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TDS Reports First Quarter 2011 Results

05/06/2011
U.S. Cellular accelerates 4G/LTE deployment and increases capacity for data usage

CHICAGO, May 6, 2011 /PRNewswire via COMTEX/ --

Note: Comparisons are year over year unless otherwise noted.

1Q 2011 Highlights

TDS Corporate

  • Operating revenues increased 3 percent to $1.3 billion.
  • Repurchased 407,281 TDS Special Common Shares for $11.6 million.

U.S. Cellular

  • A net loss of 31,000 retail customers, reflecting a loss of 22,000 postpaid customers and 9,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
  • Service revenues were $985.1 million, up 2.1 percent.
  • Postpaid ARPU (average revenue per unit) increased to $51.21 from $50.70.
  • Postpaid churn improved to 1.37 percent from 1.41 percent.
  • 5 percent increase in cell sites in service to 7,663.

TDS Telecom

  • Operating revenues increased 2 percent to $199 million.
  • Operating income increased 24 percent.
  • managedIP stations (ILEC and CLEC) grew to 31,500 from 16,600.

As previously announced, TDS will hold a teleconference May 6, 2011 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, TDS.S) reported operating revenues of $1,258.7 million for the first quarter of 2011, an increase of 3 percent from $1,222.4 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $41.6 million and $0.40, respectively, for the first quarter of 2011, compared to $48.4 million and $0.45, respectively, in the comparable period one year ago.

"U.S. Cellular and TDS Telecom continued to make progress on their strategic priorities in the quarter," said LeRoy T. Carlson, Jr., TDS president and CEO. "Both companies are increasing their investments in network capabilities this year to enhance our customers' experiences and to ensure strong foundations for future growth.

"U.S. Cellular continued to drive demand for smartphones and data use, leading to higher average revenue per customer. The high expected lifetime value of smartphone customers is an important part of the company's long-term strategy, and justifies the initial impact on profitability. To ensure outstanding data experiences for our customers, and better manage the long-term costs, U.S. Cellular is increasing data capacity and accelerating its 4G/LTE rollout, and has increased its capital expenditure guidance.

"U.S. Cellular's customer additions were disappointing, particularly in light of growing levels of customer satisfaction. The company is refocusing its marketing and sales strategies to increase awareness, consideration, and acquisition of potential switchers from other wireless carriers.

"TDS Telecom again delivered good financial results, continuing to increase revenues and improve operating margins. The company grew ILEC data revenues through its hosted and managed services offerings and increases in high-speed data customers. TDS Telecom's commercial strategy continued to drive growth in managedIP stations, and the company is actively pursuing additional opportunities to build its hosted and managed services offerings."

Guidance for year ending Dec. 31, 2011

Guidance for the year ending Dec. 31, 2011 as of May 6, 2011 is provided below, compared to the previous guidance provided on Feb. 24, 2011. 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 this guidance.


U.S. Cellular

Current Estimates


Previous Estimates (1)


Service revenues

$4,000-$4,100 million


Unchanged


Adjusted OIBDA (2) (4)

$775-$875 million


Unchanged


Operating income (3) (4)

$185-$285 million


Unchanged


Depreciation, amortization and accretion expenses, and





losses on asset disposals and impairment of assets (3)

Approx. $590 million


Unchanged


Capital expenditures (4)

$750-$800 million


Approx. $650 million







TDS Telecom





Operating revenues

$780-$810 million


Unchanged


Adjusted OIBDA (2)

$260-$290 million


Unchanged


Operating income (3)

$75-$105 million


Unchanged


Depreciation, amortization and accretion expenses, and





losses on asset disposals and impairment of assets (3)

Approx. $185 million


Unchanged


Capital expenditures (5)

$175-$200 million


Unchanged


(1)

The 2011 Estimated Results as disclosed in the TDS Annual Report on Form 10-K for the year ended December 31, 2010.



(2)

Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows.



