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TDS Reports Second Quarter 2013 Results

08/02/2013

Updates TDS Telecom guidance to include Baja Broadband acquisition

CHICAGO, Aug. 2, 2013 /PRNewswire/ -- As previously announced, TDS will hold a teleconference Aug. 2, 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 $1,228.2 million for the second quarter of 2013, versus $1,323.2 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $156.1 million and $1.42 respectively, for the second quarter of 2013, compared to $42.3 million and $0.39, respectively, in the comparable period one year ago.  

The following significant events occurred during the second quarter of 2013:

  • On April 3, U.S. Cellular deconsolidated the St. Lawrence Seaway RSA Cellular Partnership ("NY1") and the New York RSA 2 Cellular Partnership ("NY2").  As a result, the NY1 and NY2 partnerships results are now reported using the equity method of accounting for investments in the consolidated financial statements.  U.S. Cellular has retained the same ownership percentage and will continue to report the same percentage of income.  
  • On May 16, U.S. Cellular's previously announced transaction to sell its Chicago, St. Louis, central Illinois and three other markets (the "Divestiture Transaction") closed and U.S. Cellular received $480 million in cash and recognized a pre-tax gain of $266.4 million.
  • On June 25, U.S. Cellular paid a special cash dividend of $5.75 per Common Share and Series A Common Share, for an aggregate amount of $482.3 million.  Of the amount paid, TDS received $407.1 million

"Our businesses have achieved significant strategic milestones so far this year," said LeRoy T. Carlson, Jr., TDS president and CEO. "At U.S. Cellular, we divested underperforming markets in May for $480 million, and returned value to shareholders through a special, one-time dividend. In June, U.S. Cellular also announced an agreement to monetize non-strategic spectrum at a significant valuation.  Yesterday, we closed the Baja Broadband acquisition and TDS Telecom began implementing strategies to drive customer penetration in Baja's markets. This morning, we announced a new $250 million share repurchase authorization that will enable us to return value to TDS shareholders.

"With the leadership of president and CEO Ken Meyers, U.S. Cellular continues to execute aggressive strategies to accelerate customer growth and improve its competitive position. The 4G LTE network expansion is supporting growth in smartphone penetration and data use, though the corresponding increase in smartphone subsidies continues to impact profitability. To build the customer base and reduce churn, U.S. Cellular plans to enhance its device portfolio with Apple products later this year. U.S. Cellular also recently converted to a new billing and operation support system that will improve efficiency and enable faster delivery of new services and products, such as shared data plans for customers with multiple devices.

"TDS Telecom continued to increase ILEC residential broadband and video penetration in the quarter, and commercial managedIP connections increased 50 percent year over year. TDS Telecom's revenue growth in the quarter was driven primarily by our hosted and managed services acquisitions, where we are focused on offering comprehensive, end-to-end IT solutions for mid-market customers."

SHARE Repurchase
The TDS board has authorized a $250 million share repurchase program, with no expiration date.  The board authorized management to use its discretion to make purchases, as market conditions warrant, on the open market or at negotiated prices in private transactions.

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 June 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 EstimatedResults (1)




U.S. Cellular (2)


TDS Telecom


TDS (2)(6)




Previous

Current


Previous

Current


Previous

Current

(Dollars in millions)










Adjusted operating revenues (3)


$3,620-$3,740

$3,615-$3,715


$850-$900

$890-$930


$4,515-$4,685

$4,550-$4,690

Adjusted income before income taxes (4)


$595-$715

$600-$700


$220-$250

$230-$260


$810-$960

$830-$960

Capital expenditures


Unchanged

$735


$155

$165


$900

$910



(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 expected gains from pending spectrum license divestitures.  In addition, the estimates also reflect the impacts of the acquisition of Baja Broadband, LLC as of August 1, 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 the Divestiture Transaction which closed on May 16, 2013.

















