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TDS reports fourth quarter 2014 results

02/25/2015

Provides 2015 guidance
As previously announced, TDS will hold a teleconference Feb. 25, 2015 at 9:30 a.m. CST. Interested parties may listen to the call live via the Events & Presentations page of investors.teldta.com.

CHICAGO, Feb. 25, 2015 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,297.1 million for the fourth quarter of 2014, versus $1,183.5 million for the comparable period one year ago. Net loss attributable to TDS shareholders and related diluted loss per share were $16.6 million and $0.15 respectively, for the fourth quarter of 2014, compared to $6.1 million and $0.06, respectively, in the comparable period one year ago. 

"I am very pleased with the progress that both businesses achieved in 2014," said LeRoy T. Carlson, Jr. , TDS president and CEO. "U.S. Cellular turned around its customer results and grew its postpaid customer base.  TDS Telecom very successfully executed its broadband strategy and generated strong financial results.

"At U.S. Cellular, our excellent network and competitive devices, plans, and pricing helped drive customer growth.  Customer service levels returned to our normal high standards. We completed our fourth wave of 4G LTE network deployment and now cover 94 percent of our postpaid customers.  And to ensure that the company remains competitive and meets broadband demands, U.S. Cellular's partners were successful in acquiring meaningful spectrum in the most recent government auction.  Looking ahead, U.S. Cellular is in a strong competitive position and plans to grow its customer base, revenues and improve profitability.

"TDS Telecom performed well in 2014.  The wireline segment continued its targeted fiber deployment and now offers TDS TV service in eighteen markets.  Ongoing cost reductions led to improved profitability.  The BendBroadband acquisition integration has gone smoothly and the entire cable segment has been executing on its strategy to increase residential and commercial broadband penetration while leveraging wireline's expertise, infrastructure and product set.  While OneNeck IT Solutions did not perform up to our expectations, we are highly confident that growth will accelerate as it executes its mid-market-focused IT outsourcing strategy.  TDS Telecom is well-positioned for continued success in 2015.

"In 2014 TDS continued to execute on its capital allocation strategy by returning $97 million to shareholders through dividends and repurchase of shares.  At the same time, TDS invested $261 million into the business through the purchase of BendBroadband.  Additionally, at the U.S. Cellular level, we have been actively managing the portfolio of assets.  We agreed to sell non-strategic towers for $159 million and entered into exchanges involving licenses with 153 million MHz/pops that will generate $145 million in pre-tax cash." 

2015 Estimated Results
Estimates of full-year 2015 results for U.S. Cellular, TDS Telecom and TDS are shown below.  Such estimates represent management's view as of February 25, 2015.  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.

TDS has changed one of the measures which it uses to present estimates of future operating results.  TDS previously presented adjusted income before income taxes, defined as income before income taxes, adjusted for: Depreciation, amortization and accretion; net Loss on impairment of assets (if any); net Gain or loss on sale of business and other exit costs (if any); net Gain or loss on license sales and exchanges (if any); net Gain or loss on investments (if any); and interest expense.  TDS is now presenting Operating cash flow and Adjusted earnings before interest, taxes, depreciation, amortization and accretion ("Adjusted EBITDA"), as defined below, which it believes are measures which provide a comprehensive view of TDS' recurring results of operations.



2015 Estimated Results and Actual Results for the Year Ended December 31, 2014



U.S. Cellular


TDS Telecom


TDS(2)



Estimate

Actual


Estimate

Actual


Estimate

Actual

(Dollars in millions)









Total operating revenues

$4,000-$4,200

$3,893


$1,130-$1,180

$1,088


$5,145-$5,395

$5,009

Operating cash flow (1)

$350-$450

$338


$280-$310

$296


$635-$765

$632

Adjusted EBITDA (1)

$530-$630

$480


$280-$310

$298


$820-$950

$781

Capital expenditures

$600

$558


$220

$208


$830

$771

 

(1)

