News Details

TDS reports third quarter 2014 results

10/31/2014

U.S. Cellular reports positive net additions; TDS Telecom raises 2014 guidance
As previously announced, TDS will hold a teleconference Oct. 31, 2014 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.teldta.com.

CHICAGO, Oct. 31, 2014 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,280.0 million for the third quarter of 2014, versus $1,181.0 million for the comparable period one year ago. Net loss attributable to TDS shareholders and related diluted loss per share were $116.0 million and $1.07 respectively, for the third quarter of 2014, compared to $9.5 million and $0.09, respectively, in the comparable period one year ago. 

In the third quarter of 2014, TDS recorded two significant, discrete, non-cash charges, an $84 million non-cash goodwill impairment charge related to the HMS segment and $30 million of net deferred tax expense related to adjusting valuation allowances on deferred tax assets. 

"Our wireless business had a very promising quarter, with strong customer growth and improved loyalty at U.S. Cellular," said LeRoy T. Carlson, Jr. , TDS president and CEO. "In the wireline business we had another solid quarter of improved profitability, a result of continued cost reduction activities.  We also successfully completed our BendBroadband cable acquisition on September 1, 2014.

"U.S. Cellular's attractive value proposition, combining a high-quality network and competitive devices, plans, and pricing, led to strong growth in both gross and net postpaid customer additions. We also increased total revenues, though higher smartphone subsidies continued to impact margins. We have plans to build upon this momentum with competitive offerings throughout the important holiday months.

"TDS Telecom grew revenues from residential TDS TV and broadband services and from commercial managedIP connections, which helped offset declines in voice and wholesale revenues. We are integrating BendBroadband and are focused on increasing video and broadband penetration in our cable businesses. We continue to focus on increasing the strategic recurring revenues from hosted and managed services at OneNeck IT Solutions."

2014 Estimated Results

Estimates of full-year 2014 results for U.S. Cellular, TDS Telecom and TDS are shown below.  Such estimates represent management's view as of October 31, 2014.  Such forward-looking statements should not be assumed to be current as of any future date.  TDS undertakes no duty to update such information, whether as a result of new information, future events or otherwise.  There can be no assurance that final results will not differ materially from such estimated results.



2014 Estimated Results



U.S. Cellular


TDS Telecom


TDS(2)



Current

Previous


Current

Previous


Current

Previous

(Dollars in millions)









Total operating revenues

$3,900-$4,000

Unchanged


$1,075-$1,125

$1,050-$1,100


$4,995-$5,145

$4,970-$5,120

Adjusted income before income taxes (1)

$375-$450

$350-$450


$275-$300

$260-$290


$645-$745

$605-$735

Capital expenditures

$600

$640


$210

$200


$820

$850



(1)

Adjusted income before income taxes is defined as income before income taxes, adjusted for the items set forth in the reconciliation below. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. From time to time, TDS may exclude other items from adjusted income before income taxes if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future.  Adjusted income before income taxes is not a measure of financial performance under Generally Accepted Accounting Principles in the United States ("GAAP") and should not be considered as an alternative to income before income taxes as an indicator of the company's operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. TDS believes adjusted income before income taxes is a useful measure of TDS' operating results before significant recurring non-cash charges, discrete gains and losses, and financing charges (interest expense). The following tables provide a reconciliation of income before income taxes to adjusted income before income taxes for 2014 estimated results, nine months ended September 30, 2014 actual results, and year ended December 31, 2013 actual results:

 



2014 Estimated Results



U.S. Cellular


TDS Telecom


TDS(2)

(Dollars in millions)









Income (loss) before income taxes

($164)-($89)


($32)-($7)


($291)-($191)

Depreciation, amortization and accretion

$620


$225


$855

Loss on impairment of assets

 - 



$84


$84

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

($50)


($2)


($27)

(Gain) loss on license sales and exchanges

($91)


 - 


($91)

Interest expense

$60


 - 


$115

Adjusted income before income taxes

$375-$450


$275-$300


$645-$745











 



Actual Results



Nine months ended September 30, 2014


Year ended December 31, 2013



U.S. Cellular


TDS

Telecom


TDS (2)


