TDS Reports Third Quarter 2013 Results

PR Newswire

CHICAGO, Nov. 1, 2013 /PRNewswire/ -- As previously announced, TDS will hold a teleconference Nov. 1, 2013 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com.

Telephone and Data Systems, Inc. [NYSE:TDS] reported operating revenues of $1,181.0 million for the third quarter of 2013, versus $1,370.1 million for the comparable period one year ago. Net income (loss) attributable to TDS shareholders and related diluted earnings (loss) per share were $(9.5) million and $(0.09) respectively, for the third quarter of 2013, compared to $29.1 million and $0.26, respectively, in the comparable period one year ago.  

"All of our businesses continued to make progress on their strategic priorities throughout the quarter," said LeRoy T. Carlson, Jr., TDS president and CEO. "At U.S. Cellular, we introduced shared data plans, prepared for the upcoming launch of Apple devices, and implemented an important new billing system. TDS Telecom completed the acquisition of Baja Broadband in August, and acquired IT solutions provider MSN Communications in early October.

"U.S. Cellular is close to its goal of bringing 4G LTE access to nearly 90 percent of its customers in 2013, to support growth in smartphone penetration and increased data use. We expect that the addition of the Apple iPhone 5s and 5c to our device portfolio in early November, together with shared data plans we launched in October, will help build our customer base and reduce churn. We are disappointed about, and regret, the significant impact of the billing system implementation on our customer service levels for a period of time. We have resolved most of these issues, and we expect the billing system to provide outstanding benefits going forward.  U.S. Cellular has been successful in its sales of non-strategic spectrum, with deals signed or closed generating pre-tax cash proceeds of over $400 million.

"In addition to completing the recent cable and HMS acquisitions, TDS Telecom had continued growth in residential IPTV and commercial managedIP connections. A combination of revenue growth and cost reductions helped to improve TDS Telecom's profitability in the quarter."

2013 ESTIMATES

Estimates of full-year 2013 results for U.S. Cellular, TDS Telecom and TDS are shown below.  Such estimates represent management's view as of the date of filing TDS' Form 10-Q for the quarter ended September 30, 2013.  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.




2013 Estimated Results (1)




U.S. Cellular (2)


TDS Telecom


TDS (2)(6)




Previous

Current


Previous

Current


Previous

Current

(Dollars in millions)










Adjusted operating

  revenues (3)


$3,615-$3,715

$3,590-$3,640


$890-$930 

$920-$960 


$4,550-$4,690

$4,555-$4,645

Adjusted income before

  income taxes (4)


$600-$700

Unchanged


$230-$260

Unchanged


$830-$960

Unchanged

Capital expenditures


$735

Unchanged


$165

Unchanged


$910

Unchanged

 

(1)

These estimates are based on TDS' current plans, which include an expansion of the multi-year deployment of 4G LTE technology; such expansion includes deployment on 700 MHz in additional markets as well as deployment on the 850 MHz band to provide additional capacity for future growth in data usage, enable potential future 4G LTE roaming, and support the sale of Apple products.  The financial impacts of selling Apple products in 2013 consist of the following:

  • Increased Adjusted operating revenues resulting from net incremental customers added and retained as a result of offering Apple products;
  • Decreased Adjusted income before income taxes as a result of net increases in costs, primarily loss on equipment sales as a result of offering Apple products; and
  • Increased Capital expenditures related to the deployment on the 850 MHz band to provide additional capacity for future growth in data usage, which includes capacity required to accommodate Apple products.

These estimates also reflect the impacts of the deconsolidation of certain partnerships as of April 2013 at U.S. Cellular. These estimates do not include (i) the reported gain on sale of business and other exit costs, net (ii) the reported gain on investments, or (iii) the actual or expected gains from spectrum license divestitures. In addition, the estimates reflect the impacts of the acquisition of Baja Broadband, LLC as of August 1, 2013 and MSN Communications, Inc. as of October 4, 2013, and of a multi-year deployment of IPTV at TDS Telecom. New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services, costs to deploy, agreements for content or franchises, or possible acquisitions, dispositions or exchanges) could affect TDS' plans and, therefore, its 2013 estimated results.