Operating cash flow is defined as net income, adjusted for the items set forth in the reconciliation below.  Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation below.  Operating cash flow and Adjusted EBITDA exclude 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 Operating cash flow and/or Adjusted EBITDA 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.  Operating cash flow and Adjusted EBITDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States ("GAAP") and should not be considered as alternatives to net income as indicators of the company's operating performance or as alternatives to cash flows from operating activities, determined in accordance with GAAP, as indicators of cash flows or as measures of liquidity. TDS believes Operating cash flow and Adjusted EBITDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as indicated below. The following tables provide a reconciliation to Operating cash flow and Adjusted EBITDA for 2015 estimated results and year ended December 31, 2014 actual results:

 



2015 Estimated and Actual Results for the Year Ended December 31, 2014



U.S. Cellular


Telecom


TDS (2)



Estimate (3)


Actual


Estimate (3)


Actual


Estimate (3)


Actual

(Dollars in millions)









Net income (loss) (GAAP)

N/A


($47)


N/A


($24)


N/A


($147)

Add back:













Income tax expense (benefit)

N/A


($12)


N/A


$18


N/A


($5)

Income (loss) before income taxes (GAAP)

($10)-$90


($59)


$45-$75


($7)


($25)-$105


($153)

Add back:













Interest expense

$85


$57



($1)


$145


$111


Depreciation, amortization and accretion expense

$545


$606


$235


$220


$790


$837

EBITDA

$620-$720


$605


$280-$310


$212


$910-$1,040


$796

Add back:













Loss on impairment of assets




$84



$88


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

($105)


($33)



($2)


($105)


($16)


(Gain) loss on license sales and exchanges


($113)





($113)


(Gain) loss on assets disposals, net

$15


$21



$5


$15


$27

Adjusted EBITDA (4)

$530-$630


$480


$280-$310


$298


$820-$950


$781

Deduct:













Equity in earnings of unconsolidated entities

($130)


($130)




($130)


($132)


Interest and dividend income

($50)


($12)



($2)


($55)


($17)

Operating cash flow (5)

$350-$450


$338


$280-$310


$296


$635-$765


$632

 

(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.

(3)

In providing 2015 Estimated Results, TDS has not completed the above reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance. Accordingly, a reconciliation to net income is not available without unreasonable effort.

(4)

Adjusted EBITDA (new measure) equals adjusted income before income taxes (previous measure) excluding gain or loss on asset disposals, net. See Adjusted EBITDA reconciliation for full year 2014, 2013, and 2012 actual results on the company's website at investors.teldta.com.

(5)

A reconciliation of Operating cash flow (Non-GAAP) to operating income (GAAP) for full year 2014, 2013, and 2012 actual results can be found on the company's website at investors.teldta.com.

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 (fourth quarter)


312,009


$

7.3


2014 (third quarter)


421,322


$

10.7


2014 (second quarter)


650,628


$

17.3


2014 (first quarter)


157,891


$

3.8









2014 (full year)


1,541,850


$

39.1


2013 (full year)


338,851


$

9.7


Total


1,880,701


$

48.8


Conference Call Information
TDS will hold a conference call on Feb. 25, 2015 at 9:30 a.m. CST.

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; wireline and cable broadband, TV and voice; and hosted and managed services to approximately 6.0 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 10,600 people as of Dec. 31, 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; 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

12/31/2014


9/30/2014


6/30/2014


3/31/2014


12/31/2013

Retail Customers
















Postpaid

















Total at end of period


4,298,000



4,200,000



4,148,000



4,174,000



4,267,000



Gross additions


302,000



251,000



190,000



197,000



176,000



Net additions (losses)


98,000



52,000



(26,000)



(93,000)



(71,000)



ARPU (1)

$

56.51


$

56.37


$

56.82


$

57.59


$

53.53



ARPA (2)

$

136.13


$

132.99


$

131.95


$

132.03


$

121.21



Churn rate (3)


1.6%



1.6%



1.7%



2.3%



1.9%



Smartphone penetration (4)


59.8%



57.9%



55.3%



53.1%



50.8%


Prepaid

















Total at end of period


348,000



350,000



352,000



356,000



343,000



Gross additions


60,000



64,000



65,000



85,000



63,000



Net additions (losses)


(2,000)



(2,000)



(4,000)



13,000



(26,000)



ARPU (1)