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)

Unchanged

$3,475-$3,575

$145-$165

$140

$3,620-$3,740

$3,615-$3,715

Adjusted income beforeincome taxes (4)

Unchanged

$560-$660

$35-$55

$40

$595-$715

$600-$700

Capital expenditures

Unchanged

$730

Unchanged

$5

Unchanged

$735



(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: Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs (if any), net Gain or loss on investments (if any), and Interest expense. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. In the future, TDS may also exclude other items from adjusted income before income taxes if such items may 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. The following tables provide a reconciliation of Income (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results, six months ended June 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


($10)-$90


$30


$20-$120


$25-$55


$30-$160

Depreciation, amortization and accretion expense (7)


$540


$250


$790


$205


$1,005

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



($240)


($240)



($295)

(Gain) loss on investments


($20)



($20)



($15)

Interest expense


$50



$50



$105

Adjusted income beforeincome taxes


$560-$660


$40


$600-$700


$230-$260


$830-$960

 

 



Actual Results



Six Months Ended June 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


$ 282



$ 22



$ 322



$ 205



$ 45



$ 196

Depreciation, amortization andaccretion expense (7)


393



98



497



609



193



814

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


(242)





(296)



21





21

(Gain) loss on investments


(19)





(15)



4





4

Interest expense


21



(1)



48



42



(1)



87

Adjusted income beforeincome taxes


$ 435



$ 119



$ 556



$ 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 $168 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction. Actual results for the six months ended June 30, 2013 and the year ended December 31, 2012 include $88 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 Aug. 2, 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 6 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 10,700 people as of June 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 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

6/30/2013


3/31/2013


12/31/2012


9/30/2012


6/30/2012

Retail Customers
















Postpaid

















Total at end of period


4,412,000



5,060,000



5,134,000



5,175,000



5,213,000



Gross additions


165,000



191,000



241,000



230,000



199,000



Net additions (losses)


(120,000)



(74,000)



(41,000)



(38,000)



(48,000)



ARPU (1)

$

54.18


$

54.85


$

54.56


$

54.34


$

54.42



Churn rate (2)


2.0%



1.7%



1.8%



1.7%



1.6%



Smartphone penetration (3) (4)


45.5%



43.5%



41.8%



38.6%



36.8%


Prepaid

















Total at end of period


381,000



446,000



423,000



386,000



329,000



Gross additions


77,000



104,000



107,000



120,000



78,000



Net additions (losses)


(7,000)



23,000



37,000



57,000



20,000



ARPU (1)

$

31.69


$

33.31


$

33.56


$

32.97


$

33.59



Churn rate (2)


6.8%



6.2%



5.8%



5.9%



6.2%

Total customers at end of period


4,968,000



5,736,000



5,798,000



5,808,000



5,799,000

Billed ARPU (1)

$

50.60


$

51.13


$

50.94


$

50.83


$

50.99

Service revenue ARPU (1)

$

57.45


$

57.63


$

58.00


$

59.57


$

59.05

Smartphones sold as a percent of total devices sold


66.0%



61.7%



62.9%



53.0%



51.9%

Total population

















Consolidated markets (5)


84,025,000



93,943,000



93,244,000



92,996,000



92,684,000



Consolidated operating markets (5)


31,822,000



47,440,000



46,966,000



46,966,000



46,966,000

Market penetration at end of period

















Consolidated markets (6)


5.9%



6.1%



6.2%



6.2%



6.3%



Consolidated operating markets (6)


15.6%



12.1%



12.3%



12.4%



12.3%

Capital expenditures (000s)

$

168,500


$

118,400


$

253,100


$

199,100


$

183,200

Total cell sites in service


7,748



8,027



8,028



7,984



7,932

Owned towers in service


4,411



4,411



4,408



4,377



4,346

 

United States Cellular Corporation

Core Markets Summary Operating Data (Unaudited)

Excludes NY1 & NY2


















Quarter Ended

6/30/2013


3/31/2013


12/31/2012


9/30/2012


6/30/2012

Retail Customers
















Postpaid

















Total at end of period


4,412,000



4,463,000



4,496,000



4,515,000



4,538,000



Gross additions


165,000



176,000



208,000



196,000



167,000



Net additions (losses)


(53,000)



(33,000)



(19,000)



(23,000)



(30,000)



ARPU (1)

$

54.44


$

54.21


$

53.91


$

53.67


$

53.73



Churn rate (2)


1.6%



1.6%



1.7%



1.6%



1.4%



Smartphone penetration (3) (4)


45.5%



43.0%



41.1%



37.8%



36.0%


Prepaid

















Total at end of period


381,000



373,000



342,000



305,000



246,000



Gross additions


76,000



91,000



87,000



99,000



60,000



Net additions (losses)


