NEWS RELEASE
As previously announced, TDS will hold a teleconference Aug. 3, 2012 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations 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 SECOND QUARTER 2012 RESULTS
Note: Comparisons are year over year unless otherwise noted.
2Q 2012 Highlights
TDS Consolidated
§ Operating revenues increased 3 percent to $1,323.2 million.
U.S. Cellular
§ Smartphones as a percent of total devices sold increased to 51.9 percent from 39.6 percent; smartphone customers increased to 36.8 percent of postpaid customers from 23.1 percent.
§ Postpaid ARPU (average revenue per user) increased 5 percent to $54.42 from $51.84; total ARPU increased 6 percent to $59.05 from $55.69.
§ Service revenues increased 3 percent to $1,029.7 million.
§ Postpaid gross additions increased 9 percent and postpaid churn increased to 1.57 percent, resulting in a net loss of 48,000 postpaid customers. Postpaid customers comprised 94 percent of retail customers.
§ Prepaid gross additions increased 77 percent, driven by the introduction in select Walmart stores of U Prepaid, a new no contract wireless service, and prepaid churn decreased to 6.2 percent, resulting in a net increase of 20,000 prepaid customers.
§ Retail gross additions increased 23 percent; net loss of 28,000 retail customers compared to a net loss of 58,000 retail customers.
§ Cell sites in service increased 2 percent to 7,932, of which 4,512 are owned towers.
§ 4G LTE network covers 30 percent of customers; expect to reach 58 percent of customers by year-end.
§ Investment in the Los Angeles Partnership contributed $19 million to equity in earnings of unconsolidated entities, up from $14 million.
TDS Telecom
§ Operating revenues increased 5 percent to $208.5 million.
§ ILEC triple play (voice, data, and video) penetration increased to 30 percent from 27 percent.
§ managedIP connections (ILEC and CLEC) grew 91 percent to 74,600 from 39,000.
CHICAGO –Aug. 3, 2012 —Telephone and Data Systems, Inc. [NYSE:TDS]reported operating revenues of $1,323.2 million for the second quarter of 2012, an increase of 3 percent from $1,279.6 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $42.3 million and $0.39, respectively, for the second quarter of 2012, compared to $92.0 million and $0.84, respectively, in the comparable period one year ago.
“Both of our primary businesses achieved solid growth in revenues, though higher expenses related mainly to device subsidies, data growth and investment spending caused profitability to decline,” said LeRoy T. Carlson, Jr., TDS president and CEO. “U.S. Cellular had a strong increase in gross retail customer additions and grew its net prepaid customer base. Postpaid churn remained elevated, and the company is working to address this. TDS Telecom added ILEC residential broadband and IPTV customers, and commercialmanagedIP customers, and increased revenues in its hosted and managed services business.”
“U.S. Cellular continued to increase average revenue per user through growth in smartphone penetration. To attract more customers, the company expanded the scope of its prepaid distribution through entry into more than 400 Walmart stores, and it is evaluating further opportunities to be where customers most want to shop. U.S. Cellular is offering high-demand devices like the 4G LTE Samsung Galaxy S® III on its growing 4G LTE network. To further differentiate itself from competitors and increase consideration, the company launched an innovative marketing campaign, Hello Better, in July that encourages consumers who are frustrated with their providers to switch to U.S. Cellular for a better wireless experience.
“TDS Telecom continued to add high-speed broadband customers and to expand availability of TDS TV®. The company added commercialmanagedIP connections at a rapid pace, increasing 91 percent. Higher revenue from the hosted and managed services business offset decreases in legacy ILEC and CLEC revenue, and we continued to build the HMS business with the acquisition of solutions provider Vital Support Systems in June. Recent reforms to USF and ICC negatively impacted revenue and earnings in the first half of this year. We expect FCC-authorized recovery mechanisms to help offset additional rate changes set to begin in the second half.”
Guidance for year ending Dec. 31, 2012
Guidance for the year ending Dec. 31, 2012 as of Aug. 3, 2012 is provided below, compared to the previous guidance provided on May 4, 2012. 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 this guidance.
U.S. Cellular | 2012 Estimated Results (1) |
| Previous Estimates (2) |
| Service revenues | $4,050-$4,150 million | | Unchanged |
| Operating income (3) | $200-$300 million | | Unchanged |
| Depreciation, amortization and accretion expenses, and net gain or loss on asset disposals and | | | |
| exchanges and loss on impairment of assets (3) | Approx. $600 million | | Unchanged |
| Adjusted OIBDA (3) (5) | $800-$900 million | | Unchanged |
| Capital expenditures | Approx. $850 million | | Unchanged |
| | | | | |
TDS Telecom Operations | 2012 Estimated Results (4) | | Previous Estimates (2) |
| Operating revenues | $850-$880 million | | $810-$840 million |
| Operating income | $50-$70 million | | $55-$85 million |
| Depreciation, amortization and accretion expenses, and net gain or loss on asset disposals and | | | |
| exchanges and loss on impairment of assets (3) | Approx. $195 million | | Approx. $190 million |
| Adjusted OIBDA (5) | $245-$265 million | | $245-$275 million |
| Capital expenditures | $170-$190 million | | $150-$180 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) The 2012 Estimated Results as disclosed in TDS’ Quarterly Report on Form 10-Q for the period ended March 31, 2012.
(3) The 2012 Estimated Results do not include any estimate for unrecognized net gains or losses related to disposals and exchanges of assets or losses on impairment of assets (since such transactions and their effects are uncertain).
(4) These estimates are based on TDS Telecom’s current plans which include a multi-year deployment of IPTV that commenced in 2011. New developments or changing conditions (such as costs to deploy, agreements for content or franchises or possible acquisitions, dispositions or exchanges) could affect TDS Telecom’s plans and, therefore, its 2012 estimated results.
(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.
2
Interest expense
Interest expense was down $22 million, primarily due to the write-off of unamortized debt issuance costs in 2011 of $15.4 million, as well as, lower interest rates on outstanding debt.
Income taxes
In the quarter, TDS’ overall effective tax rate was 39 percent compared to 9.5 percent. In the second quarter of 2011, income tax expense was reduced by $29.1 million, primarily due to tax benefits from state law changes and other discrete items.
Stock repurchase
TDS did not repurchase any shares during the quarter. TDS determines whether to repurchase shares from time to time based on many considerations, including cash needed for other known or possible requirements, the stock price, market conditions, debt rating considerations, business forecasts, business plans, macroeconomic conditions, share issuances under compensation plans, provisions in governing and legal documents and other legal requirements, and other facts and circumstances. Subject to these considerations, TDS intends to continue to repurchase its shares from time to time when circumstances warrant. To the extent TDS does not complete its existing share authorization by the expiration date in November 2012, it is expected that the TDS board of directors will approve an additional authorization at that time.
Conference call information
TDS will hold a conference call on Aug. 3, 2012at 9:30 a.m. CDT.
