TELEPHONE AND DATA SYSTEMS, INC. CHICAGO, Aug. 1, 2014 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE: TDS) reported total operating revenues of $1,236.4 million for the second quarter of 2014, versus $1,228.2 million for the comparable period one year ago. Net income (loss) attributable to TDS shareholders and related diluted earnings (loss) per share were $(22.0) million and $(0.20) respectively, for the second quarter of 2014, compared to $156.1 million and $1.42, respectively, in the comparable period one year ago. Year-over-year comparisons are affected by U.S. Cellular's divestiture transaction and acquisitions at TDS Telecom, in 2013.
"Our businesses were productive in the second quarter. We're seeing positive results from strategic growth initiatives we've implemented over the last few years," said LeRoy T. Carlson, Jr., TDS president and CEO.
"U.S. Cellular generated strong gross customer additions and significantly reduced postpaid churn in the quarter, leading to net postpaid customer growth in June. Our high-quality 4G LTE network, competitive service plans, devices, pricing and our new equipment installment plans helped drive smartphone penetration to 55 percent, which increased data usage and helped us achieve higher average revenue per postpaid customer.
"TDS Telecom posted another solid quarter of earnings and revenue growth, fueled by residential TDS TV customer additions, broadband speed upgrades, and commercial managedIP connections, and by realizing significant cost reductions. We continue to be excited about the growth potential in our cable business. At Baja Broadband, we are working to improve our video offerings and increase broadband penetration. We also are focused on ensuring a smooth completion to our BendBroadband acquisition in the third quarter. In our hosted and managed services business, OneNeck IT Solutions, we increased revenues through growth in recurring services and through the effect of acquisitions."
2014 Estimated Results
Estimates of full-year 2014 results for U.S. Cellular, TDS Telecom and TDS are shown below. Such estimates represent management's view as of August 1, 2014. Such forward-looking statements should not be assumed to be current as of any future date. TDS undertakes no duty to update such information, whether as a result of new information, future events or otherwise. There can be no assurance that final results will not differ materially from such estimated results.
2014 Estimated Results
----------------------
U.S. Cellular TDS Telecom (1) TDS (1)(3)
------------- -------------- ---------
Current Previous Current Previous Current Previous
------- -------- ------- -------- ------- --------
(Dollars in
millions)
Total operating
revenues $3,900-$4,000 N/A $1,050-$1,100 Unchanged $4,970-$5,120 N/A
Adjusted income
before income
taxes (2) $350-$450 N/A $260-$290 $250-$280 $605-$735 N/A
Capital
expenditures $640 Unchanged $200 Unchanged $850 N/A
(1) These estimates do not reflect the
effects of the acquisition of
BendBroadband.
(2) Adjusted income before income taxes is
defined as income before income taxes,
adjusted for the items set forth in the
reconciliation below. Adjusted income
before income taxes excludes these
items in order to show operating
results on a more comparable basis from
period to period. From time to time,
TDS may exclude other items from
adjusted income before income taxes if
such items help reflect operating
results on a more comparable basis. TDS
does not intend to imply that any such
items that are excluded are non-
recurring, infrequent or unusual; such
items may occur in the future.
Adjusted income before income taxes is
not a measure of financial performance
under Generally Accepted Accounting
Principles in the United States
("GAAP") and should not be considered
as an alternative to income before
income taxes as an indicator of the
company's operating performance or as
an alternative to cash flows from
operating activities, determined in
accordance with GAAP, as an indicator
of cash flows or as a measure of
liquidity. TDS believes adjusted income
before income taxes is a useful measure
of TDS' operating results before
significant recurring non-cash
charges, discrete gains and losses, and
financing charges (interest expense).
The following tables provide a
reconciliation of income before income
taxes to adjusted income before income
taxes for 2014 estimated results, six
months ended June 30, 2014 actual
results, and year ended December 31,
2013 actual results:
2014 Estimated Results
----------------------
U.S. Cellular TDS Telecom (1) TDS (1)(3)
------------- -------------- ---------
(Dollars
in
millions)
Income
(loss)
before
income
taxes ($189)-($89) $35-$65 ($249)-($119)
Depreciation,
amortization
and
accretion $630 $225 $865
(Gain)
loss
on
sale
of
business
and
other
exit
costs,
net ($50) ? ($25)
(Gain)
loss
on
license
sales
and
exchanges ($91) ? ($91)
Interest
expense $50 ? $105
Adjusted
income
before
income
taxes $350-$450 $260-$290 $605-$735
========= ========= =========
Actual Results
--------------
Six months ended June 30, 2014 Year ended December 31, 2013
------------------------------ ----------------------------
U.S. Cellular TDS TDS (3) U.S. Cellular TDS TDS (3)
Telecom Telecom
------- -------
(Dollars in millions)
Income (loss)
before income
taxes $1 $39 ($7) $258 $49 $293
Depreciation,
amortization and $316 $107 $429 $804 $203 $1,018
accretion expense
(Gain) loss on
sale of business
and other exit
costs, net ($17) - ($4) ($247) - ($301)
(Gain) loss on
license sales and
exchanges ($91) - ($91) ($255) - ($255)
(Gain) loss on
investments - - - ($19) ($1) ($15)
Interest expense $29 ($1) $56 $44 ($2) $99
--- --- --- --- --- ---
Adjusted income
before income
taxes $238 $145 $383 $585 $249 $839
==== ==== ==== ==== ==== ====
(3) The TDS column includes U.S.
