TELEPHONE AND DATA SYSTEMS, INC. CHICAGO, Oct. 31, 2014 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,280.0 million for the third quarter of 2014, versus $1,181.0 million for the comparable period one year ago. Net loss attributable to TDS shareholders and related diluted loss per share were $116.0 million and $1.07 respectively, for the third quarter of 2014, compared to $9.5 million and $0.09, respectively, in the comparable period one year ago.
In the third quarter of 2014, TDS recorded two significant, discrete, non-cash charges, an $84 million non-cash goodwill impairment charge related to the HMS segment and $30 million of net deferred tax expense related to adjusting valuation allowances on deferred tax assets.
"Our wireless business had a very promising quarter, with strong customer growth and improved loyalty at U.S. Cellular," said LeRoy T. Carlson, Jr., TDS president and CEO. "In the wireline business we had another solid quarter of improved profitability, a result of continued cost reduction activities. We also successfully completed our BendBroadband cable acquisition on September 1, 2014.
"U.S. Cellular's attractive value proposition, combining a high-quality network and competitive devices, plans, and pricing, led to strong growth in both gross and net postpaid customer additions. We also increased total revenues, though higher smartphone subsidies continued to impact margins. We have plans to build upon this momentum with competitive offerings throughout the important holiday months.
"TDS Telecom grew revenues from residential TDS TV and broadband services and from commercial managedIP connections, which helped offset declines in voice and wholesale revenues. We are integrating BendBroadband and are focused on increasing video and broadband penetration in our cable businesses. We continue to focus on increasing the strategic recurring revenues from hosted and managed services at OneNeck IT Solutions."
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 October 31, 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 TDS(2)
------------- ----------- -----
Current Previous Current Previous Current Previous
------- -------- ------- -------- ------- --------
(Dollars in
millions)
Total operating
revenues $3,900-$4,000 Unchanged $1,075-$1,125 $1,050-$1,100 $4,995-$5,145 $4,970-$5,120
Adjusted income
before income
taxes (1) $375-$450 $350-$450 $275-$300 $260-$290 $645-$745 $605-$735
Capital
expenditures $600 $640 $210 $200 $820 $850
(1) 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, nine months
ended September 30, 2014 actual
results, and year ended
December 31, 2013 actual
results:
2014 Estimated Results
----------------------
U.S. Cellular TDS Telecom TDS(2)
------------- ----------- -----
(Dollars in
millions)
Income (loss)
before income
taxes ($164)-($89) ($32)-($7) ($291)-($191)
Depreciation,
amortization and
accretion $620 $225 $855
Loss on impairment
of assets ? $84 $84
(Gain) loss on
sale of business
and other exit
costs, net ($50) ($2) ($27)
(Gain) loss on
license sales and
exchanges ($91) ? ($91)
Interest expense $60 ? $115
Adjusted income
before income
taxes $375-$450 $275-$300 $645-$745
========= ========= =========
Actual Results
--------------
Nine months ended September 30,
2014 Year ended December 31, 2013
-------------------------------- ----------------------------
U.S. Cellular TDS TDS (2) U.S. Cellular TDS TDS (2)
Telecom Telecom
------- -------
(Dollars in millions)
Income (loss)
before income
taxes ($24) ($24) ($119) $258 $49 $293
Depreciation,
amortization and
accretion expense $465 $161 $635 $804 $203 $1,018
Loss on impairment
of assets - $84 $84 - - -
(Gain) loss on
sale of business
and other exit
costs, net ($28) ($2) ($9) ($247) - ($301)
(Gain) loss on
license sales and
exchanges ($91) - ($91) ($255) - ($255)
(Gain) loss on
investments - - - ($19) ($1) ($15)
Interest expense $43 ($1) $84 $44 ($2) $99
--- --- --- --- --- ---
Adjusted income
before income
taxes $365 $219 $583 $585 $249 $839
==== ==== ==== ==== ==== ====
(2) 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 (third quarter) 421,322 $10.7
2014 (second quarter) 650,628 $17.3
2014 (first quarter) 157,891 $3.8
2013 (full year) 338,851 $9.7
------- ----
Total 1,568,692 $41.5
========= =====
Conference Call Information
TDS will hold a conference call on Oct. 31, 2014 at 9:30 a.m. CDT.
