Exhibit 99.l NEWS RELEASE
As previously announced, TDS will hold a teleconference Aug. 1, 2014 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.teldta.com.
FOR IMMEDIATE RELEASE
TDS reports second quarter 2014 results
U.S. Cellular provides 2014 financial guidance; TDS Telecom raises AIBIT guidance
CHICAGO, (Aug. 1, 2014) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,236.4 million for the second quarter of 2014, versus $1,228.2 million for the comparable period one year ago. Net income (loss) attributable to TDS shareholders and related diluted earnings (loss) per share were $(22.0) million and $(0.20) respectively, for the second quarter of 2014, compared to $156.1 million and $1.42, respectively, in the comparable period one year ago. Year-over-year comparisons are affected by U.S. Cellular’s divestiture transaction and acquisitions at TDS Telecom, in 2013.
“Our businesses were productive in the second quarter. We’re seeing positive results from strategic growth initiatives we’ve implemented over the last few years,” said LeRoy T. Carlson, Jr., TDS president and CEO.
“U.S. Cellular generated strong gross customer additions and significantly reduced postpaid churn in the quarter, leading to net postpaid customer growth in June. Our high-quality 4G LTE network, competitive service plans, devices, pricing and our new equipment installment plans helped drive smartphone penetration to 55 percent, which increased data usage and helped us achieve higher average revenue per postpaid customer.
“TDS Telecom posted another solid quarter of earnings and revenue growth, fueled by residential TDS TV customer additions, broadband speed upgrades, and commercial managedIP connections, and by realizing significant cost reductions. We continue to be excited about the growth potential in our cable business. At Baja Broadband, we are working to improve our video offerings and increase broadband penetration. We also are focused on ensuring a smooth completion to our BendBroadband acquisition in the third quarter. In our hosted and managed services business, OneNeck IT Solutions, we increased revenues through growth in recurring services and through the effect of acquisitions.”
2014 Estimated Results
Estimates of full-year 2014 results for U.S. Cellular, TDS Telecom and TDS are shown below. Such estimates represent management’s view as of August 1, 2014. Such forward-looking statements should not be assumed to be current as of any future date. TDS undertakes no duty to update such information, whether as a result of new information, future events or otherwise. There can be no assurance that final results will not differ materially from such estimated results.
| | 2014 Estimated Results |
| | U.S. Cellular | | TDS Telecom (1) | | TDS (1)(3) |
| | Current | Previous | | Current | Previous | | Current | Previous |
(Dollars in millions) | | | | | | | | |
Total operating revenues | $3,900-$4,000 | N/A | | $1,050-$1,100 | Unchanged | | $4,970-$5,120 | N/A |
Adjusted income before income taxes (2) | $350-$450 | N/A | | $260-$290 | $250-$280 | | $605-$735 | N/A |
Capital expenditures | $640 | Unchanged | | $200 | Unchanged | | $850 | N/A |
(1) These estimates do not reflect the effects of the acquisition of BendBroadband.
(2) Adjusted income before income taxes is defined as income before income taxes, adjusted for the items set forth in the reconciliation below. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. From time to time, TDS may exclude other items from adjusted income before income taxes if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future. Adjusted income before income taxes is not a measure of financial performance under Generally Accepted Accounting Principles in the United States (“GAAP”) and should not be considered as an alternative to income before income taxes as an indicator of the company’s operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. TDS believes adjusted income before income taxes is a useful measure of TDS’ operating results before significant recurring non-cash charges, discrete gains and losses, and financing charges (interest expense). The following tables provide a reconciliation of income before income taxes to adjusted income before income taxes for 2014 estimated results, six months ended June 30, 2014 actual results, and year ended December 31, 2013 actual results:
| | 2014 Estimated Results |
| | U.S. Cellular | | TDS Telecom (1) | | TDS (1)(3) |
(Dollars in millions) | | | | | | | | |
Income (loss) before income taxes | ($189)-($89) | | $35-$65 | | ($249)-($119) |
Depreciation, amortization and accretion | $630 | | $225 | | $865 |
(Gain) loss on sale of business and other exit costs, net | ($50) | | ― | | ($25) |
(Gain) loss on license sales and exchanges | ($91) | | ― | | ($91) |
Interest expense | $50 | | ― | | $105 |
Adjusted income before income taxes | $350-$450 | | $260-$290 | | $605-$735 |
| | | | | | | | | | |
| | Actual Results |
| | Six months ended June 30, 2014 | | Year ended December 31, 2013 |
| | U.S. Cellular | | TDS Telecom | | TDS (3) | | U.S. Cellular | | TDS Telecom | | TDS (3) |
(Dollars in millions) | | | | | | | | |
Income (loss) before income taxes | $1 | | $39 | | ($7) | | $258 | | $49 | | $293 |
Depreciation, amortization and accretion expense | $316 | | $107 | | $429 | | $804 | | $203 | | $1,018 |
(Gain) loss on sale of business and other exit costs, net | ($17) | | — | | ($4) | | ($247) | | — | | ($301) |
(Gain) loss on license sales and exchanges | ($91) | | — | | ($91) | | ($255) | | — | | ($255) |
(Gain) loss on investments | — | | — | | — | | ($19) | | ($1) | | ($15) |
Interest expense | $29 | | ($1) | | $56 | | $44 | | ($2) | | $99 |
Adjusted income before income taxes | $238 | | $145 | | $383 | | $585 | | $249 | | $839 |
(3) The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.
Stock Repurchase Summary
TDS began repurchasing stock under its $250 million repurchase authorization on Aug. 5, 2013. The following represents repurchases of TDS Common Shares.
Repurchase Period | | # Shares | | Cost (in millions) | |
2014 (second quarter) | | 650,628 | | $ | 17.3 | |
2014 (first quarter) | | 157,891 | | $ | 3.8 | |
2013 (full year) | | 338,851 | | $ | 9.7 | |
Total | | 1,147,370 | | $ | 30.8 | |
Conference Call Information
TDS will hold a conference call on Aug. 1, 2014 at 9:30 a.m. CDT.
· Access the live call on the Events & Presentations page of investors.teldta.com or at www.videonewswire.com/event.asp?id=100144 .