(3)

The 2011 Estimated Results do not include any estimate for losses on impairment of assets since these cannot be predicted.



(4)

This guidance is based on U.S. Cellular's current plans, which include a multi-year deployment of Long-term Evolution ("LTE") technology commencing in 2011. As customer demand for data services increases, and competitive conditions in the wireless industry evolve, such as the rate of deployment of LTE technology by other carriers, the timing of U.S. Cellular's deployment of LTE and the timing of other capital expenditures could change. These factors could affect U.S. Cellular's estimated capital expenditures and operating expenses in 2011.



(5)

The capital expenditure guidance does not include federal grants of $105.1 million awarded to TDS Telecom through the Broadband Stimulus program under the American Recovery and Reinvestment Act for 44 projects to be completed between 2011 and 2013.

Stock repurchase summary

The following represents repurchases of TDS Common Shares and TDS Special Common Shares.



Repurchase Period


# Shares


Cost (in millions)


2011 (first quarter)


407,281


$

11.6


2010 (full year)


2,394,476


$

68.1


2009 (full year)


6,374,741


$

176.6


2008 (full year)


5,861,822


$

199.6


Total


15,038,320


$

455.9









Conference call information

TDS will hold a conference call on May 6, 2011 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, local and long-distance telephone, and broadband services to approximately 7.1 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS employed 12,100 people as of March 31, 2011.

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: the ability of the company to successfully 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; 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; and changes in customer growth rates, average monthly revenue per unit, 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 used by TDS to furnish this press release to the 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

Summary Operating Data (Unaudited)

















Quarter Ended


3/31/2011



12/31/2010



9/30/2010



6/30/2010



3/31/2010

Total population
















Consolidated markets(1)


91,090,000



90,468,000



90,468,000



90,468,000



90,468,000


Consolidated operating markets(1)


46,774,000



46,546,000



46,546,000



46,546,000



46,546,000

Market penetration at end of period
















Consolidated markets(2)


6.6%



6.7%



6.7%



6.8%



6.8%


Consolidated operating markets(2)


12.9%



13.0%



13.1%



13.2%



13.2%

All customers
















Total at end of period


6,033,000



6,072,000



6,103,000



6,144,000



6,147,000


Gross additions


293,000



327,000



338,000



349,000



358,000


Net additions (losses)


(39,000)



(31,000)



(41,000)



(3,000)



6,000


Smartphones sold as a percent of
















total devices sold(3)


42.5%



39.6%



23.6%



15.8%



16.6%

Retail customers
















Total at end of period


5,698,000



5,729,000



5,750,000



5,775,000



5,768,000


Smartphone penetration (3) (4)


20.2%



16.6%



12.0%



10.1%



8.9%


Gross additions


256,000



292,000



301,000



307,000



305,000


Net retail additions (losses)(5)


(31,000)



(21,000)



(25,000)



7,000



24,000


Net postpaid additions (losses)


(22,000)



(10,000)



(25,000)



(22,000)



(9,000)


Net prepaid additions (losses)


(9,000)



(11,000)



---



29,000



33,000

Service revenue components (000s)
















Retail service

$

864,602


$

864,905


$

865,766


$

863,836


$

865,039


Inbound roaming


64,386



67,545



72,901



60,902



51,942


Other


56,125



59,464



44,836



47,838



48,027

Total service revenues (000s)

$

985,113


$

991,914


$

983,503


$

972,576


$

965,008

Total ARPU(6)

$

54.29


$

54.37


$

53.53


$

52.71


$

52.41

Billed ARPU(7)

$

47.65


$

47.41


$

47.12


$

46.81


$

46.98

Postpaid ARPU(8)

$

51.21


$

50.99


$

50.82


$

50.55


$

50.70

Postpaid churn rate(9)


1.4%



1.5%



1.6%



1.4%



1.4%

Capital expenditures (000s)

$

95,900


$

203,400


$

124,700


$

133,500


$

121,500

Cell sites in service


7,663



7,645



7,524



7,416



7,310


(1)

Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.