8,000



31,000



37,000



59,000



23,000



ARPU (1)

$

31.65


$

32.92


$

33.21


$

32.97


$

33.23



Churn rate (2)


6.0%



5.6%



5.1%



4.8%



5.4%

Total customers at end of period


4,968,000



5,005,000



5,022,000



5,012,000



4,989,000

Billed ARPU (1)

$

50.98


$

50.93


$

50.71


$

50.59


$

50.71

Service revenue ARPU (1)

$

57.88


$

57.14


$

57.67


$

59.34


$

58.89

Smartphones sold as a percent of total devices sold


66.1%



62.1%



62.9%



53.0%



52.0%

Total population

















Consolidated markets (5)


84,025,000



84,025,000



83,384,000



82,595,000



82,283,000



Consolidated operating markets (5)


31,822,000



31,822,000



31,445,000



31,110,000



31,110,000

Market penetration at end of period

















Consolidated markets (6)


5.9%



6.0%



6.0%



6.1%



6.1%



Consolidated operating markets (6)


15.6%



15.7%



16.0%



16.1%



16.0%

Capital expenditures (000s)

$

171,200


$

113,300


$

241,400


$

184,100


$

163,600

Total cell sites in service


6,113



6,113



6,130



6,089



6,041

Owned towers in service


3,844



3,846



3,847



3,818



3,787



(1)

ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period. These revenue bases and customer populations are shown below:


a.

Postpaid ARPU consists of total postpaid service revenues and postpaid customers.


b.

Prepaid ARPU consists of total prepaid service revenues and prepaid customers.


c.

Billed ARPU consists of total retail service 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

6/30/2013


3/31/2013


12/31/2012


9/30/2012


6/30/2012

TDS Telecom










ILEC:












Residential Connections













Physical access lines (1)

342,200


345,500


350,100


355,800


360,100




Broadband connections (2)

224,500


221,900


221,700


223,100


222,400




IPTV customers

10,500


9,000


7,900


6,700


5,600




ILEC residential connections

577,200


576,400


579,700


585,600


588,100
















Commercial Connections













Physical access lines (1)

104,100


106,000


107,600


109,800


111,100




Broadband connections (2)

18,500


18,400


18,500


18,500


18,400




managedIP connections (3)

19,900


18,400


17,200


15,000


13,200




ILEC commercial connections

142,500


142,800


143,300


143,300


142,700














CLEC:












Residential Connections













Physical access lines (1)

21,800


23,000


24,600


26,200


27,900




Broadband connections (2)

7,200


7,700


8,200


8,900


9,500




CLEC residential connections

29,000


30,700


32,800


35,100


37,400
















Commercial Connections













Physical access lines (1)

125,000


129,700


135,500


140,300


145,100




Broadband connections (2)

9,700


10,400


11,200


12,000


12,800




managedIP connections (3)

92,000


85,000


77,400


69,500


61,400




CLEC commercial connections

226,700


225,100


224,100


221,800


219,300














Total ILEC and CLEC Customer Connections

975,400


975,000


979,900


985,800


987,500



(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


6/30/2013



3/31/2013



12/31/2012



9/30/2012



6/30/2012

ILEC

$

29,400


$

22,400


$

43,400


$

33,700


$

32,500

CLEC


3,900



5,500



6,100



5,400



4,900

HMS


2,300



2,600



2,300



4,400



5,500


$

35,600


$

30,500


$

51,800


$

43,500


$

42,900

 

 

Telephone and Data Systems, Inc.


Consolidated Statement of Operations Highlights


Three Months Ended June 30,


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












Increase/ (Decrease)






2013


2012


Amount

Percent


Operating revenues













U.S. Cellular

$

995,130


$

1,104,400


$

(109,270)


(10%)



TDS Telecom


223,460



208,519



14,941


7%



All Other (1)


9,576



10,250



(674)


(7%)







1,228,166



1,323,169



(95,003)


(7%)


Operating expenses













U.S. Cellular














Expenses excluding depreciation, amortization and accretion


813,464



869,980



(56,516)


(6%)




Depreciation, amortization and accretion


202,580



147,555



55,025


37%




Loss on asset disposals, net


9,018



2,702



6,316


>100%




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


(249,024)





(249,024)


