NEWS RELEASE Exhibit 99.1
As previously announced, TDS will hold a teleconference Feb. 24, 2012 at 9:30 a.m. CST. Listen to the live call via the Conference Calls page ofwww.teldta.com.
Contact: Jane W. McCahon, Vice President, Corporate Relations
(312) 592-5379,jane.mccahon@teldta.com
Julie D. Mathews, Manager, Investor Relations
(312) 592-5341,julie.mathews@teldta.com
FOR RELEASE: IMMEDIATE
TDS Reports FOURTH quarter results
provides financial guidance for 2012
Note: Comparisons are year over year unless otherwise noted.
Fourth Quarter Highlights
U.S. Cellular
§ Smartphones increased to 52.5 percent of total devices sold from 39.6 percent; smartphone customers increased to 30.5 percent of postpaid customers from 16.7 percent.
§ Postpaid ARPU (average revenue per unit) increased 5 percent to $53.35 from $50.99.
§ Service revenues increased 4 percent to $1,030.0 million.
§ Operating income increased $20.4 million to $16.3 million.
§ Net loss of 13,000 retail customers, reflecting loss of 20,000 postpaid customers and a gain of 7,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
§ Cell sites in service increased 3 percent to 7,882.
TDS Telecom
§ Operating revenues increased 4 percent to $206.8 million.
§ ILEC triple play penetration increased to 29 percent from 26 percent.
§ TDSmanagedIP stations (ILEC and CLEC) grew to 43,100 from 27,400.
CHICAGO – Feb. 24, 2012–Telephone and Data Systems, Inc. [NYSE:TDS]reported operating revenues of $1,316.7 million for the fourth quarter of 2011, versus $1,265.8 million in the comparable period one year ago. Net loss attributable to TDS was $6.2 million, or $0.06 diluted loss per share. In the fourth quarter of 2010, net income attributable to TDS was $13.1 million, or $0.12 diluted earnings per share.
The fourth quarter of 2011 was impacted by a $7.2 million expense related to the Share Consolidation (see below) that was not deductible for tax purposes, as well as a $6 million adjustment that increased tax expense related to prior periods.
For the twelve months ended Dec. 31, 2011, TDS reported operating revenues of $5,180.5 million, versus $4,986.8 million in 2010. Net income attributable to TDS for 2011 was $200.5 million, or $1.83 diluted earnings per share. In 2010, net income attributable to TDS was $144.8 million, or $1.31 diluted earnings per share.
“TDS increased revenues and improved profitability in 2011, despite very competitive industry environments for both U.S. Cellular and TDS Telecom,” said LeRoy T. Carlson, Jr., TDS president and CEO. “Both companies are making significant investments in their networks and operational infrastructure to enhance customer experiences and improve operational efficiency.
“Average total service revenue per customer at U.S. Cellular grew six percent in 2011, through greater smartphone penetration, the resulting higher-revenue data plans, and data-driven increases in inbound roaming revenues. Effective cost controls, including careful management of device subsidies, helped to improve profitability. U.S. Cellular had solid holiday sales with positive net retail additions in December, though not enough to offset customer losses for the quarter.
“Growing the postpaid customer base is U.S. Cellular’s top priority for 2012. The company’s strategy to compete includes bringing 4G LTE speeds and devices to customers, attracting new customers by building awareness, increasing our focus of small-to-medium business customers, and looking to expand other points of distribution. U.S. Cellular is also striving to increase profitability by continuing to improve its cost structure and by efficiently managing data growth.
“TDS Telecom continued to build its broadband business in 2011, adding high-speed data customers in its ILEC business, and offering more data services and faster speeds. On the commercial side, TDS Telecom continued to grow the number of stations for itsmanagedIP voice and data solution, and expanded its hosted and managed services business through acquisitions and organic growth.
“TDS Telecom’s strategic priorities for 2012 include continuing to increase broadband speeds, and launching TDS TV® in 19 markets. The company is increasing the range of its services and products for businesses, and will continue to expand the hosted and managed services footprint and service portfolio. TDS Telecom also plans to make substantial progress toward completion of its broadband stimulus projects in 2012 to bring high-speed data access to rural communities.
“At the TDS corporate level, we increased our financial flexibility and reduced the complexity of the capital structure through the Share Consolidation, which was approved by shareholders and became effective in January 2012. We are also evaluating additional steps to increase shareholder value, while continuing to focus on profitable growth.”
Share Consolidation
On Jan. 13, 2012, TDS shareholders approved Charter Amendments to the TDS Restated Certificate of Incorporation, including a Share Consolidation Amendment to reclassify each Special Common Share as one Common Share, each Common Share as 1.087 Common Shares, and each Series A Common Share as 1.087 Series A Common Shares. Additionally, there was a Vote Amendment that fixed the percentage voting power in certain matters, and amendments to eliminate obsolete and inoperative provisions.
These approved Charter Amendments were effected on Jan. 24, 2012, and the Special Common Shares ceased to be outstanding and consequently ceased trading on the New York Stock Exchange under the symbol “TDS.S.”
As of Jan. 24, 2012, immediately prior to the reclassification, there were outstanding 6,549,000 Series A Common Shares, 49,980,000 Common Shares and 47,012,000 Special Common Shares. As of Jan. 24, 2012, immediately following the reclassification, there were outstanding 7,119,000 Series A Common Shares and 101,340,000 Common Shares.
As a result of the Share Consolidation Amendment, shares outstanding as of Dec. 31, 2011, as well as average basic and diluted shares outstanding used to calculate earnings per share as of the beginning of all periods presented, were retroactively restated to reflect the impact of the increased shares outstanding.
TDS’ consolidated balance sheet as of Dec. 31, 2011 was also retroactively adjusted to reflect the incremental shares issued to Common and Series A shareholders based on the closing price of TDS Common Shares as of Dec. 31, 2011. As a result of the reclassification, an increase in Common Shares, Series A Common Shares and capital in excess of par was offset by a corresponding decrease in retained earnings, with no change to the overall amount of shareholders’ equity.
2
Guidance for year ending Dec. 31, 2012
This guidance represents the views of management as of Feb. 24, 2012, and should not be assumed to be current as of any other date. There can be no assurance that final results will not differ materially from this guidance. TDS undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.
| |
| 2012 |
| 2011 |
U.S. Cellular | Estimated Results (1) |
| Actual Results |
| Service revenues | $4,050-$4,150 million | | $4,053.8 million |
| Operating income | $200-$300 million | | $280.8 million |
| Depreciation, amortization and accretion expenses, and net gain or loss on asset disposals and exchanges | | | |
| and loss on impairment of assets (2) | Approx. $600 million | | $571.7 million |
| Adjusted OIBDA (5) | $800-$900 million | | $852.5 million |
| Capital expenditures | Approx. $850 million | | $782.5 million |
| | | | | |
| | | 2012 | | 2011 |
TDS Telecom ILEC and CLEC operations: | Estimated Results (3) | | Actual Results |
| Operating revenues | $810-$840 million | | $815.4 million |
| Operating income | $55-$85 million | | $98.7 million |
| Depreciation, amortization and accretion expenses, and net gain or loss on asset disposals and exchanges | | | |
| and loss on impairment of assets (4) | Approx. $190 million | | $181.8 million |
| Adjusted OIBDA (5) | $245-$275 million | | $280.9 million |
| Capital expenditures (6) | $150-$180 million | | $191.2 million |
(1) These estimates are based on U.S. Cellular’s current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011. New developments or changing conditions (such as customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges), could affect U.S. Cellular's plans and, therefore, its 2012 estimated results.
