TDS reports second quarter 2015 results

U.S. Cellular updates guidance; raises profitability forecast

As previously announced, TDS will hold a teleconference July 31, 2015 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.tdsinc.com.

Jul 31, 2015, 07:47 ET from Telephone and Data Systems, Inc.

CHICAGO, July 31, 2015 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE: TDS) reported total operating revenues of $1,276.4 million for the second quarter of 2015, versus $1,236.4 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $23.0 million and $0.21, respectively, for the second quarter of 2015, compared to $(22.1) million and $(0.20), respectively, in the comparable period one year ago. 

"Both of our businesses continued to make good progress on their strategic objectives," said LeRoy T. Carlson, Jr., TDS president and CEO. "U.S. Cellular added postpaid customers and improved customer loyalty. TDS Telecom achieved growth in IPTV customers and continued to move forward with cable, broadband, and hosted and managed services strategies.

"U.S. Cellular maintained momentum in its turnaround in customer growth while generating a significant increase in profitability.  We are further enhancing our high quality network this year, bringing 4G LTE speeds to 98 percent of U.S. Cellular customers.  U.S. Cellular is leveraging this investment to drive growth in smartphone penetration, connected devices, and data usage. 

"TDS Telecom achieved success in the recent quarter, adding IPTV customers and increasing residential revenue per customer. Our cable segment continues to focus on increasing residential and commercial broadband penetration. We are continuing to seek and evaluate potential cable acquisitions. We believe our  IT services business, OneNeck IT Solutions, has strong growth potential as more businesses and other organizations seek to outsource more of their IT needs."

2015 Estimated Results Estimates of full-year 2015 results for U.S. Cellular, TDS Telecom, and TDS are shown below.  Such estimates represent management's view as of July 31, 2015.  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.

2015 Estimated Results

U.S. Cellular

TDS Telecom

TDS(2)

Current

Previous

Current

Previous

Current

Previous

(Dollars in millions)

Total operating revenues

$4,000-$4,100

$4,000-$4,200

$1,130-$1,180

Unchanged

$5,145-$5,295

$5,145-$5,395

Operating cash flow (1)

$440-$540

$400-$500

$280-$310

Unchanged

$725-$855

$685-$815

Adjusted EBITDA (1)

$600-$700

$580-$680

$280-$310

Unchanged

$890-$1,020

$870-$1,000

Capital expenditures

Approx. $

600

Unchanged

Approx. $

220

Unchanged

Approx. $

830

Unchanged

(1)

Operating cash flow is defined as net income, adjusted for the items set forth in the reconciliation below.  Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation below.  Operating cash flow and Adjusted EBITDA exclude these items in order to show operating results on a more comparable basis from period to period. From time to time, TDS may exclude other items from Operating cash flow and/or Adjusted EBITDA if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future.  Operating cash flow and Adjusted EBITDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States ("GAAP") and should not be considered as alternatives to net income as indicators of the company's operating performance or as alternatives to cash flows from operating activities, determined in accordance with GAAP, as indicators of cash flows or as measures of liquidity. TDS believes Operating cash flow and Adjusted EBITDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as indicated below. The following tables provide a reconciliation to Operating cash flow and Adjusted EBITDA for 2015 estimated results, and actual results for the six months ended June 30, 2015 and year ended December 31, 2014:

 

2015 Estimated Results (3)

U.S. Cellular

TDS Telecom

TDS(2)

(Dollars in millions)

Net income (loss) (GAAP)

N/A

N/A

N/A

Add back:

Income tax expense (benefit)

N/A

N/A

N/A

Income (loss) before income taxes (GAAP)

$

165-265

$

45-75

$

170-300

Add back:

Interest expense

80

140

Depreciation, amortization and accretion expense

600

235

845

EBITDA

$

845-945

$

280-310

$

1,155-1,285

Add back:

(Gain) loss on sale of business and other exit costs, net

(115)

(135)

(Gain) loss on license sales and exchanges, net

(145)

(145)

(Gain) loss on asset disposals, net

15

15

Adjusted EBITDA

$

600-700

$

280-310

$

890-1,020

Deduct:

Equity in earnings of unconsolidated

   entities

(125)

(125)

Interest and dividend income

(35)

(40)

Operating cash flow (4)

$

440-540

$

280-310

$

725-855

 

Actual Results

Six Months Ended June 30, 2015

Year ended December 31, 2014

U.S. Cellular

TDS

Telecom

TDS (2)