$

35.33


$

34.40


$

34.02


$

32.22


$

31.66



Churn rate (3)


5.9%



6.3%



6.5%



6.9%



8.3%

Total customers at end of period


4,760,000



4,674,000



4,653,000



4,684,000



4,774,000

Billed ARPU (1)

$

53.63


$

53.24


$

53.36


$

53.93


$

50.25

Service revenue ARPU (1)

$

60.10


$

60.92


$

60.32


$

60.19


$

57.05

Smartphones sold as a percent of total

  handsets sold


86.5%



80.8%



79.0%



78.2%



84.5%

Total population

















Consolidated markets (5)


50,906,000



54,817,000



54,817,000



54,817,000



58,013,000



Consolidated operating markets (5)


31,729,000



31,729,000



31,729,000



31,729,000



31,759,000

Market penetration at end of period

















Consolidated markets (6)


9.4%



8.5%



8.5%



8.5%



8.2%



Consolidated operating markets (6)


15.0%



14.7%



14.7%



14.8%



15.0%

Capital expenditures (000s)

$

181,655


$

142,452


$

143,927


$

89,581


$

208,135

Total cell sites in service


6,220



6,209



6,183



6,165



6,975

Owned towers


4,281



4,487



4,457



4,448



4,448

 

 

*    

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 February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and twelve months ended December 31, 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

12/31/2014


9/30/2014


6/30/2014


3/31/2014


12/31/2013

Retail Customers
















Postpaid

















Total at end of period


4,298,000



4,200,000



4,148,000



4,174,000



4,267,000



Gross additions


302,000



251,000



190,000



197,000



176,000



Net additions (losses)


98,000



52,000



(26,000)



(93,000)



(71,000)



ARPU (1)

$

56.51


$

56.37


$

56.82


$

57.59


$

53.53



ARPA (2)

$

136.13


$

132.99


$

131.95


$

132.03


$

121.21



Churn rate (3)


1.6%



1.6%



1.7%



2.3%



1.9%



Smartphone penetration (4)


59.8%



57.9%



55.3%



53.1%



50.8%


Prepaid

















Total at end of period


348,000



350,000



352,000



356,000



343,000



Gross additions


60,000



64,000



65,000



85,000



63,000



Net additions (losses)


(2,000)



(2,000)



(4,000)



13,000



(26,000)



ARPU (1)

$

35.33


$

34.40


$

34.02


$

32.22


$

31.66



Churn rate (3)


5.9%



6.3%



6.5%



6.9%



8.3%

Total customers at end of period


4,760,000



4,674,000



4,653,000



4,684,000



4,774,000

Billed ARPU (1)

$

53.63


$

53.24


$

53.36


$

53.93


$

50.25

Service revenue ARPU (1)

$

60.10


$

60.92


$

60.32


$

60.19


$

57.05

Smartphones sold as a percent of total

  handsets sold


86.5%



80.8%



79.0%



78.2%



84.5%

Total population

















Consolidated markets (5)


50,906,000



54,817,000



54,817,000



54,817,000



58,013,000



Consolidated operating markets (5)


31,729,000



31,729,000



31,729,000



31,729,000



31,759,000

Market penetration at end of period

















Consolidated markets (6)


9.4%



8.5%



8.5%



8.5%



8.2%



Consolidated operating markets (6)


15.0%



14.7%



14.7%



14.8%



15.0%

Capital expenditures (000s)

$

181,655


$

142,452


$

143,927


$

89,581


$

211,247

Total cell sites in service


6,220



6,209



6,183



6,165



6,161

Owned towers


3,951



3,922



3,892



3,883



3,883

 

 

*   

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 February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the period.



(1)

Average Revenue Per User ("ARPU") metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period.  These revenue bases and customer populations are shown below:


a.

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


b.

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


c.

Billed ARPU consists of total postpaid, prepaid and reseller service revenues and postpaid, prepaid and reseller customers.


d.

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

(2)

Average Revenue Per Account ("ARPA") metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts by the number of months in the period.