(2) 2011 Actual Results include gains on asset disposals and exchanges, net of $1.9 million. The 2012 Estimated Results include only Depreciation, amortization and accretion expenses; such estimated results do not includenetgains or losses on disposals andexchangesof assets,or losses on impairment of assets (since such transactions and their effects cannot be predicted).
(3) These estimates are based on TDS Telecom’s current operations. Various other factors, including possible acquisitions, dispositions or exchanges, could affect TDS Telecom’s estimated guidance in 2012.
(4) 2011 Actual Results include losses on asset disposals of $1.2 million. The 2012 Estimated Results include only the estimate for Depreciation, amortization and accretion expenses; such estimated results do not include net gains or losses on asset disposals and exchanges or losses on impairment of assets (since such transactions and their effects cannot be predicted).
(5) Adjusted OIBDA is defined as operating income excluding the effects of Depreciation, amortization and accretion (OIBDA): the net gain or loss on asset disposals and exchanges (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and exchanges (if any) and loss on impairment of assets (if any), in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual and, accordingly, they may be incurred in the future. TDS believes this measure provides useful information to investors regarding TDS’ financial condition and results of operations because it highlights certain key cash and non-cash items and their impacts on cash flows from operating activities.
(6) Under the American Recovery and Reinvestment Act of 2009 (“the Recovery Act”), TDS Telecom will receive $105.1 million in federal grants and will provide $30.9 million (a portion of which is included in 2012 estimated capital expenditures) of its own funds to complete 44 projects. Under the terms of the grants, the projects must be completed by June of 2015.
Stock repurchase summary
The following represents repurchases of TDS Common Shares and TDS Special Common Shares.
| Repurchase Period |
| # Shares |
| Cost (in millions) |
| 2011 (full year) | | 748,246 | | $ | 21.5 |
| 2010 (full year) | | 2,394,476 | | $ | 68.1 |
| 2009 (full year) | | 6,374,741 | | $ | 176.6 |
| 2008 (full year) | | 5,861,822 | | $ | 199.6 |
| Total | | 15,379,285 | | $ | 465.8 |
3
Conference call information
TDS will hold a conference call on Feb. 24, 2012at 9:30 a.m. CST.
§ Listen to the live call online at http://www.videonewswire.com/event.asp?id=85230 or on the Conference Calls page ofwww.teldta.com.
§ Listen to the live call by phone at 877/869-3847 (US/Canada), no pass code required.
Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page ofwww.teldta.com. The call will be archived on the Conference Calls page ofwww.teldta.com.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless, local and long-distance telephone, and broadband services to approximately 7 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of Dec. 31, 2011.
Visitwww.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: The ability of U.S. Cellular to successfully grow its markets; the overall economy; competition; theaccess to and pricing of unbundled network elements;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; risks and uncertainties relating to possible future restatements; pending and future litigation; changes in income tax rates, laws, regulations or rulings;acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, 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 used by TDS to furnish this press release to the SEC, which are incorporated by reference herein.
For more information about TDS and its subsidiaries, visit our websites at:
TDS: www.teldta.com TDS Telecom:www.tdstelecom.com
U.S. Cellular:www.uscellular.com
4
United States Cellular Corporation
Summary Operating Data (Unaudited) |
|
| | | | | | | | | | | | | | | | | | | | |
Quarter Ended | 12/31/2011 | | 9/30/2011 | | 6/30/2011 | | 3/31/2011 | | 12/31/2010 |
Total population | | | | | | | | | | | | | | | | | | | |
| Consolidated markets (1) | | 91,965,000 | | | | 91,965,000 | | | | 91,204,000 | | | | 91,090,000 | | | | 90,468,000 | |
| Consolidated operating markets (1) | | 46,888,000 | | | | 46,888,000 | | | | 46,888,000 | | | | 46,774,000 | | | | 46,546,000 | |
Market penetration at end of period | | | | | | | | | | | | | | | | | | | |
| Consolidated markets (2) | | 6.4 | % | | | 6.5 | % | | | 6.5 | % | | | 6.6 | % | | | 6.7 | % |
| Consolidated operating markets (2) | | 12.6 | % | | | 12.7 | % | | | 12.7 | % | | | 12.9 | % | | | 13.0 | % |
All customers | | | | | | | | | | | | | | | | | | | |
| Total at end of period | | 5,891,000 | | | | 5,932,000 | | | | 5,968,000 | | | | 6,033,000 | | | | 6,072,000 | |
| Gross additions | | 306,000 | | | | 299,000 | | | | 257,000 | | | | 293,000 | | | | 327,000 | |
| Net additions (losses) | | (41,000 | ) | | | (36,000 | ) | | | (70,000 | ) | | | (39,000 | ) | | | (31,000 | ) |
| Smartphones sold as a percent of | | | | | | | | | | | | | | | | | | | |
| total devices sold (3) | | 52.5 | % | | | 39.9 | % | | | 39.6 | % | | | 42.5 | % | | | 39.6 | % |
Retail customers | | | | | | | | | | | | | | | | | | | |
| Total at end of period | | 5,608,000 | | | | 5,621,000 | | | | 5,644,000 | | | | 5,698,000 | | | | 5,729,000 | |
| Smartphone penetration (3) (4) | | 30.5 | % | | | 26.2 | % | | | 23.1 | % | | | 20.3 | % | | | 16.7 | % |
| Gross additions | | 298,000 | | | | 284,000 | | | | 226,000 | | | | 256,000 | | | | 292,000 | |
| Net retail additions (losses) (5) | | (13,000 | ) | | | (23,000 | ) | | | (58,000 | ) | | | (31,000 | ) | | | (21,000 | ) |
| Net postpaid additions (losses) | | (20,000 | ) | | | (34,000 | ) | | | (41,000 | ) | | | (22,000 | ) | | | (10,000 | ) |
| Net prepaid additions (losses) | | 7,000 | | | | 11,000 | | | | (17,000 | ) | | | (9,000 | ) | | | (11,000 | ) |
Service revenue components (000s) | | | | | | | | | | | | | | | | | | | |
| Retail service | $ | 882,091 | | | $ | 871,199 | | | $ | 868,630 | | | $ | 864,602 | | | $ | 864,905 | |
| Inbound roaming | | 93,353 | | | | 107,810 | | | | 82,760 | | | | 64,386 | | | | 67,545 | |
| Other | | 54,601 | | | | 57,600 | | | | 50,640 | | | | 56,125 | | | | 59,464 | |
Total service revenues (000s) | $ | 1,030,045 | | | $ | 1,036,609 | | | $ | 1,002,030 | | | $ | 985,113 | | | $ | 991,914 | |
Total ARPU (6) | $ | 58.13 | | | $ | 58.09 | | | $ | 55.69 | | | $ | 54.29 | | | $ | 54.37 | |
Billed ARPU (7) | $ | 49.78 | | | $ | 48.82 | | | $ | 48.27 | | | $ | 47.65 | | | $ | 47.41 | |
Postpaid ARPU (8) | $ | 53.35 | | | $ | 52.41 | | | $ | 51.84 | | | $ | 51.21 | | | $ | 50.99 | |
Postpaid churn rate (9) | | 1.6 | % | | | 1.5 | % | | | 1.4 | % | | | 1.4 | % | | | 1.5 | % |
Capital expenditures (000s) | $ | 276,400 | | | $ | 248,000 | | | $ | 162,100 | | | $ | 95,900 | | | $ | 203,400 | |
Cell sites in service | | 7,882 | | | | 7,828 | | | | 7,770 | | | | 7,663 | | | | 7,645 | |
(1) Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.
