WJTV News Channel 12 - TDS reports fourth quarter 2013 results

TDS reports fourth quarter 2013 results

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SOURCE Telephone and Data Systems, Inc.

CHICAGO, Feb. 26, 2014 /PRNewswire/ -- As previously announced, TDS will hold a teleconference Feb. 26, 2014 at 9:30 a.m. CST. Interested parties may listen to the call live via the Events & Presentations page of investors.teldta.com. 

Telephone and Data Systems, Inc. (NYSE:TDS) reported operating revenues of $1,183.5 million for the fourth quarter of 2013, versus $1,346.2 million for the comparable period one year ago. Net loss attributable to TDS shareholders and related diluted loss per share were $6.1 million and $0.06 respectively, for the fourth quarter of 2013, compared to $41.9 million and $0.39, respectively, in the comparable period one year ago.

Year-over-year comparisons are affected by U.S. Cellular's Divestiture Transaction, the deconsolidation of certain U.S. Cellular partnerships, and acquisitions at TDS Telecom, in 2013.

"Throughout the year, our businesses took strategic actions to compete more effectively and position us well for the future, and these actions impacted our financial results," said LeRoy T. Carlson, Jr., TDS president and CEO. "At U.S. Cellular, we brought 4G LTE speeds and quality to nearly 90 percent of our customers, which has resulted in strong growth in smartphone adoption and data use. TDS Telecom brought high-speed broadband and TDS TV to more markets, and is moving aggressively to increase residential and commercial penetration in our cable markets.

"At U.S. Cellular, we expect our competitive devices, plans, and pricing to help us attract and retain customers, though service issues related to our recent billing system conversion continue to impact customer churn. U.S. Cellular is driving ongoing growth in smartphone penetration and data use through our high-quality nationwide network and comprehensive device portfolio. Customer response to our Apple device offerings and shared data plans has been very positive, and we expect that to continue. We have very strong 4G LTE coverage in our markets and we are competing aggressively with our outstanding network and customer experiences.

"TDS Telecom brought high-speed broadband and TDS TV services to more markets in 2013, and maintained customer loyalty through service bundling. Commercial managedIP connections increased substantially, and TDS Telecom began introducing new services in our cable markets.  Cable is an attractive growth opportunity, and we plan to build our business through additional acquisitions in 2014.  We brought our five hosted and managed services businesses together as OneNeck IT Solutions to provide end-to-end solutions and to drive faster growth in recurring revenues from mid-market commercial customers."

2014 Estimated Results
U.S. Cellular capital expenditures for 2014 are expected to be approximately $640 million, down from $738 million in 2013.  U.S. Cellular is not providing guidance for 2014 revenues and profitability at this time due to a number of factors, which involve significant uncertainty and affect U.S. Cellular's ability to estimate future results with reasonable confidence.  Such factors include (i) the unprecedented number of actions related to pricing of service plans and devices, including device financing, announced by competitors in recent weeks, for which U.S. Cellular is evaluating and determining its response; and (ii) continuing elevated churn due, at least in part, to issues arising from U.S. Cellular's billing system implementation in the second half of 2013.  Although U.S. Cellular expects churn to improve over the next several months, the extent and timing of the improvement is uncertain.

TDS Telecom estimates for full-year 2014 results are shown below.  Such estimates represent management's view as of Feb. 26, 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



TDS Telecom

(Dollars in millions)


Operating revenues

$1,050-$1,100

Adjusted income before income taxes (1)

$250-$280

Capital expenditures

$200



(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. In addition, 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 amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future.  Adjusted income before income taxes is not a measure of financial performance under 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 table provides a reconciliation of income (loss) before income taxes to adjusted income before income taxes for 2014 estimated results:

 



2014 Estimated Results



TDS Telecom

(Dollars in millions)


Income before income taxes

$25-$55

Depreciation, amortization and accretion expense

$225

Adjusted income before income taxes

$250-$280

 

