SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2014
TELEPHONE AND DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
001-14157 |
36-2669023 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
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30 North LaSalle Street, Suite 4000, Chicago, Illinois |
60602 |
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(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code: (312) 630-1900
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition
On May 2, 2014, Telephone and Data Systems, Inc. (“TDS”) issued a news release announcing its results of operations for the period ended March 31, 2014. A copy of the news release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
The information in this Item 2.02 of Form 8-K is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits:
In accordance with the provisions of Item 601 of Regulation S-K, any Exhibits filed or furnished herewith are set forth on the Exhibit Index attached hereto.
Attached as Exhibit 99.2 is a safe harbor cautionary statement under the Private Securities Litigation Reform Act of 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
Telephone and Data Systems, Inc. |
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(Registrant) |
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Date: |
May 2, 2014 |
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By: |
/s/ Douglas D. Shuma |
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Douglas D. Shuma |
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Senior Vice President and Controller (principal financial officer and principal accounting officer) |
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EXHIBIT INDEX
The following exhibits are filed or furnished herewith as noted below.
Exhibit No. |
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Description |
99.1 |
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Earnings Press Release dated May 2, 2014 |
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99.2 |
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Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement |
Exhibit 99.l NEWS RELEASE
As previously announced, TDS will hold a teleconference May 2, 2014 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.teldta.com.
FOR IMMEDIATE RELEASE
TDS reports first quarter 2014 results
CHICAGO, (May 2, 2014) — Telephone and Data Systems, Inc. (NYSE:TDS) reported operating revenues of $1,196.0 million for the first quarter of 2014, versus $1,308.6 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $18.3 million and $0.16 respectively, for the first quarter of 2014, compared to $1.4 million and $0.01, respectively, in the comparable period one year ago.
Year-over-year comparisons are affected by U.S. Cellular’s divestiture transaction, the deconsolidation of certain U.S. Cellular partnerships, and acquisitions at TDS Telecom, in 2013.
“Our businesses made significant progress in the quarter to execute on their customer strategies and improve operating efficiency,” said LeRoy T. Carlson, Jr., TDS president and CEO. “While we have considerable work to do to improve our financial and operating performance, I believe we’re focused on the right areas.
“U.S. Cellular continues to attract new customers and drive smartphone adoption and data use, leading to higher average revenue per customer. Substantial progress has been made to restore high standards of service following the billing system conversion, and U.S. Cellular has already leveraged the system to deliver new services like our Shared Connect Plans and no contract Simple Connect Plans.
“TDS Telecom increased average revenue per customer for both residential and commercial wireline customers, with higher-tier TDS TV packages and faster broadband speeds, and new managedIP plans. We also continued to improve the overall efficiency of the wireline business. Revenues increased 77 percent at OneNeck IT Solutions, our hosted and managed services business, driven by revenues from acquisitions and increased revenues for recurring services.
“As we continued to execute our integration and customer strategies for Baja Broadband, we also agreed to acquire Bend Broadband, a premier cable and broadband provider to residential and business customers in Central Oregon. BendBroadband’s high-capacity, all-digital network, technology leadership, and customer-centered approach will be tremendous assets as we develop a premier cable broadband business.”
1
2014 Estimated Results
U.S. Cellular capital expenditures for 2014 are expected to be approximately $640 million, down from $738 million in 2013.
TDS Telecom estimates for full-year 2014 results are shown below. Such estimates represent management’s view as of May 2, 2014. Such forward-looking statements should not be assumed to be current as of any future date. TDS undertakes no duty to update such information, whether as a result of new information, future events or otherwise. There can be no assurance that final results will not differ materially from such estimated results.
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TDS Telecom 2014 Estimated Results (1) |
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Current |
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Previous |
(Dollars in millions) |
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Operating revenues |
$1,050-$1,100 |
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Unchanged |
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Adjusted income before income taxes (2) |
$250-$280 |
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Unchanged |
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Capital expenditures |
$200 |
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Unchanged |
(1) These estimates do not reflect the effects of the acquisition of BendBroadband.
(2) Adjusted income before income taxes is defined as income before income taxes, adjusted for the items set forth in the reconciliation below. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. In addition, TDS may exclude other items from adjusted income before income taxes if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future. Adjusted income before income taxes is not a measure of financial performance under Generally Accepted Accounting Principles in the United States (“GAAP”) and should not be considered as an alternative to income before income taxes as an indicator of the company’s operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. TDS believes adjusted income before income taxes is a useful measure of TDS’ operating results before significant recurring non-cash charges, discrete gains and losses, and financing charges (interest expense). The following table provides a reconciliation of income before income taxes to adjusted income before income taxes for 2014 estimated results, three months ended March 31, 2014, and 2013 actual results:
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TDS Telecom |
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Actual Results |
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2014 Estimated Results |
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Three Months Ended March 31, 2014 |
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Year Ended December 31, 2013 |
(Dollars in millions) |
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Income before income taxes |
$25-$55 |
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$19 |
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$49 |
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Depreciation, amortization and accretion expense |
$225 |
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$54 |
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$203 |
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(Gain) loss on investments |
― |
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― |
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($1) |
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Interest expense |
― |
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― |
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($2) |
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Adjusted income before income taxes |
$250-$280 |
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$73 |
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$249 |
2
Stock repurchase summary
TDS began repurchasing under its $250 million repurchase authorization on Aug. 5, 2013. The following represents repurchases of TDS Common Shares.
Repurchase Period |
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# Shares |
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Cost (in millions) |
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2014 (first quarter) |
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157,891 |
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$ |
3.8 |
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2013 (full year) |
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338,851 |
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$ |
9.7 |
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Total |
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496,742 |
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$ |
13.5 |
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Conference Call Information
TDS will hold a conference call on May 2, 2014 at 9:30 a.m. CST.
