EX-99.1 2 Ex991.htm EXHIBIT 99.1  

 

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.

 

 

1

 

 

 

 

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.   

 

 

2

 

 

 

 

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.

 

 

 

3

 

 

 

(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  

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 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  

 

 

 

5

 

 

 

 

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                                

 

 

6

 

 

 

 

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.

 

   

 

 

7

 

 

 

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

 

 

8

 

 

 

 

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

 

 

9

 

 

 

 

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

 

 

10

 

 

 

 

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  

 

 

11

 

 

 

 

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. 

  

 

 

 

12

 

 

 

 

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  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

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.

 

 

 

 

   

 

 

14

 

 

 

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  

 

 

15

 

 

 

 

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%)

 

 

16

 

 

 

 

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%)

 

 

17

 

 

 

 

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) 

 

 

 

 

 

 

 

 

18

 

 

 

 

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.

 

 

 

19