§ Access the live call on the Investor Relations page ofwww.teldta.com or athttp://www.videonewswire.com/event.asp?id=88721.
§ Access the call by phone at 877/407-8029 (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 Investor Relations 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 June 30, 2012.
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 the company to successfully manage and grow its markets; the overall economy; competition; theaccess 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
3
United States Cellular Corporation Summary Operating Data (Unaudited) |
|
|
| | | | | | | | | | | | | | | | | | | |
Quarter Ended | 6/30/2012 | | 3/31/2012 | | 12/31/2011 | | 9/30/2011 | | 6/30/2011 |
Total population | | | | | | | | | | | | | | | | | | | |
| Consolidated markets (1) | | 92,684,000 | | | | 92,684,000 | | | | 91,965,000 | | | | 91,965,000 | | | | 91,204,000 | |
| Consolidated operating markets (1) | | 46,966,000 | | | | 46,966,000 | | | | 46,888,000 | | | | 46,888,000 | | | | 46,888,000 | |
Market penetration at end of period | | | | | | | | | | | | | | | | | | | |
| Consolidated markets (2) | | 6.3 | % | | | 6.3 | % | | | 6.4 | % | | | 6.5 | % | | | 6.5 | % |
| Consolidated operating markets (2) | | 12.3 | % | | | 12.4 | % | | | 12.6 | % | | | 12.7 | % | | | 12.7 | % |
All customers | | | | | | | | | | | | | | | | | | | |
| Total at end of period | | 5,799,000 | | | | 5,837,000 | | | | 5,891,000 | | | | 5,932,000 | | | | 5,968,000 | |
| Gross additions | | 290,000 | | | | 285,000 | | | | 306,000 | | | | 299,000 | | | | 257,000 | |
| Net additions (losses) | | (38,000 | ) | | | (49,000 | ) | | | (41,000 | ) | | | (36,000 | ) | | | (70,000 | ) |
| Smartphones sold as a percent of | | | | | | | | | | | | | | | | | | | |
| total devices sold (3) | | 51.9 | % | | | 54.1 | % | | | 52.5 | % | | | 39.9 | % | | | 39.6 | % |
Retail customers | | | | | | | | | | | | | | | | | | | |
| Total at end of period | | 5,542,000 | | | | 5,570,000 | | | | 5,608,000 | | | | 5,621,000 | | | | 5,644,000 | |
| Smartphone penetration (3) (4) | | 36.8 | % | | | 34.4 | % | | | 30.5 | % | | | 26.2 | % | | | 23.1 | % |
| Gross additions | | 277,000 | | | | 273,000 | | | | 298,000 | | | | 284,000 | | | | 226,000 | |
| Net retail additions (losses) (5) | | (28,000 | ) | | | (34,000 | ) | | | (13,000 | ) | | | (23,000 | ) | | | (58,000 | ) |
| Net postpaid additions (losses) | | (48,000 | ) | | | (38,000 | ) | | | (20,000 | ) | | | (34,000 | ) | | | (41,000 | ) |
| Net prepaid additions (losses) | | 20,000 | | | | 4,000 | | | | 7,000 | | | | 11,000 | | | | (17,000 | ) |
Service revenue components (000s) | | | | | | | | | | | | | | | | | | | |
| Retail service | $ | 889,219 | | | $ | 888,527 | | | $ | 882,091 | | | $ | 871,199 | | | $ | 868,630 | |
| Inbound roaming | | 86,363 | | | | 80,132 | | | | 93,353 | | | | 107,810 | | | | 82,760 | |
| Other | | 54,160 | | | | 55,161 | | | | 54,601 | | | | 57,600 | | | | 50,640 | |
Total service revenues (000s) | $ | 1,029,742 | | | $ | 1,023,820 | | | $ | 1,030,045 | | | $ | 1,036,609 | | | $ | 1,002,030 | |
Total ARPU(6) | $ | 59.05 | | | $ | 58.21 | | | $ | 58.13 | | | $ | 58.09 | | | $ | 55.69 | |
Billed ARPU(7) | $ | 50.99 | | | $ | 50.52 | | | $ | 49.78 | | | $ | 48.82 | | | $ | 48.28 | |
Postpaid ARPU(8) | $ | 54.42 | | | $ | 54.00 | | | $ | 53.35 | | | $ | 52.41 | | | $ | 51.84 | |
Postpaid churn rate(9) | | 1.6 | % | | | 1.6 | % | | | 1.6 | % | | | 1.5 | % | | | 1.4 | % |
Capital expenditures (000s) | $ | 183,200 | | | $ | 201,300 | | | $ | 276,400 | | | $ | 248,000 | | | $ | 162,100 | |
Cell sites in service | | 7,932 | | | | 7,875 | | | | 7,882 | | | | 7,828 | | | | 7,770 | |
(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®,orWindows Mobile®operating system, excluding tablets.
(4) Smartphone penetration is calculated by dividing postpaid smartphonecustomersby total postpaid customers.
(5) Includes net postpaid additions (losses) and net prepaid additions (losses).
(6) Total ARPU - Average monthly service revenue per user includes retail service, inbound roaming and other service revenues and is calculated by dividingtotalservice 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 user 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 user 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.
4
TDS Telecom Summary Operating Data (Unaudited) |
| | | | | | | | | | | | | | | | | | |
Quarter Ended |
6/30/2012 |
|
3/31/2012 |
|
12/31/2011 |
|
9/30/2011 | | 6/30/2011 |
TDS Telecom |
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|
|
|
|
|
|
|
|
| | | | |
ILEC: |
|
|
|
|
|
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| | | | |
| | Residential Connections | | | | | | | | | | | | | | |
| | | Physical access lines (1) | | 360,100 | | | 363,500 | | | 367,600 | | | 373,700 | | | 378,500 |
| | | Broadband connections (2) | | 222,400 | | | 219,500 | | | 219,600 | | | 220,500 | | | 217,600 |
| | | IPTV customers | | 5,600 | | | 4,900 | | | 4,600 | | | 4,500 | | | 4,300 |
| | | | ILEC Residential Connections | | 588,100 | | | 587,900 | | | 591,800 | | | 598,700 | | | 600,400 |
| | | | | | | | | | | | | | | | | | |
| | Commercial Connections | | | | | | | | | | | | | | |
| | | Physical access lines (1) | | 111,100 | | | 112,600 | | | 114,400 | | | 116,500 | | | 117,800 |
| | | Broadband connections (2) | | 18,400 | | | 18,200 | | | 18,200 | | | 17,900 | | | 17,600 |
| | | managedIP connections (3) | | 13,200 | | | 10,800 | | | 8,600 | | | 6,800 | | | 5,800 |
| | | | ILEC Commercial Connections | | 142,700 | | | 141,600 | | | 141,200 | | | 141,200 | | | 141,200 |
| | | | | | | | | | | | | | | |
CLEC: |
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|
|
|
|
|
|
|
|
|
| | | |
| | Residential Connections | | | | | | | | | | | | | | |
| | | Physical access lines (1) | | 27,900 | | | 29,600 | | | 31,800 | | | 33,900 | | | 36,700 |
| | | Broadband connections (2) | | 9,500 | | | 10,100 | | | 11,000 | | | 11,700 | | | 12,800 |
| | | | CLEC Residential Connections | | 37,400 | | | 39,700 | | | 42,800 | | | 45,600 | | | 49,500 |
| | | | | | | | | | | | | | | | | | |
| | Commercial Connections | | | | | | | | | | | | | | |
| | | Physical access lines (1) | | 145,100 | | | 151,100 | | | 157,300 | | | 163,600 | | | 168,100 |
| | | Broadband connections (2) | | 12,800 | | | 13,700 | | | 14,600 | | | 15,400 | | | 15,900 |
| | | managedIP connections (3) | | 61,400 | | | 53,700 | | | 44,900 | | | 38,000 | | | 33,200 |
| | | | CLEC Commercial Connections | | 219,300 | | | 218,500 | | | 216,800 | | | 217,000 | | | 217,200 |
| | | | | | | | | | | | | | | |
Total ILEC and CLEC customer connections | | 987,500 | | | 987,700 | | | 992,600 | | | 1,002,500 | | | 1,008,300 |
(1) Individual circuits connecting customers to TDS Telecom's central office facilities.