N/M







776,038



1,020,237



(244,199)


(24%)



TDS Telecom














Expenses excluding depreciation, amortization and accretion


162,954



148,983



13,971


9%




Depreciation, amortization and accretion


48,756



47,945



811


2%




(Gain) loss on asset disposals, net


(682)



306



(988)


>(100%)







211,028



197,234



13,794


7%



All Other (1)














Expenses excluding depreciation and amortization


10,033



11,111



(1,078)


(10%)




Depreciation and amortization


2,867



3,009



(142)


(5%)




Loss on impairment of assets




515



(515)


N/M




Gain on asset disposals, net


(17)



(13)



(4)


(31%)




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


(54,010)





(54,010)


N/M







(41,127)



14,622



(55,749)


>(100%)




















Total operating expenses


945,939



1,232,093



(286,154)


(23%)


Operating income (loss)













U.S. Cellular


219,092



84,163



134,929


>100%



TDS Telecom


12,432



11,285



1,147


10%



All Other (1)


50,703



(4,372)



55,075


>(100%)







282,227



91,076



191,151


>100%


Investment and other income (expense)













Equity in earnings of unconsolidated entities


35,605



25,392



10,213


40%



Interest and dividend income


2,600



2,352



248


11%



Gain (loss) on investments


14,518



(3,728)



18,246


>(100%)



Interest expense


(23,749)



(23,139)



(610)


(3%)



Other, net


(197)



(249)



52


21%




Total investment and other income


28,777



628



28,149


>100%


Income before income taxes


311,004



91,704



219,300


>100%



Income tax expense


132,607



35,765



96,842


>100%


Net income


178,397



55,939



122,458


>100%



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


(22,320)



(13,602)



(8,718)


(64%)


Net income attributable to TDS shareholders


156,077



42,337



113,740


>100%



Preferred dividend requirement


(12)



(12)





Net income available to common shareholders

$

156,065


$

42,325


$

113,740


>100%

















Basic weighted average shares outstanding


108,385



108,732



(347)



Basic earnings per share attributable to TDS shareholders

$

1.44


$

0.39


$

1.05


>100%

















Diluted weighted average shares outstanding


108,913



109,022



(109)



Diluted earnings per share attributable to TDS shareholders

$

1.42


$

0.39


$

1.03


>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. TDS recognized an incremental $53.5 million upon closing of the Divesture Transaction as a result of lower asset basis in assets disposed.


N/M – Percentage change not meaningful

 

 

Telephone and Data Systems, Inc.


Consolidated Statement of Operations Highlights


Six Months Ended June 30,


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












Increase/ (Decrease)






2013


2012


Amount

Percent


Operating revenues













U.S. Cellular

$

2,076,876


$

2,196,521


$

(119,645)


(5%)



TDS Telecom


440,521



412,594



27,927


7%



All Other (1)


19,342



19,845



(503)


(3%)







2,536,739



2,628,960



(92,221)


(4%)


Operating expenses













U.S. Cellular














Expenses excluding depreciation, amortization and accretion


1,691,534



1,732,424



(40,890)


(2%)




Depreciation, amortization and accretion


392,425



294,240



98,185


33%




Loss on asset disposals, net


14,452



4,705



9,747


>100%




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


(242,093)



(4,213)



(237,880)


>100%







1,856,318



2,027,156



(170,838)


(8%)



TDS Telecom














Expenses excluding depreciation, amortization and accretion


322,440



292,403



30,037


10%




Depreciation, amortization and accretion


98,247



95,388



2,859


3%




(Gain) loss on asset disposals, net


(489)



426



(915)


>(100%)







420,198



388,217



31,981


8%



All Other (1)














Expenses excluding depreciation and amortization


19,272



22,057



(2,785)


(13%)




Depreciation and amortization


5,608



6,315



(707)


(11%)




Loss on impairment of assets




515



(515)


N/M




Gain on asset disposals, net


(28)



(18)



(10)


(56%)




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


(54,010)





(54,010)


N/M







(29,158)



28,869



(58,027)


>(100%)




















Total operating expenses


2,247,358



2,444,242



(196,884)


(8%)


Operating income (loss)













U.S. Cellular


220,558



169,365



51,193


30%



TDS Telecom


20,323



24,377



(4,054)


(17%)



All Other (1)


48,500



(9,024)