Cellular, TDS Telecom and also
the impacts of consolidating
eliminations, corporate
operations and non-reportable
segments, all of which are not
presented above.
Stock Repurchase Summary
TDS began repurchasing stock under its $250 million repurchase authorization on Aug. 5, 2013. The following represents repurchases of TDS Common Shares.
Repurchase Period # Shares Cost (in
millions)
----------------- -------- ---------
2014 (second quarter) 650,628 $17.3
2014 (first quarter) 157,891 $3.8
2013 (full year) 338,851 $9.7
------- ----
Total 1,147,370 $30.8
========= =====
Conference Call Information
TDS will hold a conference call on Aug. 1, 2014 at 9:30 a.m. CDT.
-- Access the live call on the Events & Presentations page of
investors.teldta.com or at www.videonewswire.com/event.asp?id=100144.
-- Access the call by phone at 877-407-8029 (US/Canada), no pass code
required.
Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.teldta.com. The call will be archived on the Events & Presentations page of investors.teldta.com.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 1000® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 5.8 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions and Baja Broadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,100 people as of June 30, 2014.
Visit www.teldta.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: impacts of any pending acquisition and divestiture transactions, 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 overall economy; competition; 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 afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; 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 products and services 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 ("SEC"), which are incorporated by reference herein.
For more information about TDS and its subsidiaries, visit:
TDS: www.teldta.com
U.S. Cellular: www.uscellular.com
TDS Telecom: www.tdstelecom.com
OneNeck IT Solutions: www.oneneck.com
United States Cellular Corporation
Total Markets* Summary Operating Data (Unaudited)
As of or for the Quarter Ended 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
------------------------------ --------- --------- ---------- --------- ---------
Retail Customers
Postpaid
Total at end of period 4,148,000 4,174,000 4,267,000 4,343,000 4,412,000
Gross additions 190,000 197,000 176,000 165,000 165,000
Net additions (losses) (26,000) (93,000) (71,000) (60,000) (120,000)
ARPU (1) $56.82 $57.59 $53.53 $54.64 $54.18
Churn rate (2) 1.7% 2.3% 1.9% 1.7% 2.0%
Smartphone penetration (3) 55.3% 53.1% 50.8% 47.1% 45.5%
Prepaid
Total at end of period 352,000 356,000 343,000 370,000 381,000
Gross additions 65,000 85,000 63,000 65,000 77,000
Net additions (losses) (4,000) 13,000 (26,000) (11,000) (7,000)
ARPU (1) $34.02 $32.22 $31.66 $28.72 $31.69
Churn rate (2) 6.5% 6.9% 8.3% 6.8% 6.8%
Total customers at end of period 4,653,000 4,684,000 4,774,000 4,875,000 4,968,000
Billed ARPU (1) $53.36 $53.93 $50.25 $50.92 $50.60
Service revenue ARPU (1) $60.32 $60.19 $57.05 $58.36 $57.45
Smartphones sold as a percent of total 72.6% 73.0% 79.6% 65.2% 66.0%
devices sold
Total population
Consolidated markets (4) 54,817,000 54,817,000 58,013,000 84,025,000 84,025,000
Consolidated operating markets
(4) 31,729,000 31,729,000 31,759,000 31,822,000 31,822,000
Market penetration at end of period
Consolidated markets (5) 8.5% 8.5% 8.2% 5.8% 5.9%
Consolidated operating markets
(5) 14.7% 14.8% 15.0% 15.3% 15.6%
Capital expenditures (000s) $143,927 $89,581 $208,135 $242,459 $168,497
Total cell sites in service 6,183 6,165 6,975 7,687 7,748
Owned towers 4,457 4,448 4,448 4,422 4,411
* Represents U.S. Cellular's consolidated
markets. These results include markets
which U. S. Cellular currently
consolidates, or previously consolidated
in the periods presented, and are not
adjusted in prior periods for subsequent
divestitures or deconsolidations.
