TDS reports second quarter 2014 results - myFOXnepa.com

TDS reports second quarter 2014 results

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SOURCE Telephone and Data Systems, Inc.

U.S. Cellular provides 2014 financial guidance; TDS Telecom raises AIBIT guidance

As previously announced, TDS will hold a teleconference Aug. 1, 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, Aug. 1, 2014 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE: TDS) reported total operating revenues of $1,236.4 million for the second quarter of 2014, versus $1,228.2 million for the comparable period one year ago. Net income (loss) attributable to TDS shareholders and related diluted earnings (loss) per share were $(22.0) million and $(0.20) respectively, for the second quarter of 2014, compared to $156.1 million and $1.42, respectively, in the comparable period one year ago.  Year-over-year comparisons are affected by U.S. Cellular's divestiture transaction and acquisitions at TDS Telecom, in 2013.

"Our businesses were productive in the second quarter. We're seeing positive results from strategic growth initiatives we've implemented over the last few years," said LeRoy T. Carlson, Jr., TDS president and CEO.

"U.S. Cellular generated strong gross customer additions and significantly reduced postpaid churn in the quarter, leading to net postpaid customer growth in June. Our high-quality 4G LTE network, competitive service plans, devices, pricing and our new equipment installment plans helped drive smartphone penetration to 55 percent, which increased data usage and helped us achieve higher average revenue per postpaid customer.

"TDS Telecom posted another solid quarter of earnings and revenue growth, fueled by residential TDS TV customer additions, broadband speed upgrades, and commercial managedIP connections, and by realizing significant cost reductions. We continue to be excited about the growth potential in our cable business. At Baja Broadband, we are working to improve our video offerings and increase broadband penetration. We also are focused on ensuring a smooth completion to our BendBroadband acquisition in the third quarter. In our hosted and managed services business, OneNeck IT Solutions, we increased revenues through growth in recurring services and through the effect of acquisitions."

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 August 1, 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 (1)


TDS (1)(3)


Current

Previous


Current

Previous


Current

Previous

(Dollars in millions)









Total operating revenues

$3,900-$4,000

N/A


$1,050-$1,100

Unchanged


$4,970-$5,120

N/A

Adjusted income before income taxes (2)

$350-$450

N/A


$260-$290

$250-$280


$605-$735

N/A

Capital expenditures

$640

Unchanged


$200

Unchanged


$850

N/A



(1)

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

(2)

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, six months ended June 30, 2014 actual results, and year ended December 31, 2013 actual results:




2014 Estimated Results


U.S. Cellular


TDS Telecom (1)


TDS (1)(3)

(Dollars in millions)






Income (loss) before income taxes

($189)-($89)


$35-$65


($249)-($119)

Depreciation, amortization and accretion

$630


$225


$865

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

($50)


 ?   


($25)

(Gain) loss on license sales and exchanges

($91)


 ?   


($91)

Interest expense

$50


 ?   


$105

Adjusted income before income taxes

$350-$450


$260-$290


$605-$735







 



Actual Results



Six months ended June 30, 2014


Year ended December 31, 2013



U.S. Cellular


TDS

Telecom


TDS (3)


U.S. Cellular


TDS

Telecom


TDS (3)

(Dollars in millions)









Income (loss) before income taxes

$1


$39


($7)


$258


$49


$293

Depreciation, amortization and

accretion expense

$316


$107


$429


$804


$203


$1,018

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

($17)


-


($4)


($247)


-


($301)

(Gain) loss on license sales and exchanges

($91)


-


($91)


($255)


-


($255)

(Gain) loss on investments

-


-


-


($19)


($1)


($15)

Interest expense

$29


($1)


$56


$44


($2)


$99

Adjusted income before income taxes

$238


$145


$383


$585


$249


$839



(3)

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 (second quarter)


650,628


$

17.3

2014 (first quarter)


157,891


$

3.8

2013 (full year)


338,851


$

9.7

Total


1,147,370


$

30.8

 

Conference Call Information
TDS will hold a conference call on Aug. 1, 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 1000® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 5.8 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions and Baja Broadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,100 people as of June 30, 2014.