-- Access the live call on the Events & Presentations page of
investors.tdsinc.com or at
http://www.videonewswire.com/event.asp?id=100845.
-- 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.tdsinc.com. The call will be archived on the Events & Presentations page of investors.tdsinc.com.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 1000(TM) company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 5.9 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, Baja Broadband and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,400 people as of Sept. 30, 2014.
Visit www.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: 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.tdsinc.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 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
------------------------------ --------- --------- --------- ---------- ---------
Retail Customers
Postpaid
Total at end of period 4,200,000 4,148,000 4,174,000 4,267,000 4,343,000
Gross additions 251,000 190,000 197,000 176,000 165,000
Net additions (losses) 52,000 (26,000) (93,000) (71,000) (60,000)
ARPU (1) $56.37 $56.82 $57.59 $53.53 $54.64
Churn rate (2) 1.6% 1.7% 2.3% 1.9% 1.7%
Smartphone penetration (3) 57.9% 55.3% 53.1% 50.8% 47.1%
Prepaid
Total at end of period 350,000 352,000 356,000 343,000 370,000
Gross additions 64,000 65,000 85,000 63,000 65,000
Net additions (losses) (2,000) (4,000) 13,000 (26,000) (11,000)
ARPU (1) $34.40 $34.02 $32.22 $31.66 $28.72
Churn rate (2) 6.3% 6.5% 6.9% 8.3% 6.8%
Total customers at end of period 4,674,000 4,653,000 4,684,000 4,774,000 4,875,000
Billed ARPU (1) $53.24 $53.36 $53.93 $50.25 $50.92
Service revenue ARPU (1) $60.92 $60.32 $60.19 $57.05 $58.36
Smartphones sold as a percent of total 73.3% 72.6% 73.0% 79.6% 65.2%
devices sold
Total population
Consolidated markets (4) 54,817,000 54,817,000 54,817,000 58,013,000 84,025,000
Consolidated operating markets
(4) 31,729,000 31,729,000 31,729,000 31,759,000 31,822,000
Market penetration at end of period
Consolidated markets (5) 8.5% 8.5% 8.5% 8.2% 5.8%
Consolidated operating markets
(5) 14.7% 14.7% 14.8% 15.0% 15.3%
Capital expenditures (000s) $142,452 $143,927 $89,581 $208,135 $242,459
Total cell sites in service 6,209 6,183 6,165 6,975 7,687
Owned towers 4,487 4,457 4,448 4,448 4,422
* 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 November 1, 2013 for pro forma
financial information related to the
Divestiture Transaction and the NY1 and
NY2 Deconsolidation for the three and
nine months ended September 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 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
------------------------------ --------- --------- --------- ---------- ---------
Retail Customers
Postpaid
Total at end of period 4,200,000 4,148,000 4,174,000 4,267,000 4,343,000
Gross additions 251,000 190,000 197,000 176,000 165,000
Net additions (losses) 52,000 (26,000) (93,000) (71,000) (60,000)
ARPU (1) $56.37 $56.82 $57.59 $53.53 $54.64
Churn rate (2) 1.6% 1.7% 2.3% 1.9% 1.7%
Smartphone penetration (3) 57.9% 55.3% 53.1% 50.8% 47.1%
Prepaid
