Market Overview

TDS Reports Fourth Quarter 2012 Results And 2013 Financial Guidance

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CHICAGO, Feb. 26, 2013 /PRNewswire/ -- 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.  

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.

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