U.S. Cellular

TDS

Telecom

TDS (2)

(Dollars in millions)

Net income (loss) (GAAP)

$

185

$

29

$

202

$

(47)

$

(24)

$

(147)

Add back:

Income tax expense (benefit)

121

19

133

(12)

18

(5)

Income (loss) before income taxes

(GAAP)

$

306

$

48

$

335

$

(59)

$

(7)

$

(153)

Add back:

Interest expense

40

68

57

(1)

111

Depreciation, amortization and accretion expense

298

114

418

606

220

837

EBITDA

$

643

$

162

$

821

$

605

$

212

$

796

Add back:

Loss on impairment of assets

84

88

(Gain) loss on sale of business and other exit costs, net

(113)

(3)

(129)

(33)

(2)

(16)

(Gain) loss on license sales and exchanges, net

(123)

(123)

(113)

(113)

(Gain) loss on asset disposals, net

10

10

21

5

27

Adjusted EBITDA

$

417

$

159

$

579

$

480

$

298

$

781

Deduct:

Equity in earnings of unconsolidated

entities

(70)

(70)

(130)

(132)

Interest and dividend income

(17)

(1)

(19)

(12)

(2)

(17)

Operating cash flow (4)

$

330

$

158

$

490

$

338

$

296

$

632

Note: Totals may not foot due to rounding differences.

(2)

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.

(3)

In providing 2015 Estimated Results, TDS has not completed the above reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance.

(4)

A reconciliation of Operating cash flow (Non-GAAP) to operating income (GAAP) for June 30, 2015 actual results can be found on the company's website at investors.tdsinc.com.

Stock Repurchase Summary TDS began repurchasing stock under its $250 million repurchase authorization on Aug. 5, 2013.   The following represents repurchases of TDS Common Shares.  

Repurchase Period

# Shares

Cost (in millions)

2015 (year to date)

$

2014 (full year)

1,541,850

$

39.1

Total

1,541,850

$

39.1

Conference Call Information TDS will hold a conference call on July 31, 2015 at 9:30 a.m. Central Time.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.tdsinc.com. The call will be archived on the Events & Presentations page of investors.tdsinc.com

About TDS Telephone and Data Systems, Inc. (TDS), a Fortune 1000 company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6.0 million customers nationwide through its businesses, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,600 people as of June 30, 2015.

Visit www.tdsinc.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 any pending acquisitions/divestures/exchanges of properties and/or licenses,  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; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission ("SEC"), which are incorporated by reference herein.    

For more information about TDS and its subsidiaries, visit: TDS: www.tdsinc.com  U.S. Cellular: www.uscellular.com  TDS Telecom: www.tdstelecom.com  OneNeck IT Solutions: www.oneneck.com

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2015

3/31/2015

12/31/2014

9/30/2014

6/30/2014

Retail Customers

Postpaid

Total at end of period

4,324,000

4,307,000

4,298,000

4,200,000

4,148,000

Gross additions

191,000

200,000

302,000

251,000

190,000

Net additions (losses)

17,000

9,000

98,000

52,000

(26,000)

ARPU (1)

$

53.62

$

54.87

$

56.51

$

56.37

$

56.82

ARPA (2)

$

133.85

$

134.94

$

136.13

$

132.99

$

131.95

Churn rate (3)

1.3%

1.5%

1.6%

1.6%

1.7%

Smartphone penetration (4)

69.1%

66.9%

64.8%

61.7%

58.4%

Prepaid

Total at end of period

368,000

360,000

348,000

350,000

352,000

Gross additions

65,000

73,000

60,000

64,000

65,000

Net additions (losses)

8,000

12,000

(2,000)

(2,000)

(4,000)

ARPU (1)

$

35.98

$

35.72

$

35.33

$

34.40

$

34.02

Churn rate (3)

5.2%

5.8%

5.9%

6.3%

6.5%

Total customers at end of period

4,779,000

4,775,000

4,760,000

4,674,000

4,653,000

Billed ARPU (1)

$

51.29

$

52.29

$

53.63

$

53.24

$

53.36

Service revenue ARPU (1)

$

57.55

$

58.01

$

60.10

$

60.92

$

60.32

Smartphones sold as a percent of total handsets sold

86.7%

85.7%

86.5%

80.8%

79.0%

Total population

Consolidated markets (5)