Total at end of period 350,000 352,000 356,000 343,000 370,000
Gross additions 64,000 65,000 85,000 63,000 65,000
Net additions (losses) (2,000) (4,000) 13,000 (26,000) (11,000)
ARPU (1) $34.40 $34.02 $32.22 $31.66 $28.72
Churn rate (2) 6.3% 6.5% 6.9% 8.3% 6.8%
Total customers at end of period 4,674,000 4,653,000 4,684,000 4,774,000 4,875,000
Billed ARPU (1) $53.24 $53.36 $53.93 $50.25 $50.92
Service revenue ARPU (1) $60.92 $60.32 $60.19 $57.05 $58.36
Smartphones sold as a percent of total 73.3% 72.6% 73.0% 79.6% 65.2%
devices sold
Total population
Consolidated markets (4) 54,817,000 54,817,000 54,817,000 58,013,000 84,025,000
Consolidated operating markets
(4) 31,729,000 31,729,000 31,729,000 31,759,000 31,822,000
Market penetration at end of period
Consolidated markets (5) 8.5% 8.5% 8.5% 8.2% 5.8%
Consolidated operating markets
(5) 14.7% 14.7% 14.8% 15.0% 15.3%
Capital expenditures (000s) $142,452 $143,927 $89,581 $211,247 $239,332
Total cell sites in service 6,209 6,183 6,165 6,161 6,127
Owned towers 3,922 3,892 3,883 3,883 3,857
* 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 November 1, 2013 for pro
forma financial information related
to the Divestiture Transaction and
the NY1 and NY2 Deconsolidation for
the three and nine months ended
September 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 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
--------- --------- --------- ---------- ---------
TDS Telecom
Wireline
--------
Residential
connections
Voice (1) 340,300 346,100 348,700 352,100 358,100
Broadband (2) 231,600 232,700 229,000 227,000 229,500
IPTV (3) 20,700 18,200 15,900 13,800 12,200
------ ------ ------ ------ ------
Wireline residential
connections 592,600 597,000 593,600 592,900 599,800
======= ======= ======= ======= =======
Total
residential
revenue per
connection (4) $41.47 $41.05 $40.79 $40.93 $41.12
Commercial
connections
Voice (1) 199,300 206,200 212,200 218,400 223,800
Broadband (2) 25,300 26,000 26,600 27,100 27,600
managedIP (5) 137,700 133,300 131,000 127,600 121,000
------- ------- ------- ------- -------
Wireline commercial connections 362,300 365,500 369,800 373,100 372,400
======= ======= ======= ======= =======
Total Wireline
connections 954,900 962,500 963,400 966,000 972,200
======= ======= ======= ======= =======
Cable
-----
Cable
Connections
Video (6) 109,100 69,700 68,700 69,100 70,200
Broadband (7) 106,400 63,200 63,000 61,000 59,800
Voice (7) 41,800 17,800 17,700 17,200 16,800
------ ------ ------ ------ ------
Cable connections 257,300 150,700 149,400 147,300 146,800
======= ======= ======= ======= =======
Total
residential
revenue per
connection (4) $56.14 $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 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
--------- --------- --------- ---------- ---------
Wireline $34,200 $27,400 $22,900 $46,000 $32,800
Cable 7,600 7,200 6,200 7,000 1,400
HMS 9,800 10,600 2,800 9,200 2,400
----- ------ ----- ----- -----
$51,600 $45,200 $31,900 $62,200 $36,600
======= ======= ======= ======= =======
Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