· 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 investors.teldta.com. The call will be archived on the Events & Presentations page of investors.teldta.com.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 1000® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 5.8 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions and Baja Broadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,100 people as of June 30, 2014.
Visit www.teldta.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Contacts
Jane McCahon, Vice President, Corporate Relations and Corporate Secretary
312- 592-5379
jane.mccahon@teldta.com
Julie Mathews, Investor Relations Manager
312- 592-5341
julie.mathews@teldta.com
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: impacts of any pending acquisition and divestiture transactions, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission (“SEC”), which are incorporated by reference herein.
For more information about TDS and its subsidiaries, visit:
TDS: www.teldta.com
U.S. Cellular: www.uscellular.com
TDS Telecom: www.tdstelecom.com
OneNeck IT Solutions: www.oneneck.com
United States Cellular Corporation |
Total Markets* Summary Operating Data (Unaudited) |
| | | | | | | | | | | | | | | | |
As of or for the Quarter Ended | 6/30/2014 | | 3/31/2014 | | 12/31/2013 | | 9/30/2013 | | 6/30/2013 |
Retail Customers | | | | | | | | | | | | | | |
| Postpaid | | | | | | | | | | | | | | |
| | Total at end of period | | 4,148,000 | | | 4,174,000 | | | 4,267,000 | | | 4,343,000 | | | 4,412,000 |
| | Gross additions | | 190,000 | | | 197,000 | | | 176,000 | | | 165,000 | | | 165,000 |
| | Net additions (losses) | | (26,000) | | | (93,000) | | | (71,000) | | | (60,000) | | | (120,000) |
| | ARPU (1) | $ | 56.82 | | $ | 57.59 | | $ | 53.53 | | $ | 54.64 | | $ | 54.18 |
| | Churn rate (2) | | 1.7% | | | 2.3% | | | 1.9% | | | 1.7% | | | 2.0% |
| | Smartphone penetration (3) | | 55.3% | | | 53.1% | | | 50.8% | | | 47.1% | | | 45.5% |
| Prepaid | | | | | | | | | | | | | | |
| | Total at end of period | | 352,000 | | | 356,000 | | | 343,000 | | | 370,000 | | | 381,000 |
| | Gross additions | | 65,000 | | | 85,000 | | | 63,000 | | | 65,000 | | | 77,000 |
| | Net additions (losses) | | (4,000) | | | 13,000 | | | (26,000) | | | (11,000) | | | (7,000) |
| | ARPU (1) | $ | 34.02 | | $ | 32.22 | | $ | 31.66 | | $ | 28.72 | | $ | 31.69 |
| | Churn rate (2) | | 6.5% | | | 6.9% | | | 8.3% | | | 6.8% | | | 6.8% |
Total customers at end of period | | 4,653,000 | | | 4,684,000 | | | 4,774,000 | | | 4,875,000 | | | 4,968,000 |
Billed ARPU (1) | $ | 53.36 | | $ | 53.93 | | $ | 50.25 | | $ | 50.92 | | $ | 50.60 |
Service revenue ARPU (1) | $ | 60.32 | | $ | 60.19 | | $ | 57.05 | | $ | 58.36 | | $ | 57.45 |
Smartphones sold as a percent of total devices sold | | 72.6% | | | 73.0% | | | 79.6% | | | 65.2% | | | 66.0% |
Total population | | | | | | | | | | | | | | |
| | Consolidated markets (4) | | 54,817,000 | | | 54,817,000 | | | 58,013,000 | | | 84,025,000 | | | 84,025,000 |
| | Consolidated operating markets (4) | | 31,729,000 | | | 31,729,000 | | | 31,759,000 | | | 31,822,000 | | | 31,822,000 |
Market penetration at end of period | | | | | | | | | | | | | | |
| | Consolidated markets (5) | | 8.5% | | | 8.5% | | | 8.2% | | | 5.8% | | | 5.9% |
| | Consolidated operating markets (5) | | 14.7% | | | 14.8% | | | 15.0% | | | 15.3% | | | 15.6% |
Capital expenditures (000s) | $ | 143,927 | | $ | 89,581 | | $ | 208,135 | | $ | 242,459 | | $ | 168,497 |
Total cell sites in service | | 6,183 | | | 6,165 | | | 6,975 | | | 7,687 | | | 7,748 |
Owned towers | | 4,457 | | | 4,448 | | | 4,448 | | | 4,422 | | | 4,411 |
* Represents U.S. Cellular’s consolidated markets. These results include markets which U. S. Cellular currently consolidates, or previously consolidated in the periods presented, and are not adjusted in prior periods for subsequent divestitures or deconsolidations.
Refer to U.S. Cellular’s Form 8-K filed on August 2, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and six months ended June 30, 2013, as if the transactions had occurred at the beginning of the period.