2013 Estimated and Actual Results



2013 Estimated and Actual Results for the Year Ended December 31, 2013



U.S. Cellular (1)


TDS Telecom


TDS (1)(2)



Estimate

Actual


Estimate

Actual


Estimate

Actual

(Dollars in millions)









Adjusted operating revenues (3)

$3,590-$3,640

$3,595


$920-$960

$947


$4,555-4,645

$4,577

Adjusted income before income taxes (4)

$600-$700

$585


$230-$260

$249


$830-$960

$839

Capital expenditures

$735

$738


$165

$165


$910

$910



(1)

These estimates and actual results reflect U.S. Cellular's consolidated results for 2013. 

(2)

The TDS column includes U.S. Cellular, TDS Telecom, and also the impacts of consolidating eliminations, corporate operations and non-reportable segments.

(3)

Adjusted operating revenues is defined as operating revenues, excluding U.S. Cellular equipment sales revenues. U.S. Cellular equipment sales revenues are excluded from adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular equipment sales revenues less U.S. Cellular cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results. For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular equipment sales revenues. TDS believes this measure provides useful information to investors regarding TDS' results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to operating revenues as an indicator of the company's operating performance. The following table provides a reconciliation of actual operating revenues to adjusted operating revenues:

 




2013 Estimated and Actual Results for the Year Ended December 31, 2013



U.S. Cellular (1)


TDS (1)(2)



Estimate


Actual


Estimate


Actual

(Dollars in millions)








Operating revenues

N/A


$3,919


N/A


$4,901

U.S. Cellular equipment sales revenues

N/A


$324


N/A


$324

Adjusted operating revenues

$3,590-$3,640


$3,595


$4,555-$4,645


$4,577



(4)

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. In addition, TDS may also 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 amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future.  Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to income before income taxes as an indicator of the company's operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. 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 table provides a reconciliation of income (loss) before income taxes to adjusted income before income taxes for 2013 estimated and actual results:

 
















2013 Estimated and Actual Results for the Year Ended December 31, 2013



U.S. Cellular (1)


TDS Telecom


TDS (1)(2)



Estimate


Actual


Estimate


Actual


Estimate


Actual

(Dollars in millions)












Income (loss) before income taxes

$350-$450


$258


$25-$55


$49


$360-$490


$293

Depreciation, amortization and accretion expense

$790


$804


$205


$203


$1,005


$1,018

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

($245)


($247)


-


-


($300)


($301)

(Gain) loss on license sales and exchanges

($325)


($255)


-


-


($325)


($255)

(Gain) loss on investments

($20)


($19)


-


($1)


($15)


($15)

Interest expense

$50


$44


-


($2)


$105


$99

Adjusted income before

income taxes

$600-$700


$585


$230-$260


$249


$830-$960


$839

 

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)


2013 (fourth quarter)


134,303


$

3.9


2013 (third quarter)


204,548


$

5.8


Total


338,851


$

9.7


 

Conference Call Information
TDS will hold a conference call on Feb. 26, 2014 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 500® 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 and Baja Broadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,500 people as of Dec. 31, 2013.

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: impacts of 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 handset devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission ("SEC"), which are incorporated by reference herein.   

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

 

United States Cellular Corporation

Total Markets* Summary Operating Data (Unaudited)


















As of or for the Quarter Ended

12/31/2013


9/30/2013


6/30/2013


3/31/2013


12/31/2012

Retail Customers
















Postpaid

















Total at end of period


4,267,000



4,343,000



4,412,000



5,060,000



5,134,000



Gross additions


176,000



165,000



165,000



191,000



241,000



Net additions (losses)


(71,000)



(60,000)



(120,000)



(74,000)



(41,000)



ARPU (1)

$

53.53


$

54.64


$

54.18


$

54.85


$

54.56



Churn rate (2)


1.9%



1.7%



2.0%



1.7%



1.8%



Smartphone penetration (3) (4)