(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 Android, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5)

The decrease in the population of consolidated markets is due primarily to the divestiture of the majority of the St. Louis area non-operating market license in March 2014, and certain non-operating licenses in North Carolina in December 2014. Total Population is used only to calculate market penetration of consolidated markets and consolidated 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 markets and consolidated operating markets, respectively, as estimated by Claritas.  The increase in consolidated markets penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (5) above.

 

TDS Telecom

Summary Operating Data (Unaudited)



















Quarter Ended

12/31/2014


9/30/2014


6/30/2014


3/31/2014


12/31/2013

TDS Telecom















Wireline

















Residential connections


















Voice (1)


335,900



340,300



346,100



348,700



352,100




Broadband (2)


229,200



231,600



232,700



229,000



227,000




IPTV (3)


23,400



20,700



18,200



15,900



13,800




   Wireline residential connections


588,500



592,600



597,000



593,600



592,900





















Total residential revenue per connection (4)

$

41.56


$

41.47


$

41.05


$

40.79


$

40.93





















Commercial connections


















Voice (1)


193,200



199,300



206,200



212,200



218,400




Broadband (2)


24,700



25,300



26,000



26,600



27,100




managedIP (5)


140,200



137,700



133,300



131,000



127,600




   Wireline commercial connections


358,100



362,300



365,500



369,800



373,100





















Total Wireline connections


946,600



954,900



962,500



963,400



966,000



















Cable

















Cable Connections


















Video (6)


110,400



109,100



69,700



68,700



69,100




Broadband (7)


110,900



106,400



63,200



63,000



61,000




Voice (7)


46,000



41,800



17,800



17,700



17,200




   Cable connections


267,300



257,300



150,700



149,400



147,300



















 

(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


12/31/2014



9/30/2014



6/30/2014



3/31/2014



12/31/2013

Wireline

$

51,400


$

34,200


$

27,400


$

22,900


$

46,000

Cable


14,600



7,600



7,200



6,200



7,000

HMS


13,400



9,800



10,600



2,800



9,200


$

79,400


$

51,600


$

45,200


$

31,900


$

62,200

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended December 31,

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











Change





2014


2013


Amount

Percent

Operating revenues












U.S. Cellular

$

1,008,744


$

902,724


$

106,020


12%


TDS Telecom


281,889



271,939



9,950


4%


All Other (1)


6,428



8,854



(2,426)


(27%)






1,297,061



1,183,517



113,544


10%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


939,331



967,005



(27,674)


(3%)



Depreciation, amortization and accretion


140,955



210,371



(69,416)


(33%)



(Gain) loss on asset disposals, net


4,695



14,453



(9,758)


(68%)



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


(5,136)



(3,140)



(1,996)


(64%)



(Gain) loss on sale of license sales and exchanges


(21,547)



(255,479)



233,932


92%






1,058,298



933,210



125,088


13%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


205,825



206,097



(272)




Depreciation, amortization and accretion


58,394



53,149



5,245


10%



(Gain) loss on asset disposals, net


2,060



336



1,724


>100%



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


(156)





(156)


N/M






266,123



259,582



6,541


3%


All Other (1)













Expenses excluding depreciation and amortization


4,039



8,597



(4,558)


(53%)



Depreciation and amortization


2,168



2,982



(814)


(27%)



Loss on impairment of assets


3,802





3,802


N/M



(Gain) loss on asset disposals, net


150



(38)



188


>(100%)



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


(1,475)



121



(1,596)


>(100%)






8,684



11,662



(2,978)


(26%)


















Total operating expenses


1,333,105



1,204,454



128,651


11%

Operating income (loss)












U.S. Cellular


(49,554)



(30,486)



(19,068)


(63%)


TDS Telecom


15,766



12,357



3,409


28%


All Other  (1)


(2,256)



(2,808)



552


20%






(36,044)



(20,937)



(15,107)


(72%)

Investment and other income (expense)












Equity in earnings of unconsolidated entities


23,767



32,411



(8,644)


(27%)


Interest and dividend income


7,194



2,407



4,787


>100%


Gain (loss) on investment




29



(29)


N/M


Interest expense


(27,622)



(25,603)



(2,019)


(8%)


Other, net


(164)



169



(333)


>(100%)



Total investment and other income (expense)


