CHICAGO, Feb. 25, 2015 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,297.1 million for the fourth quarter of 2014, versus $1,183.5 million for the comparable period one year ago. Net loss attributable to TDS shareholders and related diluted loss per share were $16.6 million and $0.15 respectively, for the fourth quarter of 2014, compared to $6.1 million and $0.06, respectively, in the comparable period one year ago.
"I am very pleased with the progress that both businesses achieved in 2014," said LeRoy T. Carlson, Jr., TDS president and CEO. "U.S. Cellular turned around its customer results and grew its postpaid customer base. TDS Telecom very successfully executed its broadband strategy and generated strong financial results.
"At U.S. Cellular, our excellent network and competitive devices, plans, and pricing helped drive customer growth. Customer service levels returned to our normal high standards. We completed our fourth wave of 4G LTE network deployment and now cover 94 percent of our postpaid customers. And to ensure that the company remains competitive and meets broadband demands, U.S. Cellular's partners were successful in acquiring meaningful spectrum in the most recent government auction. Looking ahead, U.S. Cellular is in a strong competitive position and plans to grow its customer base, revenues and improve profitability.
"TDS Telecom performed well in 2014. The wireline segment continued its targeted fiber deployment and now offers TDS TV service in eighteen markets. Ongoing cost reductions led to improved profitability. The BendBroadband acquisition integration has gone smoothly and the entire cable segment has been executing on its strategy to increase residential and commercial broadband penetration while leveraging wireline's expertise, infrastructure and product set. While OneNeck IT Solutions did not perform up to our expectations, we are highly confident that growth will accelerate as it executes its mid-market-focused IT outsourcing strategy. TDS Telecom is well-positioned for continued success in 2015.
"In 2014 TDS continued to execute on its capital allocation strategy by returning $97 million to shareholders through dividends and repurchase of shares. At the same time, TDS invested $261 million into the business through the purchase of BendBroadband. Additionally, at the U.S. Cellular level, we have been actively managing the portfolio of assets. We agreed to sell non-strategic towers for $159 million and entered into exchanges involving licenses with 153 million MHz/pops that will generate $145 million in pre-tax cash."
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 February 25, 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.
TDS has changed one of the measures which it uses to present estimates of future operating results. TDS previously presented adjusted income before income taxes, defined as income before income taxes, adjusted for: Depreciation, amortization and accretion; net Loss on impairment of assets (if any); net Gain or loss on sale of business and other exit costs (if any); net Gain or loss on license sales and exchanges (if any); net Gain or loss on investments (if any); and interest expense. TDS is now presenting Operating cash flow and Adjusted earnings before interest, taxes, depreciation, amortization and accretion ("Adjusted EBITDA"), as defined below, which it believes are measures which provide a comprehensive view of TDS' recurring results of operations.
2015 Estimated Results and Actual Results for the Year Ended December 31, 2014 -------------------------------------------------------------------------- U.S. Cellular TDS Telecom TDS(2) ------------- ----------- ----- Estimate Actual Estimate Actual Estimate Actual -------- ------ -------- ------ -------- ------ (Dollars in millions) Total operating revenues $4,000-$4,200 $3,893 $1,130-$1,180 $1,088 $5,145-$5,395 $5,009 Operating cash flow (1) $350-$450 $338 $280-$310 $296 $635-$765 $632 Adjusted EBITDA (1) $530-$630 $480 $280-$310 $298 $820-$950 $781 Capital expenditures $600 $558 $220 $208 $830 $771
(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 year ended December 31, 2014 actual results:
2015 Estimated and Actual Results for the Year Ended December 31, 2014 ---------------------------------------------------------------------- U.S. Cellular Telecom TDS (2) Estimate (3) Actual Estimate (3) Actual Estimate (3) Actual ----------- ------ ----------- ------ ----------- ------ (Dollars in millions) Net income (loss) (GAAP) N/A ($47) N/A ($24) N/A ($147) Add back: Income tax expense (benefit) N/A ($12) N/A $18 N/A ($5) --- Income (loss) before income taxes (GAAP) ($10)-$90 ($59) $45-$75 ($7) ($25)-$105 ($153) --------- ---- ------- --- ---------- ----- Add back: Interest expense $85 $57 - ($1) $145 $111 Depreciation, amortization and accretion expense $545 $606 $235 $220 $790 $837 ---- EBITDA $620-$720 $605 $280-$310 $212 $910-$1,040 $796 --------- ---- --------- ---- ----------- ---- Add back: Loss on impairment of assets - - - $84 - $88 (Gain) loss on sale of business and other exit costs, net ($105) ($33) - ($2) ($105) ($16) (Gain) loss on license sales and exchanges - ($113) - - - ($113) (Gain) loss on assets disposals, net $15 $21 - $5 $15 $27 --- Adjusted EBITDA (4) $530-$630 $480 $280-$310 $298 $820-$950 $781 ========= ==== ========= ==== ========= ==== Deduct: Equity in earnings of unconsolidated entities ($130) ($130) - - ($130) ($132) Interest and dividend income ($50) ($12) - ($2) ($55) ($17) ----- Operating cash flow (5) $350-$450 $338 $280-$310 $296 $635-$765 $632 ========= ==== ========= ==== ========= ====
(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. Accordingly, a reconciliation to net income is not available without unreasonable effort. (4) Adjusted EBITDA (new measure) equals adjusted income before income taxes (previous measure) excluding gain or loss on asset disposals, net. See Adjusted EBITDA reconciliation for full year 2014, 2013, and 2012 actual results on the company's website at investors.tdsinc.com. ------------------------------------------------ (5) A reconciliation of Operating cash flow (Non- GAAP) to operating income (GAAP) for full year 2014, 2013, and 2012 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) ----------------- -------- --------- 2014 (fourth quarter) 312,009 $7.3 2014 (third quarter) 421,322 $10.7 2014 (second quarter) 650,628 $17.3 2014 (first quarter) 157,891 $3.8 2014 (full year) 1,541,850 $39.1 2013 (full year) 338,851 $9.7 ------- ---- Total 1,880,701 $48.8 ========= =====
Conference Call Information
TDS will hold a conference call on Feb. 25, 2015 at 9:30 a.m. CST.
-- Access the live call on the Events & Presentations page of
investors.tdsinc.com or at
http://www.videonewswire.com/event.asp?id=101572.
-- 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.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(TM) company, provides wireless; wireline and cable broadband, TV and voice; and hosted and managed services to approximately 6.0 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, Baja Broadband and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,600 people as of Dec. 31, 2014.
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 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; 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 Total Markets* Summary Operating Data (Unaudited) As of or for the Quarter Ended 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 ------------------------------ ---------- --------- --------- --------- ---------- Retail Customers Postpaid Total at end of period 4,298,000 4,200,000 4,148,000 4,174,000 4,267,000 Gross additions 302,000 251,000 190,000 197,000 176,000 Net additions (losses) 98,000 52,000 (26,000) (93,000) (71,000) ARPU (1) $56.51 $56.37 $56.82 $57.59 $53.53 ARPA (2) $136.13 $132.99 $131.95 $132.03 $121.21 Churn rate (3) 1.6% 1.6% 1.7% 2.3% 1.9% Smartphone penetration (4) 59.8% 57.9% 55.3% 53.1% 50.8% Prepaid Total at end of period 348,000 350,000 352,000 356,000 343,000 Gross additions 60,000 64,000 65,000 85,000 63,000 Net additions (losses) (2,000) (2,000) (4,000) 13,000 (26,000) ARPU (1) $35.33 $34.40 $34.02 $32.22 $31.66 Churn rate (3) 5.9% 6.3% 6.5% 6.9% 8.3% Total customers at end of period 4,760,000 4,674,000 4,653,000 4,684,000 4,774,000 Billed ARPU (1) $53.63 $53.24 $53.36 $53.93 $50.25 Service revenue ARPU (1) $60.10 $60.92 $60.32 $60.19 $57.05 Smartphones sold as a percent of total 86.5% 80.8% 79.0% 78.2% 84.5% handsets sold Total population Consolidated markets (5) 50,906,000 54,817,000 54,817,000 54,817,000 58,013,000 Consolidated operating markets (5) 31,729,000 31,729,000 31,729,000 31,729,000 31,759,000 Market penetration at end of period Consolidated markets (6) 9.4% 8.5% 8.5% 8.5% 8.2% Consolidated operating markets (6) 15.0% 14.7% 14.7% 14.8% 15.0% Capital expenditures (000s) $181,655 $142,452 $143,927 $89,581 $208,135 Total cell sites in service 6,220 6,209 6,183 6,165 6,975 Owned towers 4,281 4,487 4,457 4,448 4,448
* Represents U.S. Cellular's consolidated markets. These results include markets which U. S. Cellular currently consolidates, or previously consolidated in the periods presented, and are not adjusted in prior periods for subsequent divestitures or deconsolidations. Refer to U.S. Cellular's Form 8-K filed on February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the period.