(2) 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®.
(3) Smartphones represent wireless devices which run on an Android™, BlackBerry®, or Windows Mobile® operating system, excluding tablets.
(4) Smartphone penetration is calculated by dividing postpaidsmartphonecustomers by total postpaid customers.
(5) Includes net postpaid additions (losses) and net prepaid additions (losses).
(6) Total ARPU - Average monthly service revenue per customer includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.
(7) Billed ARPU - Average monthly billed revenue per customer is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.
(8) Postpaid ARPU - Average monthly revenue per postpaid customer is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.
(9) Represents the percentage of the postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.
5
TDS Telecom Summary Operating Data (Unaudited) |
|
| | | | | | | | | | | | | | | |
Quarter Ended |
12/31/2011 |
|
9/30/2011 |
|
6/30/2011 |
|
3/31/2011 | | 12/31/2010 |
TDS Telecom |
|
|
|
|
|
|
|
|
|
| | | | |
| ILEC: |
|
|
|
|
|
|
|
|
|
| | | | |
| Equivalent access lines (1) | | 754,400 | | | 762,500 | | | 764,600 | | | 765,300 | | | 767,200 |
| Physical access lines (2) | | 482,000 | | | 490,200 | | | 496,300 | | | 501,200 | | | 507,700 |
| High-speed data customers (3) | | 238,400 | | | 239,000 | | | 235,600 | | | 231,800 | | | 227,700 |
| Long-distance customers | | 371,500 | | | 373,300 | | | 373,200 | | | 370,600 | | | 370,100 |
| managedIP stations (4) | | 6,900 | | | 5,800 | | | 5,100 | | | 4,300 | | | 3,600 |
| Capital expenditures (000s) | $ | 56,200 | | $ | 51,500 | | $ | 39,100 | | $ | 22,100 | | $ | 55,700 |
| CLEC: |
|
|
|
|
|
|
|
|
|
|
| | | |
| Equivalent access lines (1) | | 317,500 | | | 322,600 | | | 328,700 | | | 331,000 | | | 335,400 |
| High-speed data customers (3) | | 28,900 | | | 30,200 | | | 31,500 | | | 32,300 | | | 33,100 |
| managedIP stations (4) | | 36,200 | | | 33,600 | | | 30,200 | | | 27,200 |
| | 23,800 |
| Capital expenditures (000s) | $ | 7,200 | | $ | 4,700 | | $ | 6,200 | | $ | 4,200 | | $ | 6,200 |
(1) Sum of physical access lines and high-capacity data lines, adjusted to estimate the equivalent number of physical access lines in terms of capacity, plus the number of managed Internet Protocol telephony (“managedIP”) stations.
(2) Individual circuits connecting customers to a telephone company's central office facilities.
(3) The number of customers provided high-capacity data circuits via various technologies, including DSL,managedIP and dedicated Internet circuit technologies.
(4) The number of telephone handsets providing communications using IP networking technology.
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) |
| | | | 2011 |
| 2010 |
| Amount |
| Percent |
Operating revenues | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | $ | 1,099,633 | |
| $ | 1,063,150 | |
| $ | 36,483 | | |
| 3 | % |
| TDS Telecom | | 206,770 | |
| | 199,101 | |
| | 7,669 | | |
| 4 | % |
| All Other (1) | | 10,324 | | | | 3,508 | | | | 6,816 | | | | >(100 | %) |
| | | | | 1,316,727 | |
| | 1,265,759 | |
| | 50,968 | | |
| 4 | % |
Operating expenses | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation, amortization and accretion (2) (3) | | 937,473 | | | | 921,778 | | | | 15,695 | | | | 2 | % |
| | Depreciation, amortization and accretion | | 141,976 | | | | 143,124 | | | | (1,148 | ) | | | (1 | %) |
| | (Gain) loss on asset disposals, net | | 3,868 | | | | 2,310 | | | | 1,558 | | | | 67 | % |
| | | | | 1,083,317 | |
| | 1,067,212 | |
| | 16,105 | | |
| 2 | % |
| TDS Telecom | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation, amortization and accretion | | 144,748 | |
| | 129,981 | |
| | 14,767 | | |
| 11 | % |
| | Depreciation, amortization and accretion | | 46,168 | |
| | 43,837 | |
| | 2,331 | | |
| 5 | % |
| | (Gain) loss on asset disposals, net | | 485 | | | | 464 | | | | 21 | | | | 5 | % |
| | | | | 191,401 | |
| | 174,282 | |
| | 17,119 | | |
| 10 | % |
| All Other (1) | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation and amortization | | 19,117 | |
| | 1,677 | |
| | 17,440 | | |
| >(100 | %) |
| | Depreciation and amortization | | 3,735 | |
| | 2,643 | |
| | 1,092 | | |
| 41 | % |
| | (Gain) loss on asset disposals, net | | (193 | ) | | | (34 | ) | | | (159 | ) | | | >(100 | %) |
| | | | | 22,659 | |
| | 4,286 | |
| | 18,373 | | |
| >(100 | %) |
| | | | | | |
| | | |
| | | | |
| | |
| | | Total operating expenses | | 1,297,377 | | | | 1,245,780 | | | | 51,597 | | | | 4 | % |
Operating income (loss) | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | | 16,316 | |
| | (4,062 | ) |
| | 20,378 | | |
| >(100 | %) |
| TDS Telecom | | 15,369 | |
| | 24,819 | |
| | (9,450 | ) | |
| (38 | %) |
| All Other (1) | | (12,335 | ) | | | (778 | ) | | | (11,557 | ) | | | >(100 | %) |
| | | | | 19,350 | |
| | 19,979 | |
| | (629 | ) | |
| (3 | %) |
Investment and other income (expense) | | | |
| | | |
| | | | |
| | |
| Equity in earnings of unconsolidated entities | | 18,507 | |
| | 23,027 | |
| | (4,520 | ) | |
| (20 | %) |
| Interest and dividend income | | 2,229 | |
| | 2,608 | |
| | (379 | ) | |
| (15 | %) |
| Loss on investment | | (2,000 | ) |
| | — | |
| | (2,000 | ) | |
| N/M | |
| Interest expense (2) | | (24,017 | ) |
| | (30,290 | ) |
| | 6,273 | | |
| 21 | % |
| Other, net | | 2,157 | | | | 468 | | | | 1,689 | | | | >(100 | %) |
| | Total investment and other income (expense) | | (3,124 | ) |
| | (4,187 | ) |
| | 1,063 | | |
| 25 | % |
Income before income taxes | | 16,226 | |
| | 15,792 | |
| | 434 | | |
| 3 | % |
| Income tax expense (benefit) (3) | | 18,239 | | | | (4,716 | ) | | | 22,955 | | | | >(100 | %) |
Net income (loss) | | (2,013 | ) |
| | 20,508 | |
| | (22,521 | ) | |
| >(100 | %) |
| Less: Net income attributable to noncontrolling interests, net of tax | | (4,173 | ) | | | (7,364 | ) |
| | 3,191 | | |
| 43 | % |
Net income (loss) attributable to TDS shareholders | | (6,186 | ) |
| | 13,144 | |
| | (19,330 | ) | |
| >(100 | %) |
| Preferred dividend requirement | | (12 | ) | | | (12 | ) | | | — | | | | — | |
Net income (loss) available to common | $ | (6,198 | ) |
| $ | 13,132 | |
| $ | (19,330 | ) | |
| >(100 | %) |
| | | | | | |
| | | |
| | | | |
| | |
Basic weighted average shares outstanding (4) | | 108,492 | |
| | 108,979 | |
| | (487 | ) | |
| — | |
Basic earnings (loss) per share attributable to TDS shareholders (4) | $ | (0.06 | ) |
| $ | 0.12 | |
| $ | (0.18 | ) | |
| >(100 | %) |
| | | | | | |
| | | |
| | | | |
| | |
Diluted weighted average shares outstanding (4) | | 108,492 | |
| | 109,790 | |
| | (1,298 | ) | |
| (1 | %) |
Diluted earnings (loss) per share attributable to TDS shareholders (4) | $ | (0.06 | ) |
| $ | 0.12 | |
| $ | (0.18 | ) | |
| >(100 | %) |
(1) Consists of Suttle Straus printing and distribution operations, Airadigm, corporate operations and intercompany eliminations.