(2)

These estimates reflect U.S. Cellular's consolidated results for 2013.  Estimated results reflecting U.S. Cellular's Divestiture Markets and Core Markets are shown in the table below:

 



2013 Estimated Results



U.S. Cellular Core

Markets (5)

U.S. Cellular Divestiture

Markets (5)

U.S. Cellular

Consolidated (5)



Previous

Current

Previous

Current

Previous

Current

(Dollars in millions)







Adjusted operating

  revenues (3)

$3,475-$3,575 

$3,450-$3,500 

$140

Unchanged 

$3,615-$3,715 

$3,590-$3,640 

Adjusted income before

  income taxes (4)

$560-$660 

Unchanged 

$40

Unchanged 

$600-$700 

Unchanged 

Capital expenditures

$730

Unchanged 

$5

Unchanged 

$735

Unchanged 









These estimates reflect the Divestiture Transaction which closed on May 16, 2013.

 

(3)

Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular Equipment sales revenues less U.S. Cellular Cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results.  For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular Equipment sales revenues.  TDS believes this measure provides useful information to investors regarding TDS' results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to Operating revenues as an indicator of the Company's operating performance.



(4)

Adjusted income before income taxes is a non-GAAP financial measure 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.  In addition, TDS may also 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 amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future.  Adjusted income before income taxes is not a measure of financial performance under 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 (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results, nine months ended September 30, 2013 actual results, and 2012 actual results:

 






2013 Current Estimated Results





U.S. Cellular Core

Markets (5)


U.S. Cellular Divestiture Markets (2)(5)


U.S. Cellular Consolidated (5)


TDS

Telecom


TDS (6)

(Dollars in millions)











Income (loss) before income taxes


$315-$415


$35


$350-$450


$25-$55


$360-$490

Depreciation, amortization and

  accretion expense (7)


$540


$250


$790


$205


$1,005

(Gain) loss on sale of business and

  other exit costs, net



($245)


($245)



($300)

(Gain) loss from spectrum license

  divestitures


($325)



($325)



($325)

(Gain) loss on investments


($20)



($20)



($15)

Interest expense


$50



$50



$105

Adjusted income before

   income taxes


$560-$660


$40


$600-$700


$230-$260


$830-$960

 



Actual Results



Nine Months Ended September 30, 2013


Year Ended December 31, 2012




U.S. Cellular Consolidated (5)



TDS

Telecom



TDS (6)



U.S. Cellular Consolidated (5)



TDS

Telecom



TDS (6)

(Dollars in millions)













Income before income taxes

$

266


$

36


$

304


$

205


$

45


$

196

Depreciation, amortization and

  accretion expense (7)


593



150



752



609



193



814

(Gain) loss on sale of business

  and other exit costs, net


(244)





(298)



21





21

(Gain) loss from spectrum license

  divestitures












(Gain) loss on investments


(18)



(1)



(15)



4





4

Interest expense


33



(2)



74



42



(1)



87

Adjusted income before

   income taxes

$

630


$

183


$

817


$

881


$

237


$

1,122




















(5)

The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets.  The amounts for Core Markets and Divestiture Markets represent non-GAAP financial measures.  TDS believes that the amounts for the Core Markets and Divestiture Markets may be useful to investors and other users of its financial information in evaluating the separate results for the Core Markets.  Divestiture Markets are comprised of U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets.  Core Markets are comprised of all other markets in which U.S. Cellular conducts business including Peoria, Rockford and certain other areas in Illinois, and in Columbia, Joplin, Jefferson City and certain other areas in Missouri.  Core Markets as defined also includes any other income or expenses due to U.S. Cellular's direct or indirect ownership interests in other spectrum in the Divestiture Markets which was not included in the sale and other retained assets from the Divestiture Markets.




















(6)

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.




















(7)

The 2013 estimated amount for Depreciation, amortization and accretion expense in the U.S. Cellular Divestiture Markets includes approximately $171 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.  Actual results for the nine months ended September 30, 2013 and the year ended December 31, 2012 include $134 million and $20 million, respectively, of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.

Stock repurchase summary
TDS began repurchasing under its $250 million repurchase authorization on Aug. 5, 2013.   The following represents the third quarter repurchases of TDS Common Shares.