Three Months Ended September 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Change
------
2014 2013 Amount Percent
---- ---- ------ -------
Operating revenues
U.S. Cellular $1,000,419 $939,236 $61,183 7%
TDS Telecom 273,157 234,543 38,614 16%
All Other (1) 6,447 7,201 (754) (10%)
1,280,023 1,180,980 99,043 8%
--------- --------- ------
Operating expenses
U.S. Cellular
Expenses
excluding
depreciation,
amortization
and accretion 905,157 781,291 123,866 16%
Depreciation,
amortization
and accretion 148,952 200,985 (52,033) (26%)
(Gain) loss on
asset
disposals, net 7,947 1,701 6,246 >100%
(Gain) loss on
sale of
business and
other exit
costs, net (10,283) (1,534) (8,749) >100%
------- ------ ------
1,051,773 982,443 69,330 7%
--------- ------- ------
TDS Telecom
Expenses
excluding
depreciation,
amortization
and accretion 199,132 170,650 28,482 17%
Depreciation,
amortization
and accretion 54,255 51,305 2,950 6%
Loss on
impairment of
assets 84,000 - 84,000 N/M
(Gain) loss on
asset
disposals, net 1,367 436 931 >100%
(Gain) loss on
sale of
business and
other exit
costs, net (2,201) - (2,201) N/M
------ --- ------
336,553 222,391 114,162 51%
------- ------- -------
All Other (1)(2)
Expenses
excluding
depreciation
and
amortization 7,117 6,208 909 15%
Depreciation
and
amortization 2,322 3,005 (683) (23%)
(Gain) loss on
asset
disposals, net (21) 18 (39) >(100%)
(Gain) loss on
sale of
business and
other exit
costs, net 7,694 - 7,694 N/M
----- --- -----
17,112 9,231 7,881 85%
------ ----- -----
Total operating expenses 1,405,438 1,214,065 191,373 16%
--------- --------- -------
Operating income (loss)
U.S. Cellular (51,354) (43,207) (8,147) (19%)
TDS Telecom (63,396) 12,152 (75,548) >(100%)
All Other (1)(2) (10,665) (2,030) (8,635) >(100%)
(125,415) (33,085) (92,330) >100%
-------- ------- -------
Investment and other income (expense)
Equity in earnings
of unconsolidated
entities 36,081 37,609 (1,528) (4%)
Interest and
dividend income 4,526 2,507 2,019 81%
Interest expense (27,170) (24,961) (2,209) (9%)
Other, net 69 145 (76) (52%)
Total
investment and
other income 13,506 15,300 (1,794) (12%)
------ ------ ------
Income (loss) before income taxes (111,909) (17,785) (94,124) >100%
Income tax expense
(benefit) 9,290 (6,731) 16,021 >(100%)
Net income (loss) (121,199) (11,054) (110,145) >100%
Less: Net income
(loss)
attributable to
noncontrolling
interests, net of
tax (5,169) (1,542) (3,627) >100%
Net income (loss) attributable to TDS shareholders (116,030) (9,512) (106,518) >100%
TDS Preferred
dividend
requirement (12) (12) - -
Net income (loss) available to common
shareholders $(116,042) $(9,524) $(106,518) >100%
========= ======= =========
Basic weighted average shares outstanding 108,252 108,571 (319) -
Basic earnings (loss) per share attributable
to TDS shareholders $(1.07) $(0.09) $(0.98) >100%
Diluted weighted average shares outstanding 108,252 108,571 (319) -
Diluted earnings (loss) per share
attributable to TDS shareholders $(1.07) $(0.09) $(0.98) >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 $7.7
million related to exit and
disposal activities in 2014.