50.8%



47.1%



45.5%



43.5%



41.8%


Prepaid

















Total at end of period


343,000



370,000



381,000



446,000



423,000



Gross additions


63,000



65,000



77,000



104,000



107,000



Net additions (losses)


(26,000)



(11,000)



(7,000)



23,000



37,000



ARPU (1)

$

31.66


$

28.72


$

31.69


$

33.31


$

33.56



Churn rate (2)


8.3%



6.8%



6.8%



6.2%



5.8%

Total customers at end of period


4,774,000



4,875,000



4,968,000



5,736,000



5,798,000

Billed ARPU (1)

$

50.25


$

50.92


$

50.60


$

51.13


$

50.94

Service revenue ARPU (1)

$

57.05


$

58.36


$

57.45


$

57.63


$

58.00

Smartphones sold as a percent of total devices sold


79.6%



65.2%



66.0%



61.7%



62.9%

Total population

















Consolidated markets (5)


58,013,000



84,025,000



84,025,000



93,943,000



93,244,000



Consolidated operating markets (5)


31,759,000



31,822,000



31,822,000



47,440,000



46,966,000

Market penetration at end of period

















Consolidated markets (6)


8.2%



5.8%



5.9%



6.1%



6.2%



Consolidated operating markets (6)


15.0%



15.3%



15.6%



12.1%



12.3%

Capital expenditures (000s)

$

208,100


$

242,500


$

168,500


$

118,400


$

253,100

Total cell sites in service


6,975



7,687



7,748



8,027



8,028

Owned towers in service


4,448



4,422



4,411



4,411



4,408



*

Represents U.S. Cellular's consolidated markets. These are markets which U. S. Cellular currently consolidates, or previously consolidated in the periods presented, and is 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 & NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the respective periods. Also refer to U.S. Cellular's Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the twelve months ended December 31, 2012.

 

United States Cellular Corporation

Core Markets* Summary Operating Data (Unaudited)


















As of or for the Quarter Ended

12/31/2013


9/30/2013


6/30/2013


3/31/2013


12/31/2012

Retail Customers
















Postpaid

















Total at end of period


4,267,000



4,343,000



4,412,000



4,463,000



4,496,000



Gross additions


176,000



165,000



165,000



176,000



208,000



Net additions (losses)


(71,000)



(60,000)



(53,000)



(33,000)



(19,000)



ARPU (1)

$

53.53


$

54.64


$

54.44


$

54.21


$

53.91



Churn rate (2)


1.9%



1.7%



1.6%



1.6%



1.7%



Smartphone penetration (3) (4)


50.8%



47.1%



45.5%



43.0%



41.1%


Prepaid

















Total at end of period


343,000



370,000



381,000



373,000



342,000



Gross additions


63,000



65,000



76,000



91,000



87,000



Net additions (losses)


(26,000)



(11,000)



8,000



31,000



37,000



ARPU (1)

$

31.66


$

28.72


$

31.65


$

32.92


$

33.21



Churn rate (2)


8.3%



6.8%



6.0%



5.6%



5.1%

Total customers at end of period


4,774,000



4,875,000



4,968,000



5,005,000



5,022,000

Billed ARPU (1)

$

50.25


$

50.92


$

50.98


$

50.93


$

50.71

Service revenue ARPU (1)

$

57.05


$

58.36


$

57.88


$

57.14


$

57.67

Smartphones sold as a percent of total

devices sold


79.6%



65.2%



66.1%



62.1%



62.9%

Total population

















Consolidated markets (5)


58,013,000



84,025,000



84,025,000



84,025,000



83,384,000



Consolidated operating markets (5)


31,759,000



31,822,000



31,822,000



31,822,000



31,445,000

Market penetration at end of period

















Consolidated markets (6)


8.2%



5.8%



5.9%



6.0%



6.0%



Consolidated operating markets (6)


15.0%



15.3%



15.6%



15.7%



16.0%

Capital expenditures (000s)

$

211,200


$

239,300


$

171,200


$

113,300


$

241,400

Total cell sites in service


6,161



6,127



6,113



6,113



6,130

Owned towers in service


3,913



3,859



3,844



3,846



3,847



*

U.S. Cellular's Core Markets excludes the Divestiture Markets and NY1 & NY2 markets 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 & NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the respective periods. Also refer to U.S. Cellular's Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the twelve months ended December 31, 2012.



