UNITED STATES

  

  

SECURITIES AND EXCHANGE COMMISSION

  

  

Washington, D.C. 20549

  

  

  

  

  

  

  

  

  

  

SCHEDULE 14A

  

  

  

  

  

  

  

  

  

  

Proxy Statement Pursuant to Section 14(a) of

  

  

the Securities Exchange Act of 1934 (Amendment No.            )

  

  

  

  

  

  

  

  

  

  

Filed by the Registrant

  

Filed by a Party other than the Registrant ¨ 

  

Check the appropriate box:

  

¨

Preliminary Proxy Statement

  

¨

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

  

¨

Definitive Proxy Statement

  

x

Definitive Additional Materials

  

¨

Soliciting Material Pursuant to §240.14a-12

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Telephone and Data Systems, Inc.

  

  

(Name of Registrant as Specified In Its Charter)

  

  

  

  

  

  

  

  

  

  

(Name of Person(s) Filing Proxy Statement, If other than the Registrant)

  

  

  

  

  

  

  

  

  

  

Payment of Filing Fee (Check the appropriate box):

  

x

No fee required.

  

¨

Fee computed on table below per Exchange Act Rules 14a 6(i)(1) and 0-11.

  

  

(1)

Title of each class of securities to which transaction applies:

  

  

(2)

Aggregate number of securities to which transaction applies:

  

  

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0 11 (set forth the amount on which the filing fee is calculated and state how it was determined):

  

  

  

(4)

Proposed maximum aggregate value of transaction:

  

  

(5)

Total fee paid:

  

¨

Fee paid previously with preliminary materials.

  

¨

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

  

  

  

(1)

Amount Previously Paid:

  

  

(2)

Form, Schedule or Registration Statement No.:

  

  

(3)

Filing Party:

  

  

(4)

Date Filed:

 


 

 

 

EXPLANATORY NOTE

 

The purpose of this Schedule 14A is to file a press release issued by Telephone and Data Systems, Inc. (“TDS”) on May 2, 2014 relating to earnings for the first quarter of 2014. 

 

 

IMPORTANT INFORMATION:  TDS and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from the shareholders of TDS in connection with the TDS 2014 annual meeting of shareholders.  Information regarding TDS directors and executive officers and other participants that may be soliciting proxies on behalf of the TDS board of directors and their respective interests in TDS by security holdings or otherwise is set forth in TDS’s definitive proxy statement relating to its 2014 annual meeting, as filed with the Securities and Exchange Commission (“SEC”) on April 18, 2014.  The 2014 proxy statement, other solicitation material and other reports that TDS files with the SEC, when available, can be obtained free of charge at the SEC’s web site at www.sec.gov  or from TDS as provided on its website at www.teldta.com.  TDS SHAREHOLDERS ARE ADVISED TO READ CAREFULLY THE PROXY STATEMENT AND OTHER SOLICITATION MATERIAL FILED BY TDS IN CONNECTION WITH THE TDS 2014 ANNUAL MEETING OF SHAREHOLDERS BEFORE MAKING ANY VOTING DECISION BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION RELATING TO THE ELECTION OF DIRECTORS OF TDS.

 


 

 

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.”

 

 

3

 


 

 

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.

 

  

  

TDS Telecom 2014 Estimated Results (1)

  

  

Current

  

Previous

(Dollars in millions)

  

  

  

Operating revenues

$1,050-$1,100

  

Unchanged

Adjusted income before income taxes (2)

$250-$280

  

Unchanged

Capital expenditures

$200 

  

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:

 

  

  

TDS Telecom

  

  

  

  

Actual Results

  

  

2014 Estimated Results

  

Three Months Ended

March 31, 2014

  

Year Ended

December 31, 2013

(Dollars in millions)

  

  

  

  

  

Income before income taxes

$25-$55

  

$19 

  

$49 

Depreciation, amortization and accretion expense

$225 

  

$54 

  

$203 

(Gain) loss on investments

 ― 

  

 ― 

  

($1)

Interest expense

 ― 

  

 ― 

  