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 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.teldta.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

6/30/2014


3/31/2014


12/31/2013


9/30/2013


6/30/2013

Retail Customers
















Postpaid

















Total at end of period


4,148,000



4,174,000



4,267,000



4,343,000



4,412,000



Gross additions


190,000



197,000



176,000



165,000



165,000



Net additions (losses)


(26,000)



(93,000)



(71,000)



(60,000)



(120,000)



ARPU (1)

$

56.82


$

57.59


$

53.53


$

54.64


$

54.18



Churn rate (2)


1.7%



2.3%



1.9%



1.7%



2.0%



Smartphone penetration (3)


55.3%



53.1%



50.8%



47.1%



45.5%


Prepaid

















Total at end of period


352,000



356,000



343,000



370,000



381,000



Gross additions


65,000



85,000



63,000



65,000



77,000



Net additions (losses)


(4,000)



13,000



(26,000)



(11,000)



(7,000)



ARPU (1)

$

34.02


$

32.22


$

31.66


$

28.72


$

31.69



Churn rate (2)


6.5%



6.9%



8.3%



6.8%



6.8%

Total customers at end of period


4,653,000



4,684,000



4,774,000



4,875,000



4,968,000

Billed ARPU (1)

$

53.36


$

53.93


$

50.25


$

50.92


$

50.60

Service revenue ARPU (1)

$

60.32


$

60.19


$

57.05


$

58.36


$

57.45

Smartphones sold as a percent of total

  devices sold


72.6%



73.0%



79.6%



65.2%



66.0%

Total population

















Consolidated markets (4)


54,817,000



54,817,000



58,013,000



84,025,000



84,025,000



Consolidated operating markets (4)


31,729,000



31,729,000



31,759,000



31,822,000



31,822,000

Market penetration at end of period

















Consolidated markets (5)


8.5%



8.5%



8.2%



5.8%



5.9%



Consolidated operating markets (5)


14.7%



14.8%



15.0%



15.3%



15.6%

Capital expenditures (000s)

$

143,927


$

89,581


$

208,135


$

242,459


$

168,497

Total cell sites in service


6,183



6,165



6,975



7,687



7,748

Owned towers


4,457



4,448



4,448



4,422



4,411


*

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 August 2, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and six months ended June 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

6/30/2014


3/31/2014


12/31/2013


9/30/2013


6/30/2013

Retail Customers
















Postpaid

















Total at end of period


4,148,000



4,174,000



4,267,000



4,343,000



4,412,000



Gross additions


190,000



197,000



176,000



165,000



165,000



Net additions (losses)


(26,000)



(93,000)



(71,000)



(60,000)



(53,000)



ARPU (1)

$

56.82


$

57.59


$

53.53


$

54.64


$

54.44



Churn rate (2)


1.7%



2.3%



1.9%



1.7%



1.6%



Smartphone penetration (3)


55.3%



53.1%



50.8%



47.1%



45.5%


Prepaid

















Total at end of period


352,000



356,000



343,000



370,000



381,000



Gross additions


65,000



85,000



63,000



65,000



76,000



Net additions (losses)


(4,000)



13,000



(26,000)



(11,000)



8,000



ARPU (1)

$

34.02


$

32.22


$

31.66


$

28.72


$

31.65



Churn rate (2)


6.5%



6.9%



8.3%



6.8%



6.0%

Total customers at end of period


4,653,000



4,684,000



4,774,000



4,875,000



4,968,000

Billed ARPU (1)

$

53.36


$

53.93


$

50.25


$

50.92


$

50.98

Service revenue ARPU (1)

$

60.32


$

60.19


$

57.05


$

58.36


$

57.88

Smartphones sold as a percent of total

  devices sold


72.6%



73.0%



79.6%



65.2%



66.1%

Total population

















Consolidated markets (4)


54,817,000



54,817,000



58,013,000



84,025,000



84,025,000



Consolidated operating markets (4)