· Access the live call on the Events & Presentations page of investors.teldta.com or at http://www.videonewswire.com/event.asp?id=99006.
· Access the call by phone at 877-407-8029 (US/Canada), no pass code required.
Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.teldta.com. The call will be archived on the Events & Presentations page of investors.teldta.com.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 5.8 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions and Baja Broadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,600 people as of March 31, 2014.
Visit www.teldta.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Contacts
Jane McCahon, Vice President, Corporate Relations and Corporate Secretary
312- 592-5379
jane.mccahon@teldta.com
Julie Mathews, Investor Relations Manager
312- 592-5341
julie.mathews@teldta.com
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: impacts of any pending acquisition and divestiture transactions, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of 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
OneNeck IT Solutions: www.oneneck.com
3
United States Cellular Corporation |
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Total Markets* Summary Operating Data (Unaudited) |
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As of or for the Quarter Ended |
3/31/2014 |
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12/31/2013 |
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9/30/2013 |
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6/30/2013 |
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3/31/2013 |
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Retail Customers |
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Postpaid |
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Total at end of period |
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4,174,000 |
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4,267,000 |
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4,343,000 |
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4,412,000 |
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5,060,000 |
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Gross additions |
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197,000 |
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176,000 |
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165,000 |
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165,000 |
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191,000 |
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Net additions (losses) |
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(93,000) |
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(71,000) |
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(60,000) |
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(120,000) |
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(74,000) |
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ARPU (1) |
$ |
57.59 |
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$ |
53.53 |
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$ |
54.64 |
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$ |
54.18 |
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$ |
54.85 |
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Churn rate (2) |
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2.3% |
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1.9% |
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1.7% |
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2.0% |
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1.7% |
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Smartphone penetration (3) (4) |
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53.1% |
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50.8% |
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47.1% |
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45.5% |
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43.5% |
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Prepaid |
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Total at end of period |
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356,000 |
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343,000 |
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370,000 |
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381,000 |
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446,000 |
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Gross additions |
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85,000 |
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63,000 |
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65,000 |
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77,000 |
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104,000 |
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Net additions (losses) |
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13,000 |
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(26,000) |
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(11,000) |
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(7,000) |
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23,000 |
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ARPU (1) |
$ |
32.22 |
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$ |
31.66 |
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$ |
28.72 |
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$ |
31.69 |
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$ |
33.31 |
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Churn rate (2) |
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6.9% |
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8.3% |
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6.8% |
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6.8% |
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6.2% |
Total customers at end of period |
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4,684,000 |
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4,774,000 |
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4,875,000 |
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4,968,000 |
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5,736,000 |
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Billed ARPU (1) |
$ |
53.93 |
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$ |
50.25 |
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$ |
50.92 |
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$ |
50.60 |
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$ |
51.13 |
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Service revenue ARPU (1) |
$ |
60.19 |
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$ |
57.05 |
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$ |
58.36 |
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$ |
57.45 |
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$ |
57.63 |
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Smartphones sold as a percent of total devices sold |
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73.0% |
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79.6% |
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65.2% |
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66.0% |
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61.7% |
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Total population |
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Consolidated markets (5) |
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54,817,000 |
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58,013,000 |
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84,025,000 |
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84,025,000 |
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93,943,000 |
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Consolidated operating markets (5) |
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31,729,000 |
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31,759,000 |
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31,822,000 |
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31,822,000 |
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47,440,000 |
Market penetration at end of period |
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Consolidated markets (6) |
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8.5% |
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8.2% |
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5.8% |
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5.9% |
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6.1% |
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Consolidated operating markets (6) |
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14.8% |
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15.0% |
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15.3% |
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15.6% |
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12.1% |
Capital expenditures (000s) |
$ |
89,581 |
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$ |
208,135 |
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$ |
242,459 |
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$ |
168,497 |
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$ |
118,410 |
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Total cell sites in service |
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6,165 |
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6,975 |
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7,687 |
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7,748 |
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8,027 |
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Owned towers |
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4,448 |
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4,448 |
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4,422 |
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4,411 |
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4,411 |
* Represents U.S. Cellular’s consolidated markets. These results include markets which U. S. Cellular currently consolidates, or previously consolidated in the periods presented, and is not adjusted in prior periods for subsequent divestitures or deconsolidations.
Refer to U.S. Cellular’s Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three months ended March 31, 2013, as if the transactions had occurred at the beginning of the period.
