NEWS RELEASE
As previously announced, TDS will hold a teleconference Feb. 26, 2013 at 9:30 a.m. CST. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com.
Contact: | Jane W. McCahon, Vice President, Corporate Relations and Corporate Secretary (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 2012 RESULTS AND 2013 FINANCIAL GUIDANCE
CHICAGO – Feb. 26, 2013 – Telephone and Data Systems, Inc. [NYSE:TDS] reported operating revenues of $1,346.2 million for the fourth quarter of 2012, an increase of 2 percent from $1,316.7 million in the comparable period one year ago. Net loss attributable to TDS shareholders was $41.8 million, or $0.39 per diluted share, respectively, for the fourth quarter of 2012, compared to $6.2 million and $0.06, respectively, in the comparable period one year ago.
As previously announced on Nov. 7, 2012, U.S. Cellular reached a definitive agreement to sell its Chicago, St. Louis, central Illinois and three other markets (the “Divestiture Markets”) to subsidiaries of Sprint Nextel Corporation [NYSE: S] for $480 million (the “Divestiture Transaction”). The transaction is subject to regulatory approvals and is expected to close in mid-2013. In the fourth quarter of 2012, TDS’ operating income was reduced by $44.5 million due to divestiture-related costs, including a $10.7 million write-down of assets, $12.6 million in employee-related costs, including severance, and $20 million in accelerated depreciation, amortization and accretion.
The table below provides pro forma performance highlights for U.S. Cellular’s Total Consolidated Markets, Divestiture Markets, and Core Markets for the fourth quarter of 2012. Core Markets are the markets that U.S. Cellular will continue to own upon completion of the Divestiture Transaction.
U.S. Cellular | | | | | | | | |
($ in millions except ARPU) | Total Consolidated Markets | | Divestiture Markets (1) | | Core Markets (1) |
Postpaid gross additions | | 241,000 | | | 23,000 | | | 218,000 |
Postpaid churn | | 1.83% | | | 3.35% | | | 1.67% |
Postpaid net additions (losses) | | (41,000) | | | (25,000) | | | (16,000) |
Prepaid net additions (losses) | | 37,000 | | | (1,000) | | | 38,000 |
Service revenues (1) | | $1,008.9 | | | $101.4 | | | $907.5 |
Postpaid ARPU (1) | | $54.56 | | | $60.91 | | | $53.92 |
(1) Total Consolidated Markets amounts represent GAAP financial measures and Divestiture Markets and Core Markets amounts represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Divestiture Markets and Core Markets may be useful to investors and other users of its financial information .
The following table highlights the performance of U.S. Cellular’s Core Markets and TDS Telecom for the fourth quarter of 2012 and 2011.
U.S. Cellular | | | | | | | % |
($ in millions except ARPU) | Q4 2012 | | Q4 2011 | | Change |
Postpaid gross additions | | 218,000 | | | 209,000 | | | 4% |
Postpaid churn | | 1.67% | | | 1.48% | | | (13%) |
Postpaid net additions (losses) | | (16,000) | | | (2,000) | | | (>100%) |
Prepaid net additions | | 38,000 | | | 6,000 | | | >100% |
Retail net additions | | 22,000 | | | 4,000 | | | >100% |
Service revenues (1) | | $907.5 | | | $917.5 | | | (1%) |
Postpaid ARPU (1) | | $53.92 | | | $52.62 | | | 2% |
Smartphones sold as % of total devices | | 62.9% | | | 52.6% | | | 20% |
4G/LTE smartphones as % of total smartphones sold | | 74% | | | 0% | | | >100% |
Capital expenditures (1) | | $241 | | | $253 | | | (5%) |
Cell sites in service | | 6,292 | | | 6,154 | | | 2% |
Owned towers | | 3,847 | | | 3,755 | | | 2% |
| | | | | | | | |
TDS Telecom | | | | | | | % |
| Q4 2012 | | Q4 2011 | | Change |
Operating revenues | | $221.5 | | | $206.8 | | | 7% |
ILEC triple play (voice, data and video) penetration | | 31% | | | 29% | | | 7% |
managedIP (ILEC and CLEC) | | 94,600 | | | 53,500 | | | 77% |
(1) The Core Markets amounts for Q4 2012 and Q4 2011 represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Core Markets may be useful to investors and other users of its financial information.
“U.S. Cellular and TDS Telecom continued to execute on their strategic initiatives, though profitability was impacted by smartphone subsidies, reductions in regulatory support, and investment spending,” said LeRoy T. Carlson, Jr., TDS president and CEO.
“U.S. Cellular achieved strong growth in smartphone penetration as more customers had access to 4G LTE speeds and devices. U.S. Cellular’s Core Markets also increased net retail customer additions, due to prepaid customer growth. While revenue from our customers increased, overall service revenues declined due to lower negotiated roaming rates which had a positive effect on roaming expenses. To further differentiate our superior customer experience, U.S. Cellular is working to provide seamless shopping and support across channels, identify more opportunities to expand distribution, and through the implementation of a new billing and operational support system, is also simplifying operations and processes to increase efficiency and reduce complexity and cost.
“TDS Telecom continued to build its residential customer base with TDS TV® and broadband offerings, and further increased momentum in commercial managedIP sales. TDS Telecom is focused on increasing residential TDS TV and broadband penetration in existing markets, and expanding broadband access through stimulus projects in progress nationwide. To grow the commercial customer base, TDS Telecom plans to expand the managedIP portfolio, and build its hosted and managed services business by providing integrated, end-to-end IT solutions, including ReliaCloudTM, to mid-market customers.”
Baja Broadband
In a separate release today, TDS announced an agreement to acquire substantially all of the assets of Baja Broadband, LLC for a purchase price of $267.5 million.
2013 ESTIMATES
Estimates of full-year 2013 results for U.S. Cellular, TDS Telecom and TDS, are shown below. Such estimates represent management’s view as of the date of filing of TDS’ Form 10-K for the year ended December 31, 2012. Such forward-looking statements should not be assumed to be current as of any future date. TDS undertakes no duty to update such information whether as a result of new information, future events or otherwise. There can be no assurance that final results will not differ materially from such estimated results.
