News Details

TDS Reports First Quarter 2013 Results

05/03/2013

U.S. Cellular to offer Apple products later this year; updates 2013 guidance

CHICAGO, May 3, 2013 /PRNewswire/ -- As previously announced, TDS will hold a teleconference May 3, 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 $1,308.6 million for the first quarter of 2013, versus $1,305.8 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $1.4 million and $0.01 respectively, for the first quarter of 2013, compared to $52.3 million and $0.48, respectively, in the comparable period one year ago.  

As previously announced on Nov. 7, 2012, U.S. Cellular reached a definitive agreement to sell its Chicago, St. Louis, central Illinois and three other markets (the "Divestiture Markets") to subsidiaries of Sprint Nextel Corporation (NYSE:S) for $480 million (the "Divestiture Transaction").  The transaction has been approved by the FCC and is expected to close in the second quarter 2013. 

"U.S. Cellular and TDS Telecom moved forward aggressively with their strategic initiatives, though higher smartphone subsidies, reductions in regulatory support, and investment spending continued to impact profitability," said LeRoy T. Carlson, Jr., TDS president and CEO.

"U.S. Cellular further expanded customer access to 4G LTE speeds and devices in its core markets, driving growth in smartphone penetration, data use and postpaid ARPU. Through its distribution with Walmart, U.S. Cellular increased net prepaid customer additions. Postpaid gross customer additions in core markets were flat, and elevated churn resulted in a net customer loss. To drive customer growth and reduce churn, U.S. Cellular will begin offering Apple products later this year, adding to its strong portfolio of iconic devices, like the recently launched 4G LTE Samsung Galaxy S® 4. U.S. Cellular continued its efforts to expand distribution in April by offering postpaid service through Sam's Club locations in 14 states, and the company is aggressively targeting key segments like small and medium businesses.

"TDS Telecom continued to build its ILEC residential customer base with TDS TV® and faster broadband speeds, and increased average revenue per ILEC residential connection. The company's residential strategy is to increase broadband and video penetration through service bundling. TDS Telecom maintained strong sales of its commercial managedIP products, and plans to continue to expand the portfolio. Hosted and managed services revenues were driven primarily by a 2012 acquisition, as the HMS business continues to integrate its offerings to provide comprehensive, end-to-end IT solutions to mid-market customers.  In February, TDS Telecom announced an agreement to acquire cable company Baja Broadband, which will expand the company's customer base and provide opportunities for future growth."

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 of TDS' Form 10-Q for the quarter ended March 31, 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 EstimatedResults (1)




U.S. Cellular (2)


TDS Telecom (3)


TDS (2)(3)(7)




Previous

Current


Previous

Current


Previous

Current

(Dollars in millions)










Adjusted operating revenues (4)


$3,765-$3,885

$3,620-$3,740


Unchanged

$850-$900


$4,660-$4,830

$4,515-$4,685

Adjusted income before income taxes (5) (8)


$780-$900

$595-$715


Unchanged

$220-$250


$995-$1,145

$810-$960

Capital expenditures


Approx. $600

Approx. $735


Unchanged

Approx. $155


Approx. $765

Approx. $900

(1)

These estimates are based on TDS' current plans, which include an expansion of the multi-year deployment of 4G LTE technology which commenced in 2011; such expansion includes deployment 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. These estimates also reflect the estimated impacts of selling Apple products and the deconsolidation of certain partnerships that will be accounted for as equity method investments effective April 3, 2013 at U.S. Cellular, and a multi-year deployment of IPTV which commenced in 2011 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 assume the Divestiture Transaction closes in the second quarter of 2013. Actual effects could vary significantly from these estimates as a result of a change in the expected timing of the Divestiture Transaction or changes in other terms and conditions of the sale.




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 (6)

U.S. Cellular Divestiture

Markets (6)

U.S. Cellular

Consolidated (6)



Previous

Current

Previous

Current

Previous

Current

(Dollars in millions)







Adjusted operating revenues (4)

$3,600-$3,700

$3,475-$3,575

$165-$185

$145-$165

$3,765-$3,885

$3,620-$3,740

Adjusted income beforeincome taxes (5) (8)

$765-$865

$560-$660

$15-$35

$35-$55

$780-$900

$595-$715

Capital expenditures

Approx. $600

Approx. $730

$5

Approx. $600

Approx. $735

(3)

These estimates do not reflect the effects of the acquisition of Baja.