31,729,000



31,729,000



31,759,000



31,822,000



31,822,000

Market penetration at end of period

















Consolidated markets (5)


8.5%



8.5%



8.2%



5.8%



5.9%



Consolidated operating markets (5)


14.7%



14.8%



15.0%



15.3%



15.6%

Capital expenditures (000s)

$

143,927


$

89,581


$

211,247


$

239,332


$

171,166

Total cell sites in service


6,183



6,165



6,161



6,127



6,113

Owned towers


3,892



3,883



3,883



3,857



3,846



*

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 August 2, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and six months ended June 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

6/30/2014


3/31/2014


12/31/2013


9/30/2013


6/30/2013

TDS Telecom















Wireline

















Residential connections


















Voice (1)


346,100



348,700



352,100



358,100



364,100




Broadband (2)


232,700



229,000



227,000



229,500



231,700




IPTV (3)


18,200



15,900



13,800



12,200



10,500




   Wireline residential connections


597,000



593,600



592,900



599,800



606,300





















Total residential revenue per connection (4)

$

41.05


$

40.79


$

40.93


$

41.12


$

40.10





















Commercial connections


















Voice (1)


206,200



212,200



218,400



223,800



229,100




Broadband (2)


26,000



26,600



27,100



27,600



28,200




managedIP (5)


133,300



131,000



127,600



121,000



112,000




   Wireline commercial connections


365,500



369,800



373,100



372,400



369,300





















Total Wireline connections


962,500



963,400



966,000



972,200



975,600



















Cable

















Cable Connections


















Video (6)


69,700



68,700



69,100



70,300







Broadband (7)


63,200



63,000



61,000



59,800







Voice (7)


17,800



17,700



17,200



16,800







   Cable connections


150,700



149,400



147,300



146,900
























Total residential revenue per connection (4)

$

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

6/30/2014


3/31/2014


12/31/2013


9/30/2013


6/30/2013

Wireline

$

27,400


$

22,900


$

46,000


$

32,800


$

33,300

Cable


7,200



6,200



7,000



1,400



-

HMS


10,600



2,800



9,200



2,400



2,300


$

45,200


$

31,900


$

62,200


$

36,600


$

35,600

 


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)











Change





2014


2013


Amount

Percent

Operating revenues












U.S. Cellular

$

957,773


$

995,130


$

(37,357)


(4%)


TDS Telecom


270,850



223,460



47,390


21%


All Other (1)


7,769



9,576



(1,807)


(19%)






1,236,392



1,228,166



8,226


1%

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


863,361



813,464



49,897


6%



Depreciation, amortization and accretion


148,337



202,580



(54,243)


(27%)



(Gain) loss on asset disposals, net


6,893



9,018



(2,125)


(24%)



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


(10,511)



(249,024)



238,513


96%






1,008,080



776,038



232,042


30%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


197,427



162,954



34,473


21%



Depreciation, amortization and accretion


53,175



48,756



4,419


9%



(Gain) loss on asset disposals, net


983



(682)



1,665


>(100%)






251,585



211,028



40,557


19%


All Other (1)(2)













Expenses excluding depreciation and amortization


9,613



10,033



(420)


(4%)



Depreciation and amortization


3,055



2,867



188


7%



(Gain) loss on asset disposals, net


27



(17)



44


>(100%)



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


13,122



(54,010)



67,132


>(100%)






25,817



(41,127)



66,944


>(100%)


















Total operating expenses


1,285,482



945,939



339,543


36%

Operating income (loss)












U.S. Cellular


(50,307)



219,092



(269,399)


>(100%)


TDS Telecom


19,265



12,432



6,833


55%


All Other  (1)(2)


(18,048)



50,703



(68,751)


>(100%)






(49,090)



282,227



(331,317)


>(100%)

Investment and other income (expense)












Equity in earnings of unconsolidated entities


34,790



35,605



(815)


(2%)


Interest and dividend income


2,751



2,600



151


6%


Gain (loss) on investments


-



14,518



(14,518)