(2) During the quarter ended December 31, 2010, TDS recorded adjustments to reduce its liability for transactional taxes in the amount of $5.8 million. Of this amount, $2.7 million and $3.1 million reduced Selling, general and administrative expenses and Interest expense, respectively, in the quarter ended December 31, 2010. These transactional taxes related to periods from 2002 through the first quarter of 2010. This adjustment reflects a change in TDS’ estimate of its liability for transactional taxes and interest and the actual amounts due and settled with the taxing authorities of taxes and interest.
(3) During the quarter ended December 31, 2011, TDS recorded animmaterialadjustment to correct its liabilities and prepaid expense related to property taxes for errors occurring primarily prior to 2009. This adjustment reduced Selling, general and administrative expenses by $5.4 million in the quarter. TDS also recorded animmaterialadjustment to correct its deferred tax balances related to a difference in the tax basis in certain partnerships for errors occurring prior to 2009. This adjustment increased Income tax expense by $6.0 million in the quarter. TDS also recorded other immaterial adjustments to correct errors in prior periods which, together with the foregoing adjustments, reduced Net income (loss) attributable to TDS shareholders by a net of $5.4 million. The correction of such errors in the fourth quarter of 2011 did not have a material effect on any prior periods, the full year ended December 31, 2011, or the trend in earnings.
(4) On January 13, 2012 TDS shareholders approved a Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS. Shares outstanding at December 31, 2011, as well as average basic and diluted shares outstanding used to calculate earnings per share as of the beginning of all periods presented, have been retroactively restated to reflect the impact of the increased shares outstanding as a result of the Share Consolidation Amendment.
N/M – Percentage change not meaningful
7
Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights Year Ended December 31, |
|
(Unaudited, dollars and shares in thousands, except per share amounts) |
| | | | | | |
| | | |
| Increase/ (Decrease) |
| | | | 2011 |
| 2010 |
| Amount |
| Percent |
Operating revenues | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | $ | 4,343,346 | |
| $ | 4,177,681 | |
| $ | 165,665 | | |
| 4 | % |
| TDS Telecom | | 815,388 | |
| | 795,842 | |
| | 19,546 | | |
| 2 | % |
| All Other (1) | | 21,737 | | | | 13,306 | | | | 8,431 | | | | 63 | % |
| | | | | 5,180,471 | |
| | 4,986,829 | |
| | 193,642 | | |
| 4 | % |
Operating expenses | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation, amortization and accretion | | 3,490,882 | |
| | 3,394,536 | |
| | 96,346 | | |
| 3 | % |
| | Depreciation, amortization and accretion | | 573,557 | |
| | 570,955 | |
| | 2,602 | | |
| — | |
| | (Gain) loss on asset disposals and exchanges, net | | (1,873 | ) | | | 10,717 | | | | (12,590 | ) | | | >(100 | %) |
| | | | | 4,062,566 | |
| | 3,976,208 | |
| | 86,358 | | |
| 2 | % |
| TDS Telecom | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation, amortization and accretion | | 534,964 | |
| | 520,823 | |
| | 14,141 | | |
| 3 | % |
| | Depreciation, amortization and accretion | | 180,530 | |
| | 174,054 | |
| | 6,476 | | |
| 4 | % |
| | (Gain) loss on asset disposals, net | | 1,243 | | | | 1,131 | | | | 112 | | | | 10 | % |
| | | | | 716,737 | |
| | 696,008 | |
| | 20,729 | | |
| 3 | % |
| All Other (1) | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation and amortization | | 27,157 | |
| | 7,967 | |
| | 19,190 | | |
| >(100 | %) |
| | Depreciation and amortization | | 11,689 | |
| | 10,640 | |
| | 1,049 | | |
| 10 | % |
| | (Gain) loss on asset disposals, net | | (180 | ) | | | (85 | ) | | | (95 | ) | | | >(100 | %) |
| | | | | 38,666 | |
| | 18,522 | |
| | 20,144 | | |
| >(100 | %) |
| | | | | | |
| | | |
| | | | |
| | |
| | | Total operating expenses | | 4,817,969 | | | | 4,690,738 | | | | 127,231 | | | | 3 | % |
Operating income (loss) | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | | 280,780 | |
| | 201,473 | |
| | 79,307 | | |
| 39 | % |
| TDS Telecom | | 98,651 | |
| | 99,834 | |
| | (1,183 | ) | |
| (1 | %) |
| All Other (1) | | (16,929 | ) |
| | (5,216 | ) |
| | (11,713 | ) | |
| >(100 | %) |
| | | | | 362,502 | |
| | 296,091 | |
| | 66,411 | | |
| 22 | % |
Investment and other income (expense) | | | |
| | | |
| | | | |
| | |
| Equity in earnings of unconsolidated entities | | 82,538 | |
| | 98,074 | |
| | (15,536 | ) | |
| (16 | %) |
| Interest and dividend income | | 9,145 | |
| | 10,508 | |
| | (1,363 | ) | |
| (13 | %) |
| Gain on investment | | 24,103 | |
| | — | |
| | 24,103 | | |
| N/M | |
| Interest expense | | (118,201 | ) |
| | (116,810 | ) |
| | (1,391 | ) | |
| (1 | %) |
| Other, net | | 3,658 | | | | (2,089 | ) | | | 5,747 | | | | >(100 | %) |
| | Total investment and other income (expense) | | 1,243 | | | | (10,317 | ) | | | 11,560 | | | | >(100 | %) |
Income before income taxes | | 363,745 | |
| | 285,774 | |
| | 77,971 | | |
| 27 | % |
| Income tax expense | | 113,503 | | | | 95,188 | | | | 18,315 | | | | 19 | % |
Net income | | 250,242 | |
| | 190,586 | |
| | 59,656 | | |
| 31 | % |
| Less: Net income attributable to noncontrolling interests, net of tax | | (49,676 | ) |
| | (45,737 | ) |
| | (3,939 | ) | |
| (9 | %) |
Net income attributable to TDS shareholders | | 200,566 | |
| | 144,849 | |
| | 55,717 | | |
| 38 | % |
| Preferred dividend requirement | | (50 | ) |
| | (50 | ) |
| | — | | |
| — | |
Net income available to common | $ | 200,516 | |
| $ | 144,799 | |
| $ | 55,717 | | |
| 38 | % |
| | | | | | |
| | | |
| | | | |
| | |
Basic weighted average shares outstanding (2) | | 108,562 | |
| | 110,016 | |
| | (1,454 | ) | |
| (1 | %) |
Basic earnings per share attributable to TDS shareholders (2) | $ | 1.85 | |
| $ | 1.32 | |
| $ | 0.53 | | |
| 40 | % |
| | | | | | |
| | | |
| | | | |
| | |
Diluted weighted average shares outstanding (2) | | 109,100 | |
| | 110,489 | |
| | (1,389 | ) | |
| (1 | %) |
Diluted earnings per share attributable to TDS shareholders (2) | $ | 1.83 | |
| $ | 1.31 | |
| $ | 0.52 | | |
| 40 | % |
(1) Consists of Suttle Straus printing and distribution operations,Airadigm,corporate operations and intercompany eliminations.