Repurchase Period


# Shares


Cost (in millions)


2013 (third quarter)


204,548


$5.8


Conference Call Information
TDS will hold a conference call on Nov. 1, 2013 at 9:30 a.m. CDT.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Investor Relations page of www.teldta.com. The call will be archived on the Conference Calls page of www.teldta.com.

About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, TDS Hosted & Managed Services and Baja Broadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,600 people as of Sept. 30, 2013.

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 transaction and the financial impacts of such transaction; 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 handset 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

 

United States Cellular Corporation

Total Markets Summary Operating Data (Unaudited)


















Quarter Ended

9/30/2013


6/30/2013


3/31/2013


12/31/2012


9/30/2012

Retail Customers
















Postpaid

















Total at end of period


4,343,000



4,412,000



5,060,000



5,134,000



5,175,000



Gross additions


165,000



165,000



191,000



241,000



230,000



Net additions (losses)


(60,000)



(120,000)



(74,000)



(41,000)



(38,000)



ARPU (1)

$

54.64


$

54.18


$

54.85


$

54.56


$

54.34



Churn rate (2)


1.7%



2.0%



1.7%



1.8%



1.7%



Smartphone penetration (3) (4)


47.1%



45.5%



43.5%



41.8%



38.6%


Prepaid

















Total at end of period


370,000



381,000



446,000



423,000



386,000



Gross additions


65,000



77,000



104,000



107,000



120,000



Net additions (losses)


(11,000)



(7,000)



23,000



37,000



57,000



ARPU (1)

$

28.72


$

31.69


$

33.31


$

33.56


$

32.97



Churn rate (2)


6.8%



6.8%



6.2%



5.8%



5.9%

Total customers at end of period


4,875,000



4,968,000



5,736,000



5,798,000



5,808,000

Billed ARPU (1)

$

50.92


$

50.60


$

51.13


$

50.94


$

50.83

Service revenue ARPU (1)

$

58.36


$

57.45


$

57.63


$

58.00


$

59.57

Smartphones sold as a percent of total

  devices sold


65.2%



66.0%



61.7%



62.9%



53.0%

Total population

















Consolidated markets (5)


84,025,000



84,025,000



93,943,000



93,244,000



92,996,000



Consolidated operating markets (5)


31,822,000



31,822,000



47,440,000



46,966,000



46,966,000

Market penetration at end of period

















Consolidated markets (6)


5.8%



5.9%



6.1%



6.2%



6.2%



Consolidated operating markets (6)


15.3%



15.6%



12.1%



12.3%



12.4%

Capital expenditures (000s)

$

242,500


$

168,500


$

118,400


$

253,100


$

199,100

Total cell sites in service


7,687



7,748



8,027



8,028



7,984

Owned towers in service


4,422



4,411



4,411



4,408



4,377

 

United States Cellular Corporation

Core Markets Summary Operating Data (Unaudited)

Excludes NY1 & NY2


















Quarter Ended

9/30/2013


6/30/2013


3/31/2013


12/31/2012


9/30/2012

Retail Customers
















Postpaid

















Total at end of period


4,343,000



4,412,000



4,463,000



4,496,000



4,515,000



Gross additions


165,000



165,000



176,000



208,000



196,000



Net additions (losses)


(60,000)



(53,000)



(33,000)



(19,000)



(23,000)



ARPU (1)

$

54.64


$

54.44


$

54.21


$

53.91


$

53.67



Churn rate (2)


1.7%



1.6%



1.6%



1.7%



1.6%



Smartphone penetration (3) (4)


47.1%



45.5%



43.0%



41.1%



37.8%


Prepaid

















Total at end of period


370,000



381,000



373,000



342,000



305,000



Gross additions


65,000



76,000



91,000



87,000



99,000



Net additions (losses)


(11,000)



8,000



31,000



37,000



59,000



ARPU (1)

$

28.72


$

31.65


$

32.92


$

33.21


$

32.97



Churn rate (2)


6.8%



6.0%



5.6%



5.1%



4.8%

Total customers at end of period


4,875,000



4,968,000



5,005,000



5,022,000



5,012,000

Billed ARPU (1)

$

50.92


$

50.98


$

50.93


$

50.71


$

50.59

Service revenue ARPU (1)