(4)

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.





(5)

Adjusted income before income taxes is a non-GAAP financial measure defined as Income before income taxes, adjusted for: Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs (if any), and Interest expense. 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 meaningful measure of TDS' operating results before significant recurring non-cash charges, gains and losses and financing charges (Interest expense) 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; such amounts may occur in the future. The following tables provide a reconciliation of Income (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results and 2012 actual results:

 





2013 Current Estimated Results





U.S. Cellular Core

Markets (6)


U.S. Cellular Divestiture Markets (2)(6)


U.S. Cellular Consolidated (6)


TDS

Telecom


TDS (7)

(Dollars in millions)











Income (loss) before income taxes (8)


($30)-$70


($215)-($195)


($245)-($125)


$25-$55


($285)-($135)

Depreciation, amortization and accretion expense (9)


Approx. $540


Approx. $250


Approx. $790


Approx. $195


Approx. $990

Interest expense


Approx. $50



Approx. $50



Approx. $105

Adjusted income beforeincome taxes


$560-$660


$35-$55


$595-$715


$220-$250


$810-$960

 



Actual Results



Three Months Ended March 31, 2013


Year Ended December 31, 2012




U.S. Cellular Consolidated (6)



TDS

Telecom



TDS (7)



U.S. Cellular Consolidated (6)



TDS

Telecom



TDS (7)

(Dollars in millions)


















Income before income taxes

$

18


$

9


$

11


$

205


$

45


$

196

Depreciation, amortization andaccretion expense (9)


190



50



242



609



193



814

(Gain) loss on sale of business

and other exit costs, net


7





7



21





21

Interest expense (Capitalized interest)


11



(1)



25



42



(1)



87

Adjusted income beforeincome taxes

$

226


$

58


$

285


$

877


$

237


$

1,118

(6)

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.




















(7)

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.




















(8)

This amount does not include any estimate for (Gain) loss on sale of business and other exit costs, net, as the timing of such amount is not readily estimable.




















(9)

The 2013 estimated amounts for depreciation, amortization and accretion expense in the U.S. Cellular Divestiture Markets include approximately $185 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction. Actual results for the three months ended March 31, 2013 and the year ended December 31, 2012 include $38 million and $20 million, respectively, of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.

Conference Call Information
TDS will hold a conference call on May 3, 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; broadband, TV and voice; and hosted and managed services to approximately 7 million customers nationwide through its business units, U.S. Cellular, TDS Telecom and TDS Hosted & Managed Services. Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of March 31, 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 the 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

3/31/2013


12/31/2012


9/30/2012


6/30/2012


3/31/2012

Retail Customers
















Postpaid

















Total at end of period (1)


5,060,000



5,134,000



5,175,000



5,213,000



5,261,000



Gross additions


191,000



241,000



230,000



199,000



210,000



Net additions (losses)


(74,000)



(41,000)



(38,000)



(48,000)



(38,000)



ARPU (2)

$

54.85


$

54.56


$

54.34


$

54.42


$

54.00



Churn rate (3)


1.7%



1.8%



1.7%



1.6%



1.6%



Smartphone penetration (4) (5)


43.5%



41.8%



38.6%



36.8%



34.4%


Prepaid

















Total at end of period


446,000



423,000



386,000



329,000



309,000



Gross additions


104,000



107,000



120,000



78,000



63,000



Net additions (losses)


23,000



37,000



57,000



20,000



4,000



ARPU (2)

$

33.31


$

33.56


$

32.97


$

33.59


$

33.17



Churn rate (3)


6.2%



5.8%



5.9%



6.2%



6.4%

Total customers at end of period (1)


5,736,000



5,798,000



5,808,000



5,799,000



5,837,000

Billed ARPU (2)

$

51.13


$

50.94


$

50.83


$

50.99


$

50.52

Service revenue ARPU (2)

$

57.63


$

58.00


$

59.57


$

59.05


$

58.21

Smartphones sold as a percent of total devices sold


61.7%



62.9%



53.0%



51.9%



54.1%

Total population

















Consolidated markets (6)


93,943,000



93,244,000



92,996,000



92,684,000



92,684,000



Consolidated operating markets (6)