United States Cellular Corporation Core* Markets Summary Operating Data (Unaudited) As of or for the Quarter Ended 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 ------------------------------ ---------- --------- --------- --------- ---------- Retail Customers Postpaid Total at end of period 4,298,000 4,200,000 4,148,000 4,174,000 4,267,000 Gross additions 302,000 251,000 190,000 197,000 176,000 Net additions (losses) 98,000 52,000 (26,000) (93,000) (71,000) ARPU (1) $56.51 $56.37 $56.82 $57.59 $53.53 ARPA (2) $136.13 $132.99 $131.95 $132.03 $121.21 Churn rate (3) 1.6% 1.6% 1.7% 2.3% 1.9% Smartphone penetration (4) 59.8% 57.9% 55.3% 53.1% 50.8% Prepaid Total at end of period 348,000 350,000 352,000 356,000 343,000 Gross additions 60,000 64,000 65,000 85,000 63,000 Net additions (losses) (2,000) (2,000) (4,000) 13,000 (26,000) ARPU (1) $35.33 $34.40 $34.02 $32.22 $31.66 Churn rate (3) 5.9% 6.3% 6.5% 6.9% 8.3% Total customers at end of period 4,760,000 4,674,000 4,653,000 4,684,000 4,774,000 Billed ARPU (1) $53.63 $53.24 $53.36 $53.93 $50.25 Service revenue ARPU (1) $60.10 $60.92 $60.32 $60.19 $57.05 Smartphones sold as a percent of total 86.5% 80.8% 79.0% 78.2% 84.5% handsets sold Total population Consolidated markets (5) 50,906,000 54,817,000 54,817,000 54,817,000 58,013,000 Consolidated operating markets (5) 31,729,000 31,729,000 31,729,000 31,729,000 31,759,000 Market penetration at end of period Consolidated markets (6) 9.4% 8.5% 8.5% 8.5% 8.2% Consolidated operating markets (6) 15.0% 14.7% 14.7% 14.8% 15.0% Capital expenditures (000s) $181,655 $142,452 $143,927 $89,581 $211,247 Total cell sites in service 6,220 6,209 6,183 6,165 6,161 Owned towers 3,951 3,922 3,892 3,883 3,883
* 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 February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the period. (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 customers. (5) The decrease in the population of consolidated markets is due primarily to the divestiture of the majority of the St. Louis area non-operating market license in March 2014, and certain non-operating licenses in North Carolina in December 2014. 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.
TDS Telecom Summary Operating Data (Unaudited) Quarter Ended 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 ---------- --------- --------- --------- ---------- TDS Telecom Wireline -------- Residential connections Voice (1) 335,900 340,300 346,100 348,700 352,100 Broadband (2) 229,200 231,600 232,700 229,000 227,000 IPTV (3) 23,400 20,700 18,200 15,900 13,800 ------ ------ ------ ------ ------ Wireline residential connections 588,500 592,600 597,000 593,600 592,900 ======= ======= ======= ======= ======= Total residential revenue per connection (4) $41.56 $41.47 $41.05 $40.79 $40.93 Commercial connections Voice (1) 193,200 199,300 206,200 212,200 218,400 Broadband (2) 24,700 25,300 26,000 26,600 27,100 managedIP (5) 140,200 137,700 133,300 131,000 127,600 ------- ------- ------- ------- ------- Wireline commercial connections 358,100 362,300 365,500 369,800 373,100 ======= ======= ======= ======= ======= Total Wireline connections 946,600 954,900 962,500 963,400 966,000 ======= ======= ======= ======= ======= Cable ----- Cable Connections Video (6) 110,400 109,100 69,700 68,700 69,100 Broadband (7) 110,900 106,400 63,200 63,000 61,000 Voice (7) 46,000 41,800 17,800 17,700 17,200 ------ ------ ------ ------ ------ Cable connections 267,300 257,300 150,700 149,400 147,300 ======= ======= ======= ======= =======
(1) The individual circuit connecting customers to TDS Telecom's central office facilities. (2) The number of customers provided high- capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies. (3) The number of customers provided video services using IP networking technology. (4) Total residential revenue divided by the average number of total residential connections. (5) The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology. (6) Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/ rooms within the building receiving service. (7) Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively.