N/M - Percentage change not meaningful
Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
Nine Months Ended September 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Change
------
2014 2013 Amount Percent
---- ---- ------ -------
Operating revenues
U.S. Cellular $2,884,003 $3,016,112 $(132,109) (4%)
TDS Telecom 806,423 675,064 131,359 19%
All Other (1) 21,951 26,543 (4,592) (17%)
3,712,377 3,717,719 (5,342) -
--------- --------- ------
Operating expenses
U.S. Cellular
Expenses
excluding
depreciation,
amortization
and accretion 2,615,163 2,472,825 142,338 6%
Depreciation,
amortization
and accretion 465,042 593,410 (128,368) (22%)
(Gain) loss on
asset
disposals, net 16,774 16,153 621 4%
(Gain) loss on
sale of
business and
other exit
costs, net (27,694) (243,627) 215,933 89%
(Gain) loss on
license sales
and exchanges (91,446) - (91,446) N/M
------- --- -------
2,977,839 2,838,761 139,078 5%
--------- --------- -------
TDS Telecom
Expenses
excluding
depreciation,
amortization
and accretion 586,862 493,090 93,772 19%
Depreciation,
amortization
and accretion 161,205 149,552 11,653 8%
Loss on
impairment of
assets 84,000 - 84,000 N/M
(Gain) loss on
asset
disposals, net 2,694 (53) 2,747 >(100%)
(Gain) loss on
sale of
business and
other exit
costs, net (2,201) - (2,201) N/M
------ --- ------
832,560 642,589 189,971 30%
------- ------- -------
All Other (1)(2)
Expenses
excluding
depreciation
and
amortization 26,056 25,480 576 2%
Depreciation
and
amortization 8,768 8,613 155 2%
(Gain) loss on
asset
disposals, net 158 (10) 168 >(100%)
(Gain) loss on
sale of
business and
other exit
costs, net 20,816 (54,010) 74,826 >(100%)
------ ------- ------
55,798 (19,927) 75,725 >(100%)
------ ------- ------
Total operating expenses 3,866,197 3,461,423 404,774 12%
--------- --------- -------
Operating income (loss)
U.S. Cellular (93,836) 177,351 (271,187) >(100%)
TDS Telecom (26,137) 32,475 (58,612) >(100%)
All Other (1)(2) (33,847) 46,470 (80,317) >(100%)
(153,820) 256,296 (410,116) >(100%)
-------- ------- --------
Investment and other income (expense)
Equity in earnings
of unconsolidated
entities 108,198 100,303 7,895 8%
Interest and
dividend income 9,763 6,685 3,078 46%
Gain (loss) on
investments ? 14,518 (14,518) N/M
Interest expense (83,775) (73,208) (10,567) (14%)
Other, net 279 (206) 485 >(100%)
Total
investment and
other income 34,465 48,092 (13,627) (28%)
------ ------ -------
Income (loss) before income taxes (119,355) 304,388 (423,743) >(100%)
Income tax expense
(benefit) 7,276 130,056 (122,780) (94%)
Net income (loss) (126,631) 174,332 (300,963) >(100%)
Less: Net income
(loss)
attributable to
noncontrolling
interests, net of
tax (6,817) 26,348 (33,165) >(100%)
Net income (loss) attributable to TDS shareholders (119,814) 147,984 (267,798) >(100%)
TDS Preferred
dividend
requirement (37) (37) - -
Net income (loss) available to common
shareholders $(119,851) $147,947 $(267,798) >(100%)
========= ======== =========
Basic weighted average shares outstanding 108,650 108,405 245 -
Basic earnings (loss) per share attributable
to TDS shareholders $(1.10) $1.36 $(2.46) >(100%)
Diluted weighted average shares outstanding 108,650 108,993 (343) -
Diluted earnings (loss) per share
attributable to TDS shareholders $(1.10) $1.35 $(2.45) >(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 $20.8
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
September 30, December 31,
2014 2013
---- ----
Current assets
Cash and cash equivalents $573,067 $830,014
Short-term investments 40,014 50,104
Accounts receivable from customers
and others 652,487 731,114
Inventory, net 193,694 244,560
Net deferred income tax asset 100,951 106,077
Prepaid expenses 89,243 87,920
Income taxes receivable 10,522 2,397
Other current assets 31,884 35,151
1,691,862 2,087,337
Assets held for sale 68,288 16,027
Investments
Licenses 1,400,808 1,423,779
Goodwill 783,280 836,843
Franchise rights 238,950 123,668
Other intangible assets, net 70,075 71,454
Investments in unconsolidated
entities 335,448 301,772
Other investments 543 641
2,829,104 2,758,157
Property, plant and equipment, net
U.S. Cellular 2,746,449 2,856,520
TDS Telecom 1,064,677 984,634
Other 25,342 36,990
3,836,468 3,878,144
Other assets and deferred charges 214,826 164,482
------- -------
Total assets $8,640,548 $8,904,147
========== ==========
Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
September 30, December 31,
2014 2013
---- ----
Current liabilities
Current portion