57,524


>(100%)







289,381



184,718



104,663


57%


Investment and other income (expense)













Equity in earnings of unconsolidated entities


62,694



48,781



13,913


29%



Interest and dividend income


4,178



4,535



(357)


(8%)



Gain (loss) on investments


14,518



(3,728)



18,246


>(100%)



Interest expense


(48,247)



(47,603)



(644)


(1%)



Other, net


(351)



(21)



(330)


>100%




Total investment and other income


32,792



1,964



30,828


>100%


Income before income taxes


322,173



186,682



135,491


73%



Income tax expense


136,787



63,177



73,610


>100%


Net income


185,386



123,505



61,881


50%



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


(27,890)



(28,914)



1,024


4%


Net income attributable to TDS shareholders


157,496



94,591



62,905


67%



Preferred dividend requirement


(25)



(25)





Net income available to common shareholders

$

157,471


$

94,566


$

62,905


67%

















Basic weighted average shares outstanding


108,320



108,693



(373)



Basic earnings per share attributable to TDS shareholders

$

1.45


$

0.87


$

0.58


67%

















Diluted weighted average shares outstanding


108,827



108,964



(137)



Diluted earnings per share attributable to TDS shareholders

$

1.44


$

0.86


$

0.58


67%




(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 Divesture 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




















June 30,


December 31,




2013


2012


Current assets








Cash and cash equivalents

$

1,246,415


$

740,481



Short-term investments


110,352



115,700



Accounts receivable from customers and others


485,596



574,328



Inventory


168,700



160,692



Net deferred income tax asset


56,822



43,411



Prepaid expenses


93,383



86,385



Income taxes receivable


9



9,625



Other current assets


32,375



32,815





2,193,652



1,763,437










Assets held for sale


78,389



163,242










Investments








Licenses


1,418,832



1,480,039



Goodwill


759,885



797,194



Other intangible assets, net


52,592



58,522



Investments in unconsolidated entities


312,046



179,921



Long-term investments


40,120



50,305



Other investments


738



824





2,584,213



2,566,805










Property, plant and equipment, net








U.S. Cellular


2,823,509



3,022,588



TDS Telecom


906,904



934,188



Other


38,520



40,490





3,768,933



3,997,266










Other assets and deferred charges


129,578



133,150










Total assets

$

8,754,765


$

8,623,900


 

 

Telephone and Data Systems, Inc.


Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)












LIABILITIES AND EQUITY


























June 30,


December 31,






2013


2012


Current liabilities









Current portion of long-term debt

$

1,899


$

1,233




Accounts payable


393,906



377,291




Customer deposits and deferred revenues


228,259



222,345




Accrued interest


8,599



6,565




Accrued taxes


190,836



48,237




Accrued compensation


95,677



134,932




Other current liabilities


114,910



134,005







1,034,086



924,608












Liabilities held for sale


559



19,594












Deferred liabilities and credits









Net deferred income tax liability


855,623



862,580




Other deferred liabilities and credits


460,991



438,727












Long-term debt


1,720,642



1,721,571












Noncontrolling interests with redemption features


512



493












Equity








TDS shareholders' equity









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


1,327



1,327




Capital in excess of par value


2,299,091



2,304,122




Treasury shares, at cost


(738,397)



(750,099)




Accumulated other comprehensive loss


(8,438)



(8,132)




Retained earnings


2,586,567



2,464,318





Total TDS shareholders' equity


4,140,150



4,011,536













Preferred shares


825



825



Noncontrolling interests


541,377



643,966














Total equity


4,682,352



4,656,327












Total liabilities and equity

$

8,754,765


$

8,623,900


 

Balance Sheet Highlights


June 30, 2013


(Unaudited, dollars in thousands)









































U.S.


TDS


TDS Corporate


Intercompany


TDS





Cellular


Telecom


& Other


Eliminations


Consolidated


Cash and cash equivalents

$

467,421


$

92,257


$

686,737


$

?


$

1,246,415


Affiliated cash investments


?



397,972



?



(397,972)



?


Short-term investments


110,352



?



?



?



110,352




$

577,773


$

490,229


$

686,737


$

(397,972)


$

1,356,767




















Licenses, goodwill and other intangible assets

$

1,783,572


$

577,367


$

(129,630)


$

?