(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 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 disconnects 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.

(4)

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

(5)

Used only to calculate market penetration of consolidated and core markets and consolidated and core operating markets, respectively. See footnote (6) below.

(6)

Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated and core markets and consolidated and core operating markets, respectively, estimated by Claritas. 

 

TDS Telecom

Summary Operating Data (Unaudited)



















Quarter Ended

12/31/2013


9/30/2013


6/30/2013


3/31/2013


12/31/2012

TDS Telecom















Wireline

















Residential connections


















Voice (1)


352,100



358,200



364,000



368,600



374,700




Broadband (2)


227,000



229,500



231,700



229,500



229,900




IPTV


13,800



12,200



10,500



9,000



7,900




   Wireline residential connections


592,900



599,900



606,200



607,100



612,500





















Commercial connections


















Voice (1)


218,400



223,800



229,100



235,600



243,100




Broadband (2)


27,100



27,600



28,300



28,800



29,700




managedIP (3)


127,600



121,000



112,000



103,400



94,600




   Wireline commercial connections


373,100



372,400



369,400



367,800



367,400





















Total Wireline connections


966,000



972,300



975,600



974,900



979,900





















Total residential revenue per connection (4)

$

40.93


$

41.12


$

40.10


$

39.99


$

39.87



Residential broadband penetration (5)


68%



68%



68%



66%



65%



















Cable

















Cable Connections:


















Video (6)


69,200



70,300













Broadband (7)


61,000



59,800













Voice (7)


17,200



16,800













   Cable connections


147,400



146,900






























Total residential revenue per connection (4)

$

55.27


$

55.67












(1)

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

(2)

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

(3)

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

(4)

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

(5)

Total number of broadband connections divided by total primary residential connections.

(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


12/31/2013



9/30/2013



6/30/2013



3/31/2013



12/31/2012

Wireline

$

46,000


$

32,800


$

33,300


$

27,900


$

49,500

Cable


7,000



1,400



-



-



-

HMS


9,200



2,400



2,300



2,600



2,300


$

62,200


$

36,600


$

35,600


$

30,500


$

51,800

 

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)











 Increase/ (Decrease)





2013


2012


Amount

Percent

Operating revenues












U.S. Cellular

$

902,724


$

1,115,206


$

(212,482)


(19%)


TDS Telecom


271,939



221,495



50,444


23%


All Other (1)


8,854



9,508



(654)


(7%)






1,183,517



1,346,209



(162,692)


(12%)

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


967,005



979,461



(12,456)


(1%)



Depreciation, amortization and accretion


210,371



169,242



41,129


24%



(Gain) loss on asset disposals, net


14,453



2,121



12,332


>100%



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


(3,140)



25,170



(28,310)


>(100%)



(Gain) loss on license sales and exchanges


(255,479)



-



(255,479)


N/M






933,210



1,175,994



(242,784)


(21%)


TDS Telecom













Expenses excluding depreciation, amortization and accretion


206,097



165,585



40,512


24%



Depreciation, amortization and accretion


53,149



49,455



3,694


7%



(Gain) loss on asset disposals, net


336



390



(54)


(14%)






259,582



215,430



44,152


20%


All Other (1)













Expenses excluding depreciation and amortization


8,597



7,865



732


9%



Depreciation and amortization


2,982



2,767



215


8%



(Gain) loss on asset disposals, net


(38)



514



(552)


>(100%)



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


121



-



121


N/M






11,662



11,146



516


5%


















Total operating expenses


1,204,454



1,402,570



(198,116)


(14%)

Operating income (loss)












U.S. Cellular


(30,486)