3,175



9,413



(6,238)


(66%)

Loss before income taxes


(32,869)



(11,524)



(21,345)


>(100%)


Income tax expense (benefit)


(12,208)



(4,013)



(8,195)


>(100%)

Net loss


(20,661)



(7,511)



(13,150)


>(100%)


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


(4,120)



(1,454)



(2,666)


>(100%)

Net loss attributable to TDS shareholders


(16,541)



(6,057)



(10,484)


>(100%)


TDS Preferred dividend requirement


(12)



(12)




Net loss available to common shareholders

$

(16,553)


$

(6,069)


$

(10,484)


>(100%)















Basic weighted average shares outstanding


107,995



108,742



(747)


(1%)

Basic earnings (loss) per share attributable to TDS shareholders

$

(0.15)


$

(0.06)


$

(0.09)


>(100%)















Diluted weighted average shares outstanding


107,995



108,742



(747)


(1%)

Diluted earnings (loss) per share attributable to TDS shareholders

$

(0.15)


$

(0.06)


$

(0.09)


>(100%)

 

 

(1)

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.

N/M – Percentage change not meaningful

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Twelve Months Ended December 31,

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











Change





2014


2013


Amount

Percent

Operating revenues












U.S. Cellular

$

3,892,747


$

3,918,836


$

(26,089)


(1%)


TDS Telecom


1,088,312



947,003



141,309


15%


All Other (1)


28,379



35,397



(7,018)


(20%)






5,009,438



4,901,236



108,202


2%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


3,554,494



3,439,830



114,664


3%



Depreciation, amortization and accretion


605,997



803,781



(197,784)


(25%)



(Gain) loss on asset disposals, net


21,469



30,606



(9,137)


(30%)



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


(32,830)



(246,767)



213,937


87%



(Gain) loss on license sales and exchanges


(112,993)



(255,479)



142,486


56%






4,036,137



3,771,971



264,166


7%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


792,687



699,187



93,500


13%



Depreciation, amortization and accretion


219,599



202,701



16,898


8%



Loss on impairment of assets


84,000





84,000


N/M



(Gain) loss on asset disposals, net


4,754



283



4,471


>100%



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


(2,357)





(2,357)


N/M






1,098,683



902,171



196,512


22%


All Other (1)













Expenses excluding depreciation and amortization


30,095



34,077



(3,982)


(12%)



Depreciation and amortization


10,936



11,595



(659)


(6%)



Loss on impairment of assets


3,802



  —  



3,802


N/M



(Gain) loss on asset disposals, net


308



(48)



356


>(100%)



(Gain) loss on sale of business and other exit costs, net (2)


19,341



(53,889)



73,230


>(100%)






64,482



(8,265)



72,747


>(100%)


















Total operating expenses


5,199,302



4,665,877



533,425


11%

Operating income (loss)












U.S. Cellular


(143,390)



146,865



(290,255)


>(100%)


TDS Telecom


(10,371)



44,832



(55,203)


>(100%)


All Other  (1)


(36,103)



43,662



(79,765)


>(100%)






(189,864)



235,359



(425,223)


>(100%)

Investment and other income (expense)












Equity in earnings of unconsolidated entities


131,965



132,714



(749)


(1%)


Interest and dividend income


16,957



9,092



7,865


87%


Gain (loss) on investments


  —  



14,547



(14,547)


N/M


Interest expense


(111,397)



(98,811)



(12,586)


(13%)


Other, net


115



(37)



152


>(100%)



Total investment and other income (expense)


37,640



57,505



(19,865)


(35%)

Income (loss) before income taxes


(152,224)



292,864



(445,088)


>(100%)


Income tax expense (benefit)


(4,932)



126,043



(130,975)


>(100%)

Net income (loss)


(147,292)



166,821



(314,113)


>(100%)


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


(10,937)



24,894



(35,831)


>(100%)

Net income (loss) attributable to TDS shareholders


(136,355)



141,927



(278,282)


>(100%)


TDS Preferred dividend requirement


(49)



(49)




Net income (loss) available to common shareholders

$

(136,404)


$

141,878


$

(278,282)


>(100%)















Basic weighted average shares outstanding


108,485



108,490



(5)


Basic earnings (loss) per share attributable to TDS shareholders

$

(1.26)


$

1.31


$

(2.57)


>(100%)















Diluted weighted average shares outstanding


108,485



109,132



(647)


(1%)

Diluted earnings (loss) per share attributable to TDS shareholders

$

(1.26)


$

1.29


$

(2.55)


>(100%)

 

 

(1)

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.