(2)

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.

(3)

Smartphones represent wireless devices which run on a Blackberry®, Windows Mobile, or Android operating system.

(4)

Smartphone penetration is calculated by dividing postpaid customers on smartphone service plans by total postpaid customers.

(5)

Includes net postpaid additions (losses) and net prepaid additions (losses).

(6)

Total ARPU - Average monthly service revenue per customer includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.

(7)

Billed ARPU - Average monthly billed revenue per customer is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.

(8)

Postpaid ARPU - Average monthly revenue per postpaid customer is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.

(9)

Represents the percentage of the retail postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.


TDS Telecom

Summary Operating Data (Unaudited)

















Quarter Ended


3/31/2011



12/31/2010



9/30/2010



6/30/2010



3/31/2010

TDS Telecom
















ILEC:
















Equivalent access lines (1)


765,300



767,200



773,800



779,200



778,700


Physical access lines (2)


501,200



507,700



517,000



525,000



530,400


High-speed data customers (3)


231,800



227,700



225,400



223,200



217,400


Long-distance customers


370,600



370,100



370,800



369,100



365,600


managedIP stations (4)


4,300



3,600



3,100



2,700



2,300


Capital expenditures (000s)

$

22,100


$

55,700


$

33,000


$

28,200


$

20,200


CLEC:
















Equivalent access lines (1)


331,000



335,400



338,700



343,100



349,300


High-speed data customers (3)


32,300



33,100



33,900



35,000



36,000


managedIP stations (4)


27,200



23,800



20,300



17,000



14,300


Capital expenditures (000s)

$

4,200


$

6,200


$

5,500


$

5,400


$

3,200


(1)

Sum of physical access lines and high-capacity data lines, adjusted to estimate the equivalent number of physical access lines in terms of capacity, plus the number of managedIP stations.

(2)

Individual circuits connecting customers to a telephone company's central office facilities.

(3)

The number of customers provided high-capacity data circuits via various technologies, including DSL, managedIP and dedicated Internet circuit technologies.

(4)

The number of telephone handsets providing communications using packet networking technology.


Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended March 31,


(Unaudited, dollars and shares in thousands, except per share amounts)

































Increase/ (Decrease)






2011



2010



Amount



Percent


Operating revenues

















U.S. Cellular

$

1,057,092



$

1,023,857



$

33,235




3%



TDS Telecom


198,916




195,505




3,411




2%



All Other (1)


2,673




3,073




(400)




(13%)







1,258,681




1,222,435




36,246




3%


Operating expenses

















U.S. Cellular


















Expenses excluding depreciation, amortization and accretion


853,967




797,824




56,143




7%




Depreciation, amortization and accretion


145,045




143,233




1,812




1%




Loss on asset disposals, net


1,037




5,176




(4,139)




(80%)







1,000,049




946,233




53,816




6%



TDS Telecom


















Expenses excluding depreciation, amortization and accretion


121,769




125,865




(4,096)




(3%)




Depreciation, amortization and accretion


44,837




43,423




1,414




3%




Loss on asset disposals, net


104




345




(241)




(70%)







166,710




169,633




(2,923)




(2%)



All Other (1)


















Expenses excluding depreciation and amortization


2,116




1,930




186




10%




Depreciation and amortization


2,636




2,733




(97)




(4%)




Loss on asset disposals, net


2




(90)




92




>(100)%







4,754




4,573




181




4%
























Total operating expenses


1,171,513




1,120,439




51,074




5%


Operating income (loss)

















U.S. Cellular


57,043




77,624




(20,581)




(27%)



TDS Telecom


32,206




25,872




6,334




24%



All Other (1)


(2,081)




(1,500)




(581)




(39%)







87,168




101,996




(14,828)




(15%)


Investment and other income (expense)

















Equity in earnings of unconsolidated entities


19,388




24,903




(5,515)




(22%)



Interest and dividend income


2,624




2,441




183




7%



Interest expense


(28,099)