United States Cellular Corporation |
Core* Markets Summary Operating Data (Unaudited) |
| | | | | | | | | | | | | | | | |
As of or for the Quarter Ended | 6/30/2014 | | 3/31/2014 | | 12/31/2013 | | 9/30/2013 | | 6/30/2013 |
Retail Customers | | | | | | | | | | | | | | |
| Postpaid | | | | | | | | | | | | | | |
| | Total at end of period | | 4,148,000 | | | 4,174,000 | | | 4,267,000 | | | 4,343,000 | | | 4,412,000 |
| | Gross additions | | 190,000 | | | 197,000 | | | 176,000 | | | 165,000 | | | 165,000 |
| | Net additions (losses) | | (26,000) | | | (93,000) | | | (71,000) | | | (60,000) | | | (53,000) |
| | ARPU (1) | $ | 56.82 | | $ | 57.59 | | $ | 53.53 | | $ | 54.64 | | $ | 54.44 |
| | Churn rate (2) | | 1.7% | | | 2.3% | | | 1.9% | | | 1.7% | | | 1.6% |
| | Smartphone penetration (3) | | 55.3% | | | 53.1% | | | 50.8% | | | 47.1% | | | 45.5% |
| Prepaid | | | | | | | | | | | | | | |
| | Total at end of period | | 352,000 | | | 356,000 | | | 343,000 | | | 370,000 | | | 381,000 |
| | Gross additions | | 65,000 | | | 85,000 | | | 63,000 | | | 65,000 | | | 76,000 |
| | Net additions (losses) | | (4,000) | | | 13,000 | | | (26,000) | | | (11,000) | | | 8,000 |
| | ARPU (1) | $ | 34.02 | | $ | 32.22 | | $ | 31.66 | | $ | 28.72 | | $ | 31.65 |
| | Churn rate (2) | | 6.5% | | | 6.9% | | | 8.3% | | | 6.8% | | | 6.0% |
Total customers at end of period | | 4,653,000 | | | 4,684,000 | | | 4,774,000 | | | 4,875,000 | | | 4,968,000 |
Billed ARPU (1) | $ | 53.36 | | $ | 53.93 | | $ | 50.25 | | $ | 50.92 | | $ | 50.98 |
Service revenue ARPU (1) | $ | 60.32 | | $ | 60.19 | | $ | 57.05 | | $ | 58.36 | | $ | 57.88 |
Smartphones sold as a percent of total devices sold | | 72.6% | | | 73.0% | | | 79.6% | | | 65.2% | | | 66.1% |
Total population | | | | | | | | | | | | | | |
| | Consolidated markets (4) | | 54,817,000 | | | 54,817,000 | | | 58,013,000 | | | 84,025,000 | | | 84,025,000 |
| | Consolidated operating markets (4) | | 31,729,000 | | | 31,729,000 | | | 31,759,000 | | | 31,822,000 | | | 31,822,000 |
Market penetration at end of period | | | | | | | | | | | | | | |
| | Consolidated markets (5) | | 8.5% | | | 8.5% | | | 8.2% | | | 5.8% | | | 5.9% |
| | Consolidated operating markets (5) | | 14.7% | | | 14.8% | | | 15.0% | | | 15.3% | | | 15.6% |
Capital expenditures (000s) | $ | 143,927 | | $ | 89,581 | | $ | 211,247 | | $ | 239,332 | | $ | 171,166 |
Total cell sites in service | | 6,183 | | | 6,165 | | | 6,161 | | | 6,127 | | | 6,113 |
Owned towers | | 3,892 | | | 3,883 | | | 3,883 | | | 3,857 | | | 3,846 |
* U.S. Cellular’s Core Markets excludes the results of the Divestiture Markets and NY1 and NY2 Partnerships for the periods presented.
Refer to U.S. Cellular’s Form 8-K filed on August 2, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and six months ended June 30, 2013, as if the transactions had occurred at the beginning of the period.
(1) ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period. These revenue bases and customer populations are shown below:
a. Postpaid ARPU consists of total postpaid service revenues and postpaid customers.
b. Prepaid ARPU consists of total prepaid service revenues and prepaid customers.
c. Billed ARPU consists of total retail service or “billed” revenues (total postpaid, prepaid and reseller service revenues) and postpaid, prepaid and reseller customers.
d. Service revenue ARPU consists of total retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.
(2) Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.
(3) Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding tablets. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.
(4) The decrease in the population of Consolidated markets is due primarily to the divestiture of the Mississippi Valley non-operating license in October 2013 and the majority of the St. Louis area non-operating market license in March 2014. Total Population is used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (5) below.
(5) Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas. The increase in penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (4) above.
TDS Telecom |
Summary Operating Data (Unaudited) |
| | | | | | | | | | | | | | | | | |
Quarter Ended | 6/30/2014 | | 3/31/2014 | | 12/31/2013 | | 9/30/2013 | | 6/30/2013 |
TDS Telecom | | | | | | | | | | | | | | |
Wireline | | | | | | | | | | | | | | |
| | Residential connections | | | | | | | | | | | | | | |
| | | Voice (1) | | 346,100 | | | 348,700 | | | 352,100 | | | 358,100 | | | 364,100 |
| | | Broadband (2) | | 232,700 | | | 229,000 | | | 227,000 | | | 229,500 | | | 231,700 |
| | | IPTV (3) | | 18,200 | | | 15,900 | | | 13,800 | | | 12,200 | | | 10,500 |
| | | Wireline residential connections | | 597,000 | | | 593,600 | | | 592,900 | | | 599,800 | | | 606,300 |
| | | | | | | | | | | | | | | | | |
| | Total residential revenue per connection (4) | $ | 41.05 | | $ | 40.79 | | $ | 40.93 | | $ | 41.12 | | $ | 40.10 |
| | | | | | | | | | | | | | | | | |
| | Commercial connections | | | | | | | | | | | | | | |
| | | Voice (1) | | 206,200 | | | 212,200 | | | 218,400 | | | 223,800 | | | 229,100 |
| | | Broadband (2) | | 26,000 | | | 26,600 | | | 27,100 | | | 27,600 | | | 28,200 |
| | | managedIP (5) | | 133,300 | | | 131,000 | | | 127,600 | | | 121,000 | | | 112,000 |
| | | Wireline commercial connections | | 365,500 | | | 369,800 | | | 373,100 | | | 372,400 | | | 369,300 |
| | | | | | | | | | | | | | | | | |
| | Total Wireline connections | | 962,500 | | | 963,400 | | | 966,000 | | | 972,200 | | | 975,600 |
| | | | | | | | | | | | | | | | | |
Cable | | | | | | | | | | | | | | |
| | Cable Connections | | | | | | | | | | | | | | |
| | | Video (6) | | 69,700 | | | 68,700 | | | 69,100 | | | 70,300 | | | |
| | | Broadband (7) | | 63,200 | | | 63,000 | | | 61,000 | | | 59,800 | | | |
| | | Voice (7) | | 17,800 | | | 17,700 | | | 17,200 | | | 16,800 | | | |
| | | Cable connections | | 150,700 | | | 149,400 | | | 147,300 | | | 146,900 | | | |
| | | | | | | | | | | | | | | | | |
| | Total residential revenue per connection (4) | $ | 56.80 | | $ | 57.37 | | $ | 55.27 | | $ | 55.67 | | | |
(1) The individual circuit connecting customers to TDS Telecom’s central office facilities.
(2) The number of customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.
(3) The number of customers provided video services using IP networking technology.
(4) Total residential revenue divided by the average number of total residential connections.
(5) The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.
(6) Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.
(7) Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively.