TDS has changed the measures which it uses to present estimates of operating results. TDS now provides estimates for consolidated revenues and capital expenditures. In addition, TDS previously presented Adjusted OIBDA, defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets; and the net gain or loss on asset disposals and exchanges. TDS believes Adjusted income before income taxes, as defined below, is a measure which provides a more comprehensive and meaningful view of TDS’ recurring results of operations.
| | | 2013 Estimated Results (1) |
| | | | | | | |
| | | U.S. Cellular (2) | | TDS Telecom (3) | | TDS (2)(3)(7) |
(Dollars in millions) | | | | | | |
Adjusted operating revenues (4) | | $3,765-$3,885 | | $850-$900 | | $4,660-$4,830 |
Adjusted income before income taxes (5) | | $780-$900 | | $220-$250 | | $995-$1,145 |
Capital expenditures | | Approx. $600 | | Approx. $155 | | Approx. $765 |
(1) These estimates are based on TDS’ current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011 at U.S. Cellular and a multi-year deployment of IPTV which commenced in 2011 at TDS Telecom. New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services, costs to deploy, agreements for content or franchises, or possible acquisitions, dispositions or exchanges) could affect TDS’ plans and, therefore, its 2013 estimated results.
(2) These estimates also assume the Divestiture Transaction closes July 1, 2013. Actual effects could vary significantly from these estimates as a result of a change in the expected timing of the Divestiture Transaction.
These estimates reflect U.S. Cellular’s consolidated results for 2013. Estimated results reflecting U.S. Cellular’s Divestiture Markets and Core Markets are shown in the table below:
| | | | 2013 Estimated Results |
| | | | | | | | |
| | | | U.S. Cellular Core Markets (6) | | U.S. Cellular Divestiture Markets (6) | | U.S. Cellular Consolidated (6) |
(Dollars in millions) | | | | | | |
Adjusted operating revenues (4) | | $3,600-$3,700 | | $165-$185 | | $3,765-$3,885 |
Adjusted income before income taxes (5) | | $765-$865 | | $15-$35 | | $780-$900 |
Capital expenditures | | Approx. $600 | | — | | Approx. $600 |
(3) These estimates do not reflect the effects of the acquisition of Baja Broadband, LLC.
(4) Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular Equipment sales revenues less U.S. Cellular Cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results. For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular Equipment sales revenues. TDS believes this measure provides useful information to investors regarding TDS’ results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to Operating revenues as an indicator of the Company’s operating performance.
(5) Adjusted income before income taxes is a non-GAAP financial measure defined as income before: Income taxes, Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs, and Interest expense. Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company’s operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. TDS believes Adjusted income before income taxes is a meaningful measure of TDS’ operating results before significant recurring non-cash charges, discrete gains and losses and financing charges (Interest expense). The following tables provide a reconciliation of Income before income taxes to Adjusted income before income taxes for 2013 Estimated Results and 2012, 2011 and 2010 actual results:
| | | | 2013 Estimated Results |
| | | | | | | | | | | | |
| | | | U.S. Cellular Core Markets (6) | | U.S. Cellular Divestiture Markets (2)(6) | | U.S. Cellular Consolidated (6) | | TDS Telecom | | TDS (7) |
(Dollars in millions) | | | | | | | | | | |
Income before income taxes (8)(9) | | $165-$265 | | ($180)-($160) | | ($15)-$105 | | $25-$55 | | ($55)-$95 |
Depreciation, amortization and accretion expense | | Approx. $545 | | Approx. $195 | | Approx. $740 | | Approx. $195 | | Approx. $940 |
Interest expense | | Approx. $55 | | — | | Approx. $55 | | — | | Approx. $110 |
Adjusted income before income taxes | | $765-$865 | | $15-$35 | | $780-$900 | | $220-$250 | | $995-$1,145 |
| | | | | | | | | | | | |
| | | | | | | | 2012 Actual Results |
| | | | | | | | | | | | |
| | | | | | | | U.S. Cellular Consolidated (6) | | TDS Telecom | | TDS (7) |
(Dollars in millions) | | | | | | | | |
Income before income taxes (9) | $ | 205.1 | $ | 45.0 | $ | 196.2 |
Depreciation, amortization and accretion expense | | 608.6 | | 193.1 | | 813.6 |
(Gain) loss on sale of business and other exit costs, net | | 21.0 | | - | | 21.1 |
Interest expense (Capitalized interest) | | 42.4 | | (1.5) | | 86.7 |
Adjusted income before income taxes | $ | 877.1 | $ | 236.6 | $ | 1,117.6 |
| | | | | | | | 2011 Actual Results |
| | | | | | | | | | | | |
| | | | | | | | U.S. Cellular Consolidated (6) | | TDS Telecom | | TDS (7) |
(Dollars in millions) | | | | | | | | |
Income before income taxes | $ | 312.8 | $ | 107.5 | $ | 363.7 |
Depreciation, amortization and accretion expense | | 573.6 | | 180.5 | | 765.8 |
(Gain) loss on sale of business and other exit costs, net | | - | | - | | - |
Interest expense (Capitalized interest) | | 65.6 | | (2.6) | | 118.2 |
Adjusted income before income taxes | $ | 952.0 | $ | 285.4 | $ | 1,247.7 |
| | | | | | | | | | | | |
| | | | | | | | 2010 Actual Results |
| | | | | | | | | | | | |
| | | | | | | | U.S. Cellular Consolidated (6) | | TDS Telecom | | TDS (7) |
(Dollars in millions) | | | | | | | | |
Income before income taxes | $ | 241.1 | $ | 101.3 | $ | 285.8 |
Depreciation, amortization and accretion expense | | 571.0 | | 174.1 | | 755.6 |
(Gain) loss on sale of business and other exit costs, net | | - | | - | | - |
Interest expense (Capitalized interest) | | 61.6 | | (0.8) | | 116.8 |
Adjusted income before income taxes | $ | 873.7 | $ | 274.6 | $ | 1,158.2 |
(6) The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets. As used herein, “Core Markets” represents U.S. Cellular‘s total consolidated markets excluding the Divestiture Markets. The Core Markets and Divestiture Markets amounts represent non-GAAP financial measures. TDS believes that the Core Markets and Divestiture Markets amounts may be useful to investors and other users of its financial information in evaluating the pro forma results for the Core Markets.
(7) The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.
(8) This amount does not include any estimate for (Gain) loss on sale of business and other exit costs, net, as the timing of such amount is not readily estimable.
(9) The 2013 estimated amounts for depreciation, amortization and accretion expense in the U.S. Cellular Divestiture Markets include approximately $120 million of incremental accelerated depreciation resulting from the Divestiture Transaction. The 2012 actual results include $20.1 million of incremental accelerated depreciation resulting from the Divestiture Transaction.
Stock Repurchase
The following represents repurchases of TDS Common Shares (including Special Common Shares that were reclassified as Common Shares in the Share Consolidation Amendment in January 2012).
Repurchase Period | | # Shares | | Cost (in millions) | |
2012 (full year) | | 867,841 | | $ | 20.0 | |
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 | | 16,247,126 | | $ | 485.8 | |
Conference Call Information
TDS will hold a conference call on Feb. 26, 2013 at 9:30 a.m. CST.
· Access the live call on the Investor Relations page of www.teldta.com or at
http://ir.teldta.com/phoenix.zhtml?c=67422&p=irol-eventDetails&EventId=4917451.