U.S. Cellular


TDS

Telecom


TDS (2)

(Dollars in millions)









Income (loss) before income taxes

($24)


($24)


($119)


$258


$49


$293

Depreciation, amortization and accretion expense

$465


$161


$635


$804


$203


$1,018

Loss on impairment of assets


$84


$84




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

($28)


($2)


($9)


($247)



($301)

(Gain) loss on license sales and exchanges

($91)



($91)


($255)



($255)

(Gain) loss on investments




($19)


($1)


($15)

Interest expense

$43


($1)


$84


$44


($2)


$99

Adjusted income before income taxes

$365


$219


$583


$585


$249


$839



(2)

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.

Stock Repurchase Summary

TDS began repurchasing stock under its $250 million repurchase authorization on Aug. 5, 2013.   The following represents repurchases of TDS Common Shares.

Repurchase Period


# Shares


Cost (in millions)


2014 (third quarter)


421,322


$

10.7


2014 (second quarter)


650,628


$

17.3


2014 (first quarter)


157,891


$

3.8


2013 (full year)


338,851


$

9.7


Total


1,568,692


$

41.5


Conference Call Information

TDS will hold a conference call on Oct. 31, 2014 at 9:30 a.m. CDT.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.teldta.com. The call will be archived on the Events & Presentations page of investors.teldta.com.

About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 1000TM company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 5.9 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, Baja Broadband and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,400 people as of Sept. 30, 2014.

Visit www.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:  All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: impacts of any pending acquisition and divestiture transactions,  including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets;  pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission ("SEC"), which are incorporated by reference herein.   

 

For more information about TDS and its subsidiaries, visit:
TDS: www.tdsinc.com
U.S. Cellular: www.uscellular.com
TDS Telecom: www.tdstelecom.com
OneNeck IT Solutions: www.oneneck.com


 

United States Cellular Corporation

Total Markets* Summary Operating Data (Unaudited)


















As of or for the Quarter Ended

9/30/2014


6/30/2014


3/31/2014


12/31/2013


9/30/2013

Retail Customers
















Postpaid

















Total at end of period


4,200,000



4,148,000



4,174,000



4,267,000



4,343,000



Gross additions


251,000



190,000



197,000



176,000



165,000



Net additions (losses)


52,000



(26,000)



(93,000)



(71,000)



(60,000)



ARPU (1)

$

56.37


$

56.82


$

57.59


$

53.53


$

54.64



Churn rate (2)


1.6%



1.7%



2.3%



1.9%



1.7%



Smartphone penetration (3)


57.9%



55.3%



53.1%



50.8%



47.1%


Prepaid

















Total at end of period


350,000



352,000



356,000



343,000



370,000



Gross additions


64,000



65,000



85,000



63,000



65,000



Net additions (losses)


(2,000)



(4,000)



13,000



(26,000)



(11,000)



ARPU (1)

$

34.40


$

34.02


$

32.22


$

31.66


$

28.72



Churn rate (2)


6.3%



6.5%



6.9%



8.3%



6.8%

Total customers at end of period


4,674,000



4,653,000



4,684,000



4,774,000



4,875,000

Billed ARPU (1)

$

53.24


$

53.36


$

53.93


$

50.25


$

50.92

Service revenue ARPU (1)

$

60.92


$

60.32


$

60.19


$

57.05


$

58.36

Smartphones sold as a percent of total

  devices sold


73.3%



72.6%



73.0%



79.6%



65.2%

Total population

















Consolidated markets (4)


54,817,000



54,817,000



54,817,000



58,013,000



84,025,000



Consolidated operating markets (4)


31,729,000



31,729,000



31,729,000



31,759,000



31,822,000

Market penetration at end of period

















Consolidated markets (5)


8.5%



8.5%



8.5%



8.2%



5.8%



Consolidated operating markets (5)


14.7%



14.7%



14.8%



15.0%



15.3%

Capital expenditures (000s)

$

142,452


$

143,927


$

89,581


$

208,135


$

242,459

Total cell sites in service


6,209



6,183



6,165



6,975



7,687

Owned towers


4,487



4,457



4,448



4,448



4,422



*  

Represents U.S. Cellular's consolidated markets. These results include markets which U. S. Cellular currently consolidates, or previously consolidated in the periods presented, and are not adjusted in prior periods for subsequent divestitures or deconsolidations.