45,737,000

45,737,000

50,906,000

54,817,000

54,817,000

Consolidated operating markets (5)

31,814,000

31,814,000

31,729,000

31,729,000

31,729,000

Market penetration at end of period

Consolidated markets (6)

10.4%

10.4%

9.4%

8.5%

8.5%

Consolidated operating markets (6)

15.0%

15.0%

15.0%

14.7%

14.7%

Capital expenditures (000s)

$

133,666

$

66,460

$

181,655

$

142,452

$

143,927

Total cell sites in service

6,223

6,219

6,220

6,209

6,183

Owned towers (7)

3,940

3,936

4,280

4,487

4,457

(1)

Average Revenue Per User ("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 postpaid, prepaid and reseller service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)

Average Revenue Per Account ("ARPA") metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts by the number of months in the period.

(3)

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.

(4)

Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid handset customers.

(5)

The decrease in the population of Consolidated markets is due primarily to the license exchange transactions of certain non-operating licenses in North Carolina in December 2014 and Illinois and Indiana in March 2015. Total Population is 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.  The increase in consolidated markets penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (5) above.

(7)

During the quarters ended March 31, 2015 and December 31, 2014, sold 359 and 236 towers, respectively, in divested markets.

 

TDS Telecom

Summary Operating Data (Unaudited)

Quarter Ended

6/30/2015

3/31/2015

12/31/2014

9/30/2014

6/30/2014

TDS Telecom

Wireline

Residential connections

Voice (1)

329,000

333,400

335,900

340,300

346,100

Broadband (2)

231,200

229,400

229,200

231,600

232,700

IPTV (3)

27,900

25,600

23,400

20,700

18,200

   Wireline residential connections

588,100

588,400

588,500

592,600

597,000

Total residential revenue per connection (4)

$

42.10

$

42.32

$

41.56

$

41.47

$

41.05

Commercial connections

Voice (1)

181,800

187,500

193,200

199,300

206,200

Broadband (2)

23,700

24,300

24,700

25,300

26,000

managedIP (5)

145,100

143,200

140,200

137,700

133,300

   Wireline commercial connections

350,600

355,000

358,100

362,300

365,500

Total Wireline connections

938,700

943,400

946,600

954,900

962,500

Cable

Cable Connections

Video (6)

109,100

109,700

110,400

109,100

69,700

Broadband (7)

112,300

112,200

110,900

106,400

63,200

Voice (7)

51,500

49,100

46,000

41,800

17,800

   Cable connections

272,900

271,000

267,300

257,300

150,700

(1)

The individual circuit connecting customers to TDS Telecom's central office facilities.

(2)

The number of customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.

(3)

The number of customers provided video services using IP networking technology.

(4)

Total residential revenue per connection is calculated by dividing the average residential revenue for the period by the average number of residential connections for the period.

(5)

The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.

(6)

Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.

(7)

Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively.

 

TDS Telecom

Capital Expenditures (000s)

Quarter Ended

6/30/2015

3/31/2015

12/31/2014

9/30/2014

6/30/2014

Wireline

$

31,700

$

20,400

$

51,400

$

34,200

$

27,400

Cable

11,900

11,600

14,600

7,600

7,200

HMS

9,400

4,900

13,400

9,800

10,600

$

53,000

$

36,900

$

79,400

$

51,600

$

45,200

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended June 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

Change

2015

2014

Amount

Percent

Operating revenues

U.S. Cellular

$

975,667

$

957,773

$

17,894

2%

TDS Telecom

294,813

270,850

23,963

9%

All Other (1)

5,915

7,769

(1,854)

(24)%

1,276,395

1,236,392

40,003

3%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

812,918

863,361

(50,443)

(6)%

Depreciation, amortization and accretion

150,581

148,337

2,244

2%

(Gain) loss on asset disposals, net

5,399

6,893

(1,494)

(22)%

(Gain) loss on sale of business and other exit costs, net

(1,705)

(10,511)

8,806

84%

(Gain) loss on license sales and exchanges, net

(25)

(25)

N/M

967,168

1,008,080

(40,912)

(4)%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

216,160

197,427

18,733

9%

Depreciation, amortization and accretion

56,636

53,175

3,461

7%

(Gain) loss on asset disposals, net

(631)

983

(1,614)

>(100)%

(Gain) loss on sale of business and other exit costs, net

(3,054)