(2) On January 13, 2012 TDS shareholders approved a Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS. Shares outstanding at December 31, 2011, as well as average basic and diluted shares outstanding used to calculate earnings per share as of the beginning of all periods presented, have been retroactively restated to reflect the impact of the increased shares outstanding as a result of the Share Consolidation Amendment.
N/M – Percentage change not meaningful
8
Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands) |
|
| | | | |
| | |
ASSETS |
| | | | |
| | |
| | | December 31, |
| December 31, |
| | | 2011 |
| 2010 (1) |
Current assets | | |
| | |
| Cash and cash equivalents | $ | 563,275 |
| $ | 341,683 |
| Short-term investments | | 246,273 |
| | 402,882 |
| Accounts receivable from customers and others | | 542,577 |
| | 512,946 |
| Inventory | | 130,044 |
| | 116,330 |
| Net deferred income tax asset | | 40,898 |
| | 37,079 |
| Prepaid expenses | | 80,628 |
| | 76,935 |
| Income taxes receivable | | 85,636 |
| | 64,985 |
| Other current assets | | 16,349 |
| | 17,384 |
| | | | 1,705,680 |
| | 1,570,224 |
| | | | |
| | |
Assets held for sale | | 49,647 |
| | — |
| | | | |
| | |
Investments | | |
| | |
| Licenses | | 1,494,014 |
| | 1,460,126 |
| Goodwill | | 797,077 |
| | 728,455 |
| Other intangible assets, net | | 50,734 |
| | 30,810 |
| Investments in unconsolidated entities | | 173,710 |
| | 197,922 |
| Long-term investments | | 45,138 |
| | 102,185 |
| Other investments | | 3,072 |
| | 8,988 |
| | | | 2,563,745 |
| | 2,528,486 |
| | | | |
| | |
Property, plant and equipment, net | | |
| | |
| U.S. Cellular | | 2,790,302 |
| | 2,574,522 |
| TDS Telecom | | 936,757 |
| | 909,951 |
| Other | | 57,476 |
| | 33,311 |
| | | | 3,784,535 |
| | 3,517,784 |
| | | | |
| | |
Other assets and deferred charges | | 97,398 |
| | 79,623 |
| | | | |
| | |
Total assets | $ | 8,201,005 |
| $ | 7,696,117 |
(1) Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.
9
Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights |
(Unaudited, dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
| | | | | | | | | | |
| | |
| December 31, |
| December 31, |
| | |
| 2011 |
| 2010 (1) |
Current liabilities |
|
|
|
|
|
|
|
| Current portion of long-term debt | $ | 1,509 | | | $ | 1,711 | |
| Accounts payable | | 364,746 | | | | 317,904 | |
| Customer deposits and deferred revenues | | 207,633 | | | | 171,781 | |
| Accrued interest | | 7,456 | | | | 4,308 | |
| Accrued taxes | | 41,069 | | | | 46,110 | |
| Accrued compensation | | 107,719 | | | | 99,020 | |
| Other current liabilities | | 144,001 | | | | 144,938 | |
| | | | | 874,133 | | | | 785,772 | |
| | | | | | | | | | |
Liabilities held for sale | | 1,051 | | | | — | |
| | | | | | | | | | |
Deferred liabilities and credits |
| | |
|
| | |
| Net deferred income tax liability | | 808,713 | | | | 589,092 | |
| Other deferred liabilities and credits | | 383,567 | | | | 354,798 | |
| | | | | | | | | | |
Long-term debt | | 1,529,857 | | | | 1,499,862 | |
| | |
| | | | | | | |
Noncontrolling interests with redemption features | | 1,005 | | | | 855 | |
| | |
| | | | | | | |
Equity | | | | | | | |
| TDS shareholders’ equity | | | | | | | |
| | Series A Common, Special Common and Common Shares,par value $.01 (2) | | 1,326 | | | | 1,270 | |
| | Capital in excess of par value (2) | | 2,268,711 | | | | 2,107,929 | |
| | Special Common and Common Treasury shares, at cost (2) | | (750,921 | ) | | | (738,695 | ) |
| | Accumulated other comprehensive loss | | (8,854 | ) | | | (3,208 | ) |
| | Retained earnings (2) | | 2,451,899 | | | | 2,450,599 | |
| | | Total TDS shareholders’ equity | | 3,962,161 | | | | 3,817,895 | |
| | | | | | | | | | |
| Preferred shares | | 830 | | | | 830 | |
| Noncontrolling interests | | 639,688 | | | | 647,013 | |
| | | | | | | | | | |
| | Total equity | | 4,602,679 | | | | 4,465,738 | |
| | | | | | | | | | |
Total liabilities and equity | $ | 8,201,005 | | | $ | 7,696,117 | |
(1) Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.
(2) The December 31, 2011 amounts reflect the impact of the Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS, as approved by the TDS shareholders on January 13, 2012.
10
Balance Sheet Highlights December 31, 2011 |
|
(Unaudited, dollars in thousands) |
|
| | | | | | | |
|
| | |
|
| | |
|
| | | |
| | | U.S. Cellular | | TDS Telecom |
| TDS Corporate & Other |
| Intercompany Eliminations |
| TDS Consolidated |
| | | |
|
|
|
Cash and cash equivalents | $ | 424,155 |
|
| $ | 44,241 |
|
| $ | 94,879 |
|
| $ | ― |
|
| $ | 563,275 | |
Affiliated cash investments | | ― |
|
| | 361,285 |
|
| | ― |
|
| | (361,285 | ) | | | ― | |
Short-term investments | | 127,039 | |
| | 27,444 | |
| | 91,790 | |
| | ― | |
| | 246,273 | |
| | $ | 551,194 | | | $ | 432,970 | | | $ | 186,669 | | | $ | (361,285 | ) | | $ | 809,548 | |
| | | | |
|
| | |
|
| | |
|
| | |
|
| | | |
Licenses, goodwill and other intangible assets | $ | 1,965,820 |
|
| $ | 553,464 |
|
| $ | (177,459 | ) | | $ | ― |
|
| $ | 2,341,825 | |
Investment in unconsolidated entities | | 138,096 |
|
| | 3,808 |
|
| | 36,836 |
|
| | (5,030 | ) | | | 173,710 | |
Long-term and other investments | | 31,978 | |
| | 1,150 | |
| | 15,082 | |
| | ― | |
| | 48,210 | |
| | | $ | 2,135,894 | | | $ | 558,422 | | | $ | (125,541 | ) | | $ | (5,030 | ) | | $ | 2,563,745 | |
| | | | |
|
| | |
|
| | |
|
| | |
|
| | | |
| | | | |
|
| | |
|
| | |
|
| | |
|
| | | |
Property, plant and equipment, net | $ | 2,790,302 | | | $ | 936,757 | | | $ | 57,476 | | | $ | ― | | | $ | 3,784,535 | |
| | | | | | | | | | | | | | | | | | | | | |
Long-term debt: | | |
|
| | |
|
| | |
|
| | |
|
| | | |
| Current portion | $ | 127 |
|
| $ | 196 |
|
| $ | 1,186 |
|
| $ | ― |
|
| $ | 1,509 | |
| Non-current portion | | 880,320 | |
| | 1,780 | |
| | 647,757 | |
| | ― | |
| | 1,529,857 | |
| | Total | $ | 880,447 | | | $ | 1,976 | | | $ | 648,943 | | | $ | ― | | | $ | 1,531,366 | |
| | | | | | | | | | | | | | | | | | | | | |
Preferred shares | $ | ― | | | $ | ― | | | $ | 830 | | | $ | ― | | | $ | 830 | |
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, 2011 and December 31, 2010.