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
TDS Telecom |
Capital Expenditures (000s) |
| | | | | | | | | | | | | | |
Quarter Ended | | 6/30/2014 | | | 3/31/2014 | | | 12/31/2013 | | | 9/30/2013 | | | 6/30/2013 |
Wireline | $ | 27,400 | | $ | 22,900 | | $ | 46,000 | | $ | 32,800 | | $ | 33,300 |
Cable | | 7,200 | | | 6,200 | | | 7,000 | | | 1,400 | | | — |
HMS | | 10,600 | | | 2,800 | | | 9,200 | | | 2,400 | | | 2,300 |
| $ | 45,200 | | $ | 31,900 | | $ | 62,200 | | $ | 36,600 | | $ | 35,600 |
Telephone and Data Systems, Inc. |
Consolidated Statement of Operations Highlights |
Three Months Ended June 30, |
(Unaudited, dollars and shares in thousands, except per share amounts) |
| | | | | | | | | | Change |
| | | | 2014 | | 2013 | | Amount | Percent |
Operating revenues | | | | | | | | | | |
| U.S. Cellular | $ | 957,773 | | $ | 995,130 | | $ | (37,357) | | (4%) |
| TDS Telecom | | 270,850 | | | 223,460 | | | 47,390 | | 21% |
| All Other (1) | | 7,769 | | | 9,576 | | | (1,807) | | (19%) |
| | | | | 1,236,392 | | | 1,228,166 | | | 8,226 | | 1% |
Operating expenses | | | | | | | | | | |
| U.S. Cellular | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 863,361 | | | 813,464 | | | 49,897 | | 6% |
| | Depreciation, amortization and accretion | | 148,337 | | | 202,580 | | | (54,243) | | (27%) |
| | (Gain) loss on asset disposals, net | | 6,893 | | | 9,018 | | | (2,125) | | (24%) |
| | (Gain) loss on sale of business and other exit costs, net | | (10,511) | | | (249,024) | | | 238,513 | | 96% |
| | | | | 1,008,080 | | | 776,038 | | | 232,042 | | 30% |
| TDS Telecom | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 197,427 | | | 162,954 | | | 34,473 | | 21% |
| | Depreciation, amortization and accretion | | 53,175 | | | 48,756 | | | 4,419 | | 9% |
| | (Gain) loss on asset disposals, net | | 983 | | | (682) | | | 1,665 | | >(100%) |
| | | | | 251,585 | | | 211,028 | | | 40,557 | | 19% |
| All Other (1)(2) | | | | | | | | | | |
| | Expenses excluding depreciation and amortization | | 9,613 | | | 10,033 | | | (420) | | (4%) |
| | Depreciation and amortization | | 3,055 | | | 2,867 | | | 188 | | 7% |
| | (Gain) loss on asset disposals, net | | 27 | | | (17) | | | 44 | | >(100%) |
| | (Gain) loss on sale of business and other exit costs, net | | 13,122 | | | (54,010) | | | 67,132 | | >(100%) |
| | | | | 25,817 | | | (41,127) | | | 66,944 | | >(100%) |
| | | | | | | | | | | | | |
| | | Total operating expenses | | 1,285,482 | | | 945,939 | | | 339,543 | | 36% |
Operating income (loss) | | | | | | | | | | |
| U.S. Cellular | | (50,307) | | | 219,092 | | | (269,399) | | >(100%) |
| TDS Telecom | | 19,265 | | | 12,432 | | | 6,833 | | 55% |
| All Other (1)(2) | | (18,048) | | | 50,703 | | | (68,751) | | >(100%) |
| | | | | (49,090) | | | 282,227 | | | (331,317) | | >(100%) |
Investment and other income (expense) | | | | | | | | | | |
| Equity in earnings of unconsolidated entities | | 34,790 | | | 35,605 | | | (815) | | (2%) |
| Interest and dividend income | | 2,751 | | | 2,600 | | | 151 | | 6% |
| Gain (loss) on investments | | — | | | 14,518 | | | (14,518) | | N/M |
| Interest expense | | (27,898) | | | (23,749) | | | (4,149) | | (17%) |
| Other, net | | 50 | | | (197) | | | 247 | | >(100%) |
| | Total investment and other income | | 9,693 | | | 28,777 | | | (19,084) | | (66%) |
Income (loss) before income taxes | | (39,397) | | | 311,004 | | | (350,401) | | >(100%) |
| Income tax expense (benefit) | | (13,671) | | | 132,607 | | | (146,278) | | >(100%) |
Net income (loss) | | (25,726) | | | 178,397 | | | (204,123) | | >(100%) |
| Less: Net income (loss) attributable to noncontrolling interests, net of tax | | (3,688) | | | 22,320 | | | (26,008) | | >(100%) |
Net income (loss) attributable to TDS shareholders | | (22,038) | | | 156,077 | | | (178,115) | | >(100%) |
| TDS Preferred dividend requirement | | (12) | | | (12) | | | — | | — |
Net income (loss) available to common shareholders | $ | (22,050) | | $ | 156,065 | | $ | (178,115) | | >(100%) |
| | | | | | | | | | | | | |
Basic weighted average shares outstanding | | 108,719 | | | 108,385 | | | 334 | | — |
Basic earnings (loss) per share attributable to TDS shareholders | $ | (0.20) | | $ | 1.44 | | $ | (1.64) | | >(100%) |
| | | | | | | | | | | | | |
Diluted weighted average shares outstanding | | 108,719 | | | 108,913 | | | (194) | | — |
Diluted earnings (loss) per share attributable to TDS shareholders | $ | (0.20) | | $ | 1.42 | | $ | (1.62) | | >(100%) |
(1) Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations.
(2) Due to the Airadigm Transaction, TDS recognized expenses of $13.1 million related to exit and disposal activities in 2014. In 2013, TDS recognized an incremental gain of $53.5 million compared to U.S. Cellular upon closing of the Divestiture Transaction as a result of lower asset basis in the assets disposed.