(2)

Due to the Airadigm Transaction, TDS recognized expenses of $20.2 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

















December 31,


December 31,



2014


2013

Current assets







Cash and cash equivalents

$

471,901


$

830,014


Short-term investments




50,104


Accounts receivable from customers and others


683,681



731,114


Inventory, net


273,707



244,560


Net deferred income tax asset


107,686



106,077


Prepaid expenses


86,506



87,920


Income taxes receivable


113,708



2,397


Other current assets


29,766



35,151




1,766,955



2,087,337








Assets held for sale


103,343



16,027








Investments







Licenses


1,453,574



1,423,779


Goodwill


771,352



836,843


Franchise rights


244,300



123,668


Other intangible assets, net


64,499



71,454


Investments in unconsolidated entities


321,729



301,772


Other investments


508



641




2,855,962



2,758,157








Property, plant and equipment, net







U.S. Cellular


2,728,217



2,856,520


TDS Telecom


1,093,671



984,634


Other


24,237



36,990




3,846,125



3,878,144








Other assets and deferred charges


334,554



164,482








Total assets

$

8,906,939


$

8,904,147

 

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)










LIABILITIES AND EQUITY























December 31,


December 31,





2014


2013

Current liabilities








Current portion of long-term debt

$

808


$

1,646



Accounts payable


387,125



496,069



Customer deposits and deferred revenues


324,318



289,445



Accrued interest


7,919



6,673



Accrued taxes


46,734



70,518



Accrued compensation


114,549



115,031



Other current liabilities


181,803



212,374






1,063,256



1,191,756










Liabilities held for sale


21,643












Deferred liabilities and credits








Net deferred income tax liability


941,519



862,975



Other deferred liabilities and credits


430,774



458,709










Long-term debt


1,993,586



1,720,074










Noncontrolling interests with redemption features


1,150



536










Equity







TDS shareholders' equity








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


1,327



1,327



Capital in excess of par value


2,336,511



2,308,807



Treasury shares, at cost


(748,199)



(721,354)



Accumulated other comprehensive loss


6,452



(569)



Retained earnings


2,330,187



2,529,626




   Total TDS shareholders' equity


3,926,278



4,117,837











Preferred shares


824



824


Noncontrolling interests


527,909



551,436












Total equity


4,455,011



4,670,097










Total liabilities and equity

$

8,906,939


$

8,904,147

 

 

Balance Sheet Highlights

December 31, 2014

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

211,513


$

71,999


$

188,389


$

 — 


$

471,901

Affiliated cash investments


 — 



332,334



 — 



(332,334)



 — 



$

211,513


$

404,333


$

188,389


$

(332,334)


$

471,901


















Licenses, goodwill and other intangible assets

$

1,813,589


$

857,864


$

(137,728)


$

 — 


$

2,533,725

Investment in unconsolidated entities


283,014



3,804



39,657



(4,746)



321,729

Long-term and other investments


 — 



508



 — 



 — 



508




$

2,096,603


$

862,176


$

(98,071)


$

(4,746)


$

2,855,962



































Property, plant and equipment, net

$

2,728,217


$

1,093,671


$

24,478


$

(241)


$

3,846,125


















Long-term debt:
















Current portion

$

46


$

32


$

730


$

 — 


$

808


Non-current portion


1,151,819



1,435



840,332



 — 



1,993,586




$

1,151,865


$

1,467


$

841,062


$

 — 


$

1,994,394

 

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 December 31, 2014 and December 31, 2013.