$

58.36


$

57.88


$

57.14


$

57.67


$

59.34

Smartphones sold as a percent of total

  devices sold


65.2%



66.1%



62.1%



62.9%



53.0%

Total population

















Consolidated markets (5)


84,025,000



84,025,000



84,025,000



83,384,000



82,595,000



Consolidated operating markets (5)


31,822,000



31,822,000



31,822,000



31,445,000



31,110,000

Market penetration at end of period

















Consolidated markets (6)


5.8%



5.9%



6.0%



6.0%



6.1%



Consolidated operating markets (6)


15.3%



15.6%



15.7%



16.0%



16.1%

Capital expenditures (000s)

$

239,300


$

171,200


$

113,300


$

241,400


$

184,100

Total cell sites in service


6,127



6,113



6,113



6,130



6,089

Owned towers in service


3,859



3,844



3,846



3,847



3,818
















(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 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 AndroidTM, BlackBerry® or Windows Mobile® operating system, excluding tablets.

(4)

Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5)

Used only to calculate market penetration of consolidated and core markets and consolidated and core operating markets, respectively. See footnote (6) below.

(6)

Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated and core markets and consolidated and core operating markets, respectively, as estimated by Claritas®.

















 

TDS Telecom

Summary Operating Data (Unaudited)














Quarter Ended

9/30/2013


6/30/2013


3/31/2013


12/31/2012


9/30/2012

TDS Telecom










Wireline Connections:












Residential













Voice

358,200


364,000


368,600


374,700


382,000




Broadband

229,500


231,700


229,500


229,900


232,000




IPTV

12,200


10,500


9,000


7,900


6,700




   Wireline residential connections

599,900


606,200


607,100


612,500


620,700
















Commercial













Voice

223,800


229,100


235,600


243,100


250,100




Broadband

27,600


28,300


28,800


29,600


30,500




managedIP

121,000


112,000


103,400


94,600


84,500




   Wireline commercial connections

372,400


369,400


367,800


367,300


365,100
















Total Wireline connections

972,300


975,600


974,900


979,800


985,800














Cable Connections:













Video

70,300








Broadband

59,800








Voice

16,800








   Cable connections

146,900


















Total Wireline and Cable Customer Connections

1,119,200


975,600


974,900


979,800


985,800

 


TDS Telecom

Capital Expenditures (000s)
















Quarter Ended


9/30/2013



6/30/2013



3/31/2013



12/31/2012



9/30/2012

Wireline

$

32,800


$

33,300


$

27,900


$

49,500


$

39,100

Cable


1,400









HMS


2,400



2,300



2,600



2,300



4,400


$

36,600


$

35,600


$

30,500


$

51,800


$

43,500

 

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)











 Increase/ (Decrease)





2013


2012


Amount

Percent

Operating revenues












U.S. Cellular

$

939,236


$

1,140,357


$

(201,121)


(18%)


TDS Telecom


234,543



220,417



14,126


6%


All Other (1)


7,201



9,334



(2,133)


(23%)






1,180,980



1,370,108



(189,128)


(14%)

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


781,291



935,800



(154,509)


(17%)



Depreciation, amortization and accretion


200,985



145,151



55,834


38%



Loss on asset disposals, net


1,701



11,262



(9,561)


(85%)



(Gain) loss on sale of business and other exit costs, net


(1,534)



65



(1,599)


>(100%)






982,443



1,092,278



(109,835)


(10%)


TDS Telecom













Expenses excluding depreciation, amortization and accretion


170,650



161,515



9,135


6%



Depreciation, amortization and accretion


51,305



48,251



3,054


6%



Loss on asset disposals, net


436



351



85


24%






222,391



210,117



12,274


6%


All Other (1)













Expenses excluding depreciation and amortization


6,208



9,361



(3,153)


(34%)



Depreciation and amortization


3,005



2,817



188


7%



Loss on asset disposals, net


18



29



(11)


(38%)






9,231



12,207



(2,976)


(24%)


















Total operating expenses


1,214,065



1,314,602



(100,537)


(8%)

Operating income (loss)












U.S. Cellular


(43,207)



48,079



(91,286)


>(100%)


TDS Telecom


12,152



10,300



1,852


18%


All Other  (1)


(2,030)



(2,873)



843


29%






(33,085)