(2) The number of customers provided high-capacity data circuits via various technologies, including DSLand dedicated Internet circuit technologies.
(3) The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.
TDS Telecom Capital Expenditures (000s) |
| | | | | | | | | | | | | | | | | | |
Quarter Ended |
6/30/2012 |
|
3/31/2012 |
|
12/31/2011 |
|
9/30/2011 | | 6/30/2011 |
ILEC | $ | 32,500 |
|
$ | 27,500 |
|
$ | 50,300 |
|
$ | 36,500 | | $ | 34,500 |
CLEC |
| 4,900 |
|
| 5,100 |
|
| 7,200 |
|
| 4,700 | | | 6,200 |
HMS | | 5,500 | | | 3,100 | | | 5,900 | | | 15,000 | | | 4,600 |
| | | | $ | 42,900 | | $ | 35,700 | | $ | 63,400 | | $ | 56,200 | | $ | 45,300 |
5
Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights Three Months Ended June 30, (Unaudited, dollars and shares in thousands, except per share amounts) |
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| | | |
| | | | |
| | |
| | | | | | |
| | | |
| Increase/ (Decrease) |
| | | | 2012 |
| 2011 |
| Amount |
| Percent |
Operating revenues | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | $ | 1,104,400 | |
| $ | 1,076,182 | |
| $ | 28,218 | | |
| 3 | % |
| TDS Telecom | | 208,519 | |
| | 198,896 | |
| | 9,623 | | |
| 5 | % |
| All Other (1) | | 10,250 | |
| | 4,562 | |
| | 5,688 | | |
| >100 | % |
| | | | | 1,323,169 | |
| | 1,279,640 | |
| | 43,529 | | |
| 3 | % |
Operating expenses | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation, amortization and accretion | | 869,980 | |
| | 822,587 | |
| | 47,393 | | |
| 6 | % |
| | Depreciation, amortization and accretion | | 147,555 | |
| | 146,577 | |
| | 978 | | |
| 1 | % |
| | Loss on asset disposals and exchanges, net | | 2,702 | |
| | 2,922 | |
| | (220 | ) | |
| (8 | %) |
| | | | | 1,020,237 | |
| | 972,086 | |
| | 48,151 | | |
| 5 | % |
| TDS Telecom | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation, amortization and accretion | | 148,983 | |
| | 128,846 | |
| | 20,137 | | |
| 16 | % |
| | Depreciation, amortization and accretion | | 47,945 | |
| | 43,843 | |
| | 4,102 | | |
| 9 | % |
| | Loss on asset disposals, net | | 306 | |
| | 317 | |
| | (11 | ) | |
| (3 | %) |
| | | | | 197,234 | |
| | 173,006 | |
| | 24,228 | | |
| 14 | % |
| All Other (1) | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation and amortization | | 11,111 | |
| | 4,569 | |
| | 6,542 | | |
| >100 | % |
| | Depreciation and amortization | | 3,009 | |
| | 2,625 | |
| | 384 | | |
| 15 | % |
| | Loss on impairment of intangible assets | | 515 | |
| | — | |
| | 515 | | |
| N/M | |
| | (Gain) on asset disposals, net | | (13 | ) |
| | (1 | ) |
| | (12 | ) | |
| >100 | % |
| | | | | 14,622 | |
| | 7,193 | |
| | 7,429 | | |
| >100 | % |
| | | | | | |
| | | |
| | | | |
| | |
| | | Total operating expenses | | 1,232,093 | |
| | 1,152,285 | |
| | 79,808 | | |
| 7 | % |
Operating income (loss) | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | | 84,163 | |
| | 104,096 | |
| | (19,933 | ) | |
| (19 | %) |
| TDS Telecom | | 11,285 | |
| | 25,890 | |
| | (14,605 | ) | |
| (56 | %) |
| All Other (1) | | (4,372 | ) |
| | (2,631 | ) |
| | (1,741 | ) | |
| (66 | %) |
| | | | | 91,076 | |
| | 127,355 | |
| | (36,279 | ) | |
| (28 | %) |
Investment and other income (expense) | | | |
| | | |
| | | | |
| | |
| Equity in earnings of unconsolidated entities | | 25,392 | |
| | 22,590 | |
| | 2,802 | | |
| 12 | % |
| Interest and dividend income | | 2,352 | |
| | 2,093 | |
| | 259 | | |
| 12 | % |
| Gain (loss) on investment | | (3,728 | ) |
| | 13,373 | |
| | (17,101 | ) | |
| >(100 | %) |
| Interest expense | | (23,139 | ) |
| | (45,417 | ) |
| | 22,278 | | |
| 49 | % |
| Other, net | | (249 | ) |
| | 1,306 | |
| | (1,555 | ) | |
| >(100 | %) |
| | Total investment and other income (expense) | | 628 | |
| | (6,055 | ) |
| | 6,683 | | |
| >100 | % |
Income before income taxes | | 91,704 | |
| | 121,300 | |
| | (29,596 | ) | |
| (24 | %) |
| Income tax expense | | 35,765 | |
| | 11,560 | |
| | 24,205 | | |
| >100 | % |
Net income | | 55,939 | |
| | 109,740 | |
| | (53,801 | ) | |
| (49 | %) |
| Less: Net income attributable to noncontrolling interests, net of tax | | (13,602 | ) |
| | (17,786 | ) |
| | 4,184 | | |
| 24 | % |
Net income attributable to TDS shareholders | | 42,337 | |
| | 91,954 | |
| | (49,617 | ) | |
| (54 | %) |
| Preferred dividend requirement | | (12 | ) |
| | (12 | ) |
| | — | | |
| — | |
Net income available to common shareholders | $ | 42,325 | |
| $ | 91,942 | |
| $ | (49,617 | ) | |
| (54 | %) |
| | | | | | |
| | | |
| | | | |
| | |
Basic weighted average shares outstanding (2) | | 108,732 | |
| | 108,423 | |
| | 309 | | |
| — | |
Basic earnings per share attributable to TDS shareholders (2) | $ | 0.39 | |
| $ | 0.85 | |
| $ | (0.46 | ) | |
| (54 | %) |
| | | | | | |
| | | |
| | | | |
| | |
Diluted weighted average shares outstanding (2) | | 109,022 | |
| | 109,133 | |
| | (111 | ) | |
| — | |
Diluted earnings per share attributable to TDS shareholders (2) | $ | 0.39 | |
| $ | 0.84 | |
| $ | (0.45 | ) | |