(60,788)



30,302


50%


TDS Telecom


12,357



6,065



6,292


>100%


All Other  (1)


(2,808)



(1,638)



(1,170)


(71%)






(20,937)



(56,361)



35,424


63%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


32,411



19,071



13,340


70%


Interest and dividend income


2,407



2,354



53


2%


Gain on investment


29



10



19


>100%


Interest expense


(25,603)



(18,645)



(6,958)


(37%)


Other, net


169



524



(355)


(68%)



Total investment and other income


9,413



3,314



6,099


>100%

Loss before income taxes


(11,524)



(53,047)



41,523


78%


Income tax benefit


(4,013)



(12,037)



8,024


67%

Net loss


(7,511)



(41,010)



33,499


82%


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


(1,454)



837



(2,291)


>(100%)

Net loss attributable to TDS shareholders


(6,057)



(41,847)



35,790


86%


Preferred dividend requirement


(12)



(12)



-


-

Net loss available to common shareholders

$

(6,069)


$

(41,859)


$

35,790


86%















Basic weighted average shares outstanding


108,742



108,481



261


-

Basic loss per share attributable to TDS shareholders

$

(0.06)


$

(0.39)


$

0.33


85%















Diluted weighted average shares outstanding


108,742



108,481



261


-

Diluted loss per share attributable to TDS shareholders

$

(0.06)


$

(0.39)


$

0.33


85%



(1)

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



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)











 Increase/ (Decrease)





2013


2012


Amount

Percent

Operating revenues












U.S. Cellular

$

3,918,836


$

4,452,084


$

(533,248)


(12%)


TDS Telecom


947,003



854,506



92,497


11%


All Other (1)


35,397



38,687



(3,290)


(9%)






4,901,236



5,345,277



(444,041)


(8%)

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


3,439,830



3,647,685



(207,855)


(6%)



Depreciation, amortization and accretion


803,781



608,633



195,148


32%



(Gain) loss on asset disposals, net


30,606



18,088



12,518


69%



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


(246,767)



21,022



(267,789)


>(100%)



(Gain) loss on license sales and exchanges


(255,479)



-



(255,479)


N/M






3,771,971



4,295,428



(523,457)


(12%)


TDS Telecom













Expenses excluding depreciation, amortization and accretion


699,187



619,503



79,684


13%



Depreciation, amortization and accretion


202,701



193,094



9,607


5%



(Gain) loss on asset disposals, net


283



1,128



(845)


(75%)



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


-



39



(39)


N/M






902,171



813,764



88,407


11%


All Other (1)













Expenses excluding depreciation and amortization


34,077



39,283



(5,206)


(13%)



Depreciation and amortization


11,595



11,899



(304)


(3%)



Loss on impairment of assets


-



515



(515)


N/M



(Gain) loss on asset disposals, net


(48)



525



(573)


>(100%)



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


(53,889)



-



(53,889)


N/M






(8,265)



52,222



(60,487)


>(100%)


















Total operating expenses


4,665,877



5,161,414



(495,537)


(10%)

Operating income (loss)












U.S. Cellular


146,865



156,656



(9,791)


(6%)


TDS Telecom


44,832



40,742



4,090


10%


All Other  (1)


43,662



(13,535)



57,197


>(100%)






235,359



183,863



51,496


28%

Investment and other income (expense)












Equity in earnings of unconsolidated entities


132,714



92,867



39,847


43%


Interest and dividend income


9,092



9,248



(156)


(2%)


Gain (loss) on investment


14,547



(3,718)



18,265


>(100%)


Interest expense


(98,811)



(86,745)



(12,066)


(14%)


Other, net


(37)



720



(757)


>(100%)



Total investment and other income


57,505



12,372



45,133


>100%

Income before income taxes


292,864



196,235



96,629


49%


Income tax expense


126,043



73,582



52,461


71%

Net income


166,821



122,653



44,168


36%


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


24,894



40,792



(15,898)


(39%)