47,440,000



46,966,000



46,966,000



46,966,000



46,966,000

Market penetration at end of period

















Consolidated markets (7)


6.1%



6.2%



6.2%



6.3%



6.3%



Consolidated operating markets (7)


12.1%



12.3%



12.4%



12.3%



12.4%

Capital expenditures (000s)

$

118,400


$

253,100


$

199,100


$

183,200


$

201,300

Total cell sites in service


8,027



8,028



7,984



7,932



7,875

Owned towers in service


4,411



4,408



4,377



4,346



4,318

United States Cellular Corporation

Core Markets Summary Operating Data (Unaudited)


















Quarter Ended

3/31/2013


12/31/2012


9/30/2012


6/30/2012


3/31/2012

Retail Customers
















Postpaid

















Total at end of period (1)


4,639,000



4,672,000



4,688,000



4,708,000



4,736,000



Gross additions


184,000



218,000



204,000



176,000



182,000



Net additions (losses)


(32,000)



(16,000)



(20,000)



(28,000)



(21,000)



ARPU (2)

$

54.23


$

53.92


$

53.68


$

53.70


$

53.25



Churn rate (3)


1.5%



1.7%



1.6%



1.4%



1.4%



Smartphone penetration (4) (5)


43.0%



41.1%



37.8%



36.0%



34.3%


Prepaid

















Total at end of period


373,000



342,000



305,000



246,000



223,000



Gross additions


92,000



86,000



100,000



59,000



42,000



Net additions (losses)


31,000



38,000



59,000



23,000



5,000



ARPU (2)

$

32.92


$

33.21


$

33.09


$

33.37


$

32.69



Churn rate (3)


5.7%



5.0%



5.0%



5.2%



5.6%

Total customers at end of period (1)


5,225,000



5,238,000



5,223,000



5,196,000



5,210,000

Billed ARPU (2)

$

50.65


$

50.43


$

50.34


$

50.43


$

49.91

Service revenue ARPU (2)

$

57.37


$

57.90


$

59.66


$

59.03


$

58.20

Smartphones sold as a percent of totaldevices sold


62.1%



62.9%



53.0%



52.0%



54.1%

Total population

















Consolidated markets (6)


84,625,000



83,864,000



83,075,000



82,763,000



82,763,000



Consolidated operating markets (6)


32,422,000



31,925,000



31,590,000



31,590,000



31,590,000

Market penetration at end of period

















Consolidated markets (7)


6.2%



6.2%



6.3%



6.3%



6.3%



Consolidated operating markets (7)


16.1%



16.4%



16.5%



16.4%



16.5%

Capital expenditures (000s)

$

113,300


$

241,400


$

184,100


$

163,600


$

179,700

Total cell sites in service


6,277



6,292



6,251



6,199



6,146

Owned towers in service


3,846



3,847



3,818



3,787



3,761

 

(1)

Includes 176,000 and 168,000 postpaid customers at March 31, 2013 and 2012, respectively, related to the St. Lawrence Seaway RSA Cellular Partnership ("NY1") and New York RSA 2 Cellular Partnership ("NY2" and, together with NY1, the "Partnerships").

(2)

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 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.

(3)

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.

(4)

Smartphones represent wireless devices which run on an AndroidTM, BlackBerry® or Windows Mobile® operating system, excluding tablets.

(5)

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

(6)

Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (7)below.

(7)

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®.

 

TDS Telecom

Summary Operating Data (Unaudited)













Quarter Ended

3/31/2013


12/31/2012


9/30/2012


6/30/2012


3/31/2012

TDS Telecom










ILEC:











Residential Connections












Physical access lines (1)

345,500


350,100


355,800


360,100


363,500



Broadband connections (2)

221,900


221,700


223,100


222,400


219,500



IPTV customers

9,000


7,900


6,700


5,600


4,900



ILEC residential connections

576,400


579,700


585,600


588,100


587,900














Commercial Connections












Physical access lines (1)

106,000


107,600


109,800


111,100


112,600



Broadband connections (2)

18,400


18,500


18,500


18,400


18,200



managedIP connections (3)

18,400


17,200


15,000


13,200


10,800



ILEC commercial connections

142,800


143,300


143,300


142,700


141,600













CLEC:










Residential Connections












Physical access lines (1)