N/M


Interest expense


(27,898)



(23,749)



(4,149)


(17%)


Other, net


50



(197)



247


>(100%)



Total investment and other income


9,693



28,777



(19,084)


(66%)

Income (loss) before income taxes


(39,397)



311,004



(350,401)


>(100%)


Income tax expense (benefit)


(13,671)



132,607



(146,278)


>(100%)

Net income (loss)


(25,726)



178,397



(204,123)


>(100%)


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


(3,688)



22,320



(26,008)


>(100%)

Net income (loss) attributable to TDS shareholders


(22,038)



156,077



(178,115)


>(100%)


TDS Preferred dividend requirement


(12)



(12)



-


-

Net income (loss) available to common shareholders

$

(22,050)


$

156,065


$

(178,115)


>(100%)















Basic weighted average shares outstanding


108,719



108,385



334


-

Basic earnings (loss) per share attributable to TDS shareholders

$

(0.20)


$

1.44


$

(1.64)


>(100%)















Diluted weighted average shares outstanding


108,719



108,913



(194)


-

Diluted earnings (loss) per share attributable to TDS shareholders

$

(0.20)


$

1.42


$

(1.62)


>(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 $13.1 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 Statement of Operations Highlights

Six Months Ended June 30,

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











Change





2014


2013


Amount

Percent

Operating revenues












U.S. Cellular

$

1,883,584


$

2,076,876


$

(193,292)


(9%)


TDS Telecom


533,266



440,521



92,745


21%


All Other (1)


15,504



19,342



(3,838)


(20%)






2,432,354



2,536,739



(104,385)


(4%)

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


1,710,006



1,691,534



18,472


1%



Depreciation, amortization and accretion


316,090



392,425



(76,335)


(19%)



(Gain) loss on asset disposals, net


8,827



14,452



(5,625)


(39%)



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


(17,411)



(242,093)



224,682


93%



(Gain) loss on license sales and exchanges


(91,446)



-



(91,446)


N/M






1,926,066



1,856,318



69,748


4%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


387,730



322,440



65,290


20%



Depreciation, amortization and accretion


106,950



98,247



8,703


9%



(Gain) loss on asset disposals, net


1,327



(489)



1,816


>(100%)






496,007



420,198



75,809


18%


All Other (1)(2)













Expenses excluding depreciation and amortization


18,939



19,272



(333)


(2%)



Depreciation and amortization


6,446



5,608



838


15%



(Gain) loss on asset disposals, net


179



(28)



207


>(100%)



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


13,122



(54,010)



67,132


>(100%)






38,686



(29,158)



67,844


>(100%)


















Total operating expenses


2,460,759



2,247,358



213,401


9%

Operating income (loss)












U.S. Cellular


(42,482)



220,558



(263,040)


>(100%)


TDS Telecom


37,259



20,323



16,936


83%


All Other  (1)(2)


(23,182)



48,500



(71,682)


>(100%)






(28,405)



289,381



(317,786)


>(100%)

Investment and other income (expense)












Equity in earnings of unconsolidated entities


72,117



62,694



9,423


15%


Interest and dividend income


5,237



4,178



1,059


25%


Gain (loss) on investments


  ?  



14,518



(14,518)


N/M


Interest expense


(56,605)



(48,247)



(8,358)


(17%)


Other, net


210



(351)



561


>(100%)



Total investment and other income


20,959



32,792



(11,833)


(36%)

Income (loss) before income taxes


(7,446)



322,173



(329,619)


>(100%)


Income tax expense (benefit)


(2,014)



136,787



(138,801)


>(100%)

Net income (loss)


(5,432)



185,386



(190,818)


>(100%)


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


(1,648)



27,890



(29,538)


>(100%)

Net income (loss) attributable to TDS shareholders


(3,784)



157,496



(161,280)


>(100%)


TDS Preferred dividend requirement


(25)



(25)



-


-

Net income (loss) available to common shareholders

$

(3,809)


$

157,471


$

(161,280)


>(100%)