Refer to U.S. Cellular's Form 8-K filed on November 1, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and nine months ended September 30, 2013, as if the transactions had occurred at the beginning of the period.

 

 

United States Cellular Corporation

Core* Markets Summary Operating Data (Unaudited)


















As of or for the Quarter Ended

9/30/2014


6/30/2014


3/31/2014


12/31/2013


9/30/2013

Retail Customers
















Postpaid

















Total at end of period


4,200,000



4,148,000



4,174,000



4,267,000



4,343,000



Gross additions


251,000



190,000



197,000



176,000



165,000



Net additions (losses)


52,000



(26,000)



(93,000)



(71,000)



(60,000)



ARPU (1)

$

56.37


$

56.82


$

57.59


$

53.53


$

54.64



Churn rate (2)


1.6%



1.7%



2.3%



1.9%



1.7%



Smartphone penetration (3)


57.9%



55.3%



53.1%



50.8%



47.1%


Prepaid

















Total at end of period


350,000



352,000



356,000



343,000



370,000



Gross additions


64,000



65,000



85,000



63,000



65,000



Net additions (losses)


(2,000)



(4,000)



13,000



(26,000)



(11,000)



ARPU (1)

$

34.40


$

34.02


$

32.22


$

31.66


$

28.72



Churn rate (2)


6.3%



6.5%



6.9%



8.3%



6.8%

Total customers at end of period


4,674,000



4,653,000



4,684,000



4,774,000



4,875,000

Billed ARPU (1)

$

53.24


$

53.36


$

53.93


$

50.25


$

50.92

Service revenue ARPU (1)

$

60.92


$

60.32


$

60.19


$

57.05


$

58.36

Smartphones sold as a percent of total

  devices sold


73.3%



72.6%



73.0%



79.6%



65.2%

Total population

















Consolidated markets (4)


54,817,000



54,817,000



54,817,000



58,013,000



84,025,000



Consolidated operating markets (4)


31,729,000



31,729,000



31,729,000



31,759,000



31,822,000

Market penetration at end of period

















Consolidated markets (5)


8.5%



8.5%



8.5%



8.2%



5.8%



Consolidated operating markets (5)


14.7%



14.7%



14.8%



15.0%



15.3%

Capital expenditures (000s)

$

142,452


$

143,927


$

89,581


$

211,247


$

239,332

Total cell sites in service


6,209



6,183



6,165



6,161



6,127

Owned towers


3,922



3,892



3,883



3,883



3,857



*    

U.S. Cellular's Core Markets excludes the results of the Divestiture Markets and NY1 and NY2 Partnerships for the periods presented.

Refer to U.S. Cellular's Form 8-K filed on November 1, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and nine months ended September 30, 2013, as if the transactions had occurred at the beginning of the period.



(1)

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

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

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

c.    Billed ARPU consists of total retail service or "billed" revenues (total postpaid, prepaid and reseller service revenues) and postpaid, prepaid and reseller customers.

d.    Service revenue ARPU consists of total retail service revenues,  inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)

Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

(3)

Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding tablets. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(4)

The decrease in the population of Consolidated markets is due primarily to the divestiture of the Mississippi Valley non-operating license in October 2013 and the majority of the St. Louis area non-operating market license in March 2014. Total Population is used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (5) below.

(5)

Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.  The increase in penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (4) above.