Refer to U.S. Cellular's Form 8-K filed
on August 2, 2013 for pro forma
financial information related to the
Divestiture Transaction and the NY1 and
NY2 Deconsolidation for the three and
six months ended June 30, 2013, as if
the transactions had occurred at the
beginning of the period.
United States Cellular Corporation
Core* Markets Summary Operating Data (Unaudited)
As of or for the Quarter Ended 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
------------------------------ --------- --------- ---------- --------- ---------
Retail Customers
Postpaid
Total at end of period 4,148,000 4,174,000 4,267,000 4,343,000 4,412,000
Gross additions 190,000 197,000 176,000 165,000 165,000
Net additions (losses) (26,000) (93,000) (71,000) (60,000) (53,000)
ARPU (1) $56.82 $57.59 $53.53 $54.64 $54.44
Churn rate (2) 1.7% 2.3% 1.9% 1.7% 1.6%
Smartphone penetration (3) 55.3% 53.1% 50.8% 47.1% 45.5%
Prepaid
Total at end of period 352,000 356,000 343,000 370,000 381,000
Gross additions 65,000 85,000 63,000 65,000 76,000
Net additions (losses) (4,000) 13,000 (26,000) (11,000) 8,000
ARPU (1) $34.02 $32.22 $31.66 $28.72 $31.65
Churn rate (2) 6.5% 6.9% 8.3% 6.8% 6.0%
Total customers at end of period 4,653,000 4,684,000 4,774,000 4,875,000 4,968,000
Billed ARPU (1) $53.36 $53.93 $50.25 $50.92 $50.98
Service revenue ARPU (1) $60.32 $60.19 $57.05 $58.36 $57.88
Smartphones sold as a percent of total 72.6% 73.0% 79.6% 65.2% 66.1%
devices sold
Total population
Consolidated markets (4) 54,817,000 54,817,000 58,013,000 84,025,000 84,025,000
Consolidated operating markets
(4) 31,729,000 31,729,000 31,759,000 31,822,000 31,822,000
Market penetration at end of period
Consolidated markets (5) 8.5% 8.5% 8.2% 5.8% 5.9%
Consolidated operating markets
(5) 14.7% 14.8% 15.0% 15.3% 15.6%
Capital expenditures (000s) $143,927 $89,581 $211,247 $239,332 $171,166
Total cell sites in service 6,183 6,165 6,161 6,127 6,113
Owned towers 3,892 3,883 3,883 3,857 3,846
* U.S. Cellular's Core Markets excludes
the results of the Divestiture Markets
and NY1 and NY2 Partnerships for the
periods presented.
Refer to U.S. Cellular's Form 8-K filed
on August 2, 2013 for pro forma
financial information related to the
Divestiture Transaction and the NY1
and NY2 Deconsolidation for the three
and six months ended June 30, 2013, as
if the transactions had occurred at
the beginning of the period.
(1) ARPU metrics are calculated by dividing
a revenue base by an average number of
customers by the number of months in
the period. These revenue bases and
customer populations are shown below:
a. Postpaid ARPU consists of total
postpaid service revenues and postpaid
customers.
b. Prepaid ARPU consists of total
prepaid service revenues and prepaid
customers.
c. Billed ARPU consists of total
retail service or "billed" revenues
(total postpaid, prepaid and reseller
service revenues) and postpaid,
prepaid and reseller customers.
d. Service revenue ARPU consists
of total retail service revenues,
inbound roaming and other service
revenues and postpaid, prepaid and
reseller customers.
(2) Churn metrics represent the percentage
of the postpaid or prepaid customers
that disconnect service each month.
These metrics represent the average
monthly postpaid or prepaid churn rate
for each respective period.
(3) Smartphones represent wireless devices
which run on an Android, Apple,
BlackBerry or Windows Mobile operating
system, excluding tablets. Smartphone
penetration is calculated by dividing
postpaid smartphone customers by total
postpaid customers.
(4) The decrease in the population of
Consolidated markets is due primarily
to the divestiture of the Mississippi
Valley non-operating license in
October 2013 and the majority of the
St. Louis area non-operating market
license in March 2014. Total
Population is used only to calculate
market penetration of consolidated
markets and consolidated operating
markets, respectively. See footnote
(5) below.
(5) Market penetration is calculated by
dividing the number of wireless
customers at the end of the period by
the total population of consolidated
markets and consolidated operating
markets, respectively, as estimated by
Claritas. The increase in penetration
is due primarily to a lower
denominator as a result of the license
divestitures described in footnote (4)
above.