55,506



(88,591)


>(100%)

Investment and other income (expense)












Equity in earnings of unconsolidated entities


37,609



25,015



12,594


50%


Interest and dividend income


2,507



2,359



148


6%


Interest expense


(24,961)



(20,497)



(4,464)


(22%)


Other, net


145



217



(72)


(33%)



Total investment and other income


15,300



7,094



8,206


>100%

Income (loss) before income taxes


(17,785)



62,600



(80,385)


>(100%)


Income tax expense (benefit)


(6,731)



22,442



(29,173)


>(100%)

Net income (loss)


(11,054)



40,158



(51,212)


>(100%)


Less: Net income (loss) attributable to noncontrolling interests, net of tax


(1,542)



11,041



(12,583)


>(100%)

Net income (loss) attributable to TDS shareholders


(9,512)



29,117



(38,629)


>(100%)


Preferred dividend requirement


(12)



(12)




Net income (loss) available to common shareholders

$

(9,524)


$

29,105


$

(38,629)


>(100%)















Basic weighted average shares outstanding


108,571



108,819



(248)


Basic earnings (loss) per share attributable to TDS shareholders

$

(0.09)


$

0.27


$

(0.36)


>(100%)















Diluted weighted average shares outstanding


108,571



109,246



(675)


Diluted earnings (loss) per share attributable to TDS shareholders

$

(0.09)


$

0.26


$

(0.35)


>(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.












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)











 Increase/ (Decrease)





2013


2012


Amount

Percent

Operating revenues












U.S. Cellular

$

3,016,112


$

3,336,878


$

(320,766)


(10%)


TDS Telecom


675,064



633,011



42,053


7%


All Other (1)


26,543



29,179



(2,636)


(9%)






3,717,719



3,999,068



(281,349)


(7%)

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


2,472,825



2,668,224



(195,399)


(7%)



Depreciation, amortization and accretion


593,410



439,391



154,019


35%



Loss on asset disposals, net


16,153



15,967



186


1%



(Gain) loss on sale of business and other exit costs, net


(243,627)



(4,148)



(239,479)


>100%






2,838,761



3,119,434



(280,673)


(9%)


TDS Telecom













Expenses excluding depreciation, amortization and accretion


493,090



453,918



39,172


9%



Depreciation, amortization and accretion


149,552



143,639



5,913


4%



(Gain) loss on asset disposals, net


(53)



738



(791)


>(100%)



(Gain) loss on sale of business and other exit costs, net




39



(39)


N/M






642,589



598,334



44,255


7%


All Other (1)













Expenses excluding depreciation and amortization


25,480



31,418



(5,938)


(19%)



Depreciation and amortization


8,613



9,132



(519)


(6%)



Loss on impairment of assets




515



(515)


N/M



(Gain) loss on asset disposals, net


(10)



11



(21)


>(100%)



(Gain) loss on sale of business and other exit costs, net


(54,010)





(54,010)


N/M






(19,927)



41,076



(61,003)


>(100%)


















Total operating expenses


3,461,423



3,758,844



(297,421)


(8%)

Operating income (loss)












U.S. Cellular


177,351



217,444



(40,093)


(18%)


TDS Telecom


32,475



34,677



(2,202)


(6%)


All Other  (1)


46,470



(11,897)



58,367


>(100%)






256,296



240,224



16,072


7%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


100,303



73,796



26,507


36%


Interest and dividend income


6,685



6,894



(209)


(3%)


Gain (loss) on investments


14,518



(3,728)



18,246


>(100%)


Interest expense


(73,208)



(68,100)



(5,108)


(8%)


Other, net


(206)



196



(402)


>(100%)



Total investment and other income


48,092



9,058



39,034


>100%

Income before income taxes


304,388



249,282



55,106


22%


Income tax expense


130,056



85,619



44,437


52%

Net income


174,332



163,663



10,669


7%


Less: Net income attributable to noncontrolling interests, net of tax


26,348



39,955



(13,607)


(34%)

Net income attributable to TDS shareholders


147,984



123,708



24,276


20%


Preferred dividend requirement


(37)



(37)




Net income available to common shareholders

$

147,947


$

123,671


$

24,276


20%















Basic weighted average shares outstanding


108,405



108,735



(330)