(3,054)

N/M

269,111

251,585

17,526

7%

All Other (1)

Expenses excluding depreciation and amortization

4,954

9,613

(4,659)

(48)%

Depreciation and amortization

3,887

3,055

832

27%

(Gain) loss on asset disposals, net

(16)

27

(43)

>(100)%

(Gain) loss on sale of business and other exit costs, net (2)

(830)

13,122

(13,952)

>(100)%

7,995

25,817

(17,822)

(69)%

Total operating expenses

1,244,274

1,285,482

(41,208)

(3)%

Operating income (loss)

U.S. Cellular

8,499

(50,307)

58,806

>100%

TDS Telecom

25,702

19,265

6,437

33%

All Other (1)

(2,080)

(18,048)

15,968

88%

32,121

(49,090)

81,211

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

35,412

34,790

622

2%

Interest and dividend income

10,117

2,751

7,366

>100%

Interest expense

(33,919)

(27,898)

(6,021)

(22)%

Other, net

202

50

152

>100%

Total investment and other income

11,812

9,693

2,119

22%

Income (loss) before income taxes

43,933

(39,397)

83,330

>100%

Income tax expense (benefit)

17,433

(13,671)

31,104

>100%

Net income (loss)

26,500

(25,726)

52,226

>100%

Less: Net income (loss) attributable to noncontrolling interests, net of tax

3,454

(3,688)

7,142

>100%

Net income (loss) attributable to TDS shareholders

23,046

(22,038)

45,084

>100%

TDS Preferred dividend requirement

(12)

(12)

-

Net income (loss) available to common shareholders

$

23,034

$

(22,050)

$

45,084

>100%

Basic weighted average shares outstanding

108,484

108,719

(235)

-

Basic earnings per share attributable to TDS shareholders

$

0.21

$

(0.20)

$

0.42

>100%

Diluted weighted average shares outstanding

109,785

108,719

1,066

1%

Diluted earnings per share attributable to TDS shareholders

$

0.21

$

(0.20)

$

0.41

>100%

(1)

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.

(2)

Due to Airadigm Transaction, TDS recognized expenses of $13.1 million related to exit and disposal activities in 2014.

N/M – Percentage change not meaningful

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Six Months Ended June 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

Change

2015

2014

Amount

Percent

Operating revenues

U.S. Cellular

$

1,940,912

$

1,883,584

$

57,328

3%

TDS Telecom

574,798

533,266

41,532

8%

All Other (1)

12,278

15,504

(3,226)

(21)%

2,527,988

2,432,354

95,634

4%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

1,610,864

1,710,006

(99,142)

(6)%

Depreciation, amortization and accretion

297,666

316,090

(18,424)

(6)%

(Gain) loss on asset disposals, net

9,650

8,827

823

9%

(Gain) loss on sale of business and other exit costs, net

(113,182)

(17,411)

(95,771)

>(100)%

(Gain) loss on license sales and exchanges, net

(122,898)

(91,446)

(31,452)

(34)%

1,682,100

1,926,066

(243,966)

(13)%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

416,620

387,730

28,890

7%

Depreciation, amortization and accretion

113,799

106,950

6,849

6%

(Gain) loss on asset disposals, net

499

1,327

(828)

(62)%

(Gain) loss on sale of business and other exit costs, net

(3,054)

(3,054)

527,864

496,007

31,857

6%

All Other (1)

Expenses excluding depreciation and amortization

10,216

18,939

(8,723)

(46)%

Depreciation and amortization

6,214

6,446

(232)

(4)%

(Gain) loss on asset disposals, net

(20)

179

(199)

>(100)%

(Gain) loss on sale of business and other exit costs, net (2)

(13,136)

13,122

(26,258)

>(100)%

3,274

38,686

(35,412)

(92)%

Total operating expenses

2,213,238

2,460,759

(247,521)

(10)%

Operating income (loss)

U.S. Cellular

258,812

(42,482)

301,294

>100%

TDS Telecom

46,934

37,259

9,675

26%

All Other (1)

9,004

(23,182)

32,186

>100%

314,750

(28,405)

343,155

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

70,053

72,117

(2,064)

(3)%

Interest and dividend income

18,502

5,237

13,265

>100%

Interest expense

(67,749)

(56,605)

(11,144)

(20)%

Other, net

198

210

(12)

(6)%

Total investment and other income

21,004

20,959

45

-

Income (loss) before income taxes

335,754

(7,446)