TDS Telecom
Summary Operating Data (Unaudited)
Quarter Ended 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
--------- --------- ---------- --------- ---------
TDS Telecom
Wireline
--------
Residential
connections
Voice (1) 346,100 348,700 352,100 358,100 364,100
Broadband (2) 232,700 229,000 227,000 229,500 231,700
IPTV (3) 18,200 15,900 13,800 12,200 10,500
------ ------ ------ ------ ------
Wireline residential
connections 597,000 593,600 592,900 599,800 606,300
======= ======= ======= ======= =======
Total
residential
revenue per
connection (4) $41.05 $40.79 $40.93 $41.12 $40.10
Commercial
connections
Voice (1) 206,200 212,200 218,400 223,800 229,100
Broadband (2) 26,000 26,600 27,100 27,600 28,200
managedIP (5) 133,300 131,000 127,600 121,000 112,000
------- ------- ------- ------- -------
Wireline commercial connections 365,500 369,800 373,100 372,400 369,300
======= ======= ======= ======= =======
Total Wireline
connections 962,500 963,400 966,000 972,200 975,600
======= ======= ======= ======= =======
Cable
-----
Cable
Connections
Video (6) 69,700 68,700 69,100 70,300
Broadband (7) 63,200 63,000 61,000 59,800
Voice (7) 17,800 17,700 17,200 16,800
------ ------ ------ ------
Cable connections 150,700 149,400 147,300 146,900
======= ======= ======= =======
Total
residential
revenue per
connection (4) $56.80 $57.37 $55.27 $55.67
(1) The individual circuit connecting
customers to TDS Telecom's central
office facilities.
(2) The number of customers provided high-
capacity data circuits via various
technologies, including DSL and
dedicated internet circuit
technologies.
(3) The number of customers provided video
services using IP networking
technology.
(4) Total residential revenue divided by
the average number of total
residential connections.
(5) The number of telephone handsets, data
lines and IP trunks providing
communications using IP networking
technology.
(6) 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.
(7) Broadband and voice connections
reflect billable number of lines into
a building for high speed data and
voice services, respectively.
TDS Telecom
Capital Expenditures (000s)
Quarter
Ended 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
--------- --------- ---------- --------- ---------
Wireline $27,400 $22,900 $46,000 $32,800 $33,300
Cable 7,200 6,200 7,000 1,400 -
HMS 10,600 2,800 9,200 2,400 2,300
------ ----- ----- ----- -----
$45,200 $31,900 $62,200 $36,600 $35,600
======= ======= ======= ======= =======
Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
Three Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Change
------
2014 2013 Amount Percent
---- ---- ------ -------
Operating revenues
U.S. Cellular $957,773 $995,130 $(37,357) (4%)
TDS Telecom 270,850 223,460 47,390 21%
All Other (1) 7,769 9,576 (1,807) (19%)
1,236,392 1,228,166 8,226 1%
--------- --------- -----
Operating expenses
U.S. Cellular
Expenses
excluding
depreciation,
amortization
and accretion 863,361 813,464 49,897 6%
Depreciation,
amortization
and accretion 148,337 202,580 (54,243) (27%)
(Gain) loss on
asset
disposals, net 6,893 9,018 (2,125) (24%)
(Gain) loss on
sale of
business and
other exit
costs, net (10,511) (249,024) 238,513 96%
------- -------- -------
1,008,080 776,038 232,042 30%
--------- ------- -------
TDS Telecom
Expenses
excluding
depreciation,
amortization
and accretion 197,427 162,954 34,473 21%
Depreciation,
amortization
and accretion 53,175 48,756 4,419 9%
(Gain) loss on
asset
disposals, net 983 (682) 1,665 >(100%)
--- ---- -----
251,585 211,028 40,557 19%
------- ------- ------
All Other (1)(2)
Expenses
excluding
depreciation
and
amortization 9,613 10,033 (420) (4%)
Depreciation
and
amortization 3,055 2,867 188 7%
(Gain) loss on
asset
disposals, net 27 (17) 44 >(100%)
(Gain) loss on
sale of
business and
other exit
costs, net 13,122 (54,010) 67,132 >(100%)
------ ------- ------
25,817 (41,127) 66,944 >(100%)
------ ------- ------
Total operating expenses 1,285,482 945,939 339,543 36%
--------- ------- -------
Operating income (loss)
U.S. Cellular (50,307) 219,092 (269,399) >(100%)
TDS Telecom 19,265 12,432 6,833 55%
All Other (1)(2) (18,048) 50,703 (68,751) >(100%)
(49,090) 282,227 (331,317) >(100%)
------- ------- --------
Investment and other income (expense)
Equity in earnings
of unconsolidated
entities 34,790 35,605 (815) (2%)
Interest and
dividend income 2,751 2,600 151 6%
Gain (loss) on
investments - 14,518 (14,518) N/M
Interest expense (27,898) (23,749) (4,149) (17%)
Other, net 50 (197) 247 >(100%)
Total
investment and
other income 9,693 28,777 (19,084) (66%)
----- ------ -------
Income (loss) before income taxes (39,397) 311,004 (350,401) >(100%)
Income tax expense
(benefit) (13,671) 132,607 (146,278) >(100%)
Net income (loss) (25,726) 178,397 (204,123) >(100%)
Less: Net income
(loss)
attributable to
noncontrolling
interests, net of
tax (3,688) 22,320 (26,008) >(100%)
Net income (loss) attributable to TDS shareholders (22,038) 156,077 (178,115) >(100%)
TDS Preferred
dividend
requirement (12) (12) - -
Net income (loss) available to common
shareholders $(22,050) $156,065 $(178,115) >(100%)
======== ======== =========
Basic weighted average shares outstanding 108,719 108,385 334 -
Basic earnings (loss) per share attributable
to TDS shareholders $(0.20) $1.44 $(1.64) >(100%)
Diluted weighted average shares outstanding 108,719 108,913 (194) -
Diluted earnings (loss) per share
attributable to TDS shareholders $(0.20) $1.42 $(1.62) >(100%)
(1) Consists of Non-Reportable
Segment, corporate operations
and intercompany eliminations
between U.S. Cellular, TDS
Telecom, the Non-Reportable
Segment and corporate
operations.