4
United States Cellular Corporation |
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Core* Markets Summary Operating Data (Unaudited) |
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As of or for the Quarter Ended |
3/31/2014 |
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12/31/2013 |
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9/30/2013 |
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6/30/2013 |
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3/31/2013 |
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Retail Customers |
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Postpaid |
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Total at end of period |
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4,174,000 |
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4,267,000 |
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4,343,000 |
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4,412,000 |
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4,463,000 |
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Gross additions |
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197,000 |
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176,000 |
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165,000 |
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165,000 |
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176,000 |
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Net additions (losses) |
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(93,000) |
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(71,000) |
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(60,000) |
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(53,000) |
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(33,000) |
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ARPU (1) |
$ |
57.59 |
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$ |
53.53 |
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$ |
54.64 |
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$ |
54.44 |
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$ |
54.21 |
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Churn rate (2) |
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2.3% |
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1.9% |
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1.7% |
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1.6% |
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1.6% |
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Smartphone penetration (3) (4) |
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53.1% |
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50.8% |
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47.1% |
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45.5% |
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43.0% |
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Prepaid |
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Total at end of period |
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356,000 |
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|
343,000 |
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370,000 |
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381,000 |
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|
373,000 |
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Gross additions |
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85,000 |
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|
63,000 |
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|
65,000 |
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|
76,000 |
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|
91,000 |
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Net additions (losses) |
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13,000 |
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(26,000) |
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(11,000) |
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|
8,000 |
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|
31,000 |
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ARPU (1) |
$ |
32.22 |
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$ |
31.66 |
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$ |
28.72 |
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$ |
31.65 |
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$ |
32.92 |
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Churn rate (2) |
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6.9% |
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8.3% |
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6.8% |
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6.0% |
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|
5.6% |
Total customers at end of period |
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4,684,000 |
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4,774,000 |
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4,875,000 |
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4,968,000 |
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|
5,005,000 |
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Billed ARPU (1) |
$ |
53.93 |
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$ |
50.25 |
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$ |
50.92 |
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$ |
50.98 |
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$ |
50.93 |
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Service revenue ARPU (1) |
$ |
60.19 |
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$ |
57.05 |
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$ |
58.36 |
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$ |
57.88 |
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$ |
57.14 |
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Smartphones sold as a percent of total devices sold |
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73.0% |
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79.6% |
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65.2% |
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66.1% |
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|
62.1% |
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Total population |
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Consolidated markets (5) |
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54,817,000 |
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58,013,000 |
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|
84,025,000 |
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|
84,025,000 |
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|
84,025,000 |
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Consolidated operating markets (5) |
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31,729,000 |
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31,759,000 |
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31,822,000 |
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|
31,822,000 |
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|
31,822,000 |
Market penetration at end of period |
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Consolidated markets (6) |
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8.5% |
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8.2% |
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|
5.8% |
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|
5.9% |
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|
6.0% |
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Consolidated operating markets (6) |
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14.8% |
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|
15.0% |
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15.3% |
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|
15.6% |
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|
15.7% |
Capital expenditures (000s) |
$ |
89,581 |
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$ |
211,247 |
|
$ |
239,332 |
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$ |
171,166 |
|
$ |
107,907 |
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Total cell sites in service |
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6,165 |
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|
6,161 |
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|
6,127 |
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|
6,113 |
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|
6,113 |
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Owned towers |
|
3,883 |
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|
3,883 |
|
|
3,857 |
|
|
3,846 |
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|
3,846 |
* U.S. Cellular’s Core Markets excludes the results of the Divestiture Markets and NY1 and NY2 Partnerships for the periods presented.
Refer to U.S. Cellular’s Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three months ended March 31, 2013, as if the transactions had occurred at the beginning of the period.
(1) ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period. These revenue bases and customer populations are shown below:
a. Postpaid ARPU consists of total postpaid service revenues and postpaid customers.
b. Prepaid ARPU consists of total prepaid service revenues and prepaid customers.
c. Billed ARPU consists of total postpaid, prepaid and reseller service revenues and postpaid, prepaid and reseller customers.
d. Service revenue ARPU consists of total retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.
(2) Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.
(3) Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding tablets.
(4) Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.
(5) Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (6) below.
(6) 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.
5
TDS Telecom |
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Summary Operating Data (Unaudited) |
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|
|
|
|
|
|
|
|
|
Quarter Ended |
3/31/2014 |
|
12/31/2013 |
|
9/30/2013 |
|
6/30/2013 |
|
3/31/2013 |
||||||||
TDS Telecom |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Wireline |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Residential connections |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice (1) |
|
348,700 |
|
|
352,100 |
|
|
358,100 |
|
|
364,100 |
|
|
368,600 |
|
|
|
Broadband (2) |
|
229,000 |
|
|
227,000 |
|
|
229,500 |
|
|
231,700 |
|
|
229,500 |
|
|
|
IPTV (3) |
|
15,900 |
|
|
13,800 |
|
|
12,200 |
|
|
10,500 |
|
|
9,000 |
|
|
|
Wireline residential connections |
|
593,600 |
|
|
592,900 |
|
|
599,800 |
|
|
606,300 |
|
|
607,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial connections |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice (1) |
|
212,200 |
|
|
218,400 |
|
|
223,800 |
|
|
229,100 |
|
|
235,700 |
|
|
|
Broadband (2) |
|
26,600 |
|
|
27,100 |
|
|
27,600 |
|
|
28,200 |
|
|
28,800 |
|
|
|
managedIP (4) |
|
131,000 |
|
|
127,600 |
|
|
121,000 |
|
|
112,000 |
|
|
103,400 |
|
|
|
Wireline commercial connections |
|
369,800 |
|
|
373,100 |
|
|
372,400 |
|
|
369,300 |
|
|
367,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wireline connections |
|
963,400 |
|
|
966,000 |
|
|
972,200 |
|
|
975,600 |
|
|
975,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential revenue per connection (5) |
$ |
40.79 |
|
$ |
40.93 |
|
$ |
41.12 |
|
$ |
40.10 |
|
$ |
39.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Cable Connections |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video (6) |
|
68,700 |
|
|
69,100 |
|
|
70,300 |
|
|
|
|
|
|
|
|
|
Broadband (7) |
|
63,000 |
|
|
61,000 |
|
|
59,800 |
|
|
|
|
|
|
|
|
|
Voice (7) |
|
17,700 |
|
|
17,200 |
|
|
16,800 |
|
|
|
|
|
|
|
|
|
Cable connections |
|
149,400 |
|
|
147,300 |
|
|
146,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential revenue per connection (5) |
$ |
57.37 |
|
$ |
55.27 |
|
$ |
55.67 |
|
|
|
|
|
|
(1) The individual circuit connecting a customer to TDS Telecom’s central office facilities.
(2) The number of customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.
(3) The number of customers provided video services using IP networking technology.