Basic weighted average shares outstanding


108,853



108,320



533


-

Basic earnings (loss) per share attributable to TDS shareholders

$

(0.04)


$

1.45


$

(1.49)


>(100%)















Diluted weighted average shares outstanding


108,853



108,827



26


-

Diluted earnings (loss) per share attributable to TDS shareholders

$

(0.04)


$

1.44


$

(1.48)


>(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 $13.1 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

















June 30,


December 31,



2014


2013

Current assets







Cash and cash equivalents

$

874,860


$

830,014


Short-term investments


40,035



50,104


Accounts receivable from customers and others


624,261



731,114


Inventory, net


205,886



244,560


Net deferred income tax asset


106,077



106,077


Prepaid expenses


88,860



87,920


Income taxes receivable


9,197



2,397


Other current assets


32,274



35,151




1,981,450



2,087,337








Assets held for sale


5,980



16,027








Investments







Licenses


1,460,484



1,423,779


Goodwill


834,352



836,843


Franchise rights


124,487



123,668


Other intangible assets, net


61,536



71,454


Investments in unconsolidated entities


308,661



301,772


Other investments


589



641




2,790,109



2,758,157








Property, plant and equipment, net







U.S. Cellular


2,761,404



2,856,520


TDS Telecom


962,377



984,634


Other


26,166



36,990




3,749,947



3,878,144








Other assets and deferred charges


180,183



164,482








Total assets

$

8,707,669


$

8,904,147

 


Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)










LIABILITIES AND EQUITY























June 30,


December 31,





2014


2013

Current liabilities








Current portion of long-term debt

$

890


$

1,646



Accounts payable


425,051



496,069



Customer deposits and deferred revenues


302,496



289,445



Accrued interest


6,671



6,673



Accrued taxes


73,227



70,518



Accrued compensation


98,099



115,031



Other current liabilities


166,270



212,374






1,072,704



1,191,756










Liabilities held for sale


722



  ?  










Deferred liabilities and credits








Net deferred income tax liability


828,458



862,975



Other deferred liabilities and credits


460,862



458,709










Long-term debt


1,718,832



1,720,074










Noncontrolling interests with redemption features


911



536










Equity







TDS shareholders' equity








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


1,327



1,327



Capital in excess of par value


2,312,515



2,308,807



Treasury shares, at cost


(737,835)



(721,354)



Accumulated other comprehensive loss


(980)



(569)



Retained earnings


2,496,735



2,529,626




   Total TDS shareholders' equity


4,071,762



4,117,837











Preferred shares


824



824


Noncontrolling interests


552,594



551,436












Total equity


4,625,180



4,670,097










Total liabilities and equity

$

8,707,669


$

8,904,147

 


Balance Sheet Highlights

June 30, 2014

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

404,058


$

87,170


$

383,632


$

 ? 


$

874,860

Affiliated cash investments


 ? 



466,295



 ? 



(466,295)



 ? 

Short-term investments


40,035



 ? 



 ? 



 ? 



40,035



$

444,093


$

553,465


$

383,632


$

(466,295)


$

914,895


















Licenses, goodwill and other intangible assets

$

1,825,355


$

786,487


$

(130,983)


$

 ? 


$

2,480,859

Investment in unconsolidated entities


270,215



3,810



41,789



(7,153)



308,661

Long-term and other investments


 ? 



588



1



 ? 



589




$

2,095,570


$

790,885


$

(89,193)


$

(7,153)


$

2,790,109



































Property, plant and equipment, net

$

2,761,404


$

962,377


$

26,166


$

 ? 


$

3,749,947


















Long-term debt:
















Current portion

$

46


$

57


$

787


$

 ? 


$

890


Non-current portion


876,715



1,424



840,693



 ? 



1,718,832




$

876,761


$

1,481


$

841,480


$

 ? 


$

1,719,722

 

 

 


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, 2014 and December 31, 2013.