of long-term
debt $862 $1,646
Accounts payable 469,193 496,069
Customer deposits
and deferred
revenues 330,789 289,445
Accrued interest 15,750 6,673
Accrued taxes 87,474 70,518
Accrued
compensation 100,297 115,031
Other current
liabilities 153,142 212,374
------- -------
1,157,507 1,191,756
Deferred liabilities and credits
Net deferred
income tax
liability 823,172 862,975
Other deferred
liabilities and
credits 455,360 458,709
Long-term debt 1,718,701 1,720,074
Noncontrolling interests with redemption features 1,007 536
Equity
TDS shareholders'
equity
Series A Common
and Common
Shares, par
value $.01 1,327 1,327
Capital in excess
of par value 2,329,674 2,308,807
Treasury shares,
at cost (746,660) (721,354)
Accumulated other
comprehensive
loss (1,307) (569)
Retained earnings 2,366,237 2,529,626
--------- ---------
Total TDS shareholders' equity 3,949,271 4,117,837
Preferred shares 824 824
Noncontrolling
interests 534,706 551,436
Total equity 4,484,801 4,670,097
Total liabilities and equity $8,640,548 $8,904,147
========== ==========
Balance Sheet Highlights
September 30, 2014
(Unaudited, dollars in thousands)
U.S. TDS TDS Corporate Intercompany TDS
Cellular Telecom & Other Eliminations Consolidated
-------- ------- ------- ------------ ------------
Cash and cash
equivalents $273,798 $75,226 $224,043 $ ? $573,067
Affiliated cash investments ? 518,587 ? (518,587) ?
Short-term investments 40,014 ? ? ? 40,014
------ --- --- --- ------
$313,812 $593,813 $224,043 $(518,587) $613,081
======== ======== ======== ========= ========
Licenses, goodwill and
other intangible
assets $1,778,196 $861,352 $(146,435) $ ? $2,493,113
Investment in unconsolidated
entities 296,900 3,803 41,936 (7,191) 335,448
Long-term and other investments ? 543 ? ? 543
--- --- --- --- ---
$2,075,096 $865,698 $(104,499) $(7,191) $2,829,104
========== ======== ========= ======= ==========
Property, plant and
equipment, net $2,746,449 $1,064,677 $25,597 $(255) $3,836,468
========== ========== ======= ===== ==========
Long-term debt:
Current
portion $46 $57 $759 $ ? $862
Non-
current
portion 876,756 1,433 840,512 ? 1,718,701
$876,802 $1,490 $841,271 $ ? $1,719,563
======== ====== ======== === === ==========
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 September 30,
2014 and December 31, 2013.
September 30, December 31,
2014 2013
---- ----
Cash and cash
equivalents $573,067 $830,014
Amounts included in short-
term investments (1) (2)
U.S. Treasury Notes 40,014 50,104
Total cash and cash
equivalents and
investments $613,081 $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
Nine Months Ended September 30,
(Unaudited, dollars in thousands)
2014 2013
---- ----
Cash flows from operating activities
Net income (loss) $(126,631) $174,332
Add (deduct)
adjustments to
reconcile net income
to cash flows
from operating
activities
Depreciation, amortization and
accretion 635,015 751,575
Bad debts expense 79,218 56,693
Stock-based compensation expense 25,715 21,867
Deferred income taxes, net (33,242) (30,748)
Equity in earnings of unconsolidated
entities (108,198) (100,303)
Distributions from unconsolidated
entities 74,864 51,879
Loss on impairment of assets 84,000 -
(Gain) loss on asset disposals, net 19,626 16,090
(Gain) loss on sale of business and
other exit costs, net (9,079) (297,637)
(Gain) loss on investments - (14,518)
(Gain) loss on license sales and
exchanges (91,446) -
Noncash interest expense 1,584 1,498
Other operating activities 13 575
Changes in assets and
liabilities from
operations
Accounts receivable (7,879) (216,700)
Inventory 52,078 11,114
Accounts payable 11,034 33,312
Customer deposits and deferred
revenues 37,834 21,883
Accrued taxes 14,307 41,838
Accrued interest 9,105 9,451
Other assets and liabilities (171,707) (94,301)
-------- -------
496,211 437,900
------- -------
Cash flows from investing activities
Cash used for additions
to property, plant and
equipment (553,718) (631,370)
Cash paid for
acquisitions and
licenses (284,089) (280,383)
Cash received from
divestitures 151,369 484,300
Cash received for
investments 10,000 80,000
Other investing
activities 5,598 13,860
(670,840) (333,593)
-------- --------
Cash flows from financing activities
Repayment of long-term
debt (819) (1,196)
TDS Common Shares
reissued for benefit
plans, net of tax
payments 486 7,537
U.S. Cellular Common
Shares reissued for
benefit plans, net of
tax payments 1,150 2,840
Repurchase of TDS Common
Shares (31,293) (5,813)
Repurchase of U.S.