| (54 | %) |
(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. Average basic and diluted shares outstanding used to calculate earnings per share for the comparative period 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
6
Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights Six Months Ended June 30, (Unaudited, dollars and shares in thousands, except per share amounts) |
|
|
| | | | | | |
| | | |
| | | | |
| | |
| | | | | | |
| | | |
| Increase/ (Decrease) |
| | | | 2012 |
| 2011 |
| Amount |
| Percent |
Operating revenues | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | $ | 2,196,521 | |
| $ | 2,133,274 | |
| $ | 63,247 | | |
| 3 | % |
| TDS Telecom | | 412,594 | |
| | 397,812 | |
| | 14,782 | | |
| 4 | % |
| All Other (1) | | 19,845 | |
| | 7,235 | |
| | 12,610 | | |
| >100 | % |
| | | | | 2,628,960 | |
| | 2,538,321 | |
| | 90,639 | | |
| 4 | % |
Operating expenses | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation, amortization and accretion | | 1,732,424 | |
| | 1,676,554 | |
| | 55,870 | | |
| 3 | % |
| | Depreciation, amortization and accretion | | 294,240 | |
| | 289,917 | |
| | 4,323 | | |
| 1 | % |
| | Loss on asset disposals and exchanges, net | | 492 | |
| | 3,959 | |
| | (3,467 | ) | |
| (88 | %) |
| | | | | 2,027,156 | |
| | 1,970,430 | |
| | 56,726 | | |
| 3 | % |
| TDS Telecom | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation, amortization and accretion | | 292,403 | |
| | 250,615 | |
| | 41,788 | | |
| 17 | % |
| | Depreciation, amortization and accretion | | 95,388 | |
| | 88,680 | |
| | 6,708 | | |
| 8 | % |
| | Loss on asset disposals, net | | 426 | |
| | 421 | |
| | 5 | | |
| 1 | % |
| | | | | 388,217 | |
| | 339,716 | |
| | 48,501 | | |
| 14 | % |
| All Other (1) | | | |
| | | |
| | | | |
| | |
| | Expenses excluding depreciation and amortization | | 22,057 | |
| | 6,685 | |
| | 15,372 | | |
| >100 | % |
| | Depreciation and amortization | | 6,315 | |
| | 5,261 | |
| | 1,054 | | |
| 20 | % |
| | Loss on impairment of intangible assets | | 515 | |
| | — | |
| | 515 | | |
| N/M | |
| | (Gain) loss on asset disposals, net | | (18 | ) |
| | 1 | |
| | (19 | ) | |
| >(100 | %) |
| | | | | 28,869 | |
| | 11,947 | |
| | 16,922 | | |
| >100 | % |
| | | | | | |
| | | |
| | | | |
| | |
| | | Total operating expenses | | 2,444,242 | |
| | 2,322,093 | |
| | 122,149 | | |
| 5 | % |
Operating income (loss) | | | |
| | | |
| | | | |
| | |
| U.S. Cellular | | 169,365 | |
| | 162,844 | |
| | 6,521 | | |
| 4 | % |
| TDS Telecom | | 24,377 | |
| | 58,096 | |
| | (33,719 | ) | |
| (58 | %) |
| All Other (1) | | (9,024 | ) |
| | (4,712 | ) |
| | (4,312 | ) | |
| (92 | %) |
| | | | | 184,718 | |
| | 216,228 | |
| | (31,510 | ) | |
| (15 | %) |
Investment and other income (expense) | | | |
| | | |
| | | | |
| | |
| Equity in earnings of unconsolidated entities | | 48,781 | |
| | 41,978 | |
| | 6,803 | | |
| 16 | % |
| Interest and dividend income | | 4,535 | |
| | 4,717 | |
| | (182 | ) | |
| (4 | %) |
| Gain (loss) on investment | | (3,728 | ) |
| | 13,373 | |
| | (17,101 | ) | |
| >(100 | %) |
| Interest expense | | (47,603 | ) |
| | (71,926 | ) |
| | 24,323 | | |
| 34 | % |
| Other, net | | (21 | ) |
| | 1,386 | |
| | (1,407 | ) | |
| >(100 | %) |
| | Total investment and other income (expense) | | 1,964 | |
| | (10,472 | ) |
| | 12,436 | | |
| >100 | % |
Income before income taxes | | 186,682 | |
| | 205,756 | |
| | (19,074 | ) | |
| (9 | %) |
| Income tax expense | | 63,177 | |
| | 41,719 | |
| | 21,458 | | |
| 51 | % |
Net income | | 123,505 | |
| | 164,037 | |
| | (40,532 | ) | |
| (25 | %) |
| Less: Net income attributable to noncontrolling interests, net of tax | | (28,914 | ) |
| | (28,579 | ) |
| | (335 | ) | |
| (1 | %) |
Net income attributable to TDS shareholders | | 94,591 | |
| | 135,458 | |
| | (40,867 | ) | |
| (30 | %) |
| Preferred dividend requirement | | (25 | ) |
| | (25 | ) |
| | — | | |
| — | |
Net income available to common shareholders | $ | 94,566 | |
| $ | 135,433 | |
| $ | (40,867 | ) | |
| (30 | %) |
| | | | | | |
| | | |
| | | | |
| | |
Basic weighted average shares outstanding (2) | | 108,693 | |
| | 108,678 | |
| | 15 | | |
| — | |
Basic earnings per share attributable to TDS shareholders (2) | $ | 0.87 | |
| $ | 1.25 | |
| $ | (0.38 | ) | |
| (30 | %) |
| | | | | | |
| | | |
| | | | |
| | |
Diluted weighted average shares outstanding (2) | | 108,964 | |
| | 109,385 | |
| | (421 | ) | |
| — | |
Diluted earnings per share attributable to TDS shareholders (2) | $ | 0.86 | |
| $ | 1.23 | |
| $ | (0.37 | ) | |
| (30 | %) |
(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. Average basic and diluted shares outstanding used to calculate earnings per share for the comparative period 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 Balance Sheet Highlights (Unaudited, dollars in thousands) |
|
| | | | |
| | |
ASSETS |
| | | | |
| | |
| | | June 30, 2012 |
| December 31, 2011 |
| | |
|
Current assets | | |
| | |
| Cash and cash equivalents | $ | 613,764 |