TDS Telecom Capital Expenditures (000s) Quarter Ended 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 ---------- --------- --------- --------- ---------- Wireline $51,400 $34,200 $27,400 $22,900 $46,000 Cable 14,600 7,600 7,200 6,200 7,000 HMS 13,400 9,800 10,600 2,800 9,200 ------ ----- ------ ----- ----- $79,400 $51,600 $45,200 $31,900 $62,200 ======= ======= ======= ======= =======
Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights Three Months Ended December 31, (Unaudited, dollars and shares in thousands, except per share amounts) Change ------ 2014 2013 Amount Percent ---- ---- ------ ------- Operating revenues U.S. Cellular $1,008,744 $902,724 $106,020 12% TDS Telecom 281,889 271,939 9,950 4% All Other (1) 6,428 8,854 (2,426) (27%) 1,297,061 1,183,517 113,544 10% --------- --------- ------- Operating expenses U.S. Cellular Expenses excluding depreciation, amortization and accretion 939,331 967,005 (27,674) (3%) Depreciation, amortization and accretion 140,955 210,371 (69,416) (33%) (Gain) loss on asset disposals, net 4,695 14,453 (9,758) (68%) (Gain) loss on sale of business and other exit costs, net (5,136) (3,140) (1,996) (64%) (Gain) loss on sale of license sales and exchanges (21,547) (255,479) 233,932 92% ------- -------- ------- 1,058,298 933,210 125,088 13% --------- ------- ------- TDS Telecom Expenses excluding depreciation, amortization and accretion 205,825 206,097 (272) - Depreciation, amortization and accretion 58,394 53,149 5,245 10% (Gain) loss on asset disposals, net 2,060 336 1,724 >100% (Gain) loss on sale of business and other exit costs, net (156) - (156) N/M ---- --- ---- 266,123 259,582 6,541 3% ------- ------- ----- All Other (1) Expenses excluding depreciation and amortization 4,039 8,597 (4,558) (53%) Depreciation and amortization 2,168 2,982 (814) (27%) Loss on impairment of assets 3,802 - 3,802 N/M (Gain) loss on asset disposals, net 150 (38) 188 >(100%) (Gain) loss on sale of business and other exit costs, net (1,475) 121 (1,596) >(100%) ------ --- ------ 8,684 11,662 (2,978) (26%) ----- ------ ------ Total operating expenses 1,333,105 1,204,454 128,651 11% --------- --------- ------- Operating income (loss) U.S. Cellular (49,554) (30,486) (19,068) (63%) TDS Telecom 15,766 12,357 3,409 28% All Other (1) (2,256) (2,808) 552 20% (36,044) (20,937) (15,107) (72%) ------- ------- ------- Investment and other income (expense) Equity in earnings of unconsolidated entities 23,767 32,411 (8,644) (27%) Interest and dividend income 7,194 2,407 4,787 >100% Gain (loss) on investment - 29 (29) N/M Interest expense (27,622) (25,603) (2,019) (8%) Other, net (164) 169 (333) >(100%) Total investment and other income (expense) 3,175 9,413 (6,238) (66%) ----- ----- ------ Loss before income taxes (32,869) (11,524) (21,345) >(100%) Income tax expense (benefit) (12,208) (4,013) (8,195) >(100%) Net loss (20,661) (7,511) (13,150) >(100%) Less: Net income (loss) attributable to noncontrolling interests, net of tax (4,120) (1,454) (2,666) >(100%) Net loss attributable to TDS shareholders (16,541) (6,057) (10,484) >(100%) TDS Preferred dividend requirement (12) (12) - - Net loss available to common shareholders $(16,553) $(6,069) $(10,484) >(100%) ======== ======= ======== Basic weighted average shares outstanding 107,995 108,742 (747) (1%) Basic earnings (loss) per share attributable to TDS shareholders $(0.15) $(0.06) $(0.09) >(100%) Diluted weighted average shares outstanding 107,995 108,742 (747) (1%) Diluted earnings (loss) per share attributable to TDS shareholders $(0.15) $(0.06) $(0.09) >(100%)
(1) Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments. N/M - Percentage change not meaningful
Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights Twelve Months Ended December 31, (Unaudited, dollars and shares in thousands, except per share amounts) Change ------ 2014 2013 Amount Percent ---- ---- ------ ------- Operating revenues U.S. Cellular $3,892,747 $3,918,836 $(26,089) (1%) TDS Telecom 1,088,312 947,003 141,309 15% All Other (1) 28,379 35,397 (7,018) (20%) 5,009,438 4,901,236 108,202 2% --------- --------- ------- Operating expenses U.S. Cellular Expenses excluding depreciation, amortization and accretion 3,554,494 3,439,830 114,664 3% Depreciation, amortization and accretion 605,997 803,781 (197,784) (25%) (Gain) loss on asset disposals, net 21,469 30,606 (9,137) (30%) (Gain) loss on sale of business and other exit costs, net (32,830) (246,767) 213,937 87% (Gain) loss on license sales and exchanges (112,993) (255,479) 142,486 56% -------- -------- ------- 4,036,137 3,771,971 264,166 7% --------- --------- ------- TDS Telecom Expenses excluding depreciation, amortization and accretion 792,687 699,187 93,500 13% Depreciation, amortization and accretion 219,599 202,701 16,898 8% Loss on impairment of assets 84,000 - 84,000 N/M (Gain) loss on asset disposals, net 4,754 283 4,471 >100% (Gain) loss on sale of business and other exit costs, net (2,357) - (2,357) N/M ------ --- ------ 1,098,683 902,171 196,512 22% --------- ------- ------- All Other (1) Expenses excluding depreciation and amortization 30,095 34,077 (3,982) (12%) Depreciation and amortization 10,936 11,595 (659) (6%) Loss on impairment of assets 3,802 ? 3,802 N/M (Gain) loss on asset disposals, net 308 (48) 356 >(100%) (Gain) loss on sale of business and other exit costs, net (2) 19,341 (53,889) 73,230 >(100%) ------ ------- ------ 64,482 (8,265) 72,747 >(100%) ------ ------ ------ Total operating expenses 5,199,302 4,665,877 533,425 11% --------- --------- ------- Operating income (loss) U.S. Cellular (143,390) 146,865 (290,255) >(100%) TDS Telecom (10,371) 44,832 (55,203) >(100%) All Other (1) (36,103) 43,662 (79,765) >(100%) (189,864) 235,359 (425,223) >(100%) -------- ------- -------- Investment and other income (expense) Equity in earnings of unconsolidated entities 131,965 132,714 (749) (1%) Interest and dividend income 16,957 9,092 7,865 87% Gain (loss) on investments ? 14,547 (14,547) N/M Interest expense (111,397) (98,811) (12,586) (13%) Other, net 115 (37) 152 >(100%) Total investment and other income (expense) 37,640 57,505 (19,865) (35%) ------ ------ ------- Income (loss) before income taxes (152,224) 292,864 (445,088) >(100%) Income tax expense (benefit) (4,932) 126,043 (130,975) >(100%) Net income (loss) (147,292) 166,821 (314,113) >(100%) Less: Net income (loss) attributable to noncontrolling interests, net of tax (10,937) 24,894 (35,831) >(100%) Net income (loss) attributable to TDS shareholders (136,355) 141,927 (278,282) >(100%) TDS Preferred dividend requirement (49) (49) - - Net income (loss) available to common shareholders $(136,404) $141,878 $(278,282) >(100%) ========= ======== ========= Basic weighted average shares outstanding 108,485 108,490 (5) - Basic earnings (loss) per share attributable to TDS shareholders $(1.26) $1.31 $(2.57) >(100%) Diluted weighted average shares outstanding 108,485 109,132 (647) (1%) Diluted earnings (loss) per share attributable to TDS shareholders $(1.26) $1.29 $(2.55) >(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 the Airadigm Transaction, TDS recognized expenses of $20.2 million related to exit and disposal activities in 2014. In 2013, TDS recognized an incremental gain of $53.5 million compared to U.S. Cellular upon closing of the Divestiture Transaction as a result of lower asset basis in the assets disposed. N/M - Percentage change not meaningful
Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands) ASSETS December 31, December 31, 2014 2013 ---- ---- Current assets Cash and cash equivalents $471,901 $830,014 Short-term investments - 50,104 Accounts receivable from customers and others 683,681 731,114 Inventory, net 273,707 244,560 Net deferred income tax asset 107,686 106,077 Prepaid expenses 86,506 87,920 Income taxes receivable 113,708 2,397 Other current assets 29,766 35,151 1,766,955 2,087,337 Assets held for sale 103,343 16,027 Investments Licenses 1,453,574 1,423,779 Goodwill 771,352 836,843 Franchise rights 244,300 123,668 Other intangible assets, net 64,499 71,454 Investments in unconsolidated entities 321,729 301,772 Other investments 508 641 2,855,962 2,758,157 Property, plant and equipment, net U.S. Cellular 2,728,217 2,856,520 TDS Telecom 1,093,671 984,634 Other 24,237 36,990 3,846,125 3,878,144 Other assets and deferred charges 334,554 164,482 ------- ------- Total assets $8,906,939 $8,904,147 ========== ==========
Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands) LIABILITIES AND EQUITY December 31, December 31, 2014 2013 ---- ---- Current liabilities Current portion of long-term debt $808 $1,646 Accounts payable 387,125 496,069 Customer deposits and deferred revenues 324,318 289,445 Accrued interest 7,919 6,673 Accrued taxes 46,734 70,518 Accrued compensation 114,549 115,031 Other current liabilities 181,803 212,374 ------- ------- 1,063,256 1,191,756 Liabilities held for sale 21,643 - Deferred liabilities and credits Net deferred income tax liability 941,519 862,975 Other deferred liabilities and credits 430,774 458,709 Long-term debt 1,993,586 1,720,074 Noncontrolling interests with redemption features 1,150 536 Equity TDS shareholders' equity Series A Common and Common Shares, par value $.01 1,327 1,327 Capital in excess of par value 2,336,511 2,308,807 Treasury shares, at cost (748,199) (721,354) Accumulated other comprehensive loss 6,452 (569) Retained earnings 2,330,187 2,529,626 --------- --------- Total TDS shareholders' equity 3,926,278 4,117,837 Preferred shares 824 824 Noncontrolling interests 527,909 551,436 Total equity 4,455,011 4,670,097 Total liabilities and equity $8,906,939 $8,904,147 ========== ==========
Balance Sheet Highlights December 31, 2014 (Unaudited, dollars in thousands) U.S. TDS TDS Corporate Intercompany TDS Cellular Telecom & Other Eliminations Consolidated -------- ------- ------- ------------ ------------ Cash and cash equivalents $211,513 $71,999 $188,389 $ ? $471,901 Affiliated cash investments ? 332,334 ? (332,334) ? --- ------- --- -------- --- $211,513 $404,333 $188,389 $(332,334) $471,901 ======== ======== ======== ========= ======== Licenses, goodwill and other intangible assets $1,813,589 $857,864 $(137,728) $ ? $2,533,725 Investment in unconsolidated entities 283,014 3,804 39,657 (4,746) 321,729 Long-term and other investments ? 508 ? ? 508 --- --- --- --- --- $2,096,603 $862,176 $(98,071) $(4,746) $2,855,962 ========== ======== ======== ======= ========== Property, plant and equipment, net $2,728,217 $1,093,671 $24,478 $(241) $3,846,125 ========== ========== ======= ===== ========== Long-term debt: Current portion $46 $32 $730 $ ? $808 Non- current portion 1,151,819 1,435 840,332 ? 1,993,586 $1,151,865 $1,467 $841,062 $ ? $1,994,394 ========== ====== ======== === === ==========
Telephone and Data Systems, Inc. Schedule of Cash and Cash Equivalents and Investments (Unaudited, dollars in thousands) The following table presents TDS' cash and cash equivalents and investments at December 31, 2014 and December 31, 2013. December 31, December 31, 2014 2013 ---- ---- Cash and cash equivalents $471,901 $830,014 Amounts included in short- term investments (1) (2) U.S. Treasury Notes - 50,104 Total cash and cash equivalents and investments $471,901 $880,118 ======== ========
(1) Designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet. (2) Maturities are less than twelve months from the respective balance sheet dates.
