percent to $21.2 million in 1991 from $16.7 million in 1990 due to increases in long-term debt and in the average balance of notes payable in 1991. Net income before the cumulative effect of a change in accounting principle was $17.8 million in 1991 compared to $18.6 million in 1990. Earnings per common share before the cumulative effect of a change in accounting principle were $.52 in 1991 compared to $.58 in 1990, reflecting results of operations and a 7.9 percent increase in weighted average common shares outstanding. Cash flow from operations remained strong, increasing 8.4 percent to $83.6 million from $77.1 million in 1990.
Net income and earnings per share for the nine months ended Sept. 30, 1991 were reduced by $5.0 million and $.15 respectively by a change in accounting principle. United States Cellular Corp. changed its method of accounting for sales commissions from capitalizing and amortizing over 36 months to expensing in the period incurred. In addition, two of United States Cellular's equity-method investees made a similar accounting change during 1991. The $.15 reduction in earnings per share reflects the effect of the change on years prior to 1991. Operating results for the nine months and third quarter of 1991 reflect the new accounting principle.
LeRoy T. Carlson Jr., president, commented, "Results of operations continue to reflect our emphasis on rapidly growing high quality telecommunications businesses. We expect the number of customers served, revenues and costs to increase significantly as USM continues its initial RSA construction and development activities. These activities may also depress operating and net income and earnings per share for the next few quarters."
TDS Telecommunications Corp. ("TDS Telecom") added six telephone companies representing over 9,700 access lines during the first nine months of 1991. Currently TDS Telecom serves 295,400 access lines in 27 states. With the completion of three pending acquisitions, TDS Telecom will serve 303,000 access lines in 28 states. Carlson remarked, "One of our primary objectives is to bring high quality telephone services to rural America. We are fortunate to have been invited into several new communities this year and will continue to look for similar opportunities."
Telephone operating revenues for the nine months continued their steady growth, increasing 9.4 percent to $155.2 million in 1991 from $141.9 million in 1990. The increase in telephone revenues is primarily due to increased recovery of costs and investment, acquisitions, changes in cost separations rules mandated by the Federal Communications Commission, increased usage of the network and internal access line growth. Telephone revenues comprised 60.5 percent of consolidated revenues at Sept. 30, 1991. Telephone operating income increased 5.4 percent to $47.7 million versus $45.3 million in 1990, while the operating margin fell slightly to 30.7 percent from 31.9 percent in 1990.
United States Cellular Corp. (AMEX: USM) TDS' 81.7-percent owned subsidiary accelerated its growth in markets and customers by initiating service to an additional 19 consolidated RSAs since Sept. 30, 1990. At Sept. 30, 1991 USM served 85,200 consolidated cellular customers in 28 metropolitan statistical areas (MSAs) and 22 RSAs.
This compares to 48,700 cellular customers served in 25 MSAs and three RSAs at Sept. 30, 1990. Carlson commented, "Vigorous growth in markets, customers served and revenues at our cellular business unit through the first nine months of 1991 highlights the tremendous market potential we have begun to realize. We are confident that our growth strategy is being implemented successfully during a very demanding period of expansion."
Subsequent to Sept. 30, 1991, USM reported it had agreed to a strategic trade of cellular interests with Centel Corp. USM will receive controlling interests in two MSAs and an additional interest in a third MSA in exchange for minority interests in two MSAs and controlling interests in two RSAs. Including the exchange, USM and TDS own or have the right to acquire interests in cellular telephone systems in 74 MSAs and 99 RSAs representing 17.5 million population equivalents.
USM's revenues totaled $69.3 million, a 56.1 percent increase over $44.4 million reported in 1990, and represented 27.0 percent of consolidated revenues for the nine months ended Sept. 30, 1991. Service operating loss increased 27.0 percent to $5.3 million in 1991 from $4.2 million in 1990, primarily reflecting costs incurred to expand into new RSAs. Service operating margin improved to (8.2 percent) from (10.7 percent) in 1990. Operating cash flow totaled almost $2.7 million for the first nine months of 1991 compared to a 1990 operating cash requirement of $1.8 million (stated on a basis consistent with 1991). Loss from equipment sales was $4.0 million in 1991 compared to $1.5 million in 1990, as USM continued to discount equipment prices as part of a program aimed at increasing subscribers and service revenues.
American Paging Inc. ("API") served 234,100 pagers through 25 systems at Sept. 30, 1991, an increase of 21.7 percent in pagers served since Sept. 30, 1990. Paging revenues increased 15.7 percent to $31.8 million in the first nine month of 1991 from $27.5 million in 1990, and now comprise 12.5 percent of consolidated TDS revenues. API's operating loss for the first nine months of 1991 increased 26.8 percent to $5.7 million, compared to $4.5 million in 1990. A continued decline in the average revenue per pager due to price competition in certain markets offset approximately 38 percent of the revenue gains from the increase in the number of units served. API's operating loss was also increased by additional costs incurred to serve the growth customer base, by improvements made to paging system signal quality and coverage and by costs related to a strategic exchange of customers. In the first quarter of 1991, API exchanged all of its customers in five markets for a similar number of additional customers in its Tampa and Orlando markets. As part of improving the quality of its systems, API recently initiated service in its satellite-controlled statewide paging system in Florida.
TDS is a Chicago-based telecommunications company with established local telephone operations and developing cellular telephone and radio paging operations. TDS builds value for its shareholders by providing excellent telecommunications services in attractive, closely related segments of the telecommunications industry.
/CONTACT: Murray Swanson, executive vice president-finance of TDS, 312-630-1900, out of town media call collect/
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(TDS) CO: Telephone and Data Systems, Inc. ST: Illinois IN: TLS SU: ERN JT -- NY080 -- 3605 11/12/91 16:20 EST