(4) The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.
(5) Total residential revenue divided by the average number of total residential connections.
(6) Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.
(7) Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDS Telecom |
||||||||||||||
Capital Expenditures (000s) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
3/31/2014 |
|
|
12/31/2013 |
|
|
9/30/2013 |
|
|
6/30/2013 |
|
|
3/31/2013 |
Wireline |
$ |
22,900 |
|
$ |
46,000 |
|
$ |
32,800 |
|
$ |
33,300 |
|
$ |
27,900 |
Cable |
|
6,200 |
|
|
7,000 |
|
|
1,400 |
|
|
— |
|
|
— |
HMS |
|
2,800 |
|
|
9,200 |
|
|
2,400 |
|
|
2,300 |
|
|
2,600 |
|
$ |
31,900 |
|
$ |
62,200 |
|
$ |
36,600 |
|
$ |
35,600 |
|
$ |
30,500 |
6
Telephone and Data Systems, Inc. |
|||||||||||||
Consolidated Statement of Operations Highlights |
|||||||||||||
Three Months Ended March 31, |
|||||||||||||
(Unaudited, dollars and shares in thousands, except per share amounts) |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Change |
|||
|
|
|
|
2014 |
|
2013 |
|
Amount |
Percent |
||||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|||
|
U.S. Cellular |
$ |
925,811 |
|
$ |
1,081,746 |
|
$ |
(155,935) |
|
(14%) |
||
|
TDS Telecom |
|
262,416 |
|
|
217,061 |
|
|
45,355 |
|
21% |
||
|
All Other (1) |
|
7,735 |
|
|
9,766 |
|
|
(2,031) |
|
(21%) |
||
|
|
|
|
|
1,195,962 |
|
|
1,308,573 |
|
|
(112,611) |
|
(9%) |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|||
|
U.S. Cellular |
|
|
|
|
|
|
|
|
|
|
||
|
|
Expenses excluding depreciation, amortization and accretion |
|
846,645 |
|
|
878,070 |
|
|
(31,425) |
|
(4%) |
|
|
|
Depreciation, amortization and accretion |
|
167,753 |
|
|
189,845 |
|
|
(22,092) |
|
(12%) |
|
|
|
(Gain) loss on asset disposals, net |
|
1,934 |
|
|
5,434 |
|
|
(3,500) |
|
(64%) |
|
|
|
(Gain) loss on sale of business and other exit costs, net |
|
(6,900) |
|
|
6,931 |
|
|
(13,831) |
|
>(100%) |
|
|
|
(Gain) loss on license sales and exchanges |
|
(91,446) |
|
|
— |
|
|
(91,446) |
|
N/M |
|
|
|
|
|
|
917,986 |
|
|
1,080,280 |
|
|
(162,294) |
|
(15%) |
|
TDS Telecom |
|
|
|
|
|
|
|
|
|
|
||
|
|
Expenses excluding depreciation, amortization and accretion |
|
190,303 |
|
|
159,486 |
|
|
30,817 |
|
19% |
|
|
|
Depreciation, amortization and accretion |
|
53,775 |
|
|
49,491 |
|
|
4,284 |
|
9% |
|
|
|
(Gain) loss on asset disposals, net |
|
344 |
|
|
193 |
|
|
151 |
|
78% |
|
|
|
|
|
|
244,422 |
|
|
209,170 |
|
|
35,252 |
|
17% |
|
All Other (1) |
|
|
|
|
|
|
|
|
|
|
||
|
|
Expenses excluding depreciation and amortization |
|
9,326 |
|
|
9,239 |
|
|
87 |
|
1% |
|
|
|
Depreciation and amortization |
|
3,391 |
|
|
2,741 |
|
|
650 |
|
24% |
|
|
|
(Gain) loss on asset disposals, net |
|
152 |
|
|
(11) |
|
|
163 |
|
>(100%) |
|
|
|
|
|
|
12,869 |
|
|
11,969 |
|
|
900 |
|
8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
1,175,277 |
|
|
1,301,419 |
|
|
(126,142) |
|
(10%) |
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|||
|
U.S. Cellular |
|
7,825 |
|
|
1,466 |
|
|
6,359 |
|
>100% |
||
|
TDS Telecom |
|
17,994 |
|
|
7,891 |
|
|
10,103 |
|
>100% |
||
|
All Other (1) |
|
(5,134) |
|
|
(2,203) |
|
|
(2,931) |
|
>(100%) |
||
|
|
|
|
|
20,685 |
|
|
7,154 |
|
|
13,531 |
|
>100% |
Investment and other income (expense) |
|
|
|
|
|
|
|
|
|
|
|||
|
Equity in earnings of unconsolidated entities |
|
37,327 |
|
|
27,089 |
|
|
10,238 |
|
38% |
||
|
Interest and dividend income |
|
2,486 |
|
|
1,578 |
|
|
908 |
|
58% |
||
|
Interest expense |
|
(28,707) |
|
|
(24,498) |
|
|
(4,209) |
|
(17%) |
||
|
Other, net |
|
160 |
|
|
(154) |
|
|
314 |
|
>(100%) |
||
|
|
Total investment and other income |
|
11,266 |
|
|
4,015 |
|
|
7,251 |
|
>100% |
|
Income before income taxes |
|
31,951 |
|
|
11,169 |
|
|
20,782 |
|
>100% |
|||
|
Income tax expense |
|
11,657 |
|
|
4,180 |
|
|
7,477 |
|
>100% |
||
Net income |
|
20,294 |
|
|
6,989 |
|
|
13,305 |
|
>100% |
|||
|
Less: Net income attributable to noncontrolling interests, net of tax |
|
2,040 |
|
|
5,570 |
|
|
(3,530) |
|
(63%) |
||
Net income attributable to TDS shareholders |
|
18,254 |
|
|
1,419 |
|
|
16,835 |
|
>100% |
|||
|
TDS Preferred dividend requirement |
|
(12) |
|
|
(12) |
|
|
— |
|
— |
||
Net income available to common shareholders |
$ |
18,242 |
|
$ |
1,407 |
|
$ |
16,835 |
|
>100% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
108,988 |
|
|
108,255 |
|
|
733 |
|
1% |
|||
Basic earnings per share attributable to TDS shareholders |
$ |
0.17 |
|
$ |
0.01 |
|
$ |
0.16 |
|
>100% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding |
|
109,672 |
|
|
108,693 |
|
|
979 |
|
1% |
|||
Diluted earnings per share attributable to TDS shareholders |
$ |
0.16 |
|
$ |
0.01 |
|
$ |
0.15 |
|
>100% |
(1) Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations.