 

TDS Telecom

Summary Operating Data (Unaudited)



















Quarter Ended

9/30/2014


6/30/2014


3/31/2014


12/31/2013


9/30/2013

TDS Telecom















Wireline

















Residential connections


















Voice (1)


340,300



346,100



348,700



352,100



358,100




Broadband (2)


231,600



232,700



229,000



227,000



229,500




IPTV (3)


20,700



18,200



15,900



13,800



12,200




   Wireline residential connections


592,600



597,000



593,600



592,900



599,800





















Total residential revenue per connection (4)

$

41.47


$

41.05


$

40.79


$

40.93


$

41.12





















Commercial connections


















Voice (1)


199,300



206,200



212,200



218,400



223,800




Broadband (2)


25,300



26,000



26,600



27,100



27,600




managedIP (5)


137,700



133,300



131,000



127,600



121,000




   Wireline commercial connections


362,300



365,500



369,800



373,100



372,400





















Total Wireline connections


954,900



962,500



963,400



966,000



972,200



















Cable

















Cable Connections


















Video (6)


109,100



69,700



68,700



69,100



70,200




Broadband (7)


106,400



63,200



63,000



61,000



59,800




Voice (7)


41,800



17,800



17,700



17,200



16,800




   Cable connections


257,300



150,700



149,400



147,300



146,800





















Total residential revenue per connection (4)

$

56.14


$

56.80


$

57.37


$

55.27



55.67

 

 

(1)

The individual circuit connecting customers to TDS Telecom's central office facilities.

(2)

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

(3)

The number of customers provided video services using IP networking technology.

(4)

Total residential revenue divided by the average number of total residential connections.

(5)

The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.

(6)

Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.

(7)

Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively.































TDS Telecom

Capital Expenditures (000s)
















Quarter Ended


9/30/2014



6/30/2014



3/31/2014



12/31/2013



9/30/2013

Wireline

$

34,200


$

27,400


$

22,900


$

46,000


$

32,800

Cable


7,600



7,200



6,200



7,000



1,400

HMS


9,800



10,600



2,800



9,200



2,400


$

51,600


$

45,200


$

31,900


$

62,200


$

36,600

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

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











Change





2014


2013


Amount

Percent

Operating revenues












U.S. Cellular

$

1,000,419


$

939,236


$

61,183


7%


TDS Telecom


273,157



234,543



38,614


16%


All Other (1)


6,447



7,201



(754)


(10%)






1,280,023



1,180,980



99,043


8%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


905,157



781,291



123,866


16%



Depreciation, amortization and accretion


148,952



200,985



(52,033)


(26%)



(Gain) loss on asset disposals, net


7,947



1,701



6,246


>100%



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


(10,283)



(1,534)



(8,749)


>100%






1,051,773



982,443



69,330


7%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


199,132



170,650



28,482


17%



Depreciation, amortization and accretion


54,255



51,305



2,950


6%



Loss on impairment of assets


84,000





84,000


N/M



(Gain) loss on asset disposals, net


1,367



436



931


>100%



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


(2,201)





(2,201)


N/M






336,553



222,391



114,162


51%


All Other (1)(2)













Expenses excluding depreciation and amortization


7,117



6,208



909


15%



Depreciation and amortization


2,322



3,005



(683)


(23%)



(Gain) loss on asset disposals, net


(21)



18



(39)


>(100%)



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


7,694





7,694


N/M






17,112



9,231



7,881


85%


















Total operating expenses


1,405,438



1,214,065



191,373


16%

Operating income (loss)












U.S. Cellular


(51,354)



(43,207)



(8,147)


(19%)


TDS Telecom


(63,396)



12,152



(75,548)


>(100%)


All Other  (1)(2)


(10,665)



(2,030)



(8,635)


>(100%)






(125,415)



(33,085)



(92,330)


>100%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


36,081



37,609



(1,528)


(4%)


Interest and dividend income


4,526



2,507



2,019


81%


Interest expense


(27,170)



(24,961)



(2,209)


(9%)


Other, net


69



145



(76)


(52%)



Total investment and other income


13,506



15,300



(1,794)


(12%)

Income (loss) before income taxes


(111,909)



(17,785)



(94,124)


>100%


Income tax expense (benefit)


9,290



(6,731)



16,021


>(100%)

Net income (loss)


(121,199)



(11,054)



(110,145)


>100%


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


(5,169)



(1,542)



(3,627)


>100%

Net income (loss) attributable to TDS shareholders


(116,030)



(9,512)



(106,518)


>100%


TDS Preferred dividend requirement


(12)



(12)




Net income (loss) available to common shareholders

$

(116,042)


$

(9,524)


$

(106,518)


>100%















Basic weighted average shares outstanding


108,252



108,571



(319)


Basic earnings (loss) per share attributable to TDS shareholders

$

(1.07)


$

(0.09)


$

(0.98)


>100%















Diluted weighted average shares outstanding


108,252



108,571



(319)


Diluted earnings (loss) per share attributable to TDS shareholders

$

(1.07)


$

(0.09)


$

(0.98)


>100%

 

(1)

Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations.