Cellular Common Shares (14,698) (18,544)
Dividends paid to TDS
shareholders (43,575) (41,430)
U.S. Cellular dividends
paid to noncontrolling
public shareholders - (75,235)
Distributions to
noncontrolling interests (439) (3,447)
Other financing
activities 6,870 1,589
(82,318) (133,699)
------- --------
Net decrease in cash and cash equivalents (256,947) (29,392)
Cash and cash equivalents
Beginning of period 830,014 740,481
End of period $573,067 $711,089
TDS Telecom Highlights
Three Months Ended September 30,
(Unaudited, dollars in thousands)
Change
------
2014 2013 Amount Percent
---- ---- ------ -------
Wireline
Operating revenues
Residential $73,901 $74,257 $(356) -
Commercial 57,179 57,075 104 -
Wholesale 46,570 49,755 (3,185) (6%)
Total
service
revenues 177,650 181,087 (3,437) (2%)
Equipment
sales 425 713 (288) (40%)
178,075 181,800 (3,725) (2%)
------- ------- ------
Operating expenses
Cost of
services 64,072 67,308 (3,236) (5%)
Cost of
equipment
sold 829 941 (112) (12%)
Selling,
general and
administrative
expenses 46,627 53,254 (6,627) (12%)
Depreciation,
amortization
and accretion 41,358 42,136 (778) (2%)
(Gain) loss on
asset
disposals,
net 743 426 317 74%
(Gain) loss on
sale of
business and
other exit
costs, net (2,201) - (2,201) N/M
151,428 164,065 (12,637) (8%)
------- ------- -------
Operating
income $26,647 $17,735 $8,912 50%
----------
Cable
Operating revenues
Residential $22,921 $11,642 $11,279 97%
Commercial 5,598 2,720 2,878 >100%
28,519 14,362 14,157 99%
Operating expenses
Cost of
services 12,651 6,727 5,924 88%
Selling,
general and
administrative
expenses 9,948 5,184 4,764 92%
Depreciation,
amortization
and accretion 6,171 2,914 3,257 >100%
(Gain) loss on
asset
disposals,
net 626 - 626 N/M
29,396 14,825 14,571 98%
------ ------ ------
Operating
income (loss) $(877) $(463) $(414) (89%)
------------
HMS
Operating revenues
Service
revenues $27,806 $23,200 $4,606 20%
Equipment
sales 39,737 15,527 24,210 >100%
67,543 38,727 28,816 74%
------ ------ ------
Operating expenses
Cost of
services 19,442 14,369 5,073 35%
Cost of
equipment
sold 33,819 13,149 20,670 >100%
Selling,
general and
administrative
expenses 12,724 10,064 2,660 26%
Depreciation,
amortization
and accretion 6,726 6,255 471 8%
Loss on
impairment of
assets 84,000 - 84,000 N/M
(Gain) loss on
asset
disposals,
net (2) 10 (12) >(100)%
156,709 43,847 112,862 >100%
------- ------ -------
Operating
income (loss) $(89,166) $(5,120) $(84,046) >(100)%
------------
Intercompany revenues $(980) $(346) $(634) >(100)%
Intercompany expenses (980) (346) (634) >(100)%
---- ---- ----
Total TDS Telecom operating
income (loss) $(63,396) $12,152 $(75,548) >(100)%
======== ======= ========
TDS Telecom Highlights
Nine Months Ended September 30,
(Unaudited, dollars in thousands)
Change
------
2014 2013 Amount Percent
---- ---- ------ -------
Wireline
Operating revenues