· 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 of www.teldta.com. The call will be archived on the Conference Calls page of www.teldta.com.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless; broadband, TV and voice; and hosted and managed services to approximately 7 million customers in 36 states through its business units, U.S. Cellular, TDS Telecom and TDS Hosted & Managed Services. Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of Dec. 31, 2012.
Visit www.teldta.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: impacts of the pending acquisition and divestiture transactions, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transaction and the financial impacts of such transaction; the ability of the company to successfully manage and grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission (“SEC”), which are incorporated by reference herein.
For more information about TDS and its subsidiaries, visit:
TDS: www.teldta.com
U.S. Cellular: www.uscellular.com
TDS Telecom: www.tdstelecom.com
United States Cellular Corporation |
Total Markets Summary Operating Data (Unaudited) |
| | | | | | | | | | | | | | | |
Quarter Ended | | 12/31/2012 | | | 9/30/2012 | | | 6/30/2012 | | | 3/31/2012 | | | 12/31/2011 |
Total population | | | | | | | | | | | | | | |
| Consolidated markets (1) | | 93,244,000 | | | 92,996,000 | | | 92,684,000 | | | 92,684,000 | | | 91,965,000 |
| Consolidated operating markets (1) | | 46,966,000 | | | 46,966,000 | | | 46,966,000 | | | 46,966,000 | | | 46,888,000 |
Market penetration at end of period | | | | | | | | | | | | | | |
| Consolidated markets (2) | | 6.2% | | | 6.2% | | | 6.3% | | | 6.3% | | | 6.4% |
| Consolidated operating markets (2) | | 12.3% | | | 12.4% | | | 12.3% | | | 12.4% | | | 12.6% |
All customers | | | | | | | | | | | | | | |
| Total at end of period | | 5,798,000 | | | 5,808,000 | | | 5,799,000 | | | 5,837,000 | | | 5,891,000 |
| Gross additions | | 363,000 | | | 364,000 | | | 290,000 | | | 285,000 | | | 306,000 |
| Net additions (losses) | | (10,000) | | | 9,000 | | | (38,000) | | | (49,000) | | | (41,000) |
| Smartphones sold as a percent of total devices sold (3) | | 62.9% | | | 53.0% | | | 51.9% | | | 54.1% | | | 52.5% |
Retail customers | | | | | | | | | | | | | | |
| Total at end of period | | 5,557,000 | | | 5,561,000 | | | 5,542,000 | | | 5,570,000 | | | 5,608,000 |
| Postpaid smartphone penetration (3) (4) | | 41.8% | | | 38.6% | | | 36.8% | | | 34.4% | | | 30.5% |
| Gross additions | | 348,000 | | | 350,000 | | | 277,000 | | | 273,000 | | | 298,000 |
| Net retail additions (losses) (5) | | (4,000) | | | 19,000 | | | (28,000) | | | (34,000) | | | (13,000) |
| Net postpaid additions (losses) | | (41,000) | | | (38,000) | | | (48,000) | | | (38,000) | | | (20,000) |
| Net prepaid additions (losses) | | 37,000 | | | 57,000 | | | 20,000 | | | 4,000 | | | 7,000 |
Service revenue components (000s) | | | | | | | | | | | | | | |
| Retail service | $ | 886,014 | | $ | 884,219 | | $ | 889,219 | | $ | 888,527 | | $ | 882,091 |
| Inbound roaming | | 76,090 | | | 106,132 | | | 86,363 | | | 80,132 | | | 93,353 |
| Other | | 46,820 | | | 46,019 | | | 54,160 | | | 55,161 | | | 54,601 |
Total service revenues (000s) | $ | 1,008,924 | | $ | 1,036,370 | | $ | 1,029,742 | | $ | 1,023,820 | | $ | 1,030,045 |
Total ARPU (6) | $ | 58.00 | | $ | 59.57 | | $ | 59.05 | | $ | 58.21 | | $ | 58.13 |
Billed ARPU (7) | $ | 50.94 | | $ | 50.83 | | $ | 50.99 | | $ | 50.52 | | $ | 49.78 |
Postpaid ARPU (8) | $ | 54.56 | | $ | 54.34 | | $ | 54.42 | | $ | 54.00 | | $ | 53.35 |
Postpaid churn rate (9) | | 1.8% | | | 1.7% | | | 1.6% | | | 1.6% | | | 1.6% |
Capital expenditures (000s) | $ | 253,100 | | $ | 199,100 | | $ | 183,200 | | $ | 201,300 | | $ | 276,400 |
Cell sites in service | | 8,028 | | | 7,984 | | | 7,932 | | | 7,875 | | | 7,882 |
(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 postpaid smartphone customers by 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 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 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.
TDS Telecom |
Summary Operating Data (Unaudited) |
| | | | | | | | | | | | |
Quarter Ended | 12/31/2012 | | 9/30/2012 | | 6/30/2012 | | 3/31/2012 | | 12/31/2011 |
TDS Telecom | | | | | | | | | |
ILEC: | | | | | | | | | |
| | Residential Connections | | | | | | | | | |
| | | Physical access lines (1) | 350,100 | | 355,800 | | 360,100 | | 363,500 | | 367,600 |
| | | Broadband connections (2) | 221,700 | | 223,100 | | 222,400 | | 219,500 | | 219,600 |
| | | IPTV customers | 7,900 | | 6,700 | | 5,600 | | 4,900 | | 4,600 |
| | | ILEC residential connections | 579,700 | | 585,600 | | 588,100 | | 587,900 | | 591,800 |
| | | | | | | | | | | | |
| | Commercial Connections | | | | | | | | | |
| | | Physical access lines (1) | 107,600 | | 109,800 | | 111,100 | | 112,600 | | 114,400 |
| | | Broadband connections (2) | 18,500 | | 18,500 | | 18,400 | | 18,200 | | 18,200 |
| | | managedIP connections (3) | 17,200 | | 15,000 | | 13,200 | | 10,800 | | 8,600 |
| | | ILEC commercial connections | 143,300 | | 143,300 | | 142,700 | | 141,600 | | 141,200 |
| | | | | | | | | | | | |
CLEC: | | | | | | | | | |
| | Residential Connections | | | | | | | | | |
| | | Physical access lines (1) | 24,600 | | 26,200 | | 27,900 | | 29,600 | | 31,800 |
| | | Broadband connections (2) | 8,200 | | 8,900 | | 9,500 | | 10,100 | | 11,000 |
| | | CLEC residential connections | 32,800 | | 35,100 | | 37,400 | | 39,700 | | 42,800 |
| | | | | | | | | | | | |
| | Commercial Connections | | | | | | | | | |
| | | Physical access lines (1) | 135,500 | | 140,300 | | 145,100 | | 151,100 | | 157,300 |
| | | Broadband connections (2) | 11,200 | | 12,000 | | 12,800 | | 13,700 | | 14,600 |
| | | managedIP connections (3) | 77,400 | | 69,500 | | 61,400 | | 53,700 | | 44,900 |
| | | CLEC commercial connections | 224,100 | | 221,800 | | 219,300 | | 218,500 | | 216,800 |