N/M – Percentage change not meaningful
7
Telephone and Data Systems, Inc. |
||||||
Consolidated Balance Sheet Highlights |
||||||
(Unaudited, dollars in thousands) |
||||||
|
|
|
|
|
|
|
ASSETS |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
||
|
|
2014 |
|
2013 |
||
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
872,910 |
|
$ |
830,014 |
|
Short-term investments |
|
40,056 |
|
|
50,104 |
|
Accounts receivable from customers and others |
|
615,009 |
|
|
731,114 |
|
Inventory, net |
|
224,904 |
|
|
244,560 |
|
Net deferred income tax asset |
|
106,077 |
|
|
106,077 |
|
Prepaid expenses |
|
89,344 |
|
|
87,920 |
|
Income taxes receivable |
|
5,679 |
|
|
2,397 |
|
Other current assets |
|
35,154 |
|
|
35,151 |
|
|
|
1,989,133 |
|
|
2,087,337 |
|
|
|
|
|
|
|
Assets held for sale |
|
— |
|
|
16,027 |
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
Licenses |
|
1,448,598 |
|
|
1,423,779 |
|
Goodwill |
|
836,843 |
|
|
836,843 |
|
Franchise rights |
|
123,668 |
|
|
123,668 |
|
Other intangible assets, net |
|
66,439 |
|
|
71,454 |
|
Investments in unconsolidated entities |
|
326,279 |
|
|
301,772 |
|
Other investments |
|
611 |
|
|
641 |
|
|
|
2,802,438 |
|
|
2,758,157 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
|
U.S. Cellular |
|
2,776,220 |
|
|
2,856,520 |
|
TDS Telecom |
|
967,847 |
|
|
984,634 |
|
Other |
|
35,066 |
|
|
36,990 |
|
|
|
3,779,133 |
|
|
3,878,144 |
|
|
|
|
|
|
|
Other assets and deferred charges |
|
178,599 |
|
|
164,482 |
|
|
|
|
|
|
|
|
Total assets |
$ |
8,749,303 |
|
$ |
8,904,147 |
8
Telephone and Data Systems, Inc. |
||||||||
Consolidated Balance Sheet Highlights |
||||||||
(Unaudited, dollars in thousands) |
||||||||
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
||
|
|
|
|
2014 |
|
2013 |
||
Current liabilities |
|
|
|
|
|
|||
|
|
Current portion of long-term debt |
$ |
1,415 |
|
$ |
1,646 |
|
|
|
Accounts payable |
|
414,015 |
|
|
496,069 |
|
|
|
Customer deposits and deferred revenues |
|
287,999 |
|
|
289,445 |
|
|
|
Accrued interest |
|
15,757 |
|
|
6,673 |
|
|
|
Accrued taxes |
|
72,761 |
|
|
70,518 |
|
|
|
Accrued compensation |
|
65,486 |
|
|
115,031 |
|
|
|
Other current liabilities |
|
167,746 |
|
|
212,374 |
|
|
|
|
|
|
1,025,179 |
|
|
1,191,756 |
|
|
|
|
|
|
|
|
|
Deferred liabilities and credits |
|
|
|
|
|
|||
|
|
Net deferred income tax liability |
|
847,850 |
|
|
862,975 |
|
|
|
Other deferred liabilities and credits |
|
477,305 |
|
|
458,709 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
1,720,031 |
|
|
1,720,074 |
|||
|
|
|
|
|
|
|
|
|
Noncontrolling interests with redemption features |
|
543 |
|
|
536 |
|||
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|||
|
TDS shareholders' equity |
|
|
|
|
|
||
|
|
Series A Common and Common Shares, par value $.01 |
|
1,327 |
|
|
1,327 |
|
|
|
Capital in excess of par value |
|
2,313,682 |
|
|
2,308,807 |
|
|
|
Treasury shares, at cost |
|
(722,658) |
|
|
(721,354) |
|
|
|
Accumulated other comprehensive loss |
|
(938) |
|
|
(569) |
|
|
|
Retained earnings |
|
2,533,298 |
|
|
2,529,626 |
|
|
|
|
Total TDS shareholders' equity |
|
4,124,711 |
|
|
4,117,837 |
|
|
|
|
|
|
|
|
|
|
Preferred shares |
|
824 |
|
|
824 |
||
|
Noncontrolling interests |
|
552,860 |
|
|
551,436 |
||
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
4,678,395 |
|
|
4,670,097 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
$ |
8,749,303 |
|
$ |
8,904,147 |
9
Balance Sheet Highlights |
||||||||||||||||
March 31, 2014 |
||||||||||||||||
(Unaudited, dollars in thousands) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
TDS |
|
TDS Corporate |
|
Intercompany |
|
TDS |
|||||
|
|
|
Cellular |
|
Telecom |
|
& Other |
|
Eliminations |
|
Consolidated |
|||||
Cash and cash equivalents |
$ |
398,541 |
|
$ |
84,120 |
|
$ |
390,249 |
|
$ |
― |
|
$ |
872,910 |
||
Affiliated cash investments |
|
― |
|
|
444,181 |
|
|
― |
|
|
(444,181) |
|
|
― |
||
Short-term investments |
|
40,056 |
|
|
― |
|
|
― |
|
|
― |
|
|
40,056 |
||
|
|
$ |
438,597 |
|
$ |
528,301 |
|
$ |
390,249 |
|
$ |
(444,181) |
|
$ |
912,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses, goodwill and other intangible assets |
$ |
1,813,469 |
|
$ |
792,606 |
|
$ |
(130,527) |
|
$ |
― |
|
$ |
2,475,548 |
||
Investment in unconsolidated entities |