| $ | 563,275 |
| Short-term investments | | 150,921 |
| | 246,273 |
| Accounts receivable from customers and others | | 542,156 |
| | 542,577 |
| Inventory | | 189,242 |
| | 130,044 |
| Net deferred income tax asset | | 44,598 |
| | 40,898 |
| Prepaid expenses | | 86,794 |
| | 80,628 |
| Income taxes receivable | | 9,376 |
| | 85,636 |
| Other current assets | | 19,224 |
| | 16,349 |
| | | | 1,656,075 |
| | 1,705,680 |
| | | | |
| | |
Assets held for sale | | — |
| | 49,647 |
| | | | |
| | |
Investments | | |
| | |
| Licenses | | 1,507,447 |
| | 1,494,014 |
| Goodwill | | 816,668 |
| | 797,077 |
| Other intangible assets, net | | 65,285 |
| | 50,734 |
| Investments in unconsolidated entities | | 213,049 |
| | 173,710 |
| Long-term investments | | 55,468 |
| | 45,138 |
| Other investments | | 1,017 |
| | 3,072 |
| | | | 2,658,934 |
| | 2,563,745 |
| | | | |
| | |
Property, plant and equipment, net | | |
| | |
| U.S. Cellular | | 2,883,118 |
| | 2,790,302 |
| TDS Telecom | | 928,686 |
| | 936,757 |
| Other | | 41,483 |
| | 57,476 |
| | | | 3,853,287 |
| | 3,784,535 |
| | | | |
| | |
Other assets and deferred charges | | 115,435 |
| | 97,398 |
| | | | |
| | |
Total assets | $ | 8,283,731 |
| $ | 8,201,005 |
8
Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
| | | | | | | | | | |
| | |
| June 30, 2012 |
| December 31, 2011 |
| | |
|
|
Current liabilities |
|
|
|
|
|
|
|
| Current portion of long-term debt | $ | 1,283 | | | $ | 1,509 | |
| Accounts payable | | 310,610 | | | | 364,746 | |
| Customer deposits and deferred revenues | | 231,743 | | | | 207,633 | |
| Accrued interest | | 5,522 | | | | 7,456 | |
| Accrued taxes | | 53,698 | | | | 41,069 | |
| Accrued compensation | | 83,080 | | | | 107,719 | |
| Other current liabilities | | 105,640 | | | | 144,001 | |
| | | | | 791,576 | | | | 874,133 | |
| | | | | | | | | | |
Liabilities held for sale | | — | | | | 1,051 | |
| | | | | | | | | | |
Deferred liabilities and credits |
| | |
|
| | |
| Net deferred income tax liability | | 847,725 | | | | 808,713 | |
| Other deferred liabilities and credits | | 391,898 | | | | 383,567 | |
| | | | | | | | | | |
Long-term debt | | 1,529,836 | | | | 1,529,857 | |
| | |
| | | | | | | |
Noncontrolling interests with redemption features | | 1,050 | | | | 1,005 | |
| | |
| | | | | | | |
Equity | | | | | | | |
| TDS shareholders’ equity | | | | | | | |
| | Series A Common and Common Shares, par value $.01 per share | | 1,326 | | | | 1,326 | |
| | Capital in excess of par value (1) | | 2,280,802 | | | | 2,268,711 | |
| | Treasury shares at cost (1) | | (742,906 | ) | | | (750,921 | ) |
| | Accumulated other comprehensive loss | | (8,494 | ) | | | (8,854 | ) |
| | Retained earnings (1) | | 2,514,327 | | | | 2,451,899 | |
| | | Total TDS shareholders’ equity | | 4,045,055 | | | | 3,962,161 | |
| | | | | | | | | | |
| Preferred shares | | 830 | | | | 830 | |
| Noncontrolling interests | | 675,761 | | | | 639,688 | |
| | | | | | | | | | |
| | Total equity | | 4,721,646 | | | | 4,602,679 | |
| | | | | | | | | | |
Total liabilities and equity | $ | 8,283,731 | | | $ | 8,201,005 | |
(1) 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.
9
Balance Sheet Highlights June 30, 2012 (Unaudited, dollars in thousands) |
|
|
| | | | | | | | |
|
| | |
|
| | |
|
| | |
| | | U.S. | | TDS |
| TDS Corporate |
| Intercompany |
| TDS |
| | | Cellular | | Telecom |
| & Other |
| Eliminations |
| Consolidated |
Cash and cash equivalents | $ | 437,624 |
|
| $ | 71,861 |
|
| $ | 104,279 |
|
| $ | ― |
|
| $ | 613,764 |
Affiliated cash investments | | ― |
|
| | 396,855 |
|
| | ― |
|
| | (396,855 | ) |
| | ― |
Short-term investments | | 100,738 |
|
| | ― |
|
| | 50,183 |
|
| | ― |
|
| | 150,921 |
| | $ | 538,362 | | | $ | 468,716 | | | $ | 154,462 | | | $ | (396,855 | ) | | $ | 764,685 |
| | | | |
|
| | |
|
| | |
|
| | |
|
| | |
Licenses, goodwill and other intangible assets | $ | 1,979,109 |
|
| $ | 589,225 |
|
| $ | (178,934 | ) |
| $ | ― |
|
| $ | 2,389,400 |
Investment in unconsolidated entities | | 175,663 |
|
| | 3,805 |
|
| | 39,906 |
|
| | (6,325 | ) |
| | 213,049 |
Long-term and other investments | | 55,550 |
|
| | 933 |
|
| | 2 |
|
| | ― |
|
| | 56,485 |
| | | $ | 2,210,322 | | | $ | 593,963 | | | $ | (139,026 | ) | | $ | (6,325 | ) | | $ | 2,658,934 |
| | | | |
|
| | |
|
| | |
|
| | |
|
| | |
| | | | |
|
| | |
|
| | |
|
| | |
|
| | |
Property, plant and equipment, net | $ | 2,883,118 | | | $ | 928,686 | | | $ | 41,483 | | | $ | ― | | | $ | 3,853,287 |
| | | | | | | | | | | | | | | | | | | | |
Long-term debt: | | |
|
| | |
|
| | |
|
| | |
|
| | |
| Current portion | $ | 127 |
|
| $ | 190 |
|
| $ | 966 |
|
| $ | ― |
|
| $ | 1,283 |
| Non-current portion | | 880,623 |
|
| | 1,685 |
|
| | 647,528 |
|
| | ― |
|
| | 1,529,836 |
| | Total | $ | 880,750 | | | $ | 1,875 | | | $ | 648,494 | | | $ | ― | | | $ | 1,531,119 |
| | | | | | | | | | | | | | | | | | | | |
Preferred shares | $ | ― | | | $ | ― | | | $ | 830 | | | $ | ― | | | $ | 830 |
10
Telephone and Data Systems, Inc.