Telephone and Data Systems, Inc. Consolidated Statement of Cash Flows Twelve Months Ended December 31, (Unaudited, dollars in thousands) 2014 2013 ---- ---- Cash flows from operating activities Net income (loss) $(147,292) $166,821 Add (deduct) adjustments to reconcile net income to cash flows from operating activities Depreciation, amortization and accretion 836,532 1,018,077 Bad debts expense 107,861 105,629 Stock-based compensation expense 35,793 30,338 Deferred income taxes, net 71,713 (67,150) Equity in earnings of unconsolidated entities (131,965) (132,714) Distributions from unconsolidated entities 112,349 127,929 Loss on impairment of assets 87,802 - (Gain) loss on asset disposals, net 26,531 30,841 (Gain) loss on sale of business and other exit costs, net (15,846) (300,656) (Gain) loss on license sales and exchanges (112,993) (255,479) (Gain) loss on investments - (14,547) Noncash interest expense 1,642 2,463 Other operating activities (641) 612 Changes in assets and liabilities from operations Accounts receivable 17,629 (293,729) Equipment installment plans receivable (188,829) (591) Inventory (29,149) (83,536) Accounts payable (117,264) 86,028 Customer deposits and deferred revenues 33,952 66,460 Accrued taxes (122,921) 17,388 Accrued interest 1,277 380 Other assets and liabilities (71,369) (9,954) ------- ------ 394,812 494,610 ------- ------- Cash flows from investing activities Cash used for additions to property, plant and equipment (799,496) (883,797) Cash paid for acquisitions and licenses (295,253) (314,570) Cash received from divestitures 187,645 811,120 Cash received for investments 50,000 115,000 Federal Communications Commission deposit (60,000) - Other investing activities 7,360 11,594 (909,744) (260,653) -------- -------- Cash flows from financing activities Issuance of long-term debt 275,000 37 Repayment of borrowing under revolving credit facility (150,000) - Borrowing under revolving credit facility 150,000 - TDS Common Shares reissued for benefit plans, net of tax payments (2,019) 9,654 U.S. Cellular Common Shares reissued for benefit plans, net of tax payments 830 5,784 Repurchase of TDS Common Shares (39,096) (9,692) Repurchase of U.S. Cellular Common Shares (18,943) (18,544) Dividends paid to TDS shareholders (58,040) (55,293) U.S. Cellular dividends paid to noncontrolling public shareholders - (75,235) Payment of debt issuance costs (10,215) (23) Distributions to noncontrolling interests (627) (3,766) Payments to acquire additional interest in subsidiaries - (4,505) Other financing activities 9,929 7,159 156,819 (144,424) ------- -------- Net increase (decrease) in cash and cash equivalents (358,113) 89,533 Cash and cash equivalents Beginning of period 830,014 740,481 End of period $471,901 $830,014
TDS Telecom Highlights Three Months Ended December 31, (Unaudited, dollars in thousands) Change ------ 2014 2013 Amount Percent ---- ---- ------ ------- Wireline -------- Operating revenues Residential $73,537 $73,045 $492 1% Commercial 56,676 58,387 (1,711) (3%) Wholesale 49,493 48,747 746 2% Total service revenues 179,706 180,179 (473) - Equipment sales 427 820 (393) (48%) 180,133 180,999 (866) - ------- ------- ---- Operating expenses Cost of services 64,101 67,159 (3,058) (5%) Cost of equipment sold 543 786 (243) (31%) Selling, general and administrative expenses 49,101 52,771 (3,670) (7%) Depreciation, amortization and accretion 43,123 41,516 1,607 4% (Gain) loss on asset disposals, net 589 306 283 92% (Gain) loss on sale of business and other exit costs, net (156) - (156) N/M 157,301 162,538 (5,237) (3%) ------- ------- ------ Operating income $22,832 $18,461 $4,371 24% ---------- Cable ----- Operating revenues Residential $34,588 $17,374 $17,214 99% Commercial 8,761 4,147 4,614 >100% 43,349 21,521 21,828 >100% Operating expenses Cost of services 19,265 10,547 8,718 83% Selling, general and administrative expenses 13,564 5,870 7,694 >100% Depreciation, amortization and accretion 8,554 4,657 3,897 84% (Gain) loss