Residential $219,766 $220,172 $(406) -
Commercial 172,631 171,328 1,303 1%
Wholesale 142,483 151,693 (9,210) (6%)
Total
service
revenues 534,880 543,193 (8,313) (2%)
Equipment
sales 1,409 2,375 (966) (41%)
536,289 545,568 (9,279) (2%)
------- ------- ------
Operating expenses
Cost of
services 192,777 199,476 (6,699) (3%)
Cost of
equipment
sold 1,793 3,045 (1,252) (41%)
Selling,
general and
administrative
expenses 140,855 167,326 (26,471) (16%)
Depreciation,
amortization
and accretion 125,921 129,352 (3,431) (3%)
(Gain) loss on
asset
disposals,
net 1,502 (176) 1,678 >100%
(Gain) loss on
sale of
business and
other exit
costs, net (2,201) - (2,201) N/M
460,647 499,023 (38,376) (8%)
------- ------- -------
Operating
income $75,642 $46,545 $29,097 63%
----------
Cable
Operating revenues
Residential $59,396 $11,642 $47,754 >100%
Commercial 14,110 2,720 11,390 >100%
73,506 14,362 59,144 >100%
Operating expenses
Cost of
services 35,000 6,727 28,273 >100%
Selling,
general and
administrative
expenses 22,611 5,184 17,427 >100%
Depreciation,
amortization
and accretion 15,089 2,914 12,175 >100%
(Gain) loss on
asset
disposals,
net 1,116 - 1,116 N/M
73,816 14,825 58,991 >100%
------ ------ ------
Operating
income (loss) $(310) $(463) $153 33%
------------
HMS
Operating revenues
Service
revenues $82,757 $68,405 $14,352 21%
Equipment
sales 115,830 47,260 68,570 >100%
198,587 115,665 82,922 72%
------- ------- ------
Operating expenses
Cost of
services 57,689 43,042 14,647 34%
Cost of
equipment
sold 98,161 39,475 58,686 >100%
Selling,
general and
administrative
expenses 39,935 29,346 10,589 36%
Depreciation,
amortization
and accretion 20,195 17,286 2,909 17%
Loss on
impairment of
assets 84,000 - 84,000 N/M
(Gain) loss on
asset
disposals,
net 76 123 (47) (38%)
300,056 129,272 170,784 >100%
------- ------- -------
Operating
income (loss) $(101,469) $(13,607) $(87,862) >(100)%
------------
Intercompany revenues $(1,959) $(531) $(1,428) >(100)%
Intercompany expenses (1,959) (531) (1,428) >(100)%
------ ---- ------
Total TDS Telecom operating
income (loss) $(26,137) $32,475 $(58,612) >(100)%
======== ======= ========
Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
TDS Consolidated
----------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2014 2013 2014 2013
---- ---- ---- ----
Cash flows from
operating
activities $180,569 $(83,592) $496,211 $437,900
Add: Sprint Cost
Reimbursement 17,896 1,131 52,012 1,131
Less: Cash used
for additions to
property, 213,811 247,089 553,718 631,370
plant and
equipment
Adjusted free cash flow (1) $(15,346) $(329,550) $(5,495) $(192,339)
======== ========= ======= =========
(1) Adjusted free cash flow is defined as Cash
flows from operating activities (which
includes cash outflows related to the
Sprint decommissioning), 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.
SOURCE Telephone and Data Systems, Inc.