(28,958)




859




3%



Other, net


80




(190)




270




>(100)%





Total investment and other income (expense)


(6,007)




(1,804)




(4,203)




>100%


Income before income taxes


81,161




100,192




(19,031)




(19%)



Income tax expense


28,917




37,923




(9,006)




(24%)


Net Income


52,244




62,269




(10,025)




(16%)



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


(10,622)




(13,855)




3,233




23%


Net income attributable to TDS shareholders


41,622




48,414




(6,792)




(14%)



Preferred dividend requirement


(12)




(12)




--




--


Net income available to common shareholders

$

41,610



$

48,402



$

(6,792)




(14%)





















Basic weighted average shares outstanding


104,025




105,938




(1,913)




(2%)


Basic earnings per share attributable to TDS shareholders

$

0.40



$

0.46



$

(0.06)




(13%)





















Diluted weighted average shares outstanding


104,554




106,250




(1,696)




(2%)


Diluted earnings per share attributable to TDS shareholders

$

0.40



$

0.45



$

(0.05)




(11%)



(1)

Consists of Suttle Straus printing and distribution operations, corporate operations and intercompany eliminations.



N/M - Percentage change not meaningful


Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)









ASSETS




















March 31,


December 31,




2011


2010

Current assets







Cash and cash equivalents

$

592,010


$

368,134


Restricted Cash - redemption of 7.6% Series A notes


282,500



--


Short-term investments


299,518



402,882


Accounts receivable from customers and others


490,266



512,946


Inventory


113,352



116,330


Net deferred income tax asset


37,079



37,079


Prepaid expenses


87,796



76,935


Prepaid income taxes


21,026



64,386


Other current assets


15,516



17,384





1,939,063



1,596,076









Investments







Licenses


1,460,426



1,460,126


Goodwill


728,455



728,455


Other intangible assets


28,611



30,810


Investments in unconsolidated entities


206,925



197,922


Long-term investments


81,570



102,185


Other investments


8,850



8,988





2,514,837



2,528,486









Property, plant and equipment, net







U.S. Cellular


2,567,274



2,615,072


TDS Telecom


893,497



909,951


Other


36,738



33,311





3,497,509



3,558,334









Other assets and deferred charges


119,892



79,623









Total assets

$

8,071,301


$

7,762,519



Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)













LIABILITIES AND STOCKHOLDERS' EQUITY




























March 31,



December 31,






2011



2010













Current liabilities









Current portion of long-term debt

$

284,166



$

1,711



Accounts payable


329,522




344,355



Customer deposits and deferred revenues


182,123




171,781



Accrued interest


19,322




2,718



Accrued taxes


42,504




46,110



Accrued compensation


67,124




99,020



Other current liabilities


101,768




144,938







1,026,529




810,633













Deferred liabilities and credits









Net deferred income tax liability


634,544




585,468



Other deferred liabilities and credits


408,378




404,892













Long-term debt


1,517,176




1,499,862













Noncontrolling interests with redemption features


894




855













Equity









TDS shareholders' equity










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


1,270




1,270




Capital in excess of par value


2,113,848




2,107,929




Special Common and Common Treasury shares, at cost


(748,063)




(738,695)




Accumulated other comprehensive loss


(3,159)




(3,208)




Retained earnings


2,475,301




2,446,626





Total TDS shareholders' equity


3,839,197




3,813,922














Preferred shares


830




830



Noncontrolling interests


643,753




646,057















Total equity


4,483,780




4,460,809













Total liabilities and equity

$

8,071,301



$

7,762,519




Balance Sheet Highlights

March 31, 2011

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

421,294


$

5,930


$

164,786


$

-


$

592,010

Affiliated cash investments


-



394,240



-



(394,240)



-

Short-term investments


121,252



74,235



104,031



-



299,518



$

542,546


$

474,405


$

268,817


$

(394,240)