343,200

>100%

Income tax expense (benefit)

133,453

(2,014)

135,467

>100%

Net income (loss)

202,301

(5,432)

207,733

>100%

Less: Net income (loss) attributable to noncontrolling interests, net of tax

33,515

(1,648)

35,163

>100%

Net income (loss)attributable to TDS shareholders

168,786

(3,784)

172,570

>100%

TDS Preferred dividend requirement

(25)

(25)

-

Net income (loss) available to common shareholders

$

168,761

$

(3,809)

$

172,570

>100%

Basic weighted average shares outstanding

108,327

108,853

(526)

-

Basic earnings per share attributable to TDS shareholders

$

1.56

$

(0.04)

$

1.60

>100%

Diluted weighted average shares outstanding

109,380

108,853

527

-

Diluted earnings per share attributable to TDS shareholders

$

1.53

$

(0.04)

$

1.57

>100%

(1)

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.

(2)

Compared to U.S. Cellular, TDS recognized an incremental gain of $11.9 million on the tower sale as a result of a lower basis in the assets disposed in 2015.  Due to the Airadigm Transaction, TDS recognized expenses of $13.1 million related to exit and disposal activities in 2014.

N/M – Percentage change not meaningful

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

ASSETS

June 30,

December 31,

2015

2014

Current assets

Cash and cash equivalents

$

631,549

$

471,901

Accounts receivable from customers and others

703,892

683,681

Inventory, net

146,686

273,707

Net deferred income tax asset

92,881

107,686

Prepaid expenses

102,975

86,506

Income taxes receivable

426

113,708

Other current assets

30,480

29,766

1,708,889

1,766,955

Assets held for sale

22,203

103,343

Investments

Licenses

1,837,792

1,453,574

Goodwill

771,119

771,352

Franchise rights

244,300

244,300

Other intangible assets, net

55,123

64,499

Investments in unconsolidated entities

364,205

321,729

Other investments

465

508

3,273,004

2,855,962

Property, plant and equipment, net

U.S. Cellular

2,625,815

2,728,217

TDS Telecom

1,078,653

1,093,671

Other

21,987

24,237

3,726,455

3,846,125

Other assets and deferred charges

255,761

334,554

Total assets

$

8,986,312

$

8,906,939

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY

June 30,

December 31,

2015

2014

Current liabilities

Current portion of long-term debt

$

747

$

808

Accounts payable

345,747

387,125

Customer deposits and deferred revenues

317,759

324,318

Accrued interest

8,276

7,919

Accrued taxes

121,144

46,734

Accrued compensation

92,994

114,549

Other current liabilities

134,516

181,803

1,021,183

1,063,256

Liabilities held for sale

21,643

Deferred liabilities and credits

Net deferred income tax liability

885,462

941,519

Other deferred liabilities and credits

436,810

430,774

Long-term debt

1,993,429

1,993,586

Noncontrolling interests with redemption features

1,178

1,150

Equity

TDS shareholders' equity

Series A Common and Common Shares, par value $.01

1,327

1,327

Capital in excess of par value

2,342,587

2,336,511

Treasury shares, at cost

(735,218)

(748,199)

Accumulated other comprehensive loss

5,130

6,452

Retained earnings

2,468,070

2,330,187

   Total TDS shareholders' equity

4,081,896

3,926,278

Preferred shares

824

824

Noncontrolling interests

565,530

527,909

Total equity

4,648,250

4,455,011

Total liabilities and equity

$

8,986,312

$

8,906,939

 

Balance Sheet Highlights

June 30, 2015

(Unaudited, dollars in thousands)

U.S.

TDS

TDS Corporate

Intercompany

TDS

Cellular

Telecom

& Other

Eliminations

Consolidated

Cash and cash equivalents

$

362,282

$

62,234

$

207,033

$

$

631,549

Affiliated cash investments

405,855

(405,855)

$

362,282

$

468,089

$

207,033

$

(405,855)

$

631,549

Licenses, goodwill and other intangible assets

$

2,197,252

$

849,195

$

(138,113)

$

$

2,908,334

Investment in unconsolidated entities

325,857

3,804

39,575

(5,031)

364,205

Long-term and other investments

463

2

465

$

2,523,109

$

853,462

$

(98,536)

$

(5,031)