23,000


24,600


26,200


27,900


29,600



Broadband connections (2)

7,700


8,200


8,900


9,500


10,100



CLEC residential connections

30,700


32,800


35,100


37,400


39,700














Commercial Connections












Physical access lines (1)

129,700


135,500


140,300


145,100


151,100



Broadband connections (2)

10,400


11,200


12,000


12,800


13,700



managedIP connections (3)

85,000


77,400


69,500


61,400


53,700



CLEC commercial connections

225,100


224,100


221,800


219,300


218,500













Total ILEC and CLEC Customer Connections

975,000


979,900


985,800


987,500


987,700



(1)

Individual circuits 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 telephone handsets, data lines and IP trunks providing communications using IP networking technology.

 

TDS Telecom

Capital Expenditures (000s)
















Quarter Ended


3/31/2013



12/31/2012



9/30/2012



6/30/2012



3/31/2012

ILEC

$

22,400


$

43,400


$

33,700


$

32,500


$

27,500

CLEC


5,500



6,100



5,400



4,900



5,100

HMS


2,600



2,300



4,400



5,500



3,100


$

30,500


$

51,800


$

43,500


$

42,900


$

35,700

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)






2013


2012


Amount

Percent


Operating revenues













U.S. Cellular

$

1,081,746


$

1,092,121


$

(10,375)


(1%)



TDS Telecom


217,061



204,075



12,986


6%



All Other (1)


9,766



9,595



171


2%







1,308,573



1,305,791



2,782



Operating expenses













U.S. Cellular














Expenses excluding depreciation, amortization and accretion


878,070



862,444



15,626


2%




Depreciation, amortization and accretion


189,845



146,685



43,160


29%




Loss on asset disposals, net


5,434



2,003



3,431


>100%




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


6,931



(4,213)



11,144


>(100%)







1,080,280



1,006,919



73,361


7%



TDS Telecom














Expenses excluding depreciation, amortization and accretion


159,486



143,420



16,066


11%




Depreciation, amortization and accretion


49,491



47,443



2,048


4%




Loss on asset disposals, net


193



120



73


61%







209,170



190,983



18,187


10%



All Other (1)














Expenses excluding depreciation and amortization


9,239



10,946



(1,707)


(16%)




Depreciation and amortization


2,741



3,306



(565)


(17%)




Gain on asset disposals, net


(11)



(5)



(6)


>100%







11,969



14,247



(2,278)


(16%)




















Total operating expenses


1,301,419



1,212,149



89,270


7%


Operating income (loss)













U.S. Cellular


1,466



85,202



(83,736)


(98%)



TDS Telecom


7,891



13,092



(5,201)


(40%)



All Other (1)


(2,203)



(4,652)



2,449


53%







7,154



93,642



(86,488)


(92%)


Investment and other income (expense)













Equity in earnings of unconsolidated entities


27,089



23,389



3,700


16%



Interest and dividend income


1,578



2,183



(605)


(28%)



Interest expense


(24,498)



(24,464)



(34)




Other, net


(154)



228



(382)


>(100%)




Total investment and other income


4,015



1,336



2,679


>100%


Income before income taxes


11,169



94,978



(83,809)


(88%)



Income tax expense


4,180



27,412



(23,232)


(85%)


Net income


6,989



67,566



(60,577)


(90%)



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


(5,570)



(15,312)



9,742


64%


Net income attributable to TDS shareholders


1,419



52,254



(50,835)


(97%)



Preferred dividend requirement


(12)



(12)





Net income available to common shareholders

$

1,407


$

52,242


$

(50,835)


(97%)

















Basic weighted average shares outstanding


108,255



108,653



(398)



Basic earnings per share attributable to TDS shareholders

$

0.01


$

0.48


$

(0.47)


(98%)

















Diluted weighted average shares outstanding


108,693



109,098



(405)



Diluted earnings per share attributable to TDS shareholders

$

0.01


$

0.48


$

(0.47)


(98%)


(1)

Consists of Suttle Straus printing and distribution operations, Airadigm, 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,