N/M – Percentage change not meaningful
Telephone and Data Systems, Inc. |
Consolidated Statement of Operations Highlights |
Six Months Ended June 30, |
(Unaudited, dollars and shares in thousands, except per share amounts) |
| | | | | | | | | | Change |
| | | | 2014 | | 2013 | | Amount | Percent |
Operating revenues | | | | | | | | | | |
| U.S. Cellular | $ | 1,883,584 | | $ | 2,076,876 | | $ | (193,292) | | (9%) |
| TDS Telecom | | 533,266 | | | 440,521 | | | 92,745 | | 21% |
| All Other (1) | | 15,504 | | | 19,342 | | | (3,838) | | (20%) |
| | | | | 2,432,354 | | | 2,536,739 | | | (104,385) | | (4%) |
Operating expenses | | | | | | | | | | |
| U.S. Cellular | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 1,710,006 | | | 1,691,534 | | | 18,472 | | 1% |
| | Depreciation, amortization and accretion | | 316,090 | | | 392,425 | | | (76,335) | | (19%) |
| | (Gain) loss on asset disposals, net | | 8,827 | | | 14,452 | | | (5,625) | | (39%) |
| | (Gain) loss on sale of business and other exit costs, net | | (17,411) | | | (242,093) | | | 224,682 | | 93% |
| | (Gain) loss on license sales and exchanges | | (91,446) | | | — | | | (91,446) | | N/M |
| | | | | 1,926,066 | | | 1,856,318 | | | 69,748 | | 4% |
| TDS Telecom | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 387,730 | | | 322,440 | | | 65,290 | | 20% |
| | Depreciation, amortization and accretion | | 106,950 | | | 98,247 | | | 8,703 | | 9% |
| | (Gain) loss on asset disposals, net | | 1,327 | | | (489) | | | 1,816 | | >(100%) |
| | | | | 496,007 | | | 420,198 | | | 75,809 | | 18% |
| All Other (1)(2) | | | | | | | | | | |
| | Expenses excluding depreciation and amortization | | 18,939 | | | 19,272 | | | (333) | | (2%) |
| | Depreciation and amortization | | 6,446 | | | 5,608 | | | 838 | | 15% |
| | (Gain) loss on asset disposals, net | | 179 | | | (28) | | | 207 | | >(100%) |
| | (Gain) loss on sale of business and other exit costs, net | | 13,122 | | | (54,010) | | | 67,132 | | >(100%) |
| | | | | 38,686 | | | (29,158) | | | 67,844 | | >(100%) |
| | | | | | | | | | | | | |
| | | Total operating expenses | | 2,460,759 | | | 2,247,358 | | | 213,401 | | 9% |
Operating income (loss) | | | | | | | | | | |
| U.S. Cellular | | (42,482) | | | 220,558 | | | (263,040) | | >(100%) |
| TDS Telecom | | 37,259 | | | 20,323 | | | 16,936 | | 83% |
| All Other (1)(2) | | (23,182) | | | 48,500 | | | (71,682) | | >(100%) |
| | | | | (28,405) | | | 289,381 | | | (317,786) | | >(100%) |
Investment and other income (expense) | | | | | | | | | | |
| Equity in earnings of unconsolidated entities | | 72,117 | | | 62,694 | | | 9,423 | | 15% |
| Interest and dividend income | | 5,237 | | | 4,178 | | | 1,059 | | 25% |
| Gain (loss) on investments | | ― | | | 14,518 | | | (14,518) | | N/M |
| Interest expense | | (56,605) | | | (48,247) | | | (8,358) | | (17%) |
| Other, net | | 210 | | | (351) | | | 561 | | >(100%) |
| | Total investment and other income | | 20,959 | | | 32,792 | | | (11,833) | | (36%) |
Income (loss) before income taxes | | (7,446) | | | 322,173 | | | (329,619) | | >(100%) |
| Income tax expense (benefit) | | (2,014) | | | 136,787 | | | (138,801) | | >(100%) |
Net income (loss) | | (5,432) | | | 185,386 | | | (190,818) | | >(100%) |
| Less: Net income (loss) attributable to noncontrolling interests, net of tax | | (1,648) | | | 27,890 | | | (29,538) | | >(100%) |
Net income (loss) attributable to TDS shareholders | | (3,784) | | | 157,496 | | | (161,280) | | >(100%) |
| TDS Preferred dividend requirement | | (25) | | | (25) | | | — | | — |
Net income (loss) available to common shareholders | $ | (3,809) | | $ | 157,471 | | $ | (161,280) | | >(100%) |
| | | | | | | | | | | | | |
Basic weighted average shares outstanding | | 108,853 | | | 108,320 | | | 533 | | — |
Basic earnings (loss) per share attributable to TDS shareholders | $ | (0.04) | | $ | 1.45 | | $ | (1.49) | | >(100%) |
| | | | | | | | | | | | | |
Diluted weighted average shares outstanding | | 108,853 | | | 108,827 | | | 26 | | — |
Diluted earnings (loss) per share attributable to TDS shareholders | $ | (0.04) | | $ | 1.44 | | $ | (1.48) | | >(100%) |
(1) Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations.
(2) Due to the Airadigm Transaction, TDS recognized expenses of $13.1 million related to exit and disposal activities in 2014. In 2013, TDS recognized an incremental gain of $53.5 million compared to U.S. Cellular upon closing of the Divestiture Transaction as a result of lower asset basis in the assets disposed.