| | | | | | | | | | | | |
Total ILEC and CLEC Customer Connections | 979,900 | | 985,800 | | 987,500 | | 987,700 | | 992,600 |
(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 DSL and 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 | | 12/31/2012 | | | 9/30/2012 | | | 6/30/2012 | | | 3/31/2012 | | | 12/31/2011 |
ILEC | $ | 43,400 | | $ | 33,700 | | $ | 32,500 | | $ | 27,500 | | $ | 50,300 |
CLEC | | 6,100 | | | 5,400 | | | 4,900 | | | 5,100 | | | 7,200 |
HMS | | 2,300 | | | 4,400 | | | 5,500 | | | 3,100 | | | 5,900 |
| $ | 51,800 | | $ | 43,500 | | $ | 42,900 | | $ | 35,700 | | $ | 63,400 |
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) |
| | | | 2012 | | 2011 | | Amount | Percent |
Operating revenues | | | | | | | | | | |
| U.S. Cellular | $ | 1,115,206 | | $ | 1,099,633 | | $ | 15,573 | | 1% |
| TDS Telecom | | 221,495 | | | 206,770 | | | 14,725 | | 7% |
| All Other (1) | | 9,508 | | | 10,324 | | | (816) | | (8%) |
| | | | | 1,346,209 | | | 1,316,727 | | | 29,482 | | 2% |
Operating expenses | | | | | | | | | | |
| U.S. Cellular | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 979,461 | | | 937,473 | | | 41,988 | | 4% |
| | Depreciation, amortization and accretion | | 169,242 | | | 141,976 | | | 27,266 | | 19% |
| | Loss on asset disposals and exchanges, net | | 2,121 | | | 3,868 | | | (1,747) | | (45%) |
| | (Gain) loss on sale of business and other exit costs, net | | 25,170 | | | - | | | 25,170 | | N/M |
| | | | | 1,175,994 | | | 1,083,317 | | | 92,677 | | 9% |
| TDS Telecom | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 165,585 | | | 144,748 | | | 20,837 | | 14% |
| | Depreciation, amortization and accretion | | 49,455 | | | 46,168 | | | 3,287 | | 7% |
| | Loss on asset disposals and exchanges, net | | 390 | | | 485 | | | (95) | | (20%) |
| | | | | 215,430 | | | 191,401 | | | 24,029 | | 13% |
| All Other (1) | | | | | | | | | | |
| | Expenses excluding depreciation and amortization | | 7,865 | | | 19,117 | | | (11,252) | | (59%) |
| | Depreciation and amortization | | 2,767 | | | 3,735 | | | (968) | | (26%) |
| | (Gain) loss on asset disposals and exchanges, net | | 514 | | | (193) | | | 707 | | >(100%) |
| | | | | 11,146 | | | 22,659 | | | (11,513) | | (51%) |
| | | | | | | | | | | | | |
| | | Total operating expenses | | 1,402,570 | | | 1,297,377 | | | 105,193 | | 8% |
Operating income (loss) | | | | | | | | | | |
| U.S. Cellular | | (60,788) | | | 16,316 | | | (77,104) | | >(100%) |
| TDS Telecom | | 6,065 | | | 15,369 | | | (9,304) | | (61%) |
| All Other (1) | | (1,638) | | | (12,335) | | | 10,697 | | 87% |
| | | | | (56,361) | | | 19,350 | | | (75,711) | | >(100%) |
Investment and other income (expense) | | | | | | | | | | |
| Equity in earnings of unconsolidated entities | | 19,071 | | | 18,507 | | | 564 | | 3% |
| Interest and dividend income | | 2,354 | | | 2,229 | | | 125 | | 6% |
| Gain (loss) on investment | | 10 | | | (2,000) | | | 2,010 | | >(100%) |
| Interest expense | | (18,645) | | | (24,017) | | | 5,372 | | 22% |
| Other, net | | 524 | | | 2,157 | | | (1,633) | | (76%) |
| | Total investment and other income (expense) | | 3,314 | | | (3,124) | | | 6,438 | | >100% |
Income (loss) before income taxes | | (53,047) | | | 16,226 | | | (69,273) | | >(100%) |
| Income tax expense (benefit) | | (12,037) | | | 18,239 | | | (30,276) | | >(100%) |
Net loss | | (41,010) | | | (2,013) | | | (38,997) | | >100% |
| Less: Net income attributable to noncontrolling interests, net of tax | | (837) | | | (4,173) | | | 3,336 | | 80% |
Net loss attributable to TDS shareholders | | (41,847) | | | (6,186) | | | (35,661) | | >100% |
| Preferred dividend requirement | | (12) | | | (12) | | | - | | - |
Net loss available to common shareholders | $ | (41,859) | | $ | (6,198) | | $ | (35,661) | | >100% |
| | | | | | | | | | | | | |
Basic weighted average shares outstanding (2) | | 108,481 | | | 108,492 | | | (11) | | - |
Basic loss per share attributable to TDS shareholders (2) | $ | (0.39) | | $ | (0.06) | | $ | (0.33) | | >100% |
| | | | | | | | | | | | | |
Diluted weighted average shares outstanding (2) | | 108,481 | | | 108,492 | | | (11) | | - |
Diluted loss per share attributable to TDS shareholders (2) | $ | (0.39) | | $ | (0.06) | | $ | (0.33) | | >100% |
(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, 2012, 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
Telephone and Data Systems, Inc. |
Consolidated Statement of Operations Highlights |
Twelve Months Ended December 31, |
(Unaudited, dollars and shares in thousands, except per share amounts) |
| | | | | | | | | | Increase/ (Decrease) |
| | | | 2012 | | 2011 | | Amount | Percent |
Operating revenues | | | | | | | | | | |
| U.S. Cellular | $ | 4,452,084 | | $ | 4,343,346 | | $ | 108,738 | | 3% |
| TDS Telecom | | 854,506 | | | 815,388 | | | 39,118 | | 5% |
| All Other (1) | | 38,687 | | | 21,737 | | | 16,950 | | 78% |
| | | | | 5,345,277 | | | 5,180,471 | | | 164,806 | | 3% |
Operating expenses | | | | | | | | | | |
| U.S. Cellular | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 3,647,685 | | | 3,490,882 | | | 156,803 | | 4% |
| | Depreciation, amortization and accretion | | 608,633 | | | 573,557 | | | 35,076 | | 6% |
| | (Gain) loss on asset disposals and exchanges, net | | 18,088 | | | (1,873) | | | 19,961 | | >(100%) |
| | (Gain) loss on sale of business and other exit costs, net | | 21,022 | | | - | | | 21,022 | | N/M |
| | | | | 4,295,428 | | | 4,062,566 | | | 232,862 | | 6% |
| TDS Telecom | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 619,503 | | | 534,964 | | | 84,539 | | 16% |
| | Depreciation, amortization and accretion | | 193,094 | | | 180,530 | | | 12,564 | | 7% |
| | Loss on asset disposals and exchanges, net | | 1,167 | | | 1,243 | | | (76) | | (6%) |
| | | | | 813,764 | | | 716,737 | | | 97,027 | | 14% |
| All Other (1) | | | | | | | | | | |