(2)

Due to the Airadigm Transaction, TDS recognized expenses of $7.7 million related to exit and disposal activities in 2014.


N/M – Percentage change not meaningful

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

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











Change





2014


2013


Amount

Percent

Operating revenues












U.S. Cellular

$

2,884,003


$

3,016,112


$

(132,109)


(4%)


TDS Telecom


806,423



675,064



131,359


19%


All Other (1)


21,951



26,543



(4,592)


(17%)






3,712,377



3,717,719



(5,342)


Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


2,615,163



2,472,825



142,338


6%



Depreciation, amortization and accretion


465,042



593,410



(128,368)


(22%)



(Gain) loss on asset disposals, net


16,774



16,153



621


4%



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


(27,694)



(243,627)



215,933


89%



(Gain) loss on license sales and exchanges


(91,446)





(91,446)


N/M






2,977,839



2,838,761



139,078


5%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


586,862



493,090



93,772


19%



Depreciation, amortization and accretion


161,205



149,552



11,653


8%



Loss on impairment of assets


84,000





84,000


N/M



(Gain) loss on asset disposals, net


2,694



(53)



2,747


>(100%)



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


(2,201)





(2,201)


N/M






832,560



642,589



189,971


30%


All Other (1)(2)













Expenses excluding depreciation and amortization


26,056



25,480



576


2%



Depreciation and amortization


8,768



8,613



155


2%



(Gain) loss on asset disposals, net


158



(10)



168


>(100%)



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


20,816



(54,010)



74,826


>(100%)






55,798



(19,927)



75,725


>(100%)


















Total operating expenses


3,866,197



3,461,423



404,774


12%

Operating income (loss)












U.S. Cellular


(93,836)



177,351



(271,187)


>(100%)


TDS Telecom


(26,137)



32,475



(58,612)


>(100%)


All Other  (1)(2)


(33,847)



46,470



(80,317)


>(100%)






(153,820)



256,296



(410,116)


>(100%)

Investment and other income (expense)












Equity in earnings of unconsolidated entities


108,198



100,303



7,895


8%


Interest and dividend income


9,763



6,685



3,078


46%


Gain (loss) on investments


  - 



14,518



(14,518)


N/M


Interest expense


(83,775)



(73,208)



(10,567)


(14%)


Other, net


279



(206)



485


>(100%)



Total investment and other income


34,465



48,092



(13,627)


(28%)

Income (loss) before income taxes


(119,355)



304,388



(423,743)


>(100%)


Income tax expense (benefit)


7,276



130,056



(122,780)


(94%)

Net income (loss)


(126,631)



174,332



(300,963)


>(100%)


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


(6,817)



26,348



(33,165)


>(100%)

Net income (loss) attributable to TDS shareholders


(119,814)



147,984



(267,798)


>(100%)


TDS Preferred dividend requirement


(37)



(37)




Net income (loss) available to common shareholders

$

(119,851)


$

147,947


$

(267,798)


>(100%)















Basic weighted average shares outstanding


108,650



108,405



245


Basic earnings (loss) per share attributable to TDS shareholders

$

(1.10)


$

1.36


$

(2.46)


>(100%)















Diluted weighted average shares outstanding


108,650



108,993



(343)


Diluted earnings (loss) per share attributable to TDS shareholders

$

(1.10)


$

1.35


$

(2.45)


>(100%)



(1)

Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations.

(2)

Due to the Airadigm Transaction, TDS recognized expenses of $20.8 million related to exit and disposal activities in 2014.  In 2013, TDS recognized an incremental gain of $53.5 million compared to U.S. Cellular upon closing of the Divestiture Transaction as a result of lower asset basis in the assets disposed.