Basic earnings per share attributable to TDS shareholders

$

1.36


$

1.14


$

0.22


19%















Diluted weighted average shares outstanding


108,993



109,018



(25)


Diluted earnings per share attributable to TDS shareholders

$

1.35


$

1.13


$

0.22


19%












(1)

Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations. TDS recognized an incremental $53.5 million upon closing of the Divestiture Transaction as a result of lower asset basis in 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, 



2013


2012

Current assets







Cash and cash equivalents

$

711,089


$

740,481


Short-term investments


45,162



115,700


Accounts receivable from customers and others


686,811



574,328


Inventory


149,489



160,692


Net deferred income tax asset


62,479



43,411


Prepaid expenses


94,989



86,385


Income taxes receivable


1,909



9,625


Other current assets


36,011



32,815




1,787,939



1,763,437








Assets held for sale


78,413



163,242








Investments







Licenses


1,420,541



1,480,039


Goodwill


821,155



797,194


Franchise rights


123,668




Other intangible assets, net


59,841



58,522


Investments in unconsolidated entities


345,411



179,921


Long-term investments


40,099



50,305


Other investments


689



824




2,811,404



2,566,805








Property, plant and equipment, net







U.S. Cellular


2,874,593



3,022,588


TDS Telecom


969,318



934,188


Other


37,924



40,490




3,881,835



3,997,266








Other assets and deferred charges


140,109



133,150








Total assets

$

8,699,700


$

8,623,900

 


Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)










LIABILITIES AND EQUITY























September 30, 


December 31, 





2013


2012

Current liabilities








Current portion of long-term debt

$

1,806


$

1,233



Accounts payable


398,867



377,291



Customer deposits and deferred revenues


244,526



222,345



Accrued interest


15,799



6,565



Accrued taxes


107,183



48,237



Accrued compensation


97,266



134,932



Other current liabilities


142,851



134,005






1,008,298



924,608










Liabilities held for sale


471



19,594










Deferred liabilities and credits








Net deferred income tax liability


851,396



862,580



Other deferred liabilities and credits


445,596



438,727










Long-term debt


1,721,085



1,721,571










Noncontrolling interests with redemption features


540



493










Equity







TDS shareholders' equity








Series A Common and Common Shares, par value $.01


1,327



1,327



Capital in excess of par value


2,301,983



2,304,122



Treasury shares, at cost


(727,577)



(750,099)



Accumulated other comprehensive loss


(8,656)



(8,132)



Retained earnings


2,555,765



2,464,318




   Total TDS shareholders' equity


4,122,842



4,011,536











Preferred shares


825



825


Noncontrolling interests


548,647



643,966












Total equity


4,672,314



4,656,327










Total liabilities and equity

$

8,699,700


$

8,623,900

 


Balance Sheet Highlights

September 30, 2013

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

183,101


$

91,200


$

436,788


$

 ― 


$

711,089

Affiliated cash investments


 ― 



428,258



 ― 



(428,258)



 ― 

Short-term investments


45,162



 ― 



 ― 



 ― 



45,162



$

228,263


$

519,458


$

436,788


$

(428,258)


$

756,251


















Licenses, goodwill and other intangible assets

$

1,785,248


$

769,748


$

(129,791)


$

 ― 


$

2,425,205

Investment in unconsolidated entities


309,481



3,809



39,491



(7,370)



345,411

Long-term and other investments


40,099



689



 ― 



 ― 



40,788




$

2,134,828


$

774,246


$

(90,300)


$

(7,370)


$

2,811,404



































Property, plant and equipment, net

$

2,874,593


$

969,318


$

37,924


$

 ― 


$

3,881,835


















Long-term debt:
















Current portion

$

102


$

98


$

1,606


$

 ― 


$

1,806


Non-current portion


878,939



1,470



840,676



 ― 



1,721,085




$

879,041


$

1,568


$

842,282


$

 ― 


$

1,722,891

 


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, 2013 and December 31, 2012.










September 30,


December 31,


2013


2012








Cash and cash equivalents

$

711,089


$

740,481








Amounts included in short-term investments (1) (2)







U.S. Treasury Notes


45,162



115,700








Amounts included in long-term investments (1) (3)







U.S. Treasury Notes


40,099



50,305








Total cash and cash equivalents and investments

$

796,350


$

906,486


(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.