| | | | December 31, | | December 31, |
| | 2011 | | 2010 |
Cash and cash equivalents (1) | | $ | 563,275 | | $ | 341,683 |
Amounts included in short-term investments (2) (3) | | | | | | |
| Government-backed securities (4) | | | | 218,829 | | | 305,612 |
| Certificates of deposit | | | | 27,444 | | | 97,270 |
|
| | | $ | 246,273 | | $ | 402,882 |
|
| | | | | | | |
Amounts included in long-term investments (2) (5) | | | | | | |
| Government-backed securities (4) | | | $ | 45,138 | | $ | 102,185 |
(1) Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.
(2) Designated as held-to-maturity investments andarerecorded at amortized cost in the Consolidated Balance Sheet.
(3) Maturities are less than twelve months from the respective balance sheet dates.
(4) Includes U.S. treasuries and corporate notes guaranteed under the FederalDepositInsuranceCorporation’s Temporary Liquidity Guarantee Program.
(5) Maturitiesrange between 15 and 21 months from the balance sheet date.
12
Telephone and Data Systems, Inc. Consolidated Statement of Cash Flows Twelve Months Ended December 31, |
|
|
(Unaudited, dollars in thousands) | |
| | | | 2011 |
| 2010 (1) |
Cash flows from operating activities | | | | | | | |
| Net income | $ | 250,242 | | | $ | 190,586 | |
| | Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | | | | | | | |
| | | Depreciation, amortization and accretion | | 765,776 | | | | 755,649 | |
| | | Bad debts expense | | 68,611 | | | | 83,098 | |
| | | Stock-based compensation expense | | 36,837 | | | | 35,128 | |
| | | Deferred income taxes, net | | 202,547 | | | | 76,391 | |
| | | Equity in earnings of unconsolidated entities | | (82,538 | ) | | | (98,074 | ) |
| | | Distributions from unconsolidated entities | | 92,231 | | | | 100,845 | |
| | | (Gain) loss on asset disposals and exchanges, net | | (810 | ) | | | 11,763 | |
| | | Gain on investment | | (24,103 | ) | | | — | |
| | | Noncash interest expense | | 18,849 | | | | 9,733 | |
| | | Other operating activities | | 1,067 | | | | 383 | |
| | Changes in assets and liabilities from operations | | | | | | | |
| | | Accounts receivable | | (95,426 | ) | | | (79,182 | ) |
| | | Inventory | | (13,382 | ) | | | 40,657 | |
| | | Accounts payable | | 29,291 | | | | (47,759 | ) |
| | | Customer deposits and deferred revenues | | 35,457 | | | | 6,478 | |
| | | Accrued taxes | | (27,871 | ) | | | (95,284 | ) |
| | | Accrued interest | | 3,351 | | | | (7,680 | ) |
| | | Other assets and liabilities | | (4,418 | ) | | | 93,475 | |
| | | | | 1,255,711 | | | | 1,076,207 | |
| | | | | | | | | | |
Cash flows from investing activities | | | | | | | |
| Cash used for additions to property, plant and equipment | | (971,759 | ) | | | (739,222 | ) |
| Cash paid for acquisitions and licenses | | (105,508 | ) | | | (81,691 | ) |
| Cash paid for investments | | (180,920 | ) | | | (493,750 | ) |
| Cash received for investments | | 393,246 | | | | 106,255 | |
| Other investing activities | | (1,148 | ) | | | 370 | |
| | | | | (866,089 | ) | | | (1,208,038 | ) |
| | | | | | | | | | |
Cash flows from financing activities | | | | | | | |
| Repayment of short-term debt | | (32,671 | ) | | | — | |
| Repayment of long-term debt | | (614,639 | ) | | | (220,249 | ) |
| Issuance of long-term debt | | 643,700 | | | | 225,648 | |
| TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments | | 32 | | | | 309 | |
| U.S. Cellular Common Shares reissued for benefit plans, net of tax payments | | 1,935 | | | | 509 | |
| Repurchase of TDS Common and Special Common Shares | | (21,500 | ) | | | (68,053 | ) |
| Repurchase of U.S. Cellular Common Shares | | (62,294 | ) | | | (52,827 | ) |
| Dividends paid | | (48,670 | ) | | | (47,202 | ) |
| Payment of debt issuance costs | | (21,657 | ) | | | (12,533 | ) |
| Distributions to noncontrolling interests | | (16,236 | ) | | | (19,630 | ) |
| Payments to acquire additional interest in subsidiaries | | — | | | | (9,248 | ) |
| Other financing activities | | 3,970 | | | | 2,321 | |
| | | | | (168,030 | ) | | | (200,955 | ) |
| | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | 221,592 | | | | (332,786 | ) |
Cash and cash equivalents | | | | | | | |
| Beginning of period | | 341,683 | | | | 674,469 | |
| End of period | $ | 563,275 | | | $ | 341,683 | |
(1) Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.