December 31,


December 31,


2014


2013








Cash and cash equivalents

$

471,901


$

830,014








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







U.S. Treasury Notes




50,104








Total cash and cash equivalents and investments

$

471,901


$

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

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)






2014


2013

Cash flows from operating activities







Net income (loss)

$

(147,292)


$

166,821



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

  from operating activities










Depreciation, amortization and accretion


836,532



1,018,077





Bad debts expense


107,861



105,629





Stock-based compensation expense


35,793



30,338





Deferred income taxes, net


71,713



(67,150)





Equity in earnings of unconsolidated entities


(131,965)



(132,714)





Distributions from unconsolidated entities


112,349



127,929





Loss on impairment of assets


87,802







(Gain) loss on asset disposals, net


26,531



30,841





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


(15,846)



(300,656)





(Gain) loss on license sales and exchanges


(112,993)



(255,479)





(Gain) loss on investments




(14,547)





Noncash interest expense


1,642



2,463





Other operating activities


(641)



612



Changes in assets and liabilities from operations










Accounts receivable


17,629



(293,729)





Equipment installment plans receivable


(188,829)



(591)





Inventory


(29,149)



(83,536)





Accounts payable


(117,264)



86,028





Customer deposits and deferred revenues


33,952



66,460





Accrued taxes


(122,921)



17,388





Accrued interest


1,277



380





Other assets and liabilities


(71,369)



(9,954)







394,812



494,610











Cash flows from investing activities







Cash used for additions to property, plant and equipment


(799,496)



(883,797)


Cash paid for acquisitions and licenses


(295,253)



(314,570)


Cash received from divestitures


187,645



811,120


Cash received for investments


50,000



115,000


Federal Communications Commission deposit


(60,000)




Other investing activities


7,360



11,594







(909,744)



(260,653)











Cash flows from financing activities







Issuance of long-term debt


275,000



37


Repayment of borrowing under revolving credit facility


(150,000)




Borrowing under revolving credit facility


150,000




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


(2,019)



9,654


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


830



5,784


Repurchase of TDS Common Shares


(39,096)



(9,692)


Repurchase of U.S. Cellular Common Shares


(18,943)



(18,544)


Dividends paid to TDS shareholders


(58,040)



(55,293)


U.S. Cellular dividends paid to noncontrolling public shareholders




(75,235)


Payment of debt issuance costs


(10,215)



(23)


Distributions to noncontrolling interests


(627)



(3,766)


Payments to acquire additional interest in subsidiaries




(4,505)


Other financing activities


9,929



7,159







156,819



(144,424)











Net increase (decrease) in cash and cash equivalents


(358,113)



89,533

Cash and cash equivalents







Beginning of period


830,014



740,481


End of period

$

471,901


$

830,014

 

 

TDS Telecom Highlights

Three Months Ended December 31,

(Unaudited, dollars in thousands)

























Change





2014


2013


Amount


Percent

Wireline











Operating revenues












Residential

$

73,537


$

73,045


$

492


1%


Commercial


56,676



58,387



(1,711)


(3%)


Wholesale


49,493



48,747



746


2%



Total service revenues


179,706



180,179



(473)



Equipment sales


427



820



(393)


(48%)






180,133



180,999



(866)


Operating expenses












Cost of services


64,101



67,159



(3,058)


(5%)


Cost of equipment sold


543



786



(243)


(31%)


Selling, general and administrative expenses


49,101



52,771



(3,670)


(7%)


Depreciation, amortization and accretion


43,123



41,516



1,607


4%


(Gain) loss on asset disposals, net


589



306



283


92%


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


(156)





(156)


N/M






157,301



162,538



(5,237)


(3%)
















Operating income

$

22,832


$

18,461


$

4,371


24%















Cable











Operating revenues












Residential

$

34,588


$

17,374


$

17,214


99%


Commercial


8,761



4,147



4,614


>100%





43,349



21,521



21,828


>100%

Operating expenses












Cost of services


19,265



10,547



8,718


83%


Selling, general and administrative expenses


13,564



5,870



7,694


>100%


Depreciation, amortization and accretion


8,554



4,657



3,897


84%


(Gain) loss on asset disposals, net


1,366



28



1,338


>100%






42,749



21,102



21,647


>100%
















Operating income

$

600


$

419


$

181


43%















HMS











Operating revenues












Service revenues

$

27,009


$

26,470


$

539


2%


Equipment sales


33,136



43,481



(10,345)