Schedule of Cash and Cash Equivalents and Investments
(Unaudited, dollars in thousands)
The following table presents TDS’ cash and cash equivalents and investments at June 30, 2012 and December 31, 2011.
| | | | June 30, 2012 | | December 31, 2011 |
| | |
| | | | | | |
Cash and cash equivalents | | $ | 613,764 | | $ | 563,275 |
Amounts included in short-term investments (1) (2) | | | | | | |
| Government-backed securities (3) | | | | 150,921 | | | 218,829 |
| Certificates of deposit | | | | — | | | 27,444 |
|
| | | $ | 150,921 | | $ | 246,273 |
|
| | | | | | | |
Amounts included in long-term investments (1) (4) | | | | | | |
| Government-backed securities (3) | | | $ | 55,468 | | $ | 45,138 |
(1) Designated as held-to-maturity investments and recorded at amortized cost in the Consolidated Balance Sheet.(2) Maturities are less than twelve months from the respective balance sheet dates.
(3) Includes U.S. treasuries and corporate notes guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.
(4) At June 30, 2012, maturities range between 12 and 21 months.
11
Telephone and Data Systems, Inc. |
Consolidated Statement of Cash Flows |
Six Months Ended June 30, |
(Unaudited, dollars in thousands) |
| | | | | 2012 | | | 2011 | |
Cash flows from operating activities | | | | | | | |
| Net income | $ | 123,505 | | | $ | 164,037 | |
| | Add (deduct) adjustments to reconcile net income to netcash flows from operating activities | | | | | | | |
| | | Depreciation, amortization and accretion | | 395,943 | | | | 383,858 | |
| | | Bad debts expense | | 33,626 | | | | 29,906 | |
| | | Stock-based compensation expense | | 20,955 | | | | 18,913 | |
| | | Deferred income taxes, net | | 29,929 | | | | 79,637 | |
| | | Equity in earnings of unconsolidated entities | | (48,781 | ) | | | (41,978 | ) |
| | | Distributions from unconsolidated entities | | 6,973 | | | | 47,375 | |
| | | Loss on impairment of intangible assets | | 515 | | | | — | |
| | | Loss on asset disposals, net | | 900 | | | | 4,381 | |
| | | (Gain) loss on investment | | 3,728 | | | | (13,373 | ) |
| | | Noncash interest expense | | 1,728 | | | | 17,147 | |
| | | Other operating activities | | 1,010 | | | | 1,070 | |
| | Changes in assets and liabilities from operations | | | | | | | |
| | | Accounts receivable | | (10,197 | ) | | | (37,819 | ) |
| | | Inventory | | (58,467 | ) | | | (48,826 | ) |
| | | Accounts payable | | (23,336 | ) | | | 24,678 | |
| | | Customer deposits and deferred revenues | | 22,786 | | | | 22,600 | |
| | | Accrued taxes | | 89,433 | | | | (459 | ) |
| | | Accrued interest | | (1,823 | ) | | | 1,355 | |
| | | Other assets and liabilities | | (81,517 | ) | | | (90,291 | ) |
| | | | | | 506,910 | | | | 562,211 | |
| | | | | | | | | | | |
Cash flows from investing activities | | | | | | | |
| Cash used for additions to property, plant and equipment | | (501,211 | ) | | | (350,856 | ) |
| Cash paid for acquisitions and licenses | | (52,213 | ) | | | (22,167 | ) |
| Cash received from divestitures | | 50,036 | | | | — | |
| Cash paid for investments | | (45,000 | ) | | | (71,000 | ) |
| Cash received for investments | | 128,444 | | | | 213,030 | |
| Other investing activities | | (8,916 | ) | | | (816 | ) |
| | | | | | (428,860 | ) | | | (231,809 | ) |
| | | | | | | | | | | |
Cash flows from financing activities | | | | | | | |
| Repayment of long-term debt | | (952 | ) | | | (613,387 | ) |
| Issuance of long-term debt | | 358 | | | | 643,700 | |
| TDS Common Shares and Special Common Sharesreissued for benefit plans, net of tax payments | | (39 | ) | | | 1,055 | |
| U.S. Cellular Common Shares reissued for benefitplans, net of tax payments | | (2,465 | ) | | | 1,264 | |
| Repurchase of TDS Common and Special Common Shares | | — | | | | (21,500 | ) |
| Repurchase of U.S. Cellular Common Shares | | — | | | | (62,308 | ) |
| Dividends paid | | (26,610 | ) | | | (24,343 | ) |
| Payment of debt issuance costs | | — | | | | (21,191 | ) |
| Distributions to noncontrolling interests | | (643 | ) | | | (1,377 | ) |
| Other financing activities | | 2,790 | | | | 2,077 | |
| | | | | | (27,561 | ) | | | (96,010 | ) |
| | | | | | | | | | | |
Cash classified as held for sale | | — | | | | (5,687 | ) |
| | | | | | | |
Net increase in cash and cash equivalents | | 50,489 | | | | 228,705 | |
Cash and cash equivalents | | | | | | | |
| Beginning of period | | 563,275 | | | | 341,683 | |
| End of period | $ | 613,764 | | | $ | 570,388 | |
12
TDS Telecom Highlights Three Months Ended June 30, (Unaudited, dollars in thousands) |
|
|
| | | | | | | | | | | | Increase (Decrease) |
| | | | 2012 | | 2011 | | Amount |
| Percent |
Local Telephone Operations | | | | | | | | | | | | | | | |
| Operating revenues | | | | | | | | | | | | | | | |
| | Residential | $ | 70,082 | | | $ | 69,951 | | | $ | 131 | | | | — | |
| | Commercial | | 24,201 | | | | 24,856 | | | | (655 | ) | | | (3 | %) |
| | Wholesale | | 49,769 | | | | 54,574 | | | | (4,805 | ) | | | (9 | %) |
| | | | | 144,052 | | | | 149,381 | | | | (5,329 | ) | | | (4 | %) |
| Operating expenses | | | | | | | | | | | | | | | |
| | Cost of services and products | | 47,180 | | | | 47,646 | | | | (466 | ) | | | (1 | %) |
| | Selling, general and administrative expenses | | 43,216 | | | | 40,076 | | | | 3,140 | | | | 8 | % |
| | Depreciation, amortization and accretion | | 37,834 | | | | 36,116 | | | | 1,718 | | | | 5 | % |
| | Loss on asset disposals, net | | 136 | | | | 245 | | | | (109 | ) | | | (44 | %) |
| | | | | 128,366 | | | | 124,083 | | | | 4,283 | | | | 3 | % |
| | | | | | | | | | | | | | | | | | |
| Operating income | $ | 15,686 | | | $ | 25,298 | | | $ | (9,612 | ) | | | (38 | %) |