$

891,528


















Licenses, goodwill and other intangible assets

$

1,947,786


$

463,589


$

(193,883)


$

-


$

2,217,492

Investment in unconsolidated entities


171,485



3,809



40,348



(8,717)



206,925

Long-term and other investments


39,770



1,440



49,210



-



90,420




$

2,159,041


$

468,838


$

(104,325)


$

(8,717)


$

2,514,837



































Property, plant and equipment, net

$

2,567,274


$

893,497


$

36,738


$

-


$

3,497,509


















Long-term debt:
















Current portion

$

101


$

269


$

283,796


$

-


$

284,166


Non-current portion


868,102



1,930



647,144



-



1,517,176



Total

$

868,203


$

2,199


$

930,940


$

-


$

1,801,342


















Preferred shares

$

-


$

-


$

830


$

-


$

830


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 March 31, 2011 and December 31, 2010.







March 31,


December 31,




2011


2010












Cash and cash equivalents


$

592,010


$

368,134


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









Government-backed securities (3)




225,033



305,612



Certificates of deposit (4)




74,485



97,270






$

299,518


$

402,882












Amounts included in long-term investments (1) (5)









Government-backed securities (3)



$

81,570


$

102,185


(1)

Designated as held-to-maturity investments and recorded at amortized cost on the consolidated balance sheet.

(2)

Maturities are less than twelve months from the respective balance sheet dates.

(3)

Includes U.S. treasuries and corporate notes that are guaranteed under the FDIC's Temporary Liquidity Guarantee Program.

(4)

TDS' investments in certificates of deposits are insured by the FDIC.

(5)

At March 31, 2011, maturities range between 14 and 21 months from the balance sheet date.


Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Three Months Ended March 31,

(Unaudited, dollars in thousands)






2011


2010

Cash flows from operating activities







Net income

$

52,244


$

62,269



Add (deduct) adjustments to reconcile net income to net









cash flows from operating activities










Depreciation, amortization and accretion


192,518



189,389





Bad debts expense


14,285



20,245





Stock-based compensation expense


9,459



7,444





Deferred income taxes, net


47,841



(13,874)





Equity in earnings of unconsolidated entities


(19,388)



(24,903)





Distributions from unconsolidated entities


8,439



7,243





Loss on asset disposals, net


1,143



5,431





Other operating activities


2,034



948



Changes in assets and liabilities










Accounts receivable


8,438



9,648





Inventory


2,978



(947)





Accounts payable


(15,134)



(40,676)





Customer deposits and deferred revenues


10,342



784





Accrued taxes


17,590



36,498





Accrued interest


16,662



9,212





Other assets and liabilities


(87,661)



(58,051)







261,790



210,660











Cash flows from investing activities







Additions to property, plant and equipment


(127,463)



(146,622)


Cash paid for acquisitions and licenses


--



(21,118)


Cash paid for investments


--



(50,000)


Cash received for investments


122,785



15,561


Transfer of cash to Restricted cash


(282,500)



--


Other investing activities


(1,503)



439







(288,681)



(201,740)











Cash flows from financing activities







Repayment of long-term debt


(402)



(697)


Issuance of long-tem debt


300,000



--


TDS Common Shares and Special Common Shares








reissued for benefit plans, net of tax payments


587



463


U.S. Cellular Common Shares reissued for benefit








plans, net of tax payments


1,305



486


Repurchase of TDS Common and Special Common Shares


(11,603)



(14,810)


Repurchase of U.S. Cellular Common Shares


(17,357)



(5,186)


Dividends paid


(12,197)



(11,891)


Payment of debt issuance costs


(9,848)



--


Distributions to noncontrolling interests


(686)



(2,284)


Other financing activities


968



(527)







250,767



(34,446)











Net increase (decrease) in cash and cash equivalents


223,876



(25,526)

Cash and cash equivalents







Beginning of period


368,134



670,992


End of period

$

592,010


$

645,466



TDS Telecom Highlights


Three Months Ended March 31,


(Unaudited, dollars in thousands)
