June 30,


December 31,


2014


2013








Cash and cash equivalents

$

874,860


$

830,014








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







U.S. Treasury Notes


40,035



50,104








Total cash and cash equivalents and investments

$

914,895


$

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

Six Months Ended June 30,

(Unaudited, dollars in thousands)






2014


2013

Cash flows from operating activities







Net income (loss)

$

(5,432)


$

185,386



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

  from operating activities










Depreciation, amortization and accretion


429,486



496,280





Bad debts expense


52,098



35,187





Stock-based compensation expense


15,488



12,902





Deferred income taxes, net


(33,346)



(21,246)





Equity in earnings of unconsolidated entities


(72,117)



(62,694)





Distributions from unconsolidated entities


65,569



47,635





(Gain) loss on asset disposals, net


10,333



13,935





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


(4,289)



(296,103)





(Gain) loss on investments


-



(14,518)





(Gain) loss on license sales and exchanges


(91,446)



-





Noncash interest expense


1,014



997





Other operating activities


3



505



Changes in assets and liabilities from operations










Accounts receivable


40,459



(5,781)





Inventory


38,674



(8,105)





Accounts payable


(43,132)



58,204





Customer deposits and deferred revenues


13,139



7,897





Accrued taxes


1,049



150,425





Accrued interest


22



2,172





Other assets and liabilities


(101,930)



(81,586)







315,642



521,492











Cash flows from investing activities







Cash used for additions to property, plant and equipment


(339,907)



(384,281)


Cash paid for acquisitions and licenses


(18,681)



(14,150)


Cash received from divestitures


125,905



480,000


Cash received for investments


10,000



15,000


Other investing activities


3,720



14,127







(218,963)



110,696











Cash flows from financing activities







Repayment of long-term debt


(589)



(605)


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


401



776


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


830



(2,206)


Repurchase of TDS Common Shares


(20,090)



-


Repurchase of U.S. Cellular Common Shares


(8,298)



(18,425)


Dividends paid to TDS shareholders


(29,107)



(27,598)


U.S. Cellular dividends paid to noncontrolling public shareholders


-



(75,235)


Distributions to noncontrolling interests


(482)



(3,292)


Other financing activities


5,502



331







(51,833)



(126,254)











Net increase in cash and cash equivalents


44,846



505,934

Cash and cash equivalents







Beginning of period


830,014



740,481


End of period

$

874,860


$

1,246,415

 


TDS Telecom Highlights

Three Months Ended June 30,

(Unaudited, dollars in thousands)

























Change





2014


2013


Amount


Percent

Wireline











Operating revenues












Residential

$

73,360


$

72,911


$

449


1%


Commercial


57,472



57,128



344


1%


Wholesale


49,465



51,389



(1,924)


(4%)



Total service revenues


180,297



181,428



(1,131)


(1%)


Equipment sales


431



765



(334)


(44%)






180,728



182,193



(1,465)


(1%)

Operating expenses












Cost of services


64,305



65,729



(1,424)


(2%)


Cost of equipment sold


481



1,094



(613)


(56%)


Selling, general and administrative expenses


47,708



56,692



(8,984)


(16%)


Depreciation, amortization and accretion


41,827



43,193



(1,366)


(3%)


(Gain) loss on asset disposals, net


514



(765)



1,279


>100%






154,835



165,943



(11,108)


(7%)
















Operating income

$

25,893


$

16,250


$

9,643


59%















Cable











Operating revenues












Residential

$

18,222


$

-


$

18,222


N/M


Commercial


4,262



-



4,262


N/M





22,484



-



22,484


N/M

Operating expenses












Cost of services


11,394



-



11,394


N/M


Selling, general and administrative expenses


6,285



-



6,285


N/M


Depreciation, amortization and accretion


4,557



-



4,557


N/M


Loss on asset disposals, net


425



-



425


N/M






22,661



-



22,661


N/M
















Operating loss

$

(177)


$

-


$

(177)