N/M – Percentage change not meaningful
Telephone and Data Systems, Inc. |
Consolidated Balance Sheet Highlights |
(Unaudited, dollars in thousands) |
| | | | | | |
ASSETS |
| | | | | | |
| | | | | | |
| | June 30, | | December 31, |
| | 2014 | | 2013 |
Current assets | | | | | |
| Cash and cash equivalents | $ | 874,860 | | $ | 830,014 |
| Short-term investments | | 40,035 | | | 50,104 |
| Accounts receivable from customers and others | | 624,261 | | | 731,114 |
| Inventory, net | | 205,886 | | | 244,560 |
| Net deferred income tax asset | | 106,077 | | | 106,077 |
| Prepaid expenses | | 88,860 | | | 87,920 |
| Income taxes receivable | | 9,197 | | | 2,397 |
| Other current assets | | 32,274 | | | 35,151 |
| | | 1,981,450 | | | 2,087,337 |
| | | | | | |
Assets held for sale | | 5,980 | | | 16,027 |
| | | | | | |
Investments | | | | | |
| Licenses | | 1,460,484 | | | 1,423,779 |
| Goodwill | | 834,352 | | | 836,843 |
| Franchise rights | | 124,487 | | | 123,668 |
| Other intangible assets, net | | 61,536 | | | 71,454 |
| Investments in unconsolidated entities | | 308,661 | | | 301,772 |
| Other investments | | 589 | | | 641 |
| | | 2,790,109 | | | 2,758,157 |
| | | | | | |
Property, plant and equipment, net | | | | | |
| U.S. Cellular | | 2,761,404 | | | 2,856,520 |
| TDS Telecom | | 962,377 | | | 984,634 |
| Other | | 26,166 | | | 36,990 |
| | | 3,749,947 | | | 3,878,144 |
| | | | | | |
Other assets and deferred charges | | 180,183 | | | 164,482 |
| | | | | | |
Total assets | $ | 8,707,669 | | $ | 8,904,147 |
Telephone and Data Systems, Inc. |
Consolidated Balance Sheet Highlights |
(Unaudited, dollars in thousands) |
| | | | | | | | |
LIABILITIES AND EQUITY |
| | | | | | | | |
| | | | | | | | |
| | | | June 30, | | December 31, |
| | | | 2014 | | 2013 |
Current liabilities | | | | | |
| | Current portion of long-term debt | $ | 890 | | $ | 1,646 |
| | Accounts payable | | 425,051 | | | 496,069 |
| | Customer deposits and deferred revenues | | 302,496 | | | 289,445 |
| | Accrued interest | | 6,671 | | | 6,673 |
| | Accrued taxes | | 73,227 | | | 70,518 |
| | Accrued compensation | | 98,099 | | | 115,031 |
| | Other current liabilities | | 166,270 | | | 212,374 |
| | | | | 1,072,704 | | | 1,191,756 |
| | | | | | | | |
Liabilities held for sale | | 722 | | | ― |
| | | | | | | | |
Deferred liabilities and credits | | | | | |
| | Net deferred income tax liability | | 828,458 | | | 862,975 |
| | Other deferred liabilities and credits | | 460,862 | | | 458,709 |
| | | | | | | | |
Long-term debt | | 1,718,832 | | | 1,720,074 |
| | | | | | | | |
Noncontrolling interests with redemption features | | 911 | | | 536 |
| | | | | | | | |
Equity | | | | | |
| TDS shareholders' equity | | | | | |
| | Series A Common and Common Shares, par value $.01 | | 1,327 | | | 1,327 |
| | Capital in excess of par value | | 2,312,515 | | | 2,308,807 |
| | Treasury shares, at cost | | (737,835) | | | (721,354) |
| | Accumulated other comprehensive loss | | (980) | | | (569) |
| | Retained earnings | | 2,496,735 | | | 2,529,626 |
| | | Total TDS shareholders' equity | | 4,071,762 | | | 4,117,837 |
| | | | | | | | |
| Preferred shares | | 824 | | | 824 |
| Noncontrolling interests | | 552,594 | | | 551,436 |
| | | | | | | | |
| | Total equity | | 4,625,180 | | | 4,670,097 |
| | | | | | | | |
Total liabilities and equity | $ | 8,707,669 | | $ | 8,904,147 |
Balance Sheet Highlights |
June 30, 2014 |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | U.S. | | TDS | | TDS Corporate | | Intercompany | | TDS |
| | | Cellular | | Telecom | | & Other | | Eliminations | | Consolidated |
Cash and cash equivalents | $ | 404,058 | | $ | 87,170 | | $ | 383,632 | | $ | ― | | $ | 874,860 |
Affiliated cash investments | | ― | | | 466,295 | | | ― | | | (466,295) | | | ― |
Short-term investments | | 40,035 | | | ― | | | ― | | | ― | | | 40,035 |
| | $ | 444,093 | | $ | 553,465 | | $ | 383,632 | | $ | (466,295) | | $ | 914,895 |
| | | | | | | | | | | | | | | | |
Licenses, goodwill and other intangible assets | $ | 1,825,355 | | $ | 786,487 | | $ | (130,983) | | $ | ― | | $ | 2,480,859 |
Investment in unconsolidated entities | | 270,215 | | | 3,810 | | | 41,789 | | | (7,153) | | | 308,661 |
Long-term and other investments | | ― | | | 588 | | | 1 | | | ― | | | 589 |
| | | $ | 2,095,570 | | $ | 790,885 | | $ | (89,193) | | $ | (7,153) | | $ | 2,790,109 |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Property, plant and equipment, net | $ | 2,761,404 | | $ | 962,377 | | $ | 26,166 | | $ | ― | | $ | 3,749,947 |
| | | | | | | | | | | | | | | | |
Long-term debt: | | | | | | | | | | | | | | |
| Current portion | $ | 46 | | $ | 57 | | $ | 787 | | $ | ― | | $ | 890 |
| Non-current portion | | 876,715 | | | 1,424 | | | 840,693 | | | ― | | | 1,718,832 |
| | | $ | 876,761 | | $ | 1,481 | | $ | 841,480 | | $ | ― | | $ | 1,719,722 |
Telephone and Data Systems, Inc.
Schedule of Cash and Cash Equivalents and Investments
(Unaudited, dollars in thousands)
The following table presents TDS’ cash and cash equivalents and investments at June 30, 2014 and December 31, 2013.
| | June 30, | | December 31, |
| 2014 | | 2013 |
| | | | | | |
Cash and cash equivalents | $ | 874,860 | | $ | 830,014 |
| | | | | | |
Amounts included in short-term investments (1) (2) | | | | | |
| U.S. Treasury Notes | | 40,035 | | | 50,104 |
| | | | | | |
Total cash and cash equivalents and investments | $ | 914,895 | | $ | 880,118 |
(1) Designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet.
(2) Maturities are less than twelve months from the respective balance sheet dates.