13
TDS Telecom Highlights Three Months Ended December 31, |
|
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | Increase (Decrease) |
| | | | 2011 | | 2010 | | Amount |
| Percent |
Local Telephone Operations | | | | | | | | | | | | | | | |
| Operating revenues | | | | | | | | | | | | | | | |
| | Voice | $ | 41,427 | | | $ | 43,880 | | | $ | (2,453 | ) | | | (6 | %) |
| | Data | | 48,395 | | | | 33,265 | | | | 15,130 | | | | 45 | % |
| | Network access | | 65,354 | | | | 68,039 | | | | (2,685 | ) | | | (4 | %) |
| | Miscellaneous | | 9,706 | | | | 10,410 | | | | (704 | ) | | | (7 | %) |
| | | | | 164,882 | | | | 155,594 | | | | 9,288 | | | | 6 | % |
| Operating expenses | | | | | | | | | | | | | | | |
| | Cost of services and products | | 58,042 | | | | 48,684 | | | | 9,358 | | | | 19 | % |
| | Selling, general and administrative expenses | | 49,771 | | | | 43,921 | | | | 5,850 | | | | 13 | % |
| | Depreciation, amortization and accretion | | 40,718 | | | | 37,942 | | | | 2,776 | | | | 7 | % |
| | Loss on asset disposals, net | | 590 | | | | 425 | | | | 165 | | | | 39 | % |
| | | | | 149,121 | | | | 130,972 | | | | 18,149 | | | | 14 | % |
| | | | | | | | | | | | | | | | | | |
| Operating income | $ | 15,761 | | | $ | 24,622 | | | $ | (8,861 | ) | | | (36 | %) |
| | | | | | | | | | | | | | | | | | |
Competitive Local Exchange Carrier Operations | | | | | | | | | | | | | | | |
| | Revenues | $ | 44,397 | | | $ | 45,878 | | | $ | (1,481 | ) | | | (3 | %) |
| | | | | | | | | | | | | | | | | |
| | Expenses (excluding Depreciation, amortization and accretion) | | 39,444 | | | | 39,747 | | | | (303 | ) | | | (1 | %) |
| | Depreciation, amortization and accretion | | 5,450 | | | | 5,895 | | | | (445 | ) | | | (8 | %) |
| | (Gain) loss on asset disposals, net | | (105 | ) | | | 39 | | | | (144 | ) | | | >(100 | %) |
| | | | | 44,789 | | | | 45,681 | | | | (892 | ) | | | (2 | %) |
| | | | | | | | | | | | | | | | | | |
| Operating income (loss) | $ | (392 | ) | | $ | 197 | | | $ | (589 | ) | | | >(100 | %) |
| | | | | | | | | | | | | | | | | | |
Intercompany revenues | $ | (2,509 | ) | | $ | (2,371 | ) | | $ | (138 | ) | | | (6 | %) |
Intercompany expenses | | (2,509 | ) | | | (2,371 | ) | | | (138 | ) | | | (6 | %) |
| | | | | | | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 15,369 | | | $ | 24,819 | | | $ | (9,450 | ) | | | (38 | %) |
14
TDS Telecom Highlights Twelve Months Ended December 31, |
|
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | Increase (Decrease) |
| | | | 2011 | | 2010 | | Amount |
| Percent |
Local Telephone Operations | | | | | | | | | | | | | | | |
| Operating revenues | | | | | | | | | | | | | | | |
| | Voice | $ | 170,238 | | | $ | 179,539 | | | $ | (9,301 | ) | | | (5 | %) |
| | Data | | 169,450 | | | | 126,029 | | | | 43,421 | | | | 34 | % |
| | Network access | | 265,773 | | | | 271,964 | | | | (6,191 | ) | | | (2 | %) |
| | Miscellaneous | | 39,530 | | | | 39,862 | | | | (332 | ) | | | (1 | %) |
| | | | | 644,991 | | | | 617,394 | | | | 27,597 | | | | 4 | % |
| Operating expenses | | | | | | | | | | | | | | | |
| | Cost of services and products | | 215,093 | | | | 196,298 | | | | 18,795 | | | | 10 | % |
| | Selling, general and administrative expenses | | 173,949 | | | | 173,020 | | | | 929 | | | | 1 | % |
| | Depreciation, amortization and accretion | | 158,554 | | | | 149,375 | | | | 9,179 | | | | 6 | % |
| | Loss on asset disposals, net | | 1,158 | | | | 769 | | | | 389 | | | | 51 | % |
| | | | | 548,754 | | | | 519,462 | | | | 29,292 | | | | 6 | % |
| | | | | | | | | | | | | | | | | | |
| Operating income | $ | 96,237 | | | $ | 97,932 | | | $ | (1,695 | ) | | | (2 | %) |
| | | | | | | | | | | | | | | | | | |
Competitive Local Exchange Carrier Operations | | | | | | | | | | | | | | | |
| | Revenues | $ | 180,332 | | | $ | 187,984 | | | $ | (7,652 | ) | | | (4 | %) |
| | | | | | | | | | | | | | | | | |
| | Expenses (excluding Depreciation, amortization and accretion) | | 155,857 | | | | 161,041 | | | | (5,184 | ) | | | (3 | %) |
| | Depreciation, amortization and accretion | | 21,976 | | | | 24,679 | | | | (2,703 | ) | | | (11 | %) |
| | Loss on asset disposals, net | | 85 | | | | 362 | | | | (277 | ) | | | (77 | %) |
| | | | | 177,918 | | | | 186,082 | | | | (8,164 | ) | | | (4 | %) |
| | | | | | | | | | | | | | | | | | |
| Operating income | $ | 2,414 | | | $ | 1,902 | | | $ | 512 | | | | 27 | % |
| | | | | | | | | | | | | | | | | | |
Intercompany revenues | $ | (9,935 | ) | | $ | (9,536 | ) | | $ | (399 | ) | | | (4 | %) |
Intercompany expenses | | (9,935 | ) | | | (9,536 | ) | | | (399 | ) | | | (4 | %) |
| | | | | | | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 98,651 | | | $ | 99,834 | | | $ | (1,183 | ) | | | (1 | %) |
15
Telephone and Data Systems, Inc.
Financial Measures and Reconciliation
(Unaudited, dollars in thousands) |
| | | | | | | | |
| Three Months Ended December 31, 2011 | | U.S. Cellular | | TDS Telecom (1) | | All Other (2) | | Consolidated
Total |
| Operating revenues | | $ | 1,099,633 | | | $ | 206,770 | | | $ | 10,324 | | | $ | 1,316,727 | |
| Deduct: |
| | U.S. Cellular equipment sales revenue | | | 69,588 | | | |
| | | Service revenues | | | 1,030,045 | | | |
| |
| Operating income (loss) | | | 16,316 | | | | 15,369 | | | | (12,335 | ) | | | 19,350 | |
| Add (Deduct): |
| Depreciation, amortization and accretion | | | 141,976 | | | | 46,168 | | | | 3,735 | | | | 191,879 | |
| | Loss on impairment of intangible assets | | | — | | | | — | | | | — | | | | — | |
| | (Gain) loss on asset disposals and exchanges | | | 3,868 | | | | 485 | | | | (193 | ) | | | 4,160 | |
| | | Adjusted OIBDA (3) | | $ | 162,160 | | | $ | 62,022 | | | $ | (8,793 | ) | | $ | 215,389 | |
| |
| | | Adjusted OIBDA margin (4) | | | 15.7 | % | | | 30.0 | % | | |
|
|
| Three Months Ended December 31, 2010 | | U.S. Cellular | | TDS Telecom (1) | | All Other (2) | | Consolidated
Total |
| Operating revenues | | $ | 1,063,150 | | | $ | 199,101 | | | $ | 3,508 | | | $ | 1,265,759 | |
| Deduct: |
| | U.S. Cellular equipment sales revenue | | | 71,236 | | |
| | | Service revenues | | | 991,914 | | |
| |
| Operating income (loss) | | | (4,062 | ) | | | 24,819 | | | | (778 | ) | | | 19,979 | |
| Add (Deduct): |
| | Depreciation, amortization and accretion | | | 143,124 | | | | 43,837 | | | | 2,643 | | | | 189,604 | |
| | Loss on impairment of intangible assets | | | — | | | | — | | | | — | | | | — | |
| | (Gain) loss on asset disposals and exchanges | | | 2,310 | | | | 464 | | | | (34 | ) | | | 2,740 | |
| | | Adjusted OIBDA (3) | | $ | 141,372 | | | $ | 69,120 | | | $ | 1,831 | | | $ | 212,323 | |
| |
| | | Adjusted OIBDA margin (4) | | | 14.3 | % | | | 34.7 | % | | |
| |
| | | TDS Consolidated | |
| Three Months Ended December 31, | | 2011 | | 2010 (6) | |
| Cash flows from operating activities | | $ | 316,510 | | | $ | 307,166 | | |
| Deduct: | |
| Cash used for additions to property, plant and equipment | | | 369,999 | | | | 232,883 | | |
| | | Free cash flow (5) | | $ | (53,489 | ) | | $ | 74,283 | | |
16
Telephone and Data Systems, Inc.