|
289,842 |
|
|
3,807 |
|
|
39,771 |
|
|
(7,141) |
|
|
326,279 |
||
Long-term and other investments |
|
― |
|
|
611 |
|
|
― |
|
|
― |
|
|
611 |
||
|
|
|
$ |
2,103,311 |
|
$ |
797,024 |
|
$ |
(90,756) |
|
$ |
(7,141) |
|
$ |
2,802,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
$ |
2,776,220 |
|
$ |
967,847 |
|
$ |
35,066 |
|
$ |
― |
|
$ |
3,779,133 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Current portion |
$ |
166 |
|
$ |
73 |
|
$ |
1,176 |
|
$ |
― |
|
$ |
1,415 |
|
|
Non-current portion |
|
878,127 |
|
|
1,420 |
|
|
840,484 |
|
|
― |
|
|
1,720,031 |
|
|
|
|
$ |
878,293 |
|
$ |
1,493 |
|
$ |
841,660 |
|
$ |
― |
|
$ |
1,721,446 |
10
Telephone and Data Systems, Inc.
Schedule of Cash and Cash Equivalents and Investments
(Unaudited, dollars in thousands)
The following table presents TDS’ cash and cash equivalents and investments at March 31, 2014 and December 31, 2013.
|
|
March 31, |
|
December 31, |
||
|
2014 |
|
2013 |
|||
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
872,910 |
|
$ |
830,014 |
|
|
|
|
|
|
|
|
Amounts included in short-term investments (1) (2) |
|
|
|
|
|
|
|
U.S. Treasury Notes |
|
40,056 |
|
|
50,104 |
|
|
|
|
|
|
|
Total cash and cash equivalents and investments |
$ |
912,966 |
|
$ |
880,118 |
(1) Designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet.
(2) Maturities are less than twelve months from the respective balance sheet dates.
11
Telephone and Data Systems, Inc. |
|||||||||
Consolidated Statement of Cash Flows |
|||||||||
Three Months Ended March 31, |
|||||||||
(Unaudited, dollars in thousands) |
|||||||||
|
|
|
|
|
2014 |
|
2013 |
||
Cash flows from operating activities |
|
|
|
|
|
||||
|
Net income |
$ |
20,294 |
|
$ |
6,989 |
|||
|
|
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities |
|
|
|
|
|
||
|
|
|
|
Depreciation, amortization and accretion |
|
224,919 |
|
|
242,077 |
|
|
|
|
Bad debts expense |
|
21,559 |
|
|
17,874 |
|
|
|
|
Stock-based compensation expense |
|
6,759 |
|
|
7,585 |
|
|
|
|
Deferred income taxes, net |
|
(14,510) |
|
|
3,009 |
|
|
|
|
Equity in earnings of unconsolidated entities |
|
(37,327) |
|
|
(27,089) |
|
|
|
|
Distributions from unconsolidated entities |
|
12,820 |
|
|
8,089 |
|
|
|
|
(Gain) loss on asset disposals, net |
|
2,430 |
|
|
5,616 |
|
|
|
|
(Gain) loss on sale of business and other exit costs, net |
|
(6,900) |
|
|
6,931 |
|
|
|
|
(Gain) loss on license sales and exchanges |
|
(91,446) |
|
|
— |
|
|
|
|
Noncash interest expense |
|
506 |
|
|
497 |
|
|
|
|
Other operating activities |
|
47 |
|
|
256 |
|
|
Changes in assets and liabilities from operations |
|
|
|
|
|
||
|
|
|
|
Accounts receivable |
|
92,949 |
|
|
34,038 |
|
|
|
|
Inventory |
|
19,656 |
|
|
16,860 |
|
|
|
|
Accounts payable |
|
(53,403) |
|
|
(3,203) |
|
|
|
|
Customer deposits and deferred revenues |
|
(1,447) |
|
|
7,904 |
|
|
|
|
Accrued taxes |
|
(1,634) |
|
|
5,309 |
|
|
|
|
Accrued interest |
|
9,136 |
|
|
9,279 |
|
|
|
|
Other assets and liabilities |
|
(99,471) |
|
|
(95,669) |
|
|
|
|
|
|
104,937 |
|
|
246,352 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
||||
|
Cash used for additions to property, plant and equipment |
|
(150,890) |
|
|
(176,318) |
|||
|
Cash paid for acquisitions and licenses |
|
(8,254) |
|
|
(14,150) |
|||
|
Cash received from divestitures |
|
103,042 |
|
|
— |
|||
|
Cash received for investments |
|
10,000 |
|
|
— |
|||
|
Other investing activities |
|
1,623 |
|
|
6,364 |
|||
|
|
|
|
|
|
(44,479) |
|
|
(184,104) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
||||
|
Repayment of long-term debt |
|
(392) |
|
|
(328) |
|||
|
TDS Common Shares reissued for benefit plans, net of tax payments |
|
(50) |
|
|
140 |
|||
|
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments |
|
316 |
|
|
123 |
|||
|
Repurchase of TDS Common Shares |
|
(3,342) |
|
|
— |
|||
|
Repurchase of U.S. Cellular Common Shares |
|
(2,000) |
|
|
(18,425) |
|||
|
Dividends paid to TDS shareholders |
|
(14,582) |
|
|
(13,792) |
|||
|
Distributions to noncontrolling interests |
|
(346) |
|
|
(2,396) |
|||
|
Other financing activities |
|
2,834 |
|
|
(1,351) |
|||
|
|
|
|
|
|
(17,562) |
|
|
(36,029) |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
42,896 |
|
|
26,219 |
||||