($2)

Adjusted income before income taxes

$250-$280

  

$73 

  

$249 

 

 

4

 


 

 

 

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

  

# Shares

  

Cost (in millions)

  

2014 (first quarter)

  

 157,891 

  

$

 3.8 

  

2013 (full year)

  

 338,851 

  

$

 9.7 

  

Total

  

 496,742 

  

$

 13.5 

  

 

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 

 

 

5

 


 

 

 

United States Cellular Corporation

Total Markets* Summary Operating Data (Unaudited)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

As of or for the Quarter Ended

3/31/2014

  

12/31/2013

  

9/30/2013

  

6/30/2013

  

3/31/2013

Retail Customers

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Postpaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 4,174,000 

  

  

 4,267,000 

  

  

 4,343,000 

  

  

 4,412,000 

  

  

 5,060,000 

  

  

Gross additions

  

 197,000 

  

  

 176,000 

  

  

 165,000 

  

  

 165,000 

  

  

 191,000 

  

  

Net additions (losses)

  

 (93,000) 

  

  

 (71,000) 

  

  

 (60,000) 

  

  

 (120,000) 

  

  

 (74,000) 

  

  

ARPU (1)

$

 57.59 

  

$

 53.53 

  

$

 54.64 

  

$

 54.18 

  

$

 54.85 

  

  

Churn rate (2)

  

2.3%

  

  

1.9%

  

  

1.7%

  

  

2.0%

  

  

1.7%

  

  

Smartphone penetration (3) (4)

  

53.1%

  

  

50.8%

  

  

47.1%

  

  

45.5%

  

  

43.5%

  

Prepaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 356,000 

  

  

 343,000 

  

  

 370,000 

  

  

 381,000 

  

  

 446,000 

  

  

Gross additions

  

 85,000 

  

  

 63,000 

  

  

 65,000 

  

  

 77,000 

  

  

 104,000 

  

  

Net additions (losses)

  

 13,000 

  

  

 (26,000) 

  

  

 (11,000) 

  

  

 (7,000) 

  

  

 23,000 

  

  

ARPU (1)

$

 32.22 

  

$

 31.66 

  

$

 28.72 

  

$

 31.69 

  

$

 33.31 

  

  

Churn rate (2)

  

6.9%

  

  

8.3%

  

  

6.8%

  

  

6.8%

  

  

6.2%

Total customers at end of period

  

 4,684,000 

  

  

 4,774,000 

  

  

 4,875,000 

  

  

 4,968,000 

  

  

 5,736,000 

Billed ARPU (1)

$

 53.93 

  

$

 50.25 

  

$

 50.92 

  

$

 50.60 

  

$

 51.13 

Service revenue ARPU (1)

$

 60.19 

  

$

 57.05 

  

$

 58.36 

  

$

 57.45 

  

$

 57.63 

Smartphones sold as a percent of total

  devices sold

  

73.0%

  

  

79.6%

  

  

65.2%

  

  

66.0%

  

  

61.7%

Total population

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (5)

  

 54,817,000 

  

  

 58,013,000 

  

  

 84,025,000 

  

  

 84,025,000 

  

  

 93,943,000 

  

  

Consolidated operating markets (5)

  

 31,729,000 

  

  

 31,759,000 

  

  

 31,822,000 

  

  

 31,822,000 

  

  

 47,440,000 

Market penetration at end of period

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (6)

  

8.5%

  

  

8.2%

  

  

5.8%

  

  

5.9%

  

  

6.1%

  

  

Consolidated operating markets (6)

  

14.8%

  

  

15.0%

  

  

15.3%

  

  

15.6%

  

  

12.1%

Capital expenditures (000s)

$

 89,581 

  

$

 208,135 

  

$

 242,459 

  

$

 168,497 

  

$

 118,410 

Total cell sites in service

  

 6,165 

  

  

 6,975 

  

  

 7,687 

  

  

 7,748 

  

  

 8,027 

Owned towers

  

 4,448 

  

  

 4,448 

  

  

 4,422 

  

  

 4,411 

  

  

 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.