(3)

At September 30, 2013, maturities range between 14 and 15 months.

 


Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Nine Months Ended September 30,

(Unaudited, dollars in thousands)






2013


2012

Cash flows from operating activities







Net income

$

174,332


$

163,663



Add (deduct) adjustments to reconcile net income to net cash flows

  from operating activities










Depreciation, amortization and accretion


751,575



592,162





Bad debts expense


56,693



56,597





Stock-based compensation expense


21,867



31,724





Deferred income taxes, net


(30,748)



52,169





Equity in earnings of unconsolidated entities


(100,303)



(73,796)





Distributions from unconsolidated entities


51,879



45,558





Loss on impairment of assets




515





Loss on asset disposals, net


16,090



16,716





(Gain) loss on sale of business and other exit costs, net


(297,637)



(4,109)





(Gain) loss on investments


(14,518)



3,728





Noncash interest expense


1,498



2,555





Other operating activities


575



1,650



Changes in assets and liabilities from operations










Accounts receivable


(216,700)



(69,478)





Inventory


11,114



(70,918)





Accounts payable


33,312



(37,728)





Customer deposits and deferred revenues


21,883



28,323





Accrued taxes


41,838



107,502





Accrued interest


9,451



9,488





Other assets and liabilities


(94,301)



(95,785)







437,900



760,536











Cash flows from investing activities







Cash used for additions to property, plant and equipment


(631,370)



(730,897)


Cash paid for acquisitions and licenses


(280,383)



(97,523)


Cash received from divestitures


484,300



50,182


Cash paid for investments




(45,000)


Cash received for investments


80,000



143,444


Other investing activities


13,860



(13,121)







(333,593)



(692,915)











Cash flows from financing activities







Repayment of long-term debt


(1,196)



(2,435)


Issuance of long-term debt




358


TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments


7,537



(23)


U.S. Cellular Common Shares reissued for benefit plans, net of tax payments


2,840



(2,299)


Repurchase of TDS Common Shares


(5,813)




Repurchase of U.S. Cellular Common Shares


(18,544)




Dividends paid to TDS shareholders


(41,430)



(39,930)


U.S. Cellular dividends paid to noncontrolling public shareholders


(75,235)




Payment of debt issuance costs


(23)




Distributions to noncontrolling interests


(3,447)



(1,491)


Other financing activities


1,612



4,208







(133,699)



(41,612)











Net increase (decrease) in cash and cash equivalents


(29,392)



26,009

Cash and cash equivalents







Beginning of period


740,481



563,275


End of period

$

711,089


$

589,284

 

TDS Telecom Highlights

 Three Months Ended September 30,

(Unaudited, dollars in thousands)

























Increase (Decrease)





2013


2012


Amount


Percent

Wireline












Operating revenues













Residential

$

74,257


$

74,434


$

(177)




Commercial


57,787



57,493



294


1%



Wholesale


49,756



52,139



(2,383)


(5%)






181,800



184,066



(2,266)


(1%)


Operating expenses













Cost of services and products


68,249



67,740



509




Selling, general and administrative expenses


53,254



57,619



(4,365)


(8%)



Depreciation, amortization and accretion


42,136



42,800



(664)


(2%)



Loss on asset disposals and exchanges, net


426



345



81


23%






164,065



168,504



(4,439)


(3%)
















Operating income

$

17,735


$

15,562


$

2,173


14%















Cable












Operating revenues













Residential

$

11,642


$


$

11,642


N/M



Commercial


2,720





2,720


N/M






14,362





14,362


N/M


Operating expenses













Cost of services and products


6,727





6,727


N/M



Selling, general and administrative expenses


5,184





5,184


N/M



Depreciation, amortization and accretion


2,914





2,914


N/M






14,825





14,825


N/M
















Operating loss

$

(463)


$


$

(463)


N/M















HMS












Operating revenues

$

38,727


$

36,428


$

2,299


6%


Operating expenses













Cost of services and products


27,518



25,332



2,186


9%



Selling, general and administrative expenses


10,064



10,901



(837)


(8%)