(24%)






60,145



69,951



(9,806)


(14%)

Operating expenses












Cost of services


19,703



17,381



2,322


13%


Cost of equipment sold


28,201



36,516



(8,315)


(23%)


Selling, general and administrative expenses


13,085



15,599



(2,514)


(16%)


Depreciation, amortization and accretion


6,717



6,976



(259)


(4%)


(Gain) loss on asset disposals, net


105



2



103


>100%






67,811



76,474



(8,663)


(11%)
















Operating loss

$

(7,666)


$

(6,523)


$

(1,143)


(18%)















Intercompany revenues

$

(1,738)


$

(532)


$

(1,206)


>(100)%

Intercompany expenses


(1,738)



(532)



(1,206)


>(100)%















Total TDS Telecom operating income

$

15,766


$

12,357


$

3,409


28%

 

 

TDS Telecom Highlights

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)

























Change





2014


2013


Amount


Percent

Wireline











Operating revenues












Residential

$

293,302


$

293,217


$

85



Commercial


229,308



229,715



(407)



Wholesale


191,976



200,440



(8,464)


(4%)



Total service revenues


714,586



723,372



(8,786)


(1%)


Equipment sales


1,836



3,195



(1,359)


(43%)






716,422



726,567



(10,145)


(1%)

Operating expenses












Cost of services


256,878



266,635



(9,757)


(4%)


Cost of equipment sold


2,336



3,831



(1,495)


(39%)


Selling, general and administrative expenses


189,956



220,097



(30,141)


(14%)


Depreciation, amortization and accretion


169,044



170,868



(1,824)


(1%)


(Gain) loss on asset disposals, net


2,091



130



1,961


>100%


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


(2,357)





(2,357)


N/M






617,948



661,561



(43,613)


(7%)
















Operating income

$

98,474


$

65,006


$

33,468


51%















Cable











Operating revenues












Residential

$

93,985


$

29,016


$

64,969


>100%


Commercial


22,870



6,867



16,003


>100%





116,855



35,883



80,972


>100%

Operating expenses












Cost of services


54,265



17,274



36,991


>100%


Selling, general and administrative expenses


36,175



11,054



25,121


>100%


Depreciation, amortization and accretion


23,643



7,571



16,072


>100%


(Gain) loss on asset disposals, net


2,482



28



2,454


>100%






116,565



35,927



80,638


>100%
















Operating income (loss)

$

290


$

(44)


$

334


>100%















HMS











Operating revenues












Service revenues

$

109,766


$

94,875


$

14,891


16%


Equipment sales


148,966



90,741



58,225


64%






258,732



185,616



73,116


39%

Operating expenses












Cost of services


77,392



60,423



16,969


28%


Cost of equipment sold


126,362



75,991



50,371


66%


Selling, general and administrative expenses


53,020



44,945



8,075


18%


Depreciation, amortization and accretion


26,912



24,262



2,650


11%


Loss on impairment of assets


84,000





84,000


N/M


(Gain) loss on asset disposals, net


181



125



56


45%






367,867



205,746



162,121


79%
















Operating loss

$

(109,135)


$

(20,130)


$

(89,005)


>(100)%















Intercompany revenues

$

(3,697)


$

(1,063)


$

(2,634)


>(100)%

Intercompany expenses


(3,697)



(1,063)



(2,634)


>(100)%















Total TDS Telecom operating income (loss)

$

(10,371)


$

44,832


$

(55,203)


>(100)%

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)




















TDS Consolidated




















Three Months Ended


Twelve Months Ended





December 31,


December 31,



2014


2013


2014


2013

















Cash flows from operating activities


$

(101,399)


$

56,710


$

394,812


$

494,610


Add: Sprint Cost Reimbursement



19,085



9,429



71,097



10,560


Less: Cash used for additions to property,

   plant and equipment



245,778



252,427



799,496



883,797



Adjusted free cash flow (1)


$

(328,092)


$

(186,288)


$

(333,587)


$

(378,627)

 

(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.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/tds-reports-fourth-quarter-2014-results-300041150.html

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

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