$

3,273,004

Property, plant and equipment, net

$

2,625,815

$

1,078,653

$

22,156

$

(169)

$

3,726,455

Long-term debt:

Current portion

$

57

$

25

$

665

$

$

747

Non-current portion

1,151,999

1,401

840,029

1,993,429

$

1,152,056

$

1,426

$

840,694

$

$

1,994,176

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Six Months Ended June 30,

(Unaudited, dollars in thousands)

2015

2014

Cash flows from operating activities

Net income (loss)

$

202,301

$

(5,432)

Add (deduct) adjustments to reconcile net income to cash flows from operating activities

Depreciation, amortization and accretion

417,679

429,486

Bad debts expense

54,599

52,098

Stock-based compensation expense

17,949

15,488

Deferred income taxes, net

(40,640)

(33,346)

Equity in earnings of unconsolidated entities

(70,053)

(72,117)

Distributions from unconsolidated entities

27,226

65,569

(Gain) loss on asset disposals, net

10,129

10,333

(Gain) loss on sale of business and other exit costs, net

(129,372)

(4,289)

(Gain) loss on license sales and exchanges, net

(122,898)

(91,446)

Noncash interest expense

1,363

1,014

Other operating activities

(387)

3

Changes in assets and liabilities from operations

Accounts receivable

(17,935)

67,136

Equipment installment plans receivable

(65,124)

(47,971)

Inventory

127,021

38,674

Accounts payable

29,589

(43,132)

Customer deposits and deferred revenues

(7,005)

13,139

Accrued taxes

191,508

1,049

Accrued interest

361

22

Other assets and liabilities

(87,880)

(80,636)

538,431

315,642

Cash flows from investing activities

Cash used for additions to property, plant and equipment

(359,513)

(339,907)

Cash paid for acquisitions and licenses

(280,710)

(18,681)

Cash received from divestitures and exchanges

291,888

125,905

Cash received for investments

10,000

Other investing activities

2,328

3,720

(346,007)

(218,963)

Cash flows from financing activities

Repayment of long-term debt

(434)

(589)

TDS Common Shares reissued for benefit plans, net of tax payments

9,831

401

U.S. Cellular Common Shares reissued for benefit plans, net of tax payments

(1,570)

830

Repurchase of TDS Common Shares

(20,090)

Repurchase of U.S. Cellular Common Shares

(2,302)

(8,298)

Dividends paid to TDS shareholders

(30,530)

(29,107)

Payment of debt issuance costs

(3,080)

Distributions to noncontrolling interests

(5,872)

(482)

Other financing activities

1,181

5,502

(32,776)

(51,833)

Net increase in cash and cash equivalents

159,648

44,846

Cash and cash equivalents

Beginning of period

471,901

830,014

End of period

$

631,549

$

874,860

 

TDS Telecom Highlights

Three Months Ended June 30,

(Unaudited, dollars in thousands)

Change

2015

2014

Amount

Percent

Wireline

Operating revenues

Residential

$

74,277

$

73,360

$

917

1%

Commercial

55,395

57,472

(2,077)

(4)%

Wholesale

45,741

49,465

(3,724)

(8)%

Total service revenues

175,413

180,297

(4,884)

(3)%

Equipment sales

557

431

126

29%

175,970

180,728

(4,758)

(3)%

Operating expenses

Cost of services

62,604

64,305

(1,701)

(3)%

Cost of equipment sold

597

481

116

24%

Selling, general and administrative expenses

49,200

47,708

1,492

3%

Depreciation, amortization and accretion

41,203

41,827

(624)

(1)%

(Gain) loss on asset disposals, net

1,010

514

496

96%

(Gain) loss on sale of business and other exit costs, net

(3,054)

(3,054)

N/M

151,560

154,835

(3,275)

(2)%

Operating income

$

24,410

$

25,893

$

(1,483)

(6)%

Cable

Operating revenues

Residential

$

34,913

$

18,222

$

16,691

92%

Commercial

9,632

4,262

5,370

>100%

Total service revenues

44,545

22,484

22,061

98%

Equipment sales

70

70

N/M

44,615

22,484

22,131

98%

Operating expenses

Cost of services

19,849

11,394

8,455

74%

Cost of equipment

15

15

N/M

Selling, general and administrative expenses

13,764

6,285

7,479

>100%

Depreciation, amortization and accretion

8,860

4,557

4,303

94%

(Gain) loss on asset disposals, net

(1,668)