2013


2012


Current assets








Cash and cash equivalents

$

766,700


$

740,481



Short-term investments


125,595



115,700



Accounts receivable from customers and others


506,710



574,328



Inventory


143,832



160,692



Net deferred income tax asset


44,288



43,411



Prepaid expenses


86,879



86,385



Income taxes receivable


11,301



9,625



Other current assets


30,498



32,815





1,715,803



1,763,437










Assets held for sale


160,073



163,242










Investments








Licenses


1,494,189



1,480,039



Goodwill


797,194



797,194



Other intangible assets, net


55,557



58,522



Investments in unconsolidated entities


201,171



179,921



Long-term investments


40,142



50,305



Other investments


778



824





2,589,031



2,566,805










Property, plant and equipment, net








U.S. Cellular


2,948,508



3,022,588



TDS Telecom


918,861



934,188



Other


39,226



40,490





3,906,595



3,997,266










Other assets and deferred charges


130,321



133,150










Total assets

$

8,501,823


$

8,623,900


Telephone and Data Systems, Inc.


Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)












LIABILITIES AND EQUITY


























March 31,


December 31,






2013


2012


Current liabilities









Current portion of long-term debt

$

1,318


$

1,233




Accounts payable


335,065



377,291




Customer deposits and deferred revenues


231,478



222,345




Accrued interest


15,774



6,565




Accrued taxes


55,944



48,237




Accrued compensation


75,324



134,932




Other current liabilities


102,208



134,005







817,111



924,608












Liabilities held for sale


18,360



19,594












Deferred liabilities and credits









Net deferred income tax liability


867,954



862,580




Other deferred liabilities and credits


445,614



438,727












Long-term debt


1,721,338



1,721,571












Noncontrolling interests with redemption features


466



493












Equity








TDS shareholders' equity









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


1,327



1,327




Capital in excess of par value


2,302,785



2,304,122




Treasury shares, at cost


(747,831)



(750,099)




Accumulated other comprehensive loss


(8,303)



(8,132)




Retained earnings


2,449,720



2,464,318





Total TDS shareholders' equity


3,997,698



4,011,536













Preferred shares


825



825



Noncontrolling interests


632,457



643,966














Total equity


4,630,980



4,656,327












Total liabilities and equity

$

8,501,823


$

8,623,900


Balance Sheet Highlights

March 31, 2013

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

419,696


$

87,459


$

259,545


$

?


$

766,700

Affiliated cash investments


?



374,137



?



(374,137)



?

Short-term investments


110,585



?



15,010



?



125,595



$

530,281


$

461,596


$

274,555


$

(374,137)


$

892,295


















Licenses, goodwill and other intangible assets

$

1,892,755


$

580,138


$

(125,953)


$

?


$

2,346,940

Investment in unconsolidated entities


165,529



3,814



38,634



(6,806)



201,171

Long-term and other investments


40,142



778



?



?



40,920




$

2,098,426


$

584,730


$

(87,319)


$

(6,806)


$

2,589,031



































Property, plant and equipment, net

$

2,948,508


$

918,861


$

39,226


$

?


$

3,906,595


















Long-term debt:
















Current portion

$

93


$

83


$

1,142


$

?


$

1,318


Non-current portion


878,975



737



841,626



?



1,721,338



Total

$

879,068


$

820


$

842,768


$

?


$

1,722,656


















Preferred shares

$

?


$

?


$

825


$

?


$

825


















 

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, 2013 and December 31, 2012.




March 31,


December 31,


2013


2012








Cash and cash equivalents

$

766,700


$

740,481

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







Government-backed securities (3)


125,595



115,700


Certificates of deposit


?



?



$

125,595


$

115,700








Amounts included in long-term investments (1) (4)







Government-backed securities (3)


40,142



50,305

Total cash and cash equivalents and investments

$

932,437


$

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)

Includes U.S treasury securities and corporate notes guaranteed under the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program.