N/M – Percentage change not meaningful

 

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)








ASSETS

















September 30,


December 31,



2014


2013

Current assets







Cash and cash equivalents

$

573,067


$

830,014


Short-term investments


40,014



50,104


Accounts receivable from customers and others


652,487



731,114


Inventory, net


193,694



244,560


Net deferred income tax asset


100,951



106,077


Prepaid expenses


89,243



87,920


Income taxes receivable


10,522



2,397


Other current assets


31,884



35,151




1,691,862



2,087,337








Assets held for sale


68,288



16,027








Investments







Licenses


1,400,808



1,423,779


Goodwill


783,280



836,843


Franchise rights


238,950



123,668


Other intangible assets, net


70,075



71,454


Investments in unconsolidated entities


335,448



301,772


Other investments


543



641




2,829,104



2,758,157








Property, plant and equipment, net







U.S. Cellular


2,746,449



2,856,520


TDS Telecom


1,064,677



984,634


Other


25,342



36,990




3,836,468



3,878,144








Other assets and deferred charges


214,826



164,482








Total assets

$

8,640,548


$

8,904,147

 

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)










LIABILITIES AND EQUITY























September 30,


December 31,





2014


2013

Current liabilities








Current portion of long-term debt

$

862


$

1,646



Accounts payable


469,193



496,069



Customer deposits and deferred revenues


330,789



289,445



Accrued interest


15,750



6,673



Accrued taxes


87,474



70,518



Accrued compensation


100,297



115,031



Other current liabilities


153,142



212,374






1,157,507



1,191,756










Deferred liabilities and credits








Net deferred income tax liability


823,172



862,975



Other deferred liabilities and credits


455,360



458,709










Long-term debt


1,718,701



1,720,074










Noncontrolling interests with redemption features


1,007



536










Equity







TDS shareholders' equity








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


1,327



1,327



Capital in excess of par value


2,329,674



2,308,807



Treasury shares, at cost


(746,660)



(721,354)



Accumulated other comprehensive loss


(1,307)



(569)



Retained earnings


2,366,237



2,529,626




   Total TDS shareholders' equity


3,949,271



4,117,837











Preferred shares


824



824


Noncontrolling interests


534,706



551,436












Total equity


4,484,801



4,670,097










Total liabilities and equity

$

8,640,548


$

8,904,147

 

 

Balance Sheet Highlights

September 30, 2014

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

273,798


$

75,226


$

224,043


$

 - 


$

573,067

Affiliated cash investments


 - 



518,587



 - 



(518,587)



 - 

Short-term investments


40,014



 - 



 - 



 - 



40,014



$

313,812


$

593,813


$

224,043


$

(518,587)


$

613,081


















Licenses, goodwill and other intangible assets

$

1,778,196


$

861,352


$

(146,435)


$

 - 


$

2,493,113

Investment in unconsolidated entities


296,900



3,803



41,936



(7,191)



335,448

Long-term and other investments


 - 



543



 - 



 - 



543




$

2,075,096


$

865,698


$

(104,499)


$

(7,191)


$

2,829,104



































Property, plant and equipment, net

$

2,746,449


$

1,064,677


$

25,597


$

(255)


$

3,836,468


















Long-term debt:
















Current portion

$

46


$

57


$

759


$

 - 


$

862


Non-current portion


876,756



1,433



840,512



 - 



1,718,701




$

876,802


$

1,490


$

841,271


$

 - 


$

1,719,563

 

 

Telephone and Data Systems, Inc.

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)


The following table presents TDS' cash and cash equivalents and investments at September 30, 2014 and December 31, 2013.








September 30,


December 31,


2014


2013








Cash and cash equivalents

$

573,067


$

830,014








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







U.S. Treasury Notes


40,014



50,104








Total cash and cash equivalents and investments

$

613,081


$

880,118



(1)

Designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet.