Financial Measures and Reconciliation
(Unaudited, dollars in thousands) |
| | | | | | | | |
| Twelve Months Ended December 31, 2011 | | U.S. Cellular | | TDS Telecom (1) | | All Other (2) | | Consolidated
Total |
| Operating revenues | | $ | 4,343,346 | | | $ | 815,388 | | | $ | 21,737 | | | $ | 5,180,471 | |
| Deduct: |
| | U.S. Cellular equipment sales revenue | | | 289,549 | | | |
| | | Service revenues | | | 4,053,797 | | | |
| |
| Operating income (loss) | | | 280,780 | | | | 98,651 | | | | (16,929 | ) | | | 362,502 | |
| Add (Deduct): |
| Depreciation, amortization and accretion | | | 573,557 | | | | 180,530 | | | | 11,689 | | | | 765,776 | |
| | Loss on impairment of intangible assets | | | — | | | | — | | | | — | | | | — | |
| | (Gain) loss on asset disposals and exchanges | | | (1,873 | ) | | | 1,243 | | | | (180 | ) | | | (810 | ) |
| | | Adjusted OIBDA (3) | | $ | 852,464 | | | $ | 280,424 | | | $ | (5,420 | ) | | $ | 1,127,468 | |
| |
| | | Adjusted OIBDA margin (4) | | | 21.0 | % | | | 34.4 | % | | |
|
|
| Twelve Months Ended December 31, 2010 | | U.S. Cellular | | TDS Telecom (1) | | All Other (2) | | Consolidated
Total |
| Operating revenues | | $ | 4,177,681 | | | $ | 795,842 | | | $ | 13,306 | | | $ | 4,986,829 | |
| Deduct: |
| | U.S. Cellular equipment sales revenue | | | 264,680 | | |
| | | Service revenues | | | 3,913,001 | | |
| |
| Operating income (loss) | | | 201,473 | | | | 99,834 | | | | (5,216 | ) | | | 296,091 | |
| Add (Deduct): |
| | Depreciation, amortization and accretion | | | 570,955 | | | | 174,054 | | | | 10,640 | | | | 755,649 | |
| | Loss on impairment of intangible assets | | | — | | | | — | | | | — | | | | — | |
| | (Gain) loss on asset disposals and exchanges | | | 10,717 | | | | 1,131 | | | | (85 | ) | | | 11,763 | |
| | | Adjusted OIBDA (3) | | $ | 783,145 | | | $ | 275,019 | | | $ | 5,339 | | | $ | 1,063,503 | |
| |
| | | Adjusted OIBDA margin (4) | | | 20.0 | % | | | 34.6 | % | | |
| |
| | | TDS Consolidated | |
| Twelve Months Ended December 31, | | 2011 | | 2010 (6) | |
| Cash flows from operating activities | | $ | 1,255,711 | | | $ | 1,076,207 | | |
| Deduct: | |
| Cash used for additions to property, plant, and equipment | | | 971,759 | | | | 739,222 | | |
| | | Free cash flow (5) | | $ | 283,952 | | | $ | 336,985 | | |
(1) Includes ILEC and CLEC intercompany eliminations.
(2) Consists of Suttle-Straus and Airadigm (as of September 23, 2011), which represents TDS’ Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom and corporate investments. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.
(3) Adjusted OIBDA is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.
(4) Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues (U.S. Cellular) and operating revenues (TDS Telecom). Equipment revenues are excluded from the denominator of the U.S. Cellular calculation since equipment is generally sold at a net negative margin, and the net equipment subsidy is effectively a cost for purposes of assessing business results and is already reflected in adjusted OIBDA. TDS believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular’s business results. Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.
(5) 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. TDS believes that free cash flow as reported by TDS is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.
(6) Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.
17
Revision of Prior Period Amounts
In preparing itsConsolidated Statement of Cash Flowsfor the year ended December 31, 2011, TDS discovered certain errors related totheclassification of outstanding checks with the right of offset andrelated to theclassification of Accounts payable forAdditions to property, plant and equipmentas non-cash investing activitiesfor purposes of preparing the Consolidated Statement of Cash Flows. These errors resulted in the misstatement of Cash and Accounts payable as of December 31, 2010 and each quarterly period in 2011 and the misstatement of Cash Flows from operating activities and Cash Flows from investing activities for the years ended December 31, 2010 and 2009 and each of the quarterly periods in 2011 and 2010. In accordance withSEC Staff Accounting Bulletin Nos. 99 and 108 (“SAB 99 and SAB 108”), TDS evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports was not required. However, in order to provide consistency in the Consolidated Statement of Cash Flows and as permitted by SAB 108, revisions for these immaterial amounts to previously reported annual amounts are reflected in the financial information herein and will be reflected in future filings containing such financial information as permitted by SAB 108.
In accordance with SAB 108, the Consolidated Balance Sheet and the Consolidated Statement of Cash Flows have been revised as follows:
Consolidated Balance Sheet -- December 31, 2010 | |
| | | | | | | | | | | | | | |
| | | |
| As previously |
|
|
|
|
|
|
|
|
|
| (Dollars in thousands) |
| reported (1) |
|
|
| Adjustment |
|
|
| Revised |
|
|
| | | | | | | | | | | |
| Cash and cash equivalents | $ | 368,134 | | | $ | (26,451 | ) | | $ | 341,683 | |
| Total current assets | | 1,596,675 | | | | (26,451 | ) | | | 1,570,224 | |
| Total assets | | 7,722,568 | | | | (26,451 | ) | | | 7,696,117 | |
| Accounts Payable | | 344,355 | | | | (26,451 | ) | | | 317,904 | |
| Total current liabilities | | 812,223 | | | | (26,451 | ) | | | 785,772 | |
| Total liabilities and equity | | 7,722,568 | | | | (26,451 | ) | | | 7,696,117 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Consolidated Statement of Cash Flows -- Year Ended December 31, 2010 | | |
| | | | | | | | | | | | | | |
| | | |
| As previously |
|
|
|
|
|
|
|
| |
| (Dollars in thousands) |
| reported (1) |
|
|
| Adjustment |
|
|
| Revised | |
|
| | | | | | | | | | | |
| Change in Accounts payable | $ | (4,016 | ) | | $ | (43,743 | ) | | $ | (47,759 | ) |
|
Change in Other assets and liabilities | | 95,470 | | | | (1,995 | ) | | | 93,475 | |
| Cash flows used in operating activities | | 1,121,945 | | | | (45,738 | ) | | | 1,076,207 | |
| Cash used for additions to property, plant and equipment | | (755,032 | ) | | | 15,810 | | | | (739,222 | ) |
| Cash flows from investing activities | | (1,223,848 | ) | | | 15,810 | | | | (1,208,038 | ) |
| Net increase (decrease) in cash and cash equivalents | | (302,858 | ) | | | (29,928 | ) | | | (332,786 | ) |
(1) In Current Report on Form 8-K filed on November 16, 2011.
18