Increase (Decrease)






2011



2010



Amount


Percent


Local Telephone Operations
















Operating revenues

















Voice

$

43,170



$

44,558



$

(1,388)



(3%)




Data


36,152




28,298




7,854



28%




Network access


66,172




67,942




(1,770)



(3%)




Miscellaneous


10,322




9,358




964



10%







155,816




150,156




5,660



4%



Operating expenses

















Cost of services and products


47,684




46,492




1,192



3%




Selling, general and administrative expenses


38,193




41,737




(3,544)



(8%)




Depreciation, amortization and accretion


39,347




37,058




2,289



6%




Loss on asset disposals, net


73




260




(187)



(72%)







125,297




125,547




(250)



--





















Operating income

$

30,519



$

24,609



$

5,910



24%




















Competitive Local Exchange Carrier Operations

















Revenues

$

45,328



$

47,743



$

(2,415)



(5%)




Expenses (excluding Depreciation, amortization

















and accretion)


38,120




40,030




(1,910)



(5%)




Depreciation, amortization and accretion


5,490




6,365




(875)



(14%)




Loss on asset disposals, net


31




85




(54)



(64%)







43,641




46,480




(2,839)



(6%)





















Operating income

$

1,687



$

1,263



$

424



34%




















Intercompany revenues

$

(2,228)



$

(2,394)



$

166



7%


Intercompany expenses


(2,228)




(2,394)




166



7%




















Total TDS Telecom operating income

$

32,206



$

25,872



$

6,334



24%




Telephone and Data Systems, Inc.


Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

Three Months Ended March 31, 2011


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated

Total




















Operating revenues


$

1,057,092


$

198,916


$

2,673


$

1,258,681



Deduct:
















U.S. Cellular equipment sales revenue



71,979














Service revenues



985,113





























Operating income (loss)



57,043



32,206



(2,081)



87,168



Add (Deduct):
















Depreciation, amortization and accretion



145,045



44,837



2,636



192,518




Loss on impairment of intangible assets



--



--



--



--




(Gain) Loss on asset disposals



1,037



104



2



1,143





Adjusted OIBDA (3)


$

203,125


$

77,147


$

557


$

280,829






















Adjusted OIBDA margin (4)



20.6%



38.8%

























Three Months Ended March 31, 2010


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated Total




















Operating revenues


$

1,023,857


$

195,505


$

3,073


$

1,222,435



Deduct:
















U.S. Cellular equipment sales revenue



58,849














Service revenues



965,008





























Operating income



77,624



25,872



(1,500)



101,996



Add:
















Depreciation, amortization and accretion



143,233



43,423



2,733



189,389




Loss on impairment of intangible assets



--



--



--



--




Loss on asset disposals



5,176



345



(90)



5,431





Adjusted OIBDA (3)


$

226,033


$

69,640


$

1,143


$

296,816






















Adjusted OIBDA margin (4)



23.4%



35.6%















































TDS Consolidated








Three Months Ended March 31,


2011


2010


























Cash flows from operating activities


$

261,790


$

210,660









Deduct:
















Capital expenditures



127,463



146,622











Free cash flow (5)


$

134,327


$

64,038









(1)

Includes ILEC and CLEC intercompany eliminations.

(2)

Consists of a non-reportable segment (Suttle-Straus), corporate operations and, intercompany eliminations between U.S. Cellular, TDS Telecom and corporate investments. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.

(3)

Adjusted OIBDA is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.

(4)

Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues (U.S. Cellular) and operating revenues (TDS Telecom). Equipment revenues are excluded from the denominator of the U.S. Cellular calculation since equipment is generally sold at a net loss, and such net loss is included in adjusted OIBDA as a cost of earning service revenues for purposes of assessing business results. TDS believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular's business results. Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.

(5)

Free cash flow is defined as cash flows from operating activities minus capital expenditures. 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.

SOURCE Telephone and Data Systems, Inc.

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