(2)

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

 

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Nine Months Ended September 30,

(Unaudited, dollars in thousands)






2014


2013

Cash flows from operating activities







Net income (loss)

$

(126,631)


$

174,332



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

  from operating activities










Depreciation, amortization and accretion


635,015



751,575





Bad debts expense


79,218



56,693





Stock-based compensation expense


25,715



21,867





Deferred income taxes, net


(33,242)



(30,748)





Equity in earnings of unconsolidated entities


(108,198)



(100,303)





Distributions from unconsolidated entities


74,864



51,879





Loss on impairment of assets


84,000







(Gain) loss on asset disposals, net


19,626



16,090





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


(9,079)



(297,637)





(Gain) loss on investments




(14,518)





(Gain) loss on license sales and exchanges


(91,446)







Noncash interest expense


1,584



1,498





Other operating activities


13



575



Changes in assets and liabilities from operations










Accounts receivable


(7,879)



(216,700)





Inventory


52,078



11,114





Accounts payable


11,034



33,312





Customer deposits and deferred revenues


37,834



21,883





Accrued taxes


14,307



41,838





Accrued interest


9,105



9,451





Other assets and liabilities


(171,707)



(94,301)







496,211



437,900











Cash flows from investing activities







Cash used for additions to property, plant and equipment


(553,718)



(631,370)


Cash paid for acquisitions and licenses


(284,089)



(280,383)


Cash received from divestitures


151,369



484,300


Cash received for investments


10,000



80,000


Other investing activities


5,598



13,860







(670,840)



(333,593)











Cash flows from financing activities







Repayment of long-term debt


(819)



(1,196)


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


486



7,537


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


1,150



2,840


Repurchase of TDS Common Shares


(31,293)



(5,813)


Repurchase of U.S. Cellular Common Shares


(14,698)



(18,544)


Dividends paid to TDS shareholders


(43,575)



(41,430)


U.S. Cellular dividends paid to noncontrolling public shareholders




(75,235)


Distributions to noncontrolling interests


(439)



(3,447)


Other financing activities


6,870



1,589







(82,318)



(133,699)











Net decrease in cash and cash equivalents


(256,947)



(29,392)

Cash and cash equivalents







Beginning of period


830,014



740,481


End of period

$

573,067


$

711,089

 

 

TDS Telecom Highlights

Three Months Ended September 30,

(Unaudited, dollars in thousands)

























Change





2014


2013


Amount


Percent

Wireline











Operating revenues












Residential

$

73,901


$

74,257


$

(356)



Commercial


57,179



57,075



104



Wholesale


46,570



49,755



(3,185)


(6%)



Total service revenues


177,650



181,087



(3,437)


(2%)


Equipment sales


425



713



(288)


(40%)






178,075



181,800



(3,725)


(2%)

Operating expenses












Cost of services


64,072



67,308



(3,236)


(5%)


Cost of equipment sold


829



941



(112)


(12%)


Selling, general and administrative expenses


46,627



53,254



(6,627)


(12%)


Depreciation, amortization and accretion


41,358



42,136



(778)


(2%)


(Gain) loss on asset disposals, net


743



426



317


74%


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


(2,201)





(2,201)


N/M






151,428



164,065



(12,637)


(8%)
















Operating income

$

26,647


$

17,735


$

8,912


50%















Cable











Operating revenues












Residential

$

22,921


$

11,642


$

11,279


97%


Commercial


5,598



2,720



2,878


>100%





28,519



14,362



14,157


99%

Operating expenses












Cost of services


12,651



6,727



5,924


88%


Selling, general and administrative expenses


9,948



5,184



4,764


92%


Depreciation, amortization and accretion


6,171



2,914



3,257


>100%


(Gain) loss on asset disposals, net


626





626


N/M






29,396



14,825



14,571


98%
















Operating income (loss)

$

(877)


$

(463)


$

(414)


(89%)















HMS











Operating revenues












Service revenues

$

27,806


$

23,200


$

4,606


20%


Equipment sales


39,737



15,527



24,210


>100%






67,543



38,727



28,816


74%

Operating expenses












Cost of services


19,442



14,369



5,073


35%


Cost of equipment sold


33,819



13,149



20,670


>100%


Selling, general and administrative expenses


12,724



10,064



2,660


26%


Depreciation, amortization and accretion


6,726



6,255



471


8%


Loss on impairment of assets


84,000





84,000


N/M


(Gain) loss on asset disposals, net


(2)