| | Expenses excluding depreciation and amortization | | 39,283 | | | 27,157 | | | 12,126 | | 45% |
| | Depreciation and amortization | | 11,899 | | | 11,689 | | | 210 | | 2% |
| | Loss on impairment of assets | | 515 | | | - | | | 515 | | N/M |
| | (Gain) loss on asset disposals and exchanges, net | | 525 | | | (180) | | | 705 | | >(100%) |
| | | | | 52,222 | | | 38,666 | | | 13,556 | | 35% |
| | | | | | | | | | | | | |
| | | Total operating expenses | | 5,161,414 | | | 4,817,969 | | | 343,445 | | 7% |
Operating income (loss) | | | | | | | | | | |
| U.S. Cellular | | 156,656 | | | 280,780 | | | (124,124) | | (44%) |
| TDS Telecom | | 40,742 | | | 98,651 | | | (57,909) | | (59%) |
| All Other (1) | | (13,535) | | | (16,929) | | | 3,394 | | 20% |
| | | | | 183,863 | | | 362,502 | | | (178,639) | | (49%) |
Investment and other income (expense) | | | | | | | | | | |
| Equity in earnings of unconsolidated entities | | 92,867 | | | 82,538 | | | 10,329 | | 13% |
| Interest and dividend income | | 9,248 | | | 9,145 | | | 103 | | 1% |
| Gain (loss) on investment | | (3,718) | | | 24,103 | | | (27,821) | | >(100%) |
| Interest expense | | (86,745) | | | (118,201) | | | 31,456 | | 27% |
| Other, net | | 720 | | | 3,658 | | | (2,938) | | (80%) |
| | Total investment and other income (expense) | | 12,372 | | | 1,243 | | | 11,129 | | >100% |
Income before income taxes | | 196,235 | | | 363,745 | | | (167,510) | | (46%) |
| Income tax expense | | 73,582 | | | 113,503 | | | (39,921) | | (35%) |
Net income | | 122,653 | | | 250,242 | | | (127,589) | | (51%) |
| Less: Net income attributable to noncontrolling interests, net of tax | | (40,792) | | | (49,676) | | | 8,884 | | 18% |
Net income attributable to TDS shareholders | | 81,861 | | | 200,566 | | | (118,705) | | (59%) |
| Preferred dividend requirement | | (50) | | | (50) | | | - | | - |
Net income available to common shareholders | $ | 81,811 | | $ | 200,516 | | $ | (118,705) | | (59%) |
| | | | | | | | | | | | | |
Basic weighted average shares outstanding (2) | | 108,671 | | | 108,562 | | | 109 | | - |
Basic earnings per share attributable to TDS shareholders (2) | $ | 0.75 | | $ | 1.85 | | $ | (1.10) | | (59%) |
| | | | | | | | | | | | | |
Diluted weighted average shares outstanding (2) | | 108,937 | | | 109,098 | | | (161) | | - |
Diluted earnings per share attributable to TDS shareholders (2) | $ | 0.75 | | $ | 1.83 | | $ | (1.08) | | (59%) |
(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, 2012, 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
Telephone and Data Systems, Inc. |
Consolidated Balance Sheet Highlights |
(Unaudited, dollars in thousands) |
| | | | | | |
ASSETS |
| | | | | | |
| | | | | | |
| | December 31, | | December 31, |
| | 2012 | | 2011 |
Current assets | | | | | |
| Cash and cash equivalents | $ | 740,481 | | $ | 563,275 |
| Short-term investments | | 115,700 | | | 246,273 |
| Accounts receivable from customers and others | | 574,328 | | | 542,577 |
| Inventory | | 160,692 | | | 130,044 |
| Net deferred income tax asset | | 43,411 | | | 40,898 |
| Prepaid expenses | | 86,385 | | | 80,628 |
| Income taxes receivable | | 9,625 | | | 85,636 |
| Other current assets | | 32,815 | | | 16,349 |
| | | 1,763,437 | | | 1,705,680 |
| | | | | | |
Assets held for sale | | 163,242 | | | 49,647 |
| | | | | | |
Investments | | | | | |
| Licenses | | 1,480,039 | | | 1,494,014 |
| Goodwill | | 797,194 | | | 797,077 |
| Other intangible assets, net | | 58,522 | | | 50,734 |
| Investments in unconsolidated entities | | 179,921 | | | 173,710 |
| Long-term investments | | 50,305 | | | 45,138 |
| Other investments | | 824 | | | 3,072 |
| | | 2,566,805 | | | 2,563,745 |
| | | | | | |
Property, plant and equipment, net | | | | | |
| U.S. Cellular | | 3,022,588 | | | 2,790,302 |
| TDS Telecom | | 934,188 | | | 936,757 |
| Other | | 40,490 | | | 57,476 |
| | | 3,997,266 | | | 3,784,535 |
| | | | | | |
Other assets and deferred charges | | 133,150 | | | 97,398 |
| | | | | | |
Total assets | $ | 8,623,900 | | $ | 8,201,005 |
Telephone and Data Systems, Inc. |
Consolidated Balance Sheet Highlights |
(Unaudited, dollars in thousands) |
| | | | | | | | |
LIABILITIES AND EQUITY |
| | | | | | | | |
| | | | | | | | |
| | | | December 31, | | December 31, |
| | | | 2012 | | 2011 |
Current liabilities | | | | | |
| | Current portion of long-term debt | $ | 1,233 | | $ | 1,509 |
| | Accounts payable | | 377,291 | | | 364,746 |
| | Customer deposits and deferred revenues | | 222,345 | | | 207,633 |
| | Accrued interest | | 6,565 | | | 7,456 |
| | Accrued taxes | | 48,237 | | | 41,069 |
| | Accrued compensation | | 134,932 | | | 107,719 |
| | Other current liabilities | | 134,005 | | | 144,001 |
| | | | | 924,608 | | | 874,133 |
| | | | | | | | |
Liabilities held for sale | | 19,594 | | | 1,051 |
| | | | | | | | |
Deferred liabilities and credits | | | | | |
| | Net deferred income tax liability | | 862,580 | | | 808,713 |
| | Other deferred liabilities and credits | | 438,727 | | | 383,567 |
| | | | | | | | |
Long-term debt | | 1,721,571 | | | 1,529,857 |
| | | | | | | | |
Noncontrolling interests with redemption features | | 493 | | | 1,005 |
| | | | | | | | |
Equity | | | | | |
| TDS shareholders' equity | | | | | |
| | Series A Common and Common Shares, par value $.01 (1) | | 1,327 | | | 1,326 |
| | Capital in excess of par value (1) | | 2,304,122 | | | 2,268,711 |
| | Treasury shares, at cost (1) | | (750,099) | | | (750,921) |
| | Accumulated other comprehensive loss | | (8,132) | | | (8,854) |
| | Retained earnings (1) | | 2,464,318 | | | 2,451,899 |
| | | Total TDS shareholders' equity | | 4,011,536 | | | 3,962,161 |
| | | | | | | | |
| Preferred shares | | 825 | | | 830 |
| Noncontrolling interests | | 643,966 | | | 639,688 |
| | | | | | | | |
| | Total equity | | 4,656,327 | | | 4,602,679 |
| | | | | | | | |
Total liabilities and equity | $ | 8,623,900 | | $ | 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.