425

(2,093)

>(100)%

40,820

22,661

18,159

80%

Operating income (loss)

$

3,795

$

(177)

$

3,972

>100%

HMS

Operating revenues

Service revenues

$

29,467

$

27,575

$

1,892

7%

Equipment sales

46,119

40,361

5,758

14%

75,586

67,936

7,650

11%

Operating expenses

Cost of services

21,954

21,301

653

3%

Cost of equipment sold

38,566

33,875

4,691

14%

Selling, general and administrative expenses

10,969

12,376

(1,407)

(11)%

Depreciation, amortization and accretion

6,573

6,791

(218)

(3)%

(Gain) loss on asset disposals, net

27

44

(17)

(39)%

78,089

74,387

3,702

5%

Operating (loss)

$

(2,503)

$

(6,451)

$

3,948

61%

Intercompany revenues

$

(1,358)

$

(298)

$

(1,060)

>(100)%

Intercompany expenses

(1,358)

(298)

(1,060)

>(100)%

Total TDS Telecom operating income (loss)

$

25,702

$

19,265

$

6,437

33%

 

TDS Telecom Highlights

Six Months Ended June 30,

(Unaudited, dollars in thousands)

Change

2015

2014

Amount

Percent

Wireline

Operating revenues

Residential

$

148,962

$

145,865

$

3,097

2%

Commercial

111,158

115,452

(4,294)

(4)%

Wholesale

90,984

95,913

(4,929)

(5)%

Total service revenues

351,104

357,230

(6,126)

(2)%

Equipment sales

1,001

984

17

2%

352,105

358,214

(6,109)

(2)%

Operating expenses

Cost of services

125,031

128,705

(3,674)

(3)%

Cost of equipment sold

1,160

964

196

20%

Selling, general and administrative expenses

94,869

94,228

641

1%

Depreciation, amortization and accretion

83,212

84,563

(1,351)

(2)%

(Gain) loss on asset disposals, net

1,528

759

769

>100%

(Gain) loss on sale of business and other exit costs, net

(3,054)

(3,054)

N/M

302,746

309,219

(6,473)

(2)%

Operating income

$

49,359

$

48,995

$

364

1%

Cable

Operating revenues

Residential

$

69,959

$

36,475

$

33,484

92%

Commercial

18,067

8,512

9,555

>100%

Total service revenues

88,026

44,987

43,039

96%

Equipment sales

158

158

N/M

88,184

44,987

43,197

96%

Operating expenses

Cost of services

39,797

22,349

17,448

78%

Cost of equipment sold

75

75

N/M

Selling, general and administrative expenses

26,389

12,663

13,726

>100%

Depreciation, amortization and accretion

17,579

8,918

8,661

97%

(Gain) loss on asset disposals, net

(986)

490

(1,476)

>(100)%

82,854

44,420

38,434

87%

Operating income

$

5,330

$

567

$

4,763

>100%

HMS

Operating revenues

Service revenues

$

57,883

$

54,951

$

2,932

5%

Equipment sales

78,664

76,093

2,571

3%

136,547

131,044

5,503

4%

Operating expenses

Cost of services

41,982

38,247

3,735

10%

Cost of equipment sold

65,696

64,342

1,354

2%

Selling, general and administrative expenses

23,659

27,211

(3,552)

(13)%

Depreciation, amortization and accretion

13,008

13,469

(461)

(3)%

(Gain) loss on asset disposals, net

(43)

78

(121)

>(100)%

144,302

143,347

955

1%

Operating (loss)

$

(7,755)

$

(12,303)

$

4,548

37%

Intercompany revenues

$

(2,038)

$

(979)

$

(1,059)

>(100)%

Intercompany expenses

(2,038)

(979)

(1,059)

>(100)%

Total TDS Telecom operating income

$

46,934

$

37,259

$

9,675

26%

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

TDS Consolidated

Three Months Ended

Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Cash flows from operating activities

$

183,125

$

210,705

$

538,431

$

315,642

Add: Sprint Cost Reimbursement

7,462

22,862

23,174

34,116

Less: Cash used for additions to property, plant and equipment

193,052

189,017

359,513

339,907

Adjusted free cash flow (1)

$

(2,465)

$

44,550

$

202,092

$

9,851

(1)

Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash used for additions to property, plant and equipment. Adjusted free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment.

 

SOURCE Telephone and Data Systems, Inc.



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