 

 

6

 


 

 

 

United States Cellular Corporation

Core* Markets Summary Operating Data (Unaudited)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

As of or for the Quarter Ended

3/31/2014

  

12/31/2013

  

9/30/2013

  

6/30/2013

  

3/31/2013

Retail Customers

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Postpaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 4,174,000 

  

  

 4,267,000 

  

  

 4,343,000 

  

  

 4,412,000 

  

  

 4,463,000 

  

  

Gross additions

  

 197,000 

  

  

 176,000 

  

  

 165,000 

  

  

 165,000 

  

  

 176,000 

  

  

Net additions (losses)

  

 (93,000) 

  

  

 (71,000) 

  

  

 (60,000) 

  

  

 (53,000) 

  

  

 (33,000) 

  

  

ARPU (1)

$

 57.59 

  

$

 53.53 

  

$

 54.64 

  

$

 54.44 

  

$

 54.21 

  

  

Churn rate (2)

  

2.3%

  

  

1.9%

  

  

1.7%

  

  

1.6%

  

  

1.6%

  

  

Smartphone penetration (3) (4)

  

53.1%

  

  

50.8%

  

  

47.1%

  

  

45.5%

  

  

43.0%

  

Prepaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 356,000 

  

  

 343,000 

  

  

 370,000 

  

  

 381,000 

  

  

 373,000 

  

  

Gross additions

  

 85,000 

  

  

 63,000 

  

  

 65,000 

  

  

 76,000 

  

  

 91,000 

  

  

Net additions (losses)

  

 13,000 

  

  

 (26,000) 

  

  

 (11,000) 

  

  

 8,000 

  

  

 31,000 

  

  

ARPU (1)

$

 32.22 

  

$

 31.66 

  

$

 28.72 

  

$

 31.65 

  

$

 32.92 

  

  

Churn rate (2)

  

6.9%

  

  

8.3%

  

  

6.8%

  

  

6.0%

  

  

5.6%

Total customers at end of period

  

 4,684,000 

  

  

 4,774,000 

  

  

 4,875,000 

  

  

 4,968,000 

  

  

 5,005,000 

Billed ARPU (1)

$

 53.93 

  

$

 50.25 

  

$

 50.92 

  

$

 50.98 

  

$

 50.93 

Service revenue ARPU (1)

$

 60.19 

  

$

 57.05 

  

$

 58.36 

  

$

 57.88 

  

$

 57.14 

Smartphones sold as a percent of total

  devices sold

  

73.0%

  

  

79.6%

  

  

65.2%

  

  

66.1%

  

  

62.1%

Total population

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (5)

  

 54,817,000 

  

  

 58,013,000 

  

  

 84,025,000 

  

  

 84,025,000 

  

  

 84,025,000 

  

  

Consolidated operating markets (5)

  

 31,729,000 

  

  

 31,759,000 

  

  

 31,822,000 

  

  

 31,822,000 

  

  

 31,822,000 

Market penetration at end of period

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (6)

  

8.5%

  

  

8.2%

  

  

5.8%

  

  

5.9%

  

  

6.0%

  

  

Consolidated operating markets (6)

  

14.8%

  

  

15.0%

  

  

15.3%

  

  

15.6%

  

  

15.7%

Capital expenditures (000s)

$

 89,581 

  

$

 211,247 

  

$

 239,332 

  

$

 171,166 

  

$

 107,907 

Total cell sites in service

  

 6,165 

  

  

 6,161 

  

  

 6,127 

  

  

 6,113 

  

  

 6,113 

Owned towers

  

 3,883 

  

  

 3,883 

  

  

 3,857 

  

  

 3,846 

  

  

 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.

   

 

 

7

 


 

 

TDS Telecom

Summary Operating Data (Unaudited)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

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 

 

 

8

 


 

 

 

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

 

 

9

 


 

 

 

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 

 

 

10

 


 

 

 

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 

 

 

11

 


 

 

 

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 

 

 

12

 


 

 

 

 

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.

 

 

13

 


 

 

 

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