| | | | | | | | | | | | | | | | | | |
Competitive Local Exchange Carrier Operations | | | | | | | | | | | | | | | |
| Operating revenues | | | | | | | | | | | | | | | |
| | Residential | $ | 4,338 | | | $ | 5,330 | | | $ | (992 | ) | | | (19 | %) |
| | Commercial | | 34,905 | | | | 35,023 | | | | (118 | ) | | | — | |
| | Wholesale | | 4,957 | | | | 5,243 | | | | (286 | ) | | | (5 | %) |
| | | | 44,200 | | | | 45,596 | | | | (1,396 | ) | | | (3 | %) |
| Operating expenses | | | | | | | | | | | | | | | |
| | Cost of services and products | | 22,702 | | | | 23,029 | | | | (327 | ) | | | (1 | %) |
| | Selling, general and administrative expenses | | 16,769 | | | | 16,087 | | | | 682 | | | | 4 | % |
| | Depreciation, amortization and accretion | | 5,466 | | | | 5,439 | | | | 27 | | | | — | |
| | Loss on asset disposals, net | | 72 | | | | 47 | | | | 25 | | | | 53 | % |
| | | | | 45,009 | | | | 44,602 | | | | 407 | | | | 1 | % |
| | | | | | | | | | | | | | | | | | |
| Operating income (loss) | $ | (809 | ) | | $ | 994 | | | $ | (1,803 | ) | | | >(100 | %) |
| | | | | | | | | | | | | | | | | | |
Hosted and Managed Services Operations | | | | | | | | | | | | | | | |
| | Revenues | $ | 22,876 | | | $ | 6,625 | | | $ | 16,251 | | | | >100 | % |
| Operating expenses | | | | | | | | | | | | | | | |
| | Cost of services and products | | 15,090 | | | | 2,193 | | | | 12,897 | | | | >100 | % |
| | Selling, general and administrative expenses | | 6,635 | | | | 2,521 | | | | 4,114 | | | | >100 | % |
| | Depreciation, amortization and accretion | | 4,645 | | | | 2,288 | | | | 2,357 | | | | >100 | % |
| | Loss on asset disposals, net | | 98 | | | | 25 | | | | 73 | | | | >100 | % |
| | | | | 26,468 | | | | 7,027 | | | | 19,441 | | | | >100 | % |
| | | | | | | | | | | | | | | | | | |
| Operating loss | $ | (3,592 | ) | | $ | (402 | ) | | $ | (3,190 | ) | | | >(100 | %) |
| | | | | | | | | | | | | | | | | | |
Intercompany revenues | $ | (2,609 | ) | | $ | (2,706 | ) | | $ | 97 | | | | 4 | % |
Intercompany expenses | | (2,609 | ) | | | (2,706 | ) | | | 97 | | | | 4 | % |
| | | | | | | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 11,285 | | | $ | 25,890 | | | $ | (14,605 | ) | | | (56 | %) |
13
TDS Telecom Highlights Six Months Ended June 30, (Unaudited, dollars in thousands) |
|
|
| | | | | | | | | | | | Increase (Decrease) |
| | | | 2012 | | 2011 | | Amount |
| Percent |
Local Telephone Operations | | | | | | | | | | | | | | | |
| Operating revenues | | | | | | | | | | | | | | | |
| | Residential | $ | 139,481 | | | $ | 139,664 | | | $ | (183 | ) | | | — | |
| | Commercial | | 48,331 | | | | 50,227 | | | | (1,896 | ) | | | (4 | %) |
| | Wholesale | | 101,305 | | | | 109,064 | | | | (7,759 | ) | | | (7 | %) |
| | | | | 289,117 | | | | 298,955 | | | | (9,838 | ) | | | (3 | %) |
| Operating expenses | | | | | | | | | | | | | | | |
| | Cost of services and products | | 96,348 | | | | 93,048 | | | | 3,300 | | | | 4 | % |
| | Selling, general and administrative expenses | | 84,730 | | | | 75,558 | | | | 9,172 | | | | 12 | % |
| | Depreciation, amortization and accretion | | 75,612 | | | | 73,316 | | | | 2,296 | | | | 3 | % |
| | Loss on asset disposals, net | | 202 | | | | 286 | | | | (84 | ) | | | (29 | %) |
| | | | | 256,892 | | | | 242,208 | | | | 14,684 | | | | 6 | % |
| | | | | | | | | | | | | | | | | | |
| Operating income | $ | 32,225 | | | $ | 56,747 | | | $ | (24,522 | ) | | | (43 | %) |
| | | | | | | | | | | | | | | | | | |
Competitive Local Exchange Carrier Operations | | | | | | | | | | | | | | | |
| Operating revenues | | | | | | | | | | | | | | | |
| | Residential | $ | 9,126 | | | $ | 11,827 | | | $ | (2,701 | ) | | | (23 | %) |
| | Commercial | | 69,246 | | | | 69,040 | | | | 206 | | | | — | |
| | Wholesale | | 9,872 | | | | 10,057 | | | | (185 | ) | | | (2 | %) |
| | | | 88,244 | | | | 90,924 | | | | (2,680 | ) | | | (3 | %) |
| Operating expenses | | | | | | | | | | | | | | | |
| | Cost of services and products | | 45,266 | | | | 45,501 | | | | (235 | ) | | | (1 | %) |
| | Selling, general and administrative expenses | | 33,029 | | | | 31,735 | | | | 1,294 | | | | 4 | % |
| | Depreciation, amortization and accretion | | 10,955 | | | | 10,929 | | | | 26 | | | | — | |
| | Loss on asset disposals, net | | 125 | | | | 78 | | | | 47 | | | | 60 | % |
| | | | | 89,375 | | | | 88,243 | | | | 1,132 | | | | 1 | % |
| | | | | | | | | | | | | | | | | | |
| Operating income (loss) | $ | (1,131 | ) | | $ | 2,681 | | | $ | (3,812 | ) | | | >(100 | %) |
| | | | | | | | | | | | | | | | | | |
Hosted and Managed Services Operations | | | | | | | | | | | | | | | |
| | Revenues | $ | 40,434 | | | $ | 12,867 | | | $ | 27,567 | | | | >100 | % |
| Operating expenses | | | | | | | | | | | | | | | |
| | Cost of services and products | | 24,864 | | | | 4,475 | | | | 20,389 | | | | >100 | % |
| | Selling, general and administrative expenses | | 13,367 | | | | 5,232 | | | | 8,135 | | | | >100 | % |
| | Depreciation, amortization and accretion | | 8,821 | | | | 4,435 | | | | 4,386 | | | | 99 | % |
| | Loss on asset disposals, net | | 99 | | | | 57 | | | | 42 | | | | 74 | % |
| | | | | 47,151 | | | | 14,199 | | | | 32,952 | | | | >100 | % |
| | | | | | | | | | | | | | | | | | |
| Operating loss | $ | (6,717 | ) | | $ | (1,332 | ) | | $ | (5,385 | ) | | | >(100 | %) |
| | | | | | | | | | | | | | | | | | |
Intercompany revenues | $ | (5,201 | ) | | $ | (4,934 | ) | | $ | (267 | ) | | | (5 | %) |
Intercompany expenses | | (5,201 | ) | | | (4,934 | ) | | | (267 | ) | | | (5 | %) |
| | | | | | | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 24,377 | | | $ | 58,096 | | | $ | (33,719 | ) | | | (58 | %) |
14
Telephone and Data Systems, Inc.