Balance Sheet Highlights |
December 31, 2012 |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | U.S. | | TDS | | TDS Corporate | | Intercompany | | TDS |
| | | Cellular | | Telecom | | & Other | | Eliminations | | Consolidated |
Cash and cash equivalents | $ | 378,358 | | $ | 89,479 | | $ | 272,644 | | $ | - | | $ | 740,481 |
Affiliated cash investments | | - | | | 356,414 | | | - | | | (356,414) | | | - |
Short-term investments | | 100,676 | | | - | | | 15,024 | | | - | | | 115,700 |
| | $ | 479,034 | | $ | 445,893 | | $ | 287,668 | | $ | (356,414) | | $ | 856,181 |
| | | | | | | | | | | | | | | | |
Licenses, goodwill and other intangible assets | $ | 1,878,639 | | $ | 582,909 | | $ | (125,793) | | $ | - | | $ | 2,335,755 |
Investment in unconsolidated entities | | 144,531 | | | 3,809 | | | 37,932 | | | (6,351) | | | 179,921 |
Long-term and other investments | | 50,305 | | | 824 | | | - | | | - | | | 51,129 |
| | | $ | 2,073,475 | | $ | 587,542 | | $ | (87,861) | | $ | (6,351) | | $ | 2,566,805 |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Property, plant and equipment, net | $ | 3,022,588 | | $ | 934,188 | | $ | 40,490 | | $ | - | | $ | 3,997,266 |
| | | | | | | | | | | | | | | | |
Long-term debt: | | | | | | | | | | | | | | |
| Current portion | $ | 92 | | $ | 95 | | $ | 1,046 | | $ | - | | $ | 1,233 |
| Non-current portion | | 878,858 | | | 749 | | | 841,964 | | | - | | | 1,721,571 |
| | Total | $ | 878,950 | | $ | 844 | | $ | 843,010 | | $ | - | | $ | 1,722,804 |
| | | | | | | | | | | | | | | | |
Preferred shares | $ | - | | $ | - | | $ | 825 | | $ | - | | $ | 825 |
| | | | | | | | | | | | | | | | |
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, 2012 and December 31, 2011.
| | December 31, | | December 31, |
| 2012 | | 2011 |
| | | | | | |
Cash and cash equivalents | $ | 740,481 | | $ | 563,275 |
Amounts included in short-term investments (1) (2) | | | | | |
| Government-backed securities (3) | | 115,700 | | | 218,829 |
| Certificates of deposit | | - | | | 27,444 |
| | $ | 115,700 | | $ | 246,273 |
| | | | | | |
Amounts included in long-term investments (1) (4) | | | | | |
| Government-backed securities (3) | | 50,305 | | | 45,138 |
Total cash and cash equivalents and investments | $ | 906,486 | | $ | 854,686 |
(1) Designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet.
(2) Maturities are less than twelve months from the respective balance sheet dates.
(3) Includes U.S treasury securities and corporate notes guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.
(4) Maturities range between 14 and 23 months from the balance sheet date.
Telephone and Data Systems, Inc. |
Consolidated Statement of Cash Flows |
Twelve Months Ended December 31, |
(Unaudited, dollars in thousands) |
| | | | | 2012 | | 2011 |
Cash flows from operating activities | | | | | |
| Net income | $ | 122,653 | | $ | 250,242 |
| | Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | | | | | |
| | | | Depreciation, amortization and accretion | | 813,626 | | | 765,776 |
| | | | Bad debts expense | | 74,695 | | | 68,611 |
| | | | Stock-based compensation expense | | 41,871 | | | 36,837 |
| | | | Deferred income taxes, net | | 58,785 | | | 202,547 |
| | | | Equity in earnings of unconsolidated entities | | (92,867) | | | (82,538) |
| | | | Distributions from unconsolidated entities | | 84,884 | | | 92,231 |
| | | | Loss on impairment of assets | | 515 | | | - |
| | | | (Gain) loss on asset disposals and exchanges, net | | 19,741 | | | (810) |
| | | | (Gain) loss on sale of business and other exit costs, net | | 21,061 | | | - |
| | | | (Gain) loss on investment | | 3,718 | | | (24,103) |
| | | | Noncash interest expense | | (572) | | | 18,849 |
| | | | Other operating activities | | 1,393 | | | 1,067 |
| | Changes in assets and liabilities from operations | | | | | |
| | | | Accounts receivable | | (81,107) | | | (95,426) |
| | | | Inventory | | (29,917) | | | (13,382) |
| | | | Accounts payable | | (12,332) | | | 29,291 |
| | | | Customer deposits and deferred revenues | | 32,981 | | | 35,457 |
| | | | Accrued taxes | | 77,458 | | | (27,871) |
| | | | Accrued interest | | (891) | | | 3,351 |
| | | | Other assets and liabilities | | (30,523) | | | (4,418) |
| | | | | | 1,105,172 | | | 1,255,711 |
| | | | | | | | | |
Cash flows from investing activities | | | | | |
| Cash used for additions to property, plant and equipment | | (995,517) | | | (971,759) |
| Cash paid for acquisitions and licenses | | (163,382) | | | (105,508) |
| Cash paid for investments | | (120,000) | | | (180,920) |
| Cash received for divestitures | | 50,182 | | | - |
| Cash received for investments | | 243,444 | | | 393,246 |
| Other investing activities | | (12,796) | | | (1,148) |
| | | | | | (998,069) | | | (866,089) |
| | | | | | | | | |
Cash flows from financing activities | | | | | |
| Repayment of short-term debt | | - | | | (32,671) |
| Repayment of long-term debt | | (2,566) | | | (614,639) |
| Issuance of long-term debt | | 195,358 | | | 643,700 |
| TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments | | (1,119) | | | 32 |
| U.S. Cellular Common Shares reissued for benefit plans, net of tax payments | | (2,205) | | | 1,935 |
| Repurchase of TDS Common and Special Common Shares | | (20,026) | | | (21,500) |
| Repurchase of U.S. Cellular Common Shares | | (20,045) | | | (62,294) |
| Dividends paid | | (53,165) | | | (48,670) |
| Payment of debt issuance costs | | (8,242) | | | (21,657) |