Telephone and Data Systems, Inc. |
Consolidated Statement of Cash Flows |
Six Months Ended June 30, |
(Unaudited, dollars in thousands) |
| | | | | 2014 | | 2013 |
Cash flows from operating activities | | | | | |
| Net income (loss) | $ | (5,432) | | $ | 185,386 |
| | Add (deduct) adjustments to reconcile net income to cash flows from operating activities | | | | | |
| | | | Depreciation, amortization and accretion | | 429,486 | | | 496,280 |
| | | | Bad debts expense | | 52,098 | | | 35,187 |
| | | | Stock-based compensation expense | | 15,488 | | | 12,902 |
| | | | Deferred income taxes, net | | (33,346) | | | (21,246) |
| | | | Equity in earnings of unconsolidated entities | | (72,117) | | | (62,694) |
| | | | Distributions from unconsolidated entities | | 65,569 | | | 47,635 |
| | | | (Gain) loss on asset disposals, net | | 10,333 | | | 13,935 |
| | | | (Gain) loss on sale of business and other exit costs, net | | (4,289) | | | (296,103) |
| | | | (Gain) loss on investments | | — | | | (14,518) |
| | | | (Gain) loss on license sales and exchanges | | (91,446) | | | — |
| | | | Noncash interest expense | | 1,014 | | | 997 |
| | | | Other operating activities | | 3 | | | 505 |
| | Changes in assets and liabilities from operations | | | | | |
| | | | Accounts receivable | | 40,459 | | | (5,781) |
| | | | Inventory | | 38,674 | | | (8,105) |
| | | | Accounts payable | | (43,132) | | | 58,204 |
| | | | Customer deposits and deferred revenues | | 13,139 | | | 7,897 |
| | | | Accrued taxes | | 1,049 | | | 150,425 |
| | | | Accrued interest | | 22 | | | 2,172 |
| | | | Other assets and liabilities | | (101,930) | | | (81,586) |
| | | | | | 315,642 | | | 521,492 |
| | | | | | | | | |
Cash flows from investing activities | | | | | |
| Cash used for additions to property, plant and equipment | | (339,907) | | | (384,281) |
| Cash paid for acquisitions and licenses | | (18,681) | | | (14,150) |
| Cash received from divestitures | | 125,905 | | | 480,000 |
| Cash received for investments | | 10,000 | | | 15,000 |
| Other investing activities | | 3,720 | | | 14,127 |
| | | | | | (218,963) | | | 110,696 |
| | | | | | | | | |
Cash flows from financing activities | | | | | |
| Repayment of long-term debt | | (589) | | | (605) |
| TDS Common Shares reissued for benefit plans, net of tax payments | | 401 | | | 776 |
| U.S. Cellular Common Shares reissued for benefit plans, net of tax payments | | 830 | | | (2,206) |
| Repurchase of TDS Common Shares | | (20,090) | | | — |
| Repurchase of U.S. Cellular Common Shares | | (8,298) | | | (18,425) |
| Dividends paid to TDS shareholders | | (29,107) | | | (27,598) |
| U.S. Cellular dividends paid to noncontrolling public shareholders | | — | | | (75,235) |
| Distributions to noncontrolling interests | | (482) | | | (3,292) |
| Other financing activities | | 5,502 | | | 331 |
| | | | | | (51,833) | | | (126,254) |
| | | | | | | | | |
Net increase in cash and cash equivalents | | 44,846 | | | 505,934 |
Cash and cash equivalents | | | | | |
| Beginning of period | | 830,014 | | | 740,481 |
| End of period | $ | 874,860 | | $ | 1,246,415 |
TDS Telecom Highlights |
Three Months Ended June 30, |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | | Change |
| | | | 2014 | | 2013 | | Amount | | Percent |
Wireline | | | | | | | | | | |
Operating revenues | | | | | | | | | | |
| Residential | $ | 73,360 | | $ | 72,911 | | $ | 449 | | 1% |
| Commercial | | 57,472 | | | 57,128 | | | 344 | | 1% |
| Wholesale | | 49,465 | | | 51,389 | | | (1,924) | | (4%) |
| | Total service revenues | | 180,297 | | | 181,428 | | | (1,131) | | (1%) |
| Equipment sales | | 431 | | | 765 | | | (334) | | (44%) |
| | | | | 180,728 | | | 182,193 | | | (1,465) | | (1%) |
Operating expenses | | | | | | | | | | |
| Cost of services | | 64,305 | | | 65,729 | | | (1,424) | | (2%) |
| Cost of equipment sold | | 481 | | | 1,094 | | | (613) | | (56%) |
| Selling, general and administrative expenses | | 47,708 | | | 56,692 | | | (8,984) | | (16%) |
| Depreciation, amortization and accretion | | 41,827 | | | 43,193 | | | (1,366) | | (3%) |
| (Gain) loss on asset disposals, net | | 514 | | | (765) | | | 1,279 | | >100% |
| | | | | 154,835 | | | 165,943 | | | (11,108) | | (7%) |
| | | | | | | | | | | | | |
| Operating income | $ | 25,893 | | $ | 16,250 | | $ | 9,643 | | 59% |
| | | | | | | | | | | | | |
Cable | | | | | | | | | | |
Operating revenues | | | | | | | | | | |
| Residential | $ | 18,222 | | $ | — | | $ | 18,222 | | N/M |
| Commercial | | 4,262 | | | — | | | 4,262 | | N/M |
| | | | 22,484 | | | — | | | 22,484 | | N/M |
Operating expenses | | | | | | | | | | |
| Cost of services | | 11,394 | | | — | | | 11,394 | | N/M |
| Selling, general and administrative expenses | | 6,285 | | | — | | | 6,285 | | N/M |
| Depreciation, amortization and accretion | | 4,557 | | | — | | | 4,557 | | N/M |
| Loss on asset disposals, net | | 425 | | | — | | | 425 | | N/M |
| | | | | 22,661 | | | — | | | 22,661 | | N/M |
| | | | | | | | | | | | | |
| Operating loss | $ | (177) | | $ | — | | $ | (177) | | N/M |
| | | | | | | | | | | | | |
HMS | | | | | | | | | | |
Operating revenues | | | | | | | | | | |
| Service revenues | $ | 27,575 | | $ | 23,205 | | $ | 4,370 | | 19% |
| Equipment sales | | 40,361 | | | 18,169 | | | 22,192 | | >100% |
| | | | | 67,936 | | | 41,374 | | | 26,562 | | 64% |