Net income attributable to TDS shareholders


141,927



81,861



60,066


73%


Preferred dividend requirement


(49)



(50)



1


2%

Net income available to common shareholders

$

141,878


$

81,811


$

60,067


73%















Basic weighted average shares outstanding


108,490



108,671



(181)


-

Basic earnings per share attributable to TDS shareholders

$

1.31


$

0.75


$

0.56


75%















Diluted weighted average shares outstanding


109,132



108,937



195


-

Diluted earnings per share attributable to TDS shareholders

$

1.29


$

0.75


$

0.54


72%



(1)

Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations.   TDS recognized an incremental gain of $53.5 million compared to U.S. Cellular upon closing of the Divesture Transaction as a result of lower asset basis in assets disposed.



N/M – Percentage change not meaningful

 


Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)








ASSETS

















December 31,


December 31,



2013


2012

Current assets







Cash and cash equivalents

$

830,014


$

740,481


Short-term investments


50,104



115,700


Accounts receivable from customers and others


731,114



574,328


Inventory


244,560



160,692


Net deferred income tax asset


106,077



43,411


Prepaid expenses


87,920



86,385


Income taxes receivable


2,397



9,625


Other current assets


35,151



32,815




2,087,337



1,763,437








Assets held for sale


16,027



163,242








Investments







Licenses


1,423,779



1,480,039


Goodwill


836,843



797,194


Franchise rights


123,668



-


Other intangible assets, net


71,454



58,522


Investments in unconsolidated entities


301,772



179,921


Long-term investments


-



50,305


Other investments


641



824




2,758,157



2,566,805








Property, plant and equipment, net







U.S. Cellular


2,856,520



3,022,588


TDS Telecom


984,634



934,188


Other


36,990



40,490




3,878,144



3,997,266








Other assets and deferred charges


164,482



133,150








Total assets

$

8,904,147


$

8,623,900

 


Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)










LIABILITIES AND EQUITY























December 31,


December 31,





2013


2012

Current liabilities








Current portion of long-term debt

$

1,646


$

1,233



Accounts payable


496,069



377,291



Customer deposits and deferred revenues


289,445



222,345



Accrued interest


6,673



6,565



Accrued taxes


70,518



48,237



Accrued compensation


115,031



134,932



Other current liabilities


212,374



134,005






1,191,756



924,608










Liabilities held for sale


-



19,594










Deferred liabilities and credits








Net deferred income tax liability


862,975



862,580



Other deferred liabilities and credits


458,709



438,727










Long-term debt


1,720,074



1,721,571










Noncontrolling interests with redemption features


536



493










Equity







TDS shareholders' equity








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


1,327



1,327



Capital in excess of par value


2,308,807



2,304,122



Treasury shares, at cost


(721,354)



(750,099)



Accumulated other comprehensive loss


(569)



(8,132)



Retained earnings


2,529,626



2,464,318




Total TDS shareholders' equity


4,117,837



4,011,536











Preferred shares


824



825


Noncontrolling interests


551,436



643,966












Total equity


4,670,097



4,656,327










Total liabilities and equity

$

8,904,147


$

8,623,900

 


Balance Sheet Highlights

December 31, 2013

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

342,065


$

87,340


$

400,609


$

 ? 


$

830,014

Affiliated cash investments


 ? 



426,431



 ? 



(426,431)



 ? 

Short-term investments


50,104



 ? 



 ? 



 ? 



50,104



$

392,169


$

513,771


$

400,609


$

(426,431)


$

880,118


















Licenses, goodwill and other intangible assets

$

1,788,650


$

797,165


$

(130,071)


$

 ? 


$

2,455,744

Investment in unconsolidated entities


265,585



3,809



39,553



(7,175)



301,772

Long-term and other investments


 ? 



641



 ? 



 ? 



641




$

2,054,235


$

801,615


$

(90,518)


$

(7,175)


$

2,758,157



































Property, plant and equipment, net

$

2,856,520


$

984,634


$

36,990


$

 ? 