Depreciation, amortization and accretion


6,255



5,451



804


15%



Loss on asset disposals and exchanges, net


10



6



4


67%






43,847



41,690



2,157


5%
















Operating loss

$

(5,120)


$

(5,262)


$

142


3%















Intercompany revenues

$

(346)


$

(77)


$

(269)


>(100)%

Intercompany expenses


(346)



(77)



(269)


>(100)%















Total TDS Telecom operating income

$

12,152


$

10,300


$

1,852


18%

 

Previously, TDS Telecom had reported Results of Operations for its incumbent local exchange carrier ("ILEC"), its competitive local exchange carrier ("CLEC") and Hosted and Managed Services ("HMS") segments.  As a result of recent acquisitions and changes in TDS' strategy, operations and internal reporting, TDS has reevaluated and changed its operating segments during the quarter ended September 30, 2013, which resulted in the following reportable segments: Wireline, Cable and HMS.  The Wireline segment consists of the former ILEC and CLEC segments.  The Cable segment consists of Baja Broadband, LLC, which was acquired in August 2013.  Periods presented for comparative purposes have been re-presented to conform to the revised presentation.


 

TDS Telecom Highlights

Nine Months Ended September 30,

(Unaudited, dollars in thousands)

























Increase (Decrease)





2013


2012


Amount


Percent

Wireline












Operating revenues













Residential

$

220,172


$

223,041


$

(2,869)




Commercial


173,702



172,299



1,403




Wholesale


151,694



160,977



(9,283)


(6%)






545,568



556,317



(10,749)


(2%)


Operating expenses













Cost of services and products


202,521



205,088



(2,567)


(1%)



Selling, general and administrative expenses


167,326



174,534



(7,208)


(4%)



Depreciation, amortization and accretion


129,352



129,367



(15)




(Gain) loss on asset disposals and exchanges, net


(176)



672



(848)


>(100)%






499,023



509,661



(10,638)


(2%)
















Operating income

$

46,545


$

46,656


$

(111)
















Cable












Operating revenues













Residential

$

11,642


$


$

11,642


N/M



Commercial


2,720





2,720


N/M






14,362





14,362


N/M


Operating expenses













Cost of services and products


6,727





6,727


N/M



Selling, general and administrative expenses


5,184





5,184


N/M



Depreciation, amortization and accretion


2,914





2,914


N/M






14,825





14,825


N/M
















Operating loss

$

(463)


$


$

(463)


N/M















HMS












Operating revenues

$

115,665


$

76,862


$

38,803


50%


Operating expenses













Cost of services and products


82,517



50,196



32,321


64%



Selling, general and administrative expenses


29,346



24,268



5,078


21%



Depreciation, amortization and accretion


17,286



14,272



3,014


21%



Loss on asset disposals and exchanges, net


123



105



18


17%






129,272



88,841



40,431


46%
















Operating loss

$

(13,607)


$

(11,979)


$

(1,628)


(14%)















Intercompany revenues

$

(531)


$

(168)


$

(363)


>(100)%

Intercompany expenses


(531)



(168)



(363)


>(100)%















Total TDS Telecom operating income

$

32,475


$

34,677


$

(2,202)


(6%)

 

Previously, TDS Telecom had reported Results of Operations for its incumbent local exchange carrier ("ILEC"), its competitive local exchange carrier ("CLEC") and Hosted and Managed Services ("HMS") segments.  As a result of recent acquisitions and changes in TDS' strategy, operations and internal reporting, TDS has reevaluated and changed its operating segments during the quarter ended September 30, 2013, which resulted in the following reportable segments: Wireline, Cable and HMS.  The Wireline segment consists of the former ILEC and CLEC segments.  The Cable segment consists of Baja Broadband, LLC, which was acquired in August 2013.  Periods presented for comparative purposes have been re-presented to conform to the revised presentation.

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,



2013


2012


2013


2012

















Cash flows from operating activities


$

(83,592)


$

253,626


$

437,900


$

760,536


Deduct:














Cash used for additions to property, plant

  and equipment



247,089



229,686



631,370



730,897



Free cash flow (1)


$

(330,681)


$

23,940


$

(193,470)


$

29,639


(1)

Free cash flow is defined as Cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure. TDS believes that free cash flow as reported by TDS is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

 

Rates

View Comments (0)