(2) Due to the Airadigm Transaction,
TDS recognized expenses of $13.1
million related to exit and
disposal activities in 2014. In
2013, TDS recognized an
incremental gain of $53.5
million compared to U.S.
Cellular upon closing of the
Divestiture Transaction as a
result of lower asset basis in
the assets disposed.
N/M - Percentage change not meaningful
Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
Six Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Change
------
2014 2013 Amount Percent
---- ---- ------ -------
Operating revenues
U.S. Cellular $1,883,584 $2,076,876 $(193,292) (9%)
TDS Telecom 533,266 440,521 92,745 21%
All Other (1) 15,504 19,342 (3,838) (20%)
2,432,354 2,536,739 (104,385) (4%)
--------- --------- --------
Operating expenses
U.S. Cellular
Expenses
excluding
depreciation,
amortization
and accretion 1,710,006 1,691,534 18,472 1%
Depreciation,
amortization
and accretion 316,090 392,425 (76,335) (19%)
(Gain) loss on
asset
disposals, net 8,827 14,452 (5,625) (39%)
(Gain) loss on
sale of
business and
other exit
costs, net (17,411) (242,093) 224,682 93%
(Gain) loss on
license sales
and exchanges (91,446) - (91,446) N/M
------- --- -------
1,926,066 1,856,318 69,748 4%
--------- --------- ------
TDS Telecom
Expenses
excluding
depreciation,
amortization
and accretion 387,730 322,440 65,290 20%
Depreciation,
amortization
and accretion 106,950 98,247 8,703 9%
(Gain) loss on
asset
disposals, net 1,327 (489) 1,816 >(100%)
----- ---- -----
496,007 420,198 75,809 18%
------- ------- ------
All Other (1)(2)
Expenses
excluding
depreciation
and
amortization 18,939 19,272 (333) (2%)
Depreciation
and
amortization 6,446 5,608 838 15%
(Gain) loss on
asset
disposals, net 179 (28) 207 >(100%)
(Gain) loss on
sale of
business and
other exit
costs, net 13,122 (54,010) 67,132 >(100%)
------ ------- ------
38,686 (29,158) 67,844 >(100%)
------ ------- ------
Total operating expenses 2,460,759 2,247,358 213,401 9%
--------- --------- -------
Operating income (loss)
U.S. Cellular (42,482) 220,558 (263,040) >(100%)
TDS Telecom 37,259 20,323 16,936 83%
All Other (1)(2) (23,182) 48,500 (71,682) >(100%)
(28,405) 289,381 (317,786) >(100%)
------- ------- --------
Investment and other income (expense)
Equity in earnings
of unconsolidated
entities 72,117 62,694 9,423 15%
Interest and
dividend income 5,237 4,178 1,059 25%
Gain (loss) on
investments ? 14,518 (14,518) N/M
Interest expense (56,605) (48,247) (8,358) (17%)
Other, net 210 (351) 561 >(100%)
Total
investment and
other income 20,959 32,792 (11,833) (36%)
------ ------ -------
Income (loss) before income taxes (7,446) 322,173 (329,619) >(100%)
Income tax expense
(benefit) (2,014) 136,787 (138,801) >(100%)
Net income (loss) (5,432) 185,386 (190,818) >(100%)
Less: Net income
(loss)
attributable to
noncontrolling
interests, net of
tax (1,648) 27,890 (29,538) >(100%)
Net income (loss) attributable to TDS shareholders (3,784) 157,496 (161,280) >(100%)
TDS Preferred
dividend
requirement (25) (25) - -
Net income (loss) available to common
shareholders $(3,809) $157,471 $(161,280) >(100%)
======= ======== =========
Basic weighted average shares outstanding 108,853 108,320 533 -
Basic earnings (loss) per share attributable
to TDS shareholders $(0.04) $1.45 $(1.49) >(100%)
Diluted weighted average shares outstanding 108,853 108,827 26 -
Diluted earnings (loss) per share
attributable to TDS shareholders $(0.04) $1.44 $(1.48) >(100%)
(1) Consists of Non-Reportable
Segment, corporate operations
and intercompany eliminations
between U.S. Cellular, TDS
Telecom, the Non-Reportable
Segment and corporate
operations.