| Distributions to noncontrolling interests | | (20,856) | | | (16,236) |
| Payments to acquire additional interests in subsidiaries | | (3,167) | | | - |
| Other financing activities | | 6,136 | | | 3,970 |
| | | | | | 70,103 | | | (168,030) |
| | | | | | | | | |
Net increase in cash and cash equivalents | | 177,206 | | | 221,592 |
Cash and cash equivalents | | | | | |
| Beginning of period | | 563,275 | | | 341,683 |
| End of period | $ | 740,481 | | $ | 563,275 |
TDS Telecom Highlights |
Three Months Ended December 31, |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | | Increase (Decrease) |
| | | | 2012 | | 2011 | | Amount | | Percent |
Local Telephone Operations | | | | | | | | | | |
| Operating revenues | | | | | | | | | | |
| | Residential | $ | 69,680 | | $ | 69,745 | | $ | (65) | | - |
| | Commercial | | 24,665 | | | 24,039 | | | 626 | | 3% |
| | Wholesale | | 50,900 | | | 53,840 | | | (2,940) | | (5%) |
| | | | | 145,245 | | | 147,624 | | | (2,379) | | (2%) |
| Operating expenses | | | | | | | | | | |
| | Cost of services and products | | 48,549 | | | 48,313 | | | 236 | | - |
| | Selling, general and administrative expenses | | 44,020 | | | 43,784 | | | 236 | | 1% |
| | Depreciation, amortization and accretion | | 37,669 | | | 36,489 | | | 1,180 | | 3% |
| | Loss on asset disposals and exchanges, net | | 269 | | | 532 | | | (263) | | (49%) |
| | | | | 130,507 | | | 129,118 | | | 1,389 | | 1% |
| | | | | | | | | | | | | |
| Operating income | $ | 14,738 | | $ | 18,506 | | $ | (3,768) | | (20%) |
| | | | | | | | | | | | | |
Competitive Local Exchange Carrier Operations | | | | | | | | | | |
| Operating revenues | | | | | | | | | | |
| | Residential | $ | 3,871 | | $ | 4,910 | | $ | (1,039) | | (21%) |
| | Commercial | | 34,900 | | | 34,514 | | | 386 | | 1% |
| | Wholesale | | 3,856 | | | 4,973 | | | (1,117) | | (22%) |
| | | | | 42,627 | | | 44,397 | | | (1,770) | | (4%) |
| Operating expenses | | | | | | | | | | |
| | Cost of services and products | | 22,457 | | | 22,654 | | | (197) | | (1%) |
| | Selling, general and administrative expenses | | 17,574 | | | 16,790 | | | 784 | | 5% |
| | Depreciation, amortization and accretion | | 5,490 | | | 5,450 | | | 40 | | 1% |
| | (Gain) loss on asset disposals and exchanges, net | | 118 | | | (105) | | | 223 | | >100% |
| | | | | 45,639 | | | 44,789 | | | 850 | | 2% |
| | | | | | | | | | | | | |
| Operating loss | $ | (3,012) | | $ | (392) | | $ | (2,620) | | >(100)% |
| | | | | | | | | | | | | |
Hosted and Managed Services Operations | | | | | | | | | | |
| | Revenues | $ | 36,148 | | $ | 17,258 | | $ | 18,890 | | >100% |
| Operating expenses | | | | | | | | | | |
| | Cost of services and products | | 25,585 | | | 9,729 | | | 15,856 | | >100% |
| | Selling, general and administrative expenses | | 9,925 | | | 5,987 | | | 3,938 | | 66% |
| | Depreciation, amortization and accretion | | 6,296 | | | 4,229 | | | 2,067 | | 49% |
| | Loss on asset disposals and exchanges, net | | 3 | | | 58 | | | (55) | | (95%) |
| | | | | 41,809 | | | 20,003 | | | 21,806 | | >100% |
| | | | | | | | | | | | | |
| Operating loss | $ | (5,661) | | $ | (2,745) | | $ | (2,916) | | >(100)% |
| | | | | | | | | | | | | |
Intercompany revenues | $ | (2,525) | | $ | (2,509) | | $ | (16) | | (1%) |
Intercompany expenses | | (2,525) | | | (2,509) | | | (16) | | (1%) |
| | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 6,065 | | $ | 15,369 | | $ | (9,304) | | (61%) |
TDS Telecom Highlights |
Twelve Months Ended December 31, |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | | Increase (Decrease) |
| | | | 2012 | | 2011 | | Amount | | Percent |
Local Telephone Operations | | | | | | | | | | |
| Operating revenues | | | | | | | | | | |
| | Residential | $ | 279,400 | | $ | 279,858 | | $ | (458) | | - |
| | Commercial | | 97,382 | | | 98,581 | | | (1,199) | | (1%) |
| | Wholesale | | 201,630 | | | 219,372 | | | (17,742) | | (8%) |
| | | | | 578,412 | | | 597,811 | | | (19,399) | | (3%) |
| Operating expenses | | | | | | | | | | |
| | Cost of services and products | | 192,514 | | | 191,591 | | | 923 | | - |
| | Selling, general and administrative expenses | | 170,493 | | | 158,302 | | | 12,191 | | 8% |
| | Depreciation, amortization and accretion | | 150,557 | | | 145,687 | | | 4,870 | | 3% |
| | Loss on asset disposals and exchanges, net | | 574 | | | 1,043 | | | (469) | | (45%) |
| | | | | 514,138 | | | 496,623 | | | 17,515 | | 4% |
| | | | | | | | | | | | | |
| Operating income | $ | 64,274 | | $ | 101,188 | | $ | (36,914) | | (36%) |
| | | | | | | | | | | | | |
Competitive Local Exchange Carrier Operations | | | | | | | | | | |
| Operating revenues | | | | | | | | | | |
| | Residential | $ | 17,192 | | $ | 22,006 | | $ | (4,814) | | (22%) |
| | Commercial | | 138,637 | | | 138,230 | | | 407 | | - |
| | Wholesale | | 17,568 | | | 20,096 | | | (2,528) | | (13%) |
| | | | | 173,397 | | | 180,332 | | | (6,935) | | (4%) |
| Operating expenses | | | | | | | | | | |
| | Cost of services and products | | 89,949 | | | 91,348 | | | (1,399) | | (2%) |
| | Selling, general and administrative expenses | | 66,886 | | | 64,509 | | | 2,377 | | 4% |
| | Depreciation, amortization and accretion | | 21,969 | | | 21,976 | | | (7) | | - |
| | Loss on asset disposals and exchanges, net | | 485 | | | 85 | | | 400 | | >100% |
| | | | | 179,289 | | | 177,918 | | | 1,371 | | 1% |
| | | | | | | | | | | | | |
| Operating income (loss) | $ | (5,892) | | $ | 2,414 | | $ | (8,306) | | >(100)% |
| | | | | | | | | | | | | |