Operating expenses | | | | | | | | | | |
| Cost of services | | 21,301 | | | 15,071 | | | 6,230 | | 41% |
| Cost of equipment sold | | 33,875 | | | 15,114 | | | 18,761 | | >100% |
| Selling, general and administrative expenses | | 12,376 | | | 9,361 | | | 3,015 | | 32% |
| Depreciation, amortization and accretion | | 6,791 | | | 5,563 | | | 1,228 | | 22% |
| Loss on asset disposals, net | | 44 | | | 83 | | | (39) | | (47%) |
| | | | | 74,387 | | | 45,192 | | | 29,195 | | 65% |
| | | | | | | | | | | | | |
| Operating loss | $ | (6,451) | | $ | (3,818) | | $ | (2,633) | | (69%) |
| | | | | | | | | | | | | |
Intercompany revenues | $ | (298) | | $ | (107) | | $ | (191) | | >(100)% |
Intercompany expenses | | (298) | | | (107) | | | (191) | | >(100)% |
| | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 19,265 | | $ | 12,432 | | $ | 6,833 | | 55% |
TDS Telecom Highlights |
Six Months Ended June 30, |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | | Change |
| | | | 2014 | | 2013 | | Amount | | Percent |
Wireline | | | | | | | | | | |
Operating revenues | | | | | | | | | | |
| Residential | $ | 145,865 | | $ | 145,915 | | $ | (50) | | — |
| Commercial | | 115,452 | | | 114,253 | | | 1,199 | | 1% |
| Wholesale | | 95,913 | | | 101,938 | | | (6,025) | | (6%) |
| | Total service revenues | | 357,230 | | | 362,106 | | | (4,876) | | (1%) |
| Equipment sales | | 984 | | | 1,662 | | | (678) | | (41%) |
| | | | | 358,214 | | | 363,768 | | | (5,554) | | (2%) |
Operating expenses | | | | | | | | | | |
| Cost of services | | 128,705 | | | 132,168 | | | (3,463) | | (3%) |
| Cost of equipment sold | | 964 | | | 2,104 | | | (1,140) | | (54%) |
| Selling, general and administrative expenses | | 94,228 | | | 114,072 | | | (19,844) | | (17%) |
| Depreciation, amortization and accretion | | 84,563 | | | 87,216 | | | (2,653) | | (3%) |
| (Gain) loss on asset disposals, net | | 759 | | | (602) | | | 1,361 | | >100% |
| | | | | 309,219 | | | 334,958 | | | (25,739) | | (8%) |
| | | | | | | | | | | | | |
| Operating income | $ | 48,995 | | $ | 28,810 | | $ | 20,185 | | 70% |
| | | | | | | | | | | | | |
Cable | | | | | | | | | | |
Operating revenues | | | | | | | | | | |
| Residential | $ | 36,475 | | $ | — | | $ | 36,475 | | N/M |
| Commercial | | 8,512 | | | — | | | 8,512 | | N/M |
| | | | 44,987 | | | — | | | 44,987 | | N/M |
Operating expenses | | | | | | | | | | |
| Cost of services | | 22,349 | | | ��� | | | 22,349 | | N/M |
| Selling, general and administrative expenses | | 12,663 | | | — | | | 12,663 | | N/M |
| Depreciation, amortization and accretion | | 8,918 | | | — | | | 8,918 | | N/M |
| Loss on asset disposals, net | | 490 | | | — | | | 490 | | N/M |
| | | | | 44,420 | | | — | | | 44,420 | | N/M |
| | | | | | | | | | | | | |
| Operating income | $ | 567 | | $ | — | | $ | 567 | | N/M |
| | | | | | | | | | | | | |
HMS | | | | | | | | | | |
Operating revenues | | | | | | | | | | |
| Service revenues | $ | 54,951 | | $ | 45,205 | | $ | 9,746 | | 22% |
| Equipment sales | | 76,093 | | | 31,733 | | | 44,360 | | >100% |
| | | | | 131,044 | | | 76,938 | | | 54,106 | | 70% |
Operating expenses | | | | | | | | | | |
| Cost of services | | 38,247 | | | 28,673 | | | 9,574 | | 33% |
| Cost of equipment sold | | 64,342 | | | 26,326 | | | 38,016 | | >100% |
| Selling, general and administrative expenses | | 27,211 | | | 19,282 | | | 7,929 | | 41% |
| Depreciation, amortization and accretion | | 13,469 | | | 11,031 | | | 2,438 | | 22% |
| Loss on asset disposals, net | | 78 | | | 113 | | | (35) | | (31%) |
| | | | | 143,347 | | | 85,425 | | | 57,922 | | 68% |
| | | | | | | | | | | | | |
| Operating loss | $ | (12,303) | | $ | (8,487) | | $ | (3,816) | | (45%) |
| | | | | | | | | | | | | |
Intercompany revenues | $ | (979) | | $ | (185) | | $ | (794) | | >(100)% |
Intercompany expenses | | (979) | | | (185) | | | (794) | | >(100)% |
| | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 37,259 | | $ | 20,323 | | $ | 16,936 | | 83% |
Telephone and Data Systems, Inc. |
Financial Measures and Reconciliations |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | | |
| | | | TDS Consolidated |
| | | | | | | | | | | | | | |
| | | | Three Months Ended | | Six Months Ended |
| | | | June 30, | | June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| | | | | | | | | | | | | | |
| Cash flows from operating activities | | $ | 210,705 | | $ | 275,140 | | $ | 315,642 | | $ | 521,492 |
| Add: Sprint Cost Reimbursement | | | 22,862 | | | — | | | 34,116 | | | — |
| Less: Cash used for additions to property, plant and equipment | | | 189,017 | | | 207,963 | | | 339,907 | | | 384,281 |
| | Adjusted free cash flow (1) | | $ | 44,550 | | $ | 67,177 | | $ | 9,851 | | $ | 137,211 |
(1) Adjusted free cash flow is defined as Cash flows from operating activities, as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash used for additions to property, plant and equipment. Adjusted free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment. The prior manner of calculating free cash flow has been adjusted to include the Sprint Cost Reimbursement. The reason for this is that the Sprint decommissioning cash outflows are included in “Cash flows from operating activities,” but the reimbursements from Sprint related to these outflows are not included in this caption.