Cash and cash equivalents |
|
|
|
|
|
||||
|
Beginning of period |
|
830,014 |
|
|
740,481 |
|||
|
End of period |
$ |
872,910 |
|
$ |
766,700 |
12
TDS Telecom Highlights |
|||||||||||||
Three Months Ended March 31, |
|||||||||||||
(Unaudited, dollars in thousands) |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|||
|
|
|
|
2014 |
|
2013 |
|
Amount |
|
Percent |
|||
Wireline |
|
|
|
|
|
|
|
|
|
|
|||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|||
|
Residential |
$ |
72,505 |
|
$ |
73,004 |
|
$ |
(499) |
|
(1%) |
||
|
Commercial |
|
57,980 |
|
|
57,125 |
|
|
855 |
|
1% |
||
|
Wholesale |
|
46,448 |
|
|
50,549 |
|
|
(4,101) |
|
(8%) |
||
|
|
Total service revenues |
|
176,933 |
|
|
180,678 |
|
|
(3,745) |
|
(2%) |
|
|
Equipment sales |
|
553 |
|
|
897 |
|
|
(344) |
|
(38%) |
||
|
|
|
|
|
177,486 |
|
|
181,575 |
|
|
(4,089) |
|
(2%) |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|||
|
Cost of services |
|
64,400 |
|
|
66,439 |
|
|
(2,039) |
|
(3%) |
||
|
Cost of equipment sold |
|
483 |
|
|
1,010 |
|
|
(527) |
|
(52%) |
||
|
Selling, general and administrative expenses |
|
46,520 |
|
|
57,380 |
|
|
(10,860) |
|
(19%) |
||
|
Depreciation, amortization and accretion |
|
42,736 |
|
|
44,023 |
|
|
(1,287) |
|
(3%) |
||
|
Loss on asset disposals, net |
|
245 |
|
|
163 |
|
|
82 |
|
50% |
||
|
|
|
|
|
154,384 |
|
|
169,015 |
|
|
(14,631) |
|
(9%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
$ |
23,102 |
|
$ |
12,560 |
|
$ |
10,542 |
|
84% |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable |
|
|
|
|
|
|
|
|
|
|
|||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|||
|
Residential |
$ |
18,253 |
|
$ |
— |
|
$ |
18,253 |
|
N/M |
||
|
Commercial |
|
4,250 |
|
|
— |
|
|
4,250 |
|
N/M |
||
|
|
|
|
22,503 |
|
|
— |
|
|
22,503 |
|
N/M |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|||
|
Cost of services |
|
10,955 |
|
|
— |
|
|
10,955 |
|
N/M |
||
|
Selling, general and administrative expenses |
|
6,378 |
|
|
— |
|
|
6,378 |
|
N/M |
||
|
Depreciation, amortization and accretion |
|
4,361 |
|
|
— |
|
|
4,361 |
|
N/M |
||
|
Loss on asset disposals, net |
|
65 |
|
|
— |
|
|
65 |
|
N/M |
||
|
|
|
|
|
21,759 |
|
|
— |
|
|
21,759 |
|
N/M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
$ |
744 |
|
$ |
— |
|
$ |
744 |
|
N/M |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMS |
|
|
|
|
|
|
|
|
|
|
|||
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|||
|
Service revenues |
$ |
27,376 |
|
$ |
22,000 |
|
$ |
5,376 |
|
24% |
||
|
Equipment sales |
|
35,732 |
|
|
13,564 |
|
|
22,168 |
|
>100% |
||
|
|
|
|
|
63,108 |
|
|
35,564 |
|
|
27,544 |
|
77% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|||
|
Cost of services |
|
16,946 |
|
|
13,602 |
|
|
3,344 |
|
25% |
||
|
Cost of equipment sold |
|
30,467 |
|
|
11,212 |
|
|
19,255 |
|
>100% |
||
|
Selling, general and administrative expenses |
|
14,835 |
|
|
9,921 |
|
|
4,914 |
|
50% |
||
|
Depreciation, amortization and accretion |
|
6,678 |
|
|
5,468 |
|
|
1,210 |
|
22% |
||
|
Loss on asset disposals, net |
|
34 |
|
|
30 |
|
|
4 |
|
13% |
||
|
|
|
|
|
68,960 |
|
|
40,233 |
|
|
28,727 |
|
71% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
$ |
(5,852) |
|
$ |
(4,669) |
|
$ |
(1,183) |
|
(25%) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany revenues |
$ |
(681) |
|
$ |
(78) |
|
$ |
(603) |
|
>(100)% |
|||
Intercompany expenses |
|
(681) |
|
|
(78) |
|
|
(603) |
|
>(100)% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total TDS Telecom operating income |
$ |
17,994 |
|
$ |
7,891 |
|
$ |
10,103 |
|
>100% |
13
Telephone and Data Systems, Inc. |
||||||||
Financial Measures and Reconciliations |
||||||||
(Unaudited, dollars in thousands) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
TDS Consolidated |
||||
Three Months Ended March 31, |
|
2014 |
|
2013 |
||||
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
$ |
104,937 |
|
$ |
246,352 |
|
|
Deduct: |
|
|
|
|
|
|
|
|
Cash used for additions to property, plant, and equipment |
|
|
150,890 |
|
|
176,318 |
|
|
|
Free cash flow (1) |
|
$ |
(45,953) |
|
$ |
70,034 |
(1) 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 which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after Cash used for additions to property, plant and equipment.