(4)

Maturities are 20 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)







2013


2012


Cash flows from operating activities








Net income

$

6,989


$

67,566




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

from operating activities











Depreciation, amortization and accretion


242,077



197,434






Bad debts expense


17,874



15,105






Stock-based compensation expense


7,585



10,330






Deferred income taxes, net


3,009



6,187






Equity in earnings of unconsolidated entities


(27,089)



(23,389)






Distributions from unconsolidated entities


8,089



2,938






Loss on asset disposals, net


5,616



2,079






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


6,931



(4,174)






Noncash interest expense


497



862






Other operating activities


256



852




Changes in assets and liabilities from operations











Accounts receivable


34,038



38,941






Inventory


16,860



(4,842)






Accounts payable


(3,203)



(25,372)






Customer deposits and deferred revenues


7,904



10,745






Accrued taxes


5,309



82,014






Accrued interest


9,279



9,117






Other assets and liabilities


(95,669)



(104,148)








246,352



282,245













Cash flows from investing activities








Cash used for additions to property, plant and equipment


(176,318)



(242,611)



Cash paid for acquisitions and licenses


(14,150)



(11,096)



Cash received from divestitures




50,036



Cash paid for investments




(10,000)



Cash received for investments




20,249



Other investing activities


6,364



(436)








(184,104)



(193,858)













Cash flows from financing activities








Repayment of long-term debt


(328)



(493)



Issuance of long-term debt




358



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


140



(33)



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


123



357



Repurchase of U.S. Cellular Common Shares


(18,425)





Dividends paid


(13,792)



(13,301)



Distributions to noncontrolling interests


(2,396)



(218)



Other financing activities


(1,351)



798








(36,029)



(12,532)













Net increase in cash and cash equivalents


26,219



75,855


Cash and cash equivalents








Beginning of period


740,481



563,275



End of period

$

766,700


$

639,130


TDS Telecom Highlights


Three Months Ended March 31,


(Unaudited, dollars in thousands)



























Increase (Decrease)






2013


2012


Amount


Percent


Local Telephone Operations













Operating revenues














Residential

$

69,386


$

69,399


$

(13)





Commercial


24,284



24,130



154


1%




Wholesale


47,850



51,536



(3,686)


(7%)







141,520



145,065



(3,545)


(2%)



Operating expenses














Cost of services and products


47,595



49,168



(1,573)


(3%)




Selling, general and administrative expenses


41,839



41,514



325


1%




Depreciation, amortization and accretion


38,576



37,778



798


2%




Loss on asset disposals and exchanges, net


122



66



56


85%







128,132



128,526



(394)



















Operating income

$

13,388


$

16,539


$

(3,151)


(19%)

















Competitive Local Exchange Carrier Operations













Operating revenues














Residential

$

3,618


$

4,788


$

(1,170)


(24%)




Commercial


35,108



34,341



767


2%




Wholesale


3,828



4,915



(1,087)


(22%)







42,554



44,044



(1,490)


(3%)



Operating expenses














Cost of services and products


21,962



22,564



(602)


(3%)




Selling, general and administrative expenses


15,932



16,260



(328)


(2%)




Depreciation, amortization and accretion


5,447



5,489



(42)


(1%)




Loss on asset disposals and exchanges, net


41



53



(12)


(23%)







43,382



44,366



(984)


(2%)


















Operating loss

$

(828)


$

(322)


$

(506)


>(100)%

















Hosted and Managed Services Operations














Revenues

$

35,564


$

17,558


$

18,006


>100%



Operating expenses














Cost of services and products


24,814



9,774



15,040


>100%




Selling, general and administrative expenses


9,921



6,732



3,189


47%




Depreciation, amortization and accretion


5,468



4,176



1,292


31%




Loss on asset disposals and exchanges, net


30



1



29


>100%







40,233



20,683



19,550


95%


















Operating loss

$

(4,669)


$

(3,125)


$

(1,544)


(49%)

















Intercompany revenues

$

(2,577)


$

(2,592)


$

15


1%


Intercompany expenses


(2,577)



(2,592)



15


1%

















Total TDS Telecom operating income

$

7,891


$

13,092


$

(5,201)


(40%)


Telephone and Data Systems, Inc.


Financial Measures and Reconciliations


(Unaudited, dollars in thousands)
















TDS Consolidated


Three Months Ended March 31,


2013


2012













Cash flows from operating activities


$

246,352


$

282,245



Deduct:









Cash used for additions to property, plant, and equipment



176,318



242,611




Free cash flow (1)


$

70,034


$

39,634


(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.

SOURCE Telephone and Data Systems, Inc.

Jane W. McCahon, Vice President, Corporate Relations and Corporate Secretary, (312) 592-5379; jane.mccahon@teldta.com; or Julie D. Mathews, Manager, Investor Relations, (312) 592-5341; julie.mathews@teldta.com