Financial Measures and Reconciliation
(Unaudited, dollars in thousands) |
| | | | | | | | |
| Three Months Ended June 30, 2012 | | U.S. Cellular | | TDS Telecom (1) | | All Other (2) | | Consolidated
Total |
| Operating revenues | | $ | 1,104,400 | | | $ | 208,519 | | | $ | 10,250 | | | $ | 1,323,169 | |
| Deduct: |
| | U.S. Cellular equipment sales revenue | | | 74,658 | | | |
| | | Service revenues | | | 1,029,742 | | | |
| |
| Operating income (loss) | | | 84,163 | | | | 11,285 | | | | (4,372 | ) | | | 91,076 | |
| Add (Deduct): |
| Depreciation, amortization and accretion | | | 147,555 | | | | 47,945 | | | | 3,009 | | | | 198,509 | |
| | Loss on impairment of intangible assets | | | — | | | | — | | | | 515 | | | | 515 | |
| | (Gain) loss on asset disposals and exchanges | | | 2,702 | | | | 306 | | | | (13 | ) | | | 2,995 | |
| | | Adjusted OIBDA (3) | | $ | 234,420 | | | $ | 59,536 | | | $ | (861 | ) | | $ | 293,095 | |
| |
| | | Adjusted OIBDA margin (4) | | | 22.8 | % | | | 28.6 | % | | |
|
|
| Three Months Ended June 30, 2011 | | U.S. Cellular | | TDS Telecom (1) | | All Other (2) | | Consolidated
Total |
| Operating revenues | | $ | 1,076,182 | | | $ | 198,896 | | | $ | 4,562 | | | $ | 1,279,640 | |
| Deduct: |
| | U.S. Cellular equipment sales revenue | | | 74,152 | | |
| | | Service revenues | | | 1,002,030 | | |
| |
| Operating income (loss) | | | 104,096 | | | | 25,890 | | | | (2,631 | ) | | | 127,355 | |
| Add (Deduct): |
| | Depreciation, amortization and accretion | | | 146,577 | | | | 43,843 | | | | 2,625 | | | | 193,045 | |
| | Loss on impairment of intangible assets | | | — | | | | — | | | | — | | | | — | |
| | (Gain) loss on asset disposals and exchanges | | | 2,922 | | | | 317 | | | | (1 | ) | | | 3,238 | |
| | | Adjusted OIBDA (3) | | $ | 253,595 | | | $ | 70,050 | | | $ | (7 | ) | | $ | 323,638 | |
| |
| | | Adjusted OIBDA margin (4) | | | 25.3 | % | | | 35.2 | % | | |
| |
| | | TDS Consolidated | |
| Three Months Ended June 30, | | 2012 | | 2011 | |
| Cash flows from operating activities | | $ | 224,665 | | | $ | 229,169 | | |
| Deduct: | |
| Cash used for additions to property, plant and equipment | | | 258,600 | | | | 192,959 | | |
| | | Free cash flow (5) | | $ | (33,935 | ) | | $ | 36,210 | | |
Telephone and Data Systems, Inc.
Financial Measures and Reconciliation
(Unaudited, dollars in thousands) |
| | | | | | | | |
| Six Months Ended June 30, 2012 | | U.S. Cellular | | TDS Telecom (1) | | All Other (2) | | Consolidated
Total |
| Operating revenues | | $ | 2,196,521 | | | $ | 412,594 | | | $ | 19,845 | | | $ | 2,628,960 | |
| Deduct: |
| | U.S. Cellular equipment sales revenue | | | 142,959 | | | |
| | | Service revenues | | | 2,053,562 | | | |
| |
| Operating income (loss) | | | 169,365 | | | | 24,377 | | | | (9,024 | ) | | | 184,718 | |
| Add (Deduct): |
| Depreciation, amortization and accretion | | | 294,240 | | | | 95,388 | | | | 6,315 | | | | 395,943 | |
| | Loss on impairment of intangible assets | | | — | | | | — | | | | 515 | | | | 515 | |
| | (Gain) loss on asset disposals and exchanges | | | 492 | | | | 426 | | | | (18 | ) | | | 900 | |
| | | Adjusted OIBDA (3) | | $ | 464,097 | | | $ | 120,191 | | | $ | (2,212 | ) | | $ | 582,076 | |
| |
| | | Adjusted OIBDA margin (4) | | | 22.6 | % | | | 29.1 | % | | |
|
|
| Six Months Ended June 30, 2011 | | U.S. Cellular | | TDS Telecom (1) | | All Other (2) | | Consolidated
Total |
| Operating revenues | | $ | 2,133,274 | | | $ | 397,812 | | | $ | 7,235 | | | $ | 2,538,321 | |
| Deduct: |
| | U.S. Cellular equipment sales revenue | | | 146,131 | | |
| | | Service revenues | | | 1,987,143 | | |
| |
| Operating income (loss) | | | 162,844 | | | | 58,096 | | | | (4,712 | ) | | | 216,228 | |
| Add (Deduct): |
| | Depreciation, amortization and accretion | | | 289,917 | | | | 88,680 | | | | 5,261 | | | | 383,858 | |
| | Loss on impairment of intangible assets | | | — | | | | — | | | | — | | | | — | |
| | Loss on asset disposals and exchanges | | | 3,959 | | | | 421 | | | | 1 | | | | 4,381 | |
| | | Adjusted OIBDA (3) | | $ | 456,720 | | | $ | 147,197 | | | $ | 550 | | | $ | 604,467 | |
| |
| | | Adjusted OIBDA margin (4) | | | 23.0 | % | | | 37.0 | % | | |
| |
| | | TDS Consolidated | |
| Six Months Ended June 30, | | 2012 | | 2011 | |
| Cash flows from operating activities | | $ | 506,910 | | | $ | 562,211 | | |
| Deduct: | |
| Cash used for additions to property, plant, and equipment | | | 501,211 | | | | 350,856 | | |
| | | Free cash flow (5) | | $ | 5,699 | | | $ | 211,355 | | |
(1) Includes ILEC, CLEC and HMS 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 operations. 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.
16