14
Exhibit 99.2
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR CAUTIONARY STATEMENT
This Form 8-K and/or press release attached to this Form 8-K contain statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities, events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include those set forth below, as more fully discussed under “Risk Factors” in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K. However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. You should carefully consider the Risk Factors in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K, the following factors and other information contained in, or incorporated by reference into, this Form 8-K and/or press release attached to this Form 8-K to understand the material risks relating to TDS’ business.
· Intense competition in the markets in which TDS operates could adversely affect TDS’ revenues or increase its costs to compete.
· A failure by TDS to successfully execute its business strategy (including planned acquisitions, divestitures and exchanges) or allocate resources or capital could have an adverse effect on TDS’ business, financial condition or results of operations.
· A failure by TDS’ service offerings to meet customer expectations, including any continuing issues relating to the conversion to the new Billing and Operational Support System ("B/OSS") in the third quarter of 2013, could limit TDS’ ability to attract and retain customers and could have an adverse effect on TDS’ business, financial condition or results of operations.
· TDS’ system infrastructure may not be capable of supporting changes in technologies and services expected by customers, which could result in lost customers and revenues.
· Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which would have an adverse effect on TDS’ business, financial condition or results of operations.
· A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations.
· To the extent conducted by the Federal Communications Commission (“FCC”), TDS is likely to participate in FCC auctions of additional spectrum in the future as an applicant or as a noncontrolling partner in another auction applicant and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on TDS.
· Changes in the regulatory environment or a failure by TDS to timely or fully comply with any applicable regulatory requirements could adversely affect TDS’ business, financial condition or results of operations.
· Changes in Universal Service Fund (“USF”) funding and/or intercarrier compensation could have an adverse impact on TDS’ business, financial condition or results of operations.
· An inability to attract and/or retain highly competent management, technical, sales and other personnel could have an adverse effect on TDS’ business, financial condition or results of operations.
· TDS’ assets are concentrated primarily in the U.S. telecommunications industry. As a result, its results of operations may fluctuate based on factors related primarily to conditions in this industry.
1
· TDS’ lower scale relative to larger competitors could adversely affect its business, financial condition or results of operations.
· Changes in various business factors could have an adverse effect on TDS’ business, financial condition or results of operations.
· Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business.
· Complexities associated with deploying new technologies present substantial risk.
· TDS is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of these fees are subject to great uncertainty.
· Performance under device purchase agreements could have a material adverse impact on TDS' business, financial condition or results of operations.
· Changes in TDS’ enterprise value, changes in the market supply or demand for wireless licenses, wireline or cable markets or IT service providers, adverse developments in the businesses or the industries in which TDS is involved and/or other factors could require TDS to recognize impairments in the carrying value of its licenses, goodwill, franchise rights and/or physical assets.
· Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of TDS’ businesses could have an adverse effect on TDS’ business, financial condition or results of operations.
· A significant portion of TDS’ wireless revenues is derived from customers who buy services through independent agents who market TDS’ services on a commission basis and third-party national retailers. If TDS’ relationships with these agents or third-party national retailers are seriously harmed, its business, financial condition or results of operations could be adversely affected.
· TDS’ investments in unproven technologies may not produce the benefits that TDS expects.
· A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its networks and support systems could have an adverse effect on its operations.
· Financial difficulties (including bankruptcy proceedings) or other operational difficulties of TDS’ key suppliers, termination or impairment of TDS’ relationships with such suppliers, or a failure by TDS to manage its supply chain effectively could result in delays or termination of TDS’ receipt of required equipment or services, or could result in excess quantities of required equipment or services, any of which could adversely affect TDS’ business, financial condition or results of operations.
· TDS has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on TDS’ financial condition or results of operations.
· A failure by TDS to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, including breaches of network or information technology security, could have an adverse effect on TDS’ business, financial condition or results of operations.
· Wars, conflicts, hostilities and/or terrorist attacks or equipment failures, power outages, natural disasters or other events could have an adverse effect on TDS’ business, financial condition or results of operations.
· The market price of TDS’ Common Shares is subject to fluctuations due to a variety of factors.
2
· Identification of errors in financial information or disclosures could require amendments to or restatements of financial information or disclosures included in this or prior filings with the Securities and Exchange Commission (“SEC”). Such amendments or restatements and related matters, including resulting delays in filing periodic reports with the SEC, could have an adverse effect on TDS’ business, financial condition or results of operations.
· The existence of material weaknesses in the effectiveness of internal control over financial reporting could result in inaccurate financial statements or other disclosures or failure to prevent fraud, which could have an adverse effect on TDS’ business, financial condition or results of operations.
· Changes in facts or circumstances, including new or additional information that affects the calculation of potential liabilities for contingent obligations under guarantees, indemnities, claims, litigation or otherwise, could require TDS to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on TDS’ business, financial condition or results of operations.
· Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations.
· Uncertainty of TDS’ ability to access capital, deterioration in the capital markets, other changes in market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs.
· Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations.
· The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on TDS’ wireless business, financial condition or results of operations.
· Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations.
· Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS.
· Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from TDS’ forward-looking estimates by a material amount.
TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. Readers should evaluate any statements in light of these important factors.
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