(2) Due to the Airadigm Transaction,
TDS recognized expenses of $13.1
million related to exit and
disposal activities in 2014. In
2013, TDS recognized an
incremental gain of $53.5
million compared to U.S.
Cellular upon closing of the
Divestiture Transaction as a
result of lower asset basis in
the assets disposed.
N/M - Percentage change not meaningful
Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
ASSETS
June 30, December 31,
2014 2013
---- ----
Current assets
Cash and cash equivalents $874,860 $830,014
Short-term investments 40,035 50,104
Accounts receivable from customers
and others 624,261 731,114
Inventory, net 205,886 244,560
Net deferred income tax asset 106,077 106,077
Prepaid expenses 88,860 87,920
Income taxes receivable 9,197 2,397
Other current assets 32,274 35,151
1,981,450 2,087,337
Assets held for sale 5,980 16,027
Investments
Licenses 1,460,484 1,423,779
Goodwill 834,352 836,843
Franchise rights 124,487 123,668
Other intangible assets, net 61,536 71,454
Investments in unconsolidated
entities 308,661 301,772
Other investments 589 641
2,790,109 2,758,157
Property, plant and equipment, net
U.S. Cellular 2,761,404 2,856,520
TDS Telecom 962,377 984,634
Other 26,166 36,990
3,749,947 3,878,144
Other assets and deferred charges 180,183 164,482
------- -------
Total assets $8,707,669 $8,904,147
========== ==========
Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
June 30, December 31,
2014 2013
---- ----
Current liabilities
Current portion
of long-term
debt $890 $1,646
Accounts payable 425,051 496,069
Customer deposits
and deferred
revenues 302,496 289,445
Accrued interest 6,671 6,673
Accrued taxes 73,227 70,518
Accrued
compensation 98,099 115,031
Other current
liabilities 166,270 212,374
------- -------
1,072,704 1,191,756
Liabilities held for sale 722 ?
Deferred liabilities and credits
Net deferred
income tax
liability 828,458 862,975
Other deferred
liabilities and
credits 460,862 458,709
Long-term debt 1,718,832 1,720,074
Noncontrolling interests with redemption features 911 536
Equity
TDS shareholders'
equity
Series A Common
and Common
Shares, par
value $.01 1,327 1,327
Capital in excess
of par value 2,312,515 2,308,807
Treasury shares,
at cost (737,835) (721,354)
Accumulated other
comprehensive
loss (980) (569)
Retained earnings 2,496,735 2,529,626
--------- ---------
Total TDS shareholders' equity 4,071,762 4,117,837
Preferred shares 824 824
Noncontrolling
interests 552,594 551,436
Total equity 4,625,180 4,670,097
Total liabilities and equity $8,707,669 $8,904,147
========== ==========
Balance Sheet Highlights
June 30, 2014
(Unaudited, dollars in thousands)
U.S. TDS TDS Corporate Intercompany TDS
Cellular Telecom & Other Eliminations Consolidated
-------- ------- ------- ------------ ------------
Cash and cash
equivalents $404,058 $87,170 $383,632 $ ? $874,860
Affiliated cash investments ? 466,295 ? (466,295) ?
Short-term investments 40,035 ? ? ? 40,035
------ --- --- --- ------
$444,093 $553,465 $383,632 $(466,295) $914,895
======== ======== ======== ========= ========
Licenses, goodwill and
other intangible
assets $1,825,355 $786,487 $(130,983) $ ? $2,480,859
Investment in unconsolidated
entities 270,215 3,810 41,789 (7,153) 308,661
Long-term and other investments ? 588 1 ? 589
--- --- --- --- ---
$2,095,570 $790,885 $(89,193) $(7,153) $2,790,109
========== ======== ======== ======= ==========
Property, plant and
equipment, net $2,761,404 $962,377 $26,166 $ ? $3,749,947
========== ======== ======= === === ==========
Long-term debt:
Current
portion $46 $57 $787 $ ? $890
Non-
current
portion 876,715 1,424 840,693 ? 1,718,832
$876,761 $1,481 $841,480 $ ? $1,719,722
======== ====== ======== === === ==========
Telephone and Data Systems, Inc.