$

2,231,309


Investment in unconsolidated entities


276,363



3,809



38,985



(7,111)



312,046


Long-term and other investments


40,120



738



?



?



40,858





$

2,100,055


$

581,914


$

(90,645)


$

(7,111)


$

2,584,213






































Property, plant and equipment, net

$

2,823,509


$

906,904


$

38,520


$

?


$

3,768,933




















Long-term debt:

















Current portion

$

100


$

70


$

1,729


$

?


$

1,899



Non-current portion


879,121



724



840,797



?



1,720,642




Total

$

879,221


$

794


$

842,526


$

?


$

1,722,541




















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 June 30, 2013 and December 31, 2012.








June 30,


December 31,


2013


2012








Cash and cash equivalents

$

1,246,415


$

740,481








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







U.S. Treasury Notes


110,352



115,700








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







U.S. Treasury Notes


40,120



50,305








Total cash and cash equivalents and investments

$

1,396,887


$

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 June 30, 2013, maturities range between 17 and 18 months.

 

 

Telephone and Data Systems, Inc.


Consolidated Statement of Cash Flows


Six Months Ended June 30,


(Unaudited, dollars in thousands)







2013


2012


Cash flows from operating activities








Net income

$

185,386


$

123,505




Add (deduct) adjustments to reconcile net income to net cash flowsfrom operating activities











Depreciation, amortization and accretion


496,280



395,943






Bad debts expense


35,187



33,626






Stock-based compensation expense


12,902



20,955






Deferred income taxes, net


(21,246)



29,929






Equity in earnings of unconsolidated entities


(62,694)



(48,781)






Distributions from unconsolidated entities


47,635



6,973






Loss on impairment of assets




515






Loss on asset disposals, net


13,935



5,074






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


(296,103)



(4,174)






(Gain) loss on investments


(14,518)



3,728






Noncash interest expense


997



1,728






Other operating activities


505



1,010




Changes in assets and liabilities from operations











Accounts receivable


(5,781)



(10,197)






Inventory


(8,105)



(58,467)






Accounts payable


58,204



(23,336)






Customer deposits and deferred revenues


7,897



22,786






Accrued taxes


150,425



89,433






Accrued interest


2,172



(1,823)






Other assets and liabilities


(81,586)



(81,517)








521,492



506,910













Cash flows from investing activities








Cash used for additions to property, plant and equipment


(384,281)



(501,211)



Cash paid for acquisitions and licenses


(14,150)



(52,213)



Cash received from divestitures


480,000



50,036



Cash paid for investments




(45,000)



Cash received for investments


15,000



128,444



Other investing activities


14,127



(8,916)








110,696



(428,860)













Cash flows from financing activities








Repayment of long-term debt


(605)



(952)



Issuance of long-term debt




358



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


776



(39)



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


(2,206)



(2,465)



Repurchase of U.S. Cellular Common Shares


(18,425)





Dividends paid to TDS shareholders


(27,598)



(26,610)



U.S. Cellular dividends paid to noncontrolling public shareholders


(75,235)





Payment of debt issuance costs


(23)





Distributions to noncontrolling interests


(3,292)



(643)



Other financing activities


354



2,790








(126,254)



(27,561)













Net increase in cash and cash equivalents


505,934



50,489


Cash and cash equivalents








Beginning of period


740,481



563,275



End of period

$

1,246,415


$

613,764


 

 

TDS Telecom Highlights


Three Months Ended June 30,


(Unaudited, dollars in thousands)



























Increase (Decrease)






2013


2012


Amount


Percent


Local Telephone Operations













Operating revenues














Residential

$

69,516


$

70,082


$

(566)


(0)




Commercial


24,266



24,201



65





Wholesale


48,691



49,769



(1,078)


(2%)







142,473



144,052



(1,579)


(1%)



Operating expenses














Cost of services and products


46,621



47,180



(559)


(0)




Selling, general and administrative expenses


41,274



43,216



(1,942)


(4%)




Depreciation, amortization and accretion


37,972



37,834



138





(Gain) loss on asset disposals and exchanges, net


(850)



136



(986)


>(100)%







125,017



128,366



(3,349)


(3%)


















Operating income

$

17,456


$

15,686


$

1,770


11%

















Competitive Local Exchange Carrier Operations













Operating revenues