10



(12)


>(100)%






156,709



43,847



112,862


>100%
















Operating income (loss)

$

(89,166)


$

(5,120)


$

(84,046)


>(100)%















Intercompany revenues

$

(980)


$

(346)


$

(634)


>(100)%

Intercompany expenses


(980)



(346)



(634)


>(100)%















Total TDS Telecom operating income (loss)

$

(63,396)


$

12,152


$

(75,548)


>(100)%

 

 

TDS Telecom Highlights

Nine Months Ended September 30,

(Unaudited, dollars in thousands)

























Change





2014


2013


Amount


Percent

Wireline











Operating revenues












Residential

$

219,766


$

220,172


$

(406)



Commercial


172,631



171,328



1,303


1%


Wholesale


142,483



151,693



(9,210)


(6%)



Total service revenues


534,880



543,193



(8,313)


(2%)


Equipment sales


1,409



2,375



(966)


(41%)






536,289



545,568



(9,279)


(2%)

Operating expenses












Cost of services


192,777



199,476



(6,699)


(3%)


Cost of equipment sold


1,793



3,045



(1,252)


(41%)


Selling, general and administrative expenses


140,855



167,326



(26,471)


(16%)


Depreciation, amortization and accretion


125,921



129,352



(3,431)


(3%)


(Gain) loss on asset disposals, net


1,502



(176)



1,678


>100%


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


(2,201)





(2,201)


N/M






460,647



499,023



(38,376)


(8%)
















Operating income

$

75,642


$

46,545


$

29,097


63%















Cable











Operating revenues












Residential

$

59,396


$

11,642


$

47,754


>100%


Commercial


14,110



2,720



11,390


>100%





73,506



14,362



59,144


>100%

Operating expenses












Cost of services


35,000



6,727



28,273


>100%


Selling, general and administrative expenses


22,611



5,184



17,427


>100%


Depreciation, amortization and accretion


15,089



2,914



12,175


>100%


(Gain) loss on asset disposals, net


1,116





1,116


N/M






73,816



14,825



58,991


>100%
















Operating income (loss)

$

(310)


$

(463)


$

153


33%















HMS











Operating revenues












Service revenues

$

82,757


$

68,405


$

14,352


21%


Equipment sales


115,830



47,260



68,570


>100%






198,587



115,665



82,922


72%

Operating expenses












Cost of services


57,689



43,042



14,647


34%


Cost of equipment sold


98,161



39,475



58,686


>100%


Selling, general and administrative expenses


39,935



29,346



10,589


36%


Depreciation, amortization and accretion


20,195



17,286



2,909


17%


Loss on impairment of assets


84,000





84,000


N/M


(Gain) loss on asset disposals, net


76



123



(47)


(38%)






300,056



129,272



170,784


>100%
















Operating income (loss)

$

(101,469)


$

(13,607)


$

(87,862)


>(100)%















Intercompany revenues

$

(1,959)


$

(531)


$

(1,428)


>(100)%

Intercompany expenses


(1,959)



(531)



(1,428)


>(100)%















Total TDS Telecom operating income (loss)

$

(26,137)


$

32,475


$

(58,612)


>(100)%

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)




















TDS Consolidated




















Three Months Ended


Nine Months Ended





September 30,


September 30,



2014


2013


2014


2013

















Cash flows from operating activities


$

180,569


$

(83,592)


$

496,211


$

437,900


Add: Sprint Cost Reimbursement



17,896



1,131



52,012



1,131


Less: Cash used for additions to property,

   plant and equipment



213,811



247,089



553,718



631,370



Adjusted free cash flow (1)


$

(15,346)


$

(329,550)


$

(5,495)


$

(192,339)



(1)

Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash used for additions to property, plant and equipment. Adjusted free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment.

 

 

SOURCE Telephone and Data Systems, Inc.

Jane McCahon, Vice President, Corporate Relations and Corporate Secretary, 312- 592-5379, jane.mccahon@tdsinc.com, Julie Mathews, Investor Relations Manager, 312- 592-5341, julie.mathews@tdsinc.com