Schedule of Cash and Cash Equivalents and Investments
(Unaudited, dollars in thousands)
The following table presents TDS' cash and cash equivalents and investments at June 30, 2014
and December 31, 2013.
June 30, December 31,
2014 2013
---- ----
Cash and cash
equivalents $874,860 $830,014
Amounts included in short-
term investments (1) (2)
U.S. Treasury Notes 40,035 50,104
Total cash and cash
equivalents and
investments $914,895 $880,118
======== ========
(1) Designated as held-to-maturity
investments and are recorded at
amortized cost in the
Consolidated Balance Sheet.
(2) Maturities are less than twelve
months from the respective
balance sheet dates.
Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
Six Months Ended June 30,
(Unaudited, dollars in thousands)
2014 2013
---- ----
Cash flows from operating activities
Net income (loss) $(5,432) $185,386
Add (deduct)
adjustments to
reconcile net income
to cash flows
from operating
activities
Depreciation, amortization and
accretion 429,486 496,280
Bad debts expense 52,098 35,187
Stock-based compensation expense 15,488 12,902
Deferred income taxes, net (33,346) (21,246)
Equity in earnings of unconsolidated
entities (72,117) (62,694)
Distributions from unconsolidated
entities 65,569 47,635
(Gain) loss on asset disposals, net 10,333 13,935
(Gain) loss on sale of business and
other exit costs, net (4,289) (296,103)
(Gain) loss on investments - (14,518)
(Gain) loss on license sales and
exchanges (91,446) -
Noncash interest expense 1,014 997
Other operating activities 3 505
Changes in assets and
liabilities from
operations
Accounts receivable 40,459 (5,781)
Inventory 38,674 (8,105)
Accounts payable (43,132) 58,204
Customer deposits and deferred
revenues 13,139 7,897
Accrued taxes 1,049 150,425
Accrued interest 22 2,172
Other assets and liabilities (101,930) (81,586)
-------- -------
315,642 521,492
------- -------
Cash flows from investing activities
Cash used for additions
to property, plant and
equipment (339,907) (384,281)
Cash paid for
acquisitions and
licenses (18,681) (14,150)
Cash received from
divestitures 125,905 480,000
Cash received for
investments 10,000 15,000
Other investing
activities 3,720 14,127
(218,963) 110,696
-------- -------
Cash flows from financing activities
Repayment of long-term
debt (589) (605)
TDS Common Shares
reissued for benefit
plans, net of tax
payments 401 776
U.S. Cellular Common
Shares reissued for
benefit plans, net of
tax payments 830 (2,206)
Repurchase of TDS Common
Shares (20,090) -
Repurchase of U.S.
Cellular Common Shares (8,298) (18,425)
Dividends paid to TDS
shareholders (29,107) (27,598)
U.S. Cellular dividends
paid to noncontrolling
public shareholders - (75,235)
Distributions to
noncontrolling interests (482) (3,292)
Other financing
activities 5,502 331
(51,833) (126,254)
------- --------
Net increase in cash and cash equivalents 44,846 505,934
Cash and cash equivalents
Beginning of period 830,014 740,481
End of period $874,860 $1,246,415
TDS Telecom Highlights
Three Months Ended June 30,
(Unaudited, dollars in thousands)
Change
------
2014 2013 Amount Percent
---- ---- ------ -------
Wireline
Operating revenues
Residential $73,360 $72,911 $449 1%
Commercial 57,472 57,128 344 1%
Wholesale 49,465 51,389 (1,924) (4%)
Total
service
revenues 180,297 181,428 (1,131) (1%)
Equipment
sales 431 765 (334) (44%)
180,728 182,193 (1,465) (1%)
------- ------- ------
Operating expenses
Cost of
services 64,305 65,729 (1,424) (2%)
Cost of
equipment
sold 481 1,094 (613) (56%)
Selling,
general and
administrative
expenses 47,708 56,692 (8,984) (16%)
Depreciation,
amortization
and accretion 41,827 43,193 (1,366) (3%)
(Gain) loss on
asset
disposals,
net 514 (765) 1,279 >100%
154,835 165,943 (11,108) (7%)
------- ------- -------
Operating
income $25,893 $16,250 $9,643 59%
----------
Cable
Operating revenues
Residential $18,222 $ - $18,222 N/M
Commercial 4,262 - 4,262 N/M
22,484 - 22,484 N/M
Operating expenses
Cost of
services 11,394 - 11,394 N/M
Selling,
general and
administrative
expenses 6,285 - 6,285 N/M
Depreciation,
amortization
and accretion 4,557 - 4,557 N/M
Loss on asset
disposals,
net 425 - 425 N/M
22,661 - 22,661 N/M
------ --- ------
Operating loss $(177) $ - $(177) N/M