$

3,878,144


















Long-term debt:
















Current portion

$

166


$

72


$

1,408


$

 ? 


$

1,646


Non-current portion


878,032



1,456



840,586



 ? 



1,720,074




$

878,198


$

1,528


$

841,994


$

 ? 


$

1,721,720

 


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, 2013 and December 31, 2012.




December 31,


December 31,


2013


2012








Cash and cash equivalents

$

830,014


$

740,481








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







U.S. Treasury Notes


50,104



115,700








Amounts included in long-term investments (1)







U.S. Treasury Notes


-



50,305








Total cash and cash equivalents and investments

$

880,118


$

906,486



(1)

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

(2)

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

 


Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)






2013


2012

Cash flows from operating activities







Net income

$

166,821


$

122,653



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

  from operating activities










Depreciation, amortization and accretion


1,018,077



813,626





Bad debts expense


105,629



74,695





Stock-based compensation expense


30,338



41,871





Deferred income taxes, net


(67,150)



58,785





Equity in earnings of unconsolidated entities


(132,714)



(92,867)





Distributions from unconsolidated entities


127,929



84,884





Loss on impairment of assets


-



515





(Gain) loss on asset disposals, net


30,841



19,741





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


(300,656)



21,061





(Gain) loss on license sales and exchanges


(255,479)



-





(Gain) loss on investments


(14,547)



3,718





Noncash interest expense


2,463



(572)





Other operating activities


612



1,393



Changes in assets and liabilities from operations










Accounts receivable


(294,320)



(81,107)





Inventory


(83,536)



(29,917)





Accounts payable


86,028



(12,332)





Customer deposits and deferred revenues


66,460



32,981





Accrued taxes


17,388



77,458





Accrued interest


380



(891)





Other assets and liabilities


(9,954)



(30,523)







494,610



1,105,172











Cash flows from investing activities







Cash used for additions to property, plant and equipment


(883,797)



(995,517)


Cash paid for acquisitions and licenses


(314,570)



(163,382)


Cash received from divestitures


811,120



50,182


Cash paid for investments


-



(120,000)


Cash received for investments


115,000



243,444


Other investing activities


11,594



(12,796)







(260,653)



(998,069)











Cash flows from financing activities







Repayment of long-term debt


(1,581)



(2,566)


Issuance of long-term debt


37



195,358


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


9,654



(1,119)


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


5,784



(2,205)


Repurchase of TDS Common Shares


(9,692)



(20,026)


Repurchase of U.S. Cellular Common Shares


(18,544)



(20,045)


Dividends paid to TDS shareholders


(55,293)



(53,165)


U.S. Cellular dividends paid to noncontrolling public shareholders


(75,235)



-


Payment of debt issuance costs


(23)



(8,242)


Distributions to noncontrolling interests


(3,766)



(20,856)


Payments to acquire additional interests in subsidiaries


(4,505)



(3,167)


Other financing activities


8,740



6,136







(144,424)



70,103











Net increase in cash and cash equivalents


89,533



177,206

Cash and cash equivalents







Beginning of period


740,481



563,275


End of period

$

830,014


$

740,481

 


TDS Telecom Highlights

 Three Months Ended December 31,

(Unaudited, dollars in thousands)

























Increase (Decrease)





2013


2012


Amount


Percent

Wireline












Operating revenues













Residential

$

73,045


$

73,551


$

(506)


(1%)



Commercial


59,208



58,175



1,033


2%



Wholesale


48,746



53,705



(4,959)


(9%)






180,999



185,431



(4,432)


(2%)


Operating expenses













Cost of services and products


67,945



68,977



(1,032)


(1%)



Selling, general and administrative expenses


52,771



61,182



(8,411)


(14%)



Depreciation, amortization and accretion


41,516



43,159



(1,643)


(4%)



Loss on asset disposals, net


306



387



(81)


(21%)






162,538



173,705



(11,167)


(6%)
