N/M















HMS











Operating revenues












Service revenues

$

27,575


$

23,205


$

4,370


19%


Equipment sales


40,361



18,169



22,192


>100%






67,936



41,374



26,562


64%

Operating expenses












Cost of services


21,301



15,071



6,230


41%


Cost of equipment sold


33,875



15,114



18,761


>100%


Selling, general and administrative expenses


12,376



9,361



3,015


32%


Depreciation, amortization and accretion


6,791



5,563



1,228


22%


Loss on asset disposals, net


44



83



(39)


(47%)






74,387



45,192



29,195


65%
















Operating loss

$

(6,451)


$

(3,818)


$

(2,633)


(69%)















Intercompany revenues

$

(298)


$

(107)


$

(191)


>(100)%

Intercompany expenses


(298)



(107)



(191)


>(100)%















Total TDS Telecom operating income

$

19,265


$

12,432


$

6,833


55%

 


TDS Telecom Highlights

Six Months Ended June 30,

(Unaudited, dollars in thousands)

























Change





2014


2013


Amount


Percent

Wireline











Operating revenues












Residential

$

145,865


$

145,915


$

(50)


-


Commercial


115,452



114,253



1,199


1%


Wholesale


95,913



101,938



(6,025)


(6%)



Total service revenues


357,230



362,106



(4,876)


(1%)


Equipment sales


984



1,662



(678)


(41%)






358,214



363,768



(5,554)


(2%)

Operating expenses












Cost of services


128,705



132,168



(3,463)


(3%)


Cost of equipment sold


964



2,104



(1,140)


(54%)


Selling, general and administrative expenses


94,228



114,072



(19,844)


(17%)


Depreciation, amortization and accretion


84,563



87,216



(2,653)


(3%)


(Gain) loss on asset disposals, net


759



(602)



1,361


>100%






309,219



334,958



(25,739)


(8%)
















Operating income

$

48,995


$

28,810


$

20,185


70%















Cable











Operating revenues












Residential

$

36,475


$

-


$

36,475


N/M


Commercial


8,512



-



8,512


N/M





44,987



-



44,987


N/M

Operating expenses












Cost of services


22,349



-



22,349


N/M


Selling, general and administrative expenses


12,663



-



12,663


N/M


Depreciation, amortization and accretion


8,918



-



8,918


N/M


Loss on asset disposals, net


490



-



490


N/M






44,420



-



44,420


N/M
















Operating income

$

567


$

-


$

567


N/M















HMS











Operating revenues












Service revenues

$

54,951


$

45,205


$

9,746


22%


Equipment sales


76,093



31,733



44,360


>100%






131,044



76,938



54,106


70%

Operating expenses












Cost of services


38,247



28,673



9,574


33%


Cost of equipment sold


64,342



26,326



38,016


>100%


Selling, general and administrative expenses


27,211



19,282



7,929


41%


Depreciation, amortization and accretion


13,469



11,031



2,438


22%


Loss on asset disposals, net


78



113



(35)


(31%)






143,347



85,425



57,922


68%
















Operating loss

$

(12,303)


$

(8,487)


$

(3,816)


(45%)















Intercompany revenues

$

(979)


$

(185)


$

(794)


>(100)%

Intercompany expenses


(979)



(185)



(794)


>(100)%















Total TDS Telecom operating income

$

37,259


$

20,323


$

16,936


83%

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)




















TDS Consolidated




















Three Months Ended


Six Months Ended





June 30,


June 30,



2014


2013


2014


2013

















Cash flows from operating activities


$

210,705


$

275,140


$

315,642


$

521,492


Add: Sprint Cost Reimbursement



22,862



-



34,116



-


Less: Cash used for additions to property,

   plant and equipment



189,017



207,963



339,907



384,281



Adjusted free cash flow (1)


$

44,550


$

67,177


$

9,851


$

137,211



(1)

Adjusted free cash flow is defined as Cash flows from operating activities, 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. The prior manner of calculating free cash flow has been adjusted to include the Sprint Cost Reimbursement. The reason for this is that the Sprint decommissioning cash outflows are included in "Cash flows from operating activities," but the reimbursements from Sprint related to these outflows are not included in this caption.

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