------------ ---
HMS
Operating revenues
Service
revenues $27,575 $23,205 $4,370 19%
Equipment
sales 40,361 18,169 22,192 >100%
67,936 41,374 26,562 64%
------ ------ ------
Operating expenses
Cost of
services 21,301 15,071 6,230 41%
Cost of
equipment
sold 33,875 15,114 18,761 >100%
Selling,
general and
administrative
expenses 12,376 9,361 3,015 32%
Depreciation,
amortization
and accretion 6,791 5,563 1,228 22%
Loss on asset
disposals,
net 44 83 (39) (47%)
74,387 45,192 29,195 65%
------ ------ ------
Operating loss $(6,451) $(3,818) $(2,633) (69%)
------------
Intercompany revenues $(298) $(107) $(191) >(100)%
Intercompany expenses (298) (107) (191) >(100)%
---- ---- ----
Total TDS Telecom operating
income $19,265 $12,432 $6,833 55%
======= ======= ======
TDS Telecom Highlights
Six Months Ended June 30,
(Unaudited, dollars in thousands)
Change
------
2014 2013 Amount Percent
---- ---- ------ -------
Wireline
Operating revenues
Residential $145,865 $145,915 $(50) -
Commercial 115,452 114,253 1,199 1%
Wholesale 95,913 101,938 (6,025) (6%)
Total
service
revenues 357,230 362,106 (4,876) (1%)
Equipment
sales 984 1,662 (678) (41%)
358,214 363,768 (5,554) (2%)
------- ------- ------
Operating expenses
Cost of
services 128,705 132,168 (3,463) (3%)
Cost of
equipment
sold 964 2,104 (1,140) (54%)
Selling,
general and
administrative
expenses 94,228 114,072 (19,844) (17%)
Depreciation,
amortization
and accretion 84,563 87,216 (2,653) (3%)
(Gain) loss on
asset
disposals,
net 759 (602) 1,361 >100%
309,219 334,958 (25,739) (8%)
------- ------- -------
Operating
income $48,995 $28,810 $20,185 70%
----------
Cable
Operating revenues
Residential $36,475 $ - $36,475 N/M
Commercial 8,512 - 8,512 N/M
44,987 - 44,987 N/M
Operating expenses
Cost of
services 22,349 - 22,349 N/M
Selling,
general and
administrative
expenses 12,663 - 12,663 N/M
Depreciation,
amortization
and accretion 8,918 - 8,918 N/M
Loss on asset
disposals,
net 490 - 490 N/M
44,420 - 44,420 N/M
------ --- ------
Operating
income $567 $ - $567 N/M
---------- ---
HMS
Operating revenues
Service
revenues $54,951 $45,205 $9,746 22%
Equipment
sales 76,093 31,733 44,360 >100%
131,044 76,938 54,106 70%
------- ------ ------
Operating expenses
Cost of
services 38,247 28,673 9,574 33%
Cost of
equipment
sold 64,342 26,326 38,016 >100%
Selling,
general and
administrative
expenses 27,211 19,282 7,929 41%
Depreciation,
amortization
and accretion 13,469 11,031 2,438 22%
Loss on asset
disposals,
net 78 113 (35) (31%)
143,347 85,425 57,922 68%
------- ------ ------
Operating loss $(12,303) $(8,487) $(3,816) (45%)
------------
Intercompany revenues $(979) $(185) $(794) >(100)%
Intercompany expenses (979) (185) (794) >(100)%
---- ---- ----
Total TDS Telecom operating
income $37,259 $20,323 $16,936 83%
======= ======= =======
Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
TDS Consolidated
----------------
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2014 2013 2014 2013
---- ---- ---- ----
Cash flows from
operating
activities $210,705 $275,140 $315,642 $521,492
Add: Sprint Cost
Reimbursement 22,862 - 34,116 -
Less: Cash used
for additions to
property, 189,017 207,963 339,907 384,281
plant and
equipment
Adjusted free cash flow (1) $44,550 $67,177 $9,851 $137,211
======= ======= ====== ========
(1) Adjusted free cash flow is defined as
Cash flows from operating activities,
as adjusted for cash proceeds from the
Sprint Cost Reimbursement (which are
included in Cash flows from investing
activities in the Consolidated
Statement of Cash Flows), less Cash
used for additions to property, plant
and equipment. Adjusted 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 the amount of
cash generated by business operations
(including cash proceeds from the
Sprint Cost Reimbursement), after Cash
used for additions to property, plant
and equipment. The prior manner of
calculating free cash flow has been
adjusted to include the Sprint Cost
Reimbursement. The reason for this is
that the Sprint decommissioning cash
outflows are included in "Cash flows
from operating activities," but the
reimbursements from Sprint related to
these outflows are not included in this
caption.
SOURCE Telephone and Data Systems, Inc.