on asset disposals, net 1,366 28 1,338 >100% 42,749 21,102 21,647 >100% ------ ------ ------ Operating income $600 $419 $181 43% ---------- HMS --- Operating revenues Service revenues $27,009 $26,470 $539 2% Equipment sales 33,136 43,481 (10,345) (24%) 60,145 69,951 (9,806) (14%) ------ ------ ------ Operating expenses Cost of services 19,703 17,381 2,322 13% Cost of equipment sold 28,201 36,516 (8,315) (23%) Selling, general and administrative expenses 13,085 15,599 (2,514) (16%) Depreciation, amortization and accretion 6,717 6,976 (259) (4%) (Gain) loss on asset disposals, net 105 2 103 >100% 67,811 76,474 (8,663) (11%) ------ ------ ------ Operating loss $(7,666) $(6,523) $(1,143) (18%) ------------ Intercompany revenues $(1,738) $(532) $(1,206) >(100)% Intercompany expenses (1,738) (532) (1,206) >(100)% ------ ---- ------ Total TDS Telecom operating income $15,766 $12,357 $3,409 28% ======= ======= ======
TDS Telecom Highlights Twelve Months Ended December 31, (Unaudited, dollars in thousands) Change ------ 2014 2013 Amount Percent ---- ---- ------ ------- Wireline -------- Operating revenues Residential $293,302 $293,217 $85 - Commercial 229,308 229,715 (407) - Wholesale 191,976 200,440 (8,464) (4%) Total service revenues 714,586 723,372 (8,786) (1%) Equipment sales 1,836 3,195 (1,359) (43%) 716,422 726,567 (10,145) (1%) ------- ------- ------- Operating expenses Cost of services 256,878 266,635 (9,757) (4%) Cost of equipment sold 2,336 3,831 (1,495) (39%) Selling, general and administrative expenses 189,956 220,097 (30,141) (14%) Depreciation, amortization and accretion 169,044 170,868 (1,824) (1%) (Gain) loss on asset disposals, net 2,091 130 1,961 >100% (Gain) loss on sale of business and other exit costs, net (2,357) - (2,357) N/M 617,948 661,561 (43,613) (7%) ------- ------- ------- Operating income $98,474 $65,006 $33,468 51% ---------- Cable ----- Operating revenues Residential $93,985 $29,016 $64,969 >100% Commercial 22,870 6,867 16,003 >100% 116,855 35,883 80,972 >100% Operating expenses Cost of services 54,265 17,274 36,991 >100% Selling, general and administrative expenses 36,175 11,054 25,121 >100% Depreciation, amortization and accretion 23,643 7,571 16,072 >100% (Gain) loss on asset disposals, net 2,482 28 2,454 >100% 116,565 35,927 80,638 >100% ------- ------ ------ Operating income (loss) $290 $(44) $334 >100% ------------ HMS --- Operating revenues Service revenues $109,766 $94,875 $14,891 16% Equipment sales 148,966 90,741 58,225 64% 258,732 185,616 73,116 39% ------- ------- ------ Operating expenses Cost of services 77,392 60,423 16,969 28% Cost of equipment sold 126,362 75,991 50,371 66% Selling, general and administrative expenses 53,020 44,945 8,075 18% Depreciation, amortization and accretion 26,912 24,262 2,650 11% Loss on impairment of assets 84,000 - 84,000 N/M (Gain) loss on asset disposals, net 181 125 56 45% 367,867 205,746 162,121 79% ------- ------- ------- Operating loss $(109,135) $(20,130) $(89,005) >(100)% ------------ Intercompany revenues $(3,697) $(1,063) $(2,634) >(100)% Intercompany expenses (3,697) (1,063) (2,634) >(100)% ------ ------ ------ Total TDS Telecom operating income (loss) $(10,371) $44,832 $(55,203) >(100)% ======== ======= ========
Telephone and Data Systems, Inc. Financial Measures and Reconciliations (Unaudited, dollars in thousands) TDS Consolidated ---------------- Three Months Ended Twelve Months Ended December 31, December 31, ------------ ------------ 2014 2013 2014 2013 ---- ---- ---- ---- Cash flows from operating activities $(101,399) $56,710 $394,812 $494,610 Add: Sprint Cost Reimbursement 19,085 9,429 71,097 10,560 Less: Cash used for additions to property, 245,778 252,427 799,496 883,797 plant and equipment Adjusted free cash flow (1) $(328,092) $(186,288) $(333,587) $(378,627) ========= ========= ========= =========
(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.
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SOURCE Telephone and Data Systems, Inc.