Hosted and Managed Services Operations | | | | | | | | | | |
| | Revenues | $ | 113,010 | | $ | 47,180 | | $ | 65,830 | | >100% |
| Operating expenses | | | | | | | | | | |
| | Cost of services and products | | 75,781 | | | 23,502 | | | 52,279 | | >100% |
| | Selling, general and administrative expenses | | 34,193 | | | 15,647 | | | 18,546 | | >100% |
| | Depreciation, amortization and accretion | | 20,568 | | | 12,867 | | | 7,701 | | 60% |
| | Loss on asset disposals and exchanges, net | | 108 | | | 115 | | | (7) | | (6%) |
| | | | | 130,650 | | | 52,131 | | | 78,519 | | >100% |
| | | | | | | | | | | | | |
| Operating loss | $ | (17,640) | | $ | (4,951) | | $ | (12,689) | | >(100)% |
| | | | | | | | | | | | | |
Intercompany revenues | $ | (10,313) | | $ | (9,935) | | $ | (378) | | (4%) |
Intercompany expenses | | (10,313) | | | (9,935) | | | (378) | | (4%) |
| | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 40,742 | | $ | 98,651 | | $ | (57,909) | | (59%) |
Telephone and Data Systems, Inc. |
| Financial Measures and Reconciliations |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | | Consolidated |
Three Months Ended December 31, 2012 | U.S. Cellular | TDS Telecom (1) | All Other (2) | Total |
| | | | | | | | | | | | | | | |
| Operating revenues | | $ | 1,115,206 | | $ | 221,495 | | $ | 9,508 | | $ | 1,346,209 |
| Deduct: | | | | | | | | | | | | |
| | U.S. Cellular equipment sales revenue | | | 106,282 | | | | | | | | | |
| | | Service revenues | | | 1,008,924 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Operating income (loss) | | | (60,788) | | | 6,065 | | | (1,638) | | | (56,361) |
| Add (Deduct): | | | | | | | | | | | | |
| | Depreciation, amortization and accretion | | | 169,242 | | | 49,455 | | | 2,767 | | | 221,464 |
| | Loss on impairment of assets | | | - | | | - | | | - | | | - |
| | Loss on asset disposals and exchanges, net | | | 2,121 | | | 390 | | | 514 | | | 3,025 |
| | (Gain) loss on sale of business and other exit costs, net | | | 25,170 | | | - | | | - | | | 25,170 |
| | | Adjusted OIBDA (3) | | $ | 135,745 | | $ | 55,910 | | $ | 1,643 | | $ | 193,298 |
| | | | | | | | | | | | | | | |
| | | Adjusted OIBDA margin (4) | | | 13.5% | | | 25.2% | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Consolidated |
Three Months Ended December 31, 2011 | U.S. Cellular | TDS Telecom (1) | All Other (2) | 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 assets | | | - | | | - | | | - | | | - |
| | (Gain) loss on asset disposals and exchanges, net | | | 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% | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | TDS Consolidated | | | | | | |
Three Months Ended December 31, | | 2012 | | 2011 | | | | | | |
| | | | | | | | | | | | | | | |
| Cash flows from operating activities | | $ | 344,636 | | $ | 316,510 | | | | | | |
| Deduct: | | | | | | | | | | | | |
| Cash used for additions to property, plant, and equipment | | | 264,620 | | | 369,999 | | | | | | |
| | | Free cash flow (5) | | $ | 80,016 | | $ | (53,489) | | | | | | |
Telephone and Data Systems, Inc. |
Financial Measures and Reconciliations |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | | Consolidated |
Twelve Months Ended December 31, 2012 | U.S. Cellular | TDS Telecom (1) | All Other (2) | Total |
| | | | | | | | | | | | | | | |
| Operating revenues | | $ | 4,452,084 | | $ | 854,506 | | $ | 38,687 | | $ | 5,345,277 |
| Deduct: | | | | | | | | | | | | |
| | U.S. Cellular equipment sales revenue | | | 353,228 | | | | | | | | | |
| | | Service revenues | | | 4,098,856 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Operating income (loss) | | | 156,656 | | | 40,742 | | | (13,535) | | | 183,863 |
| Add (Deduct): | | | | | | | | | | | | |
| | Depreciation, amortization and accretion | | | 608,633 | | | 193,094 | | | 11,899 | | | 813,626 |
| | Loss on impairment of assets | | | - | | | - | | | 515 | | | 515 |
| | Loss on asset disposals and exchanges, net | | | 18,088 | | | 1,167 | | | 525 | | | 19,780 |
| | (Gain) loss on sale of business and other exit costs, net | | | 21,022 | | | - | | | - | | | 21,022 |
| | | Adjusted OIBDA (3) | | $ | 804,399 | | $ | 235,003 | | $ | (596) | | $ | 1,038,806 |
| | | | | | | | | | | | | | | |
| | | Adjusted OIBDA margin (4) | | | 19.6% | | | 27.5% | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Consolidated |
Twelve Months Ended December 31, 2011 | U.S. Cellular | TDS Telecom (1) | All Other (2) | 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 assets | | | - | | | - | | | - | | | - |
| | (Gain) loss on asset disposals and exchanges, net | | | (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% | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | TDS Consolidated | | | | | | |
Twelve Months Ended December 31, | | 2012 | | 2011 | | | | | | |
| | | | | | | | | | | | | | | |
| Cash flows from operating activities | | $ | 1,105,172 | | $ | 1,255,711 | | | | | | |
| Deduct: | | | | | | | | | | | | |
| Cash used for additions to property, plant, and equipment | | | 995,517 | | | 971,759 | | | | | | |
| | | Free cash flow (5) | | $ | 109,655 | | $ | 283,952 | | | | | | |
(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 defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets (if any); the net gain or loss on asset disposals and exchanges (if any); and the net gain or loss on sale of business and other exit costs (if any).
(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.