Operating income

$

18,461


$

11,726


$

6,735


57%















Cable












Operating revenues













Residential

$

17,374


$

-


$

17,374


N/M



Commercial


4,147



-



4,147


N/M






21,521



-



21,521


N/M


Operating expenses













Cost of services and products


10,547



-



10,547


N/M



Selling, general and administrative expenses


5,870



-



5,870


N/M



Depreciation, amortization and accretion


4,657



-



4,657


N/M



Loss on asset disposals, net


28



-



28


N/M






21,102



-



21,102


N/M
















Operating income

$

419


$

-


$

419


N/M















HMS












Operating revenues

$

69,951


$

36,148


$

33,803


94%


Operating expenses













Cost of services and products


53,897



25,585



28,312


>100%



Selling, general and administrative expenses


15,599



9,925



5,674


57%



Depreciation, amortization and accretion


6,976



6,296



680


11%



Loss on asset disposals, net


2



3



(1)


(33%)






76,474



41,809



34,665


83%
















Operating loss

$

(6,523)


$

(5,661)


$

(862)


(15%)















Intercompany revenues

$

(532)


$

(84)


$

(448)


>(100)%

Intercompany expenses


(532)



(84)



(448)


>(100)%















Total TDS Telecom operating income

$

12,357


$

6,065


$

6,292


>100%

 


TDS Telecom Highlights

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)

























Increase (Decrease)





2013


2012


Amount


Percent

Wireline












Operating revenues













Residential

$

293,217


$

296,592


$

(3,375)


(1%)



Commercial


232,910



230,474



2,436


1%



Wholesale


200,440



214,682



(14,242)


(7%)






726,567



741,748



(15,181)


(2%)


Operating expenses













Cost of services and products


270,466



274,065



(3,599)


(1%)



Selling, general and administrative expenses


220,097



235,716



(15,619)


(7%)



Depreciation, amortization and accretion


170,868



172,526



(1,658)


(1%)



Loss on asset disposals, net


130



1,020



(890)


(87%)



Loss on sale of business and other exit costs, net


-



39



(39)


N/M






661,561



683,366



(21,805)


(3%)
















Operating income

$

65,006


$

58,382


$

6,624


11%















Cable












Operating revenues













Residential

$

29,016


$

-


$

29,016


N/M



Commercial


6,867



-



6,867


N/M






35,883



-



35,883


N/M


Operating expenses













Cost of services and products


17,274



-



17,274


N/M



Selling, general and administrative expenses


11,054



-



11,054


N/M



Depreciation, amortization and accretion


7,571



-



7,571


N/M



Loss on asset disposals, net


28



-



28


N/M






35,927



-



35,927


N/M
















Operating loss

$

(44)


$

-


$

(44)


N/M















HMS












Operating revenues

$

185,616


$

113,010


$

72,606


64%


Operating expenses













Cost of services and products


136,414



75,781



60,633


80%



Selling, general and administrative expenses


44,945



34,193



10,752


31%



Depreciation, amortization and accretion


24,262



20,568



3,694


18%



Loss on asset disposals, net


125



108



17


16%






205,746



130,650



75,096


57%
















Operating loss

$

(20,130)


$

(17,640)


$

(2,490)


(14%)















Intercompany revenues

$

(1,063)


$

(252)


$

(811)


>(100)%

Intercompany expenses


(1,063)



(252)



(811)


>(100)%















Total TDS Telecom operating income

$

44,832


$

40,742


$

4,090


10%

 

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,



2013


2012


2013


2012

















Cash flows from operating activities


$

56,710


$

344,636


$

494,610


$

1,105,172


Deduct:














Cash used for additions to property, plant

  and equipment



252,427



264,620



883,797



995,517



Free cash flow (1)


$

(195,717)


$

80,016


$

(389,187)


$

109,655



(1)

Free cash flow is defined as Cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure 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, after Cash used for additions to property, plant and equipment.

 

©2012 PR Newswire. All Rights Reserved.

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