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:

  

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Fee paid previously with preliminary materials.

  

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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 1, 2015 relating to earnings for the first quarter of 2015.  Also, attached is an excerpt from the script for the TDS earnings call on May 1, 2015 relating to the TDS annual meeting of shareholders and election of directors.

 

 

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 2015 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 2015 annual meeting, as filed with the Securities and Exchange Commission (“SEC”) on April 17, 2015.  The 2015 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.tdsinc.com.  TDS SHAREHOLDERS ARE ADVISED TO READ CAREFULLY THE PROXY STATEMENT AND OTHER SOLICITATION MATERIAL FILED BY TDS IN CONNECTION WITH THE TDS 2015 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                                                                                    

 

https:::ecms.intranet.teldta.com:sites:brand:TDS%20Brand%20Logo%20Library:TDS_Logo_Color-Trnspt.png

 

As previously announced, TDS will hold a teleconference May 1, 2015 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.tdsinc.com  

 

FOR IMMEDIATE RELEASE

 

TDS reports first quarter 2015 results

U.S. Cellular increases guidance for operating cash flow and adjusted EBITDA

 

 

CHICAGO, (May 1, 2015) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,251.6 million for the first quarter of 2015, versus $1,196.0 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $145.7 million and $1.33, respectively, for the first quarter of 2015, compared to $18.3 million and $0.16, respectively, in the comparable period one year ago. 

 

“Both of our businesses had encouraging first quarters and made good progress on their strategic objectives,” said LeRoy T. Carlson, Jr., TDS president and CEO. “U.S. Cellular continued to grow its postpaid customer base and improve loyalty. TDS Telecom achieved strong growth in IPTV customers, and we continued to move forward with our cable, broadband, and hosted and managed services strategies.

 

“U.S. Cellular maintained strong momentum from its turnaround in customer growth last year, adding more postpaid customers and reducing churn. More customers are adopting shared data plans and adding connected devices to those accounts, leading to increases in revenue. We will bring 4G LTE speeds to 98 percent of U.S. Cellular customers this year, and we plan to drive continued substantial growth in smartphone penetration, connected devices, and data use.

 

“TDS Telecom achieved continued success with its IPTV service in the recent quarter, adding residential customers and increasing residential revenue per connection. As we complete the integration of our cable acquisitions, Baja Broadband and BendBroadband, we are focused on increasing residential and commercial broadband penetration. We also continue to seek and evaluate potential cable acquisitions. Our hosted and managed services company, OneNeck IT Solutions, has had some recent sales success.  We believe there is strong potential for growth at OneNeck as more businesses and organizations seek to outsource more of their IT needs.”

 

 

 

3

 


 

 

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 May 1, 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-$4,200

Unchanged

  

$1,130-$1,180

Unchanged

  

$5,145-$5,395

Unchanged

Operating cash flow (1)

$400-$500

$350-$450

  

$280-$310

Unchanged

  

$685-$815

$635-$765

Adjusted EBITDA (1)

$580-$680

$530-$630

  

$280-$310

Unchanged

  

$870-$1,000

$820-$950

Capital expenditures

$600 

Unchanged

  

$220

Unchanged

  

$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, actual results for the three months ended March 31, 2015 and 2014 actual results:

 

  

  

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)

$140-$240

  

$45-$75

  

$140 -$270

Add back:

  

  

  

  

  

  

Interest expense

$80 

  

 ―   

  

$140 

  

Depreciation, amortization and accretion expense

$580 

  

$235 

  

$825 

EBITDA

$800-$900

  

$280-$310

  

$1,105-$1,235

Add back:

  

  

  

  

  

  

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

($110)

  

 ―   

  

($125)

  

(Gain) loss on license sales and exchanges, net

($125)

  

 ―   

  

($125)

  

(Gain) loss on assets disposals, net

$15 

  

 ―   

  

$15 

Adjusted EBITDA

$580-$680

  

$280-$310

  

$870-$1,000

Deduct:

  

  

  

  

  

  

Equity in earnings of unconsolidated entities

($130)

  

 ―   

  

($130)

  

Interest and dividend income

($50)

  

 ―   

  

($55)

Operating cash flow (4)

$400-$500

  

$280-$310

  

$685-$815

                   

 

 

 

4

 


 

 

  

  

Actual Results

  

  

Three months ended March 31, 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)

$165 

  

$13 

  

$176 

  

($47)

  

($24)

  

($147)

Add back:

  

  

  

  

  

  

  

  

  

  

  

  

Income tax expense (benefit)

$108 

  

$8 

  

$116 

  

($12)

  

$18 

  

($5)

Income (loss) before income taxes (GAAP)

$273 

  

$21 

  

$292 

  

($59)

  

($7)

  

($153)

Add back:

  

  

  

  

  

  

  

  

  

  

  

  

Interest expense

$20 

  

 — 

  

$34 

  

$57 

  

($1)

  

$111 

  

Depreciation, amortization and accretion expense

$147 

  

$57 

  

$207 

  

$606 

  

$220 

  

$837 

EBITDA

$440 

  

$78 

  

$533 

  

$605 

  

$212 

  

$796 

Add back:

  

  

  

  

  

  

  

  

  

  

  

  

Loss on impairment of assets

 — 

  

 — 

  

 — 

  

 — 

  

$84 

  

$88 

  

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

($111)

  

 — 

  

($124)

  

($33)

  

($2)

  

($16)

  

(Gain) loss on license sales and exchanges, net

($123)

  

 — 

  

($123)

  

($113)

  

 — 

  

($113)

  

(Gain) loss on assets disposals, net

$4 

  

$1 

  

$5 

  

$21 

  

$5 

  

$27 

Adjusted EBITDA

$209 

  

$80 

  

$291 

  

$480 

  

$298 

  

$781 

Deduct:

  

  

  

  

  

  

  

  

  

  

  

  

Equity in earnings of unconsolidated entities

($34)

  

 — 

  

($35)

  

($130)

  

 — 

  

($132)

  

Interest and dividend income

($8)

  

 — 

  

($8)

  

($12)

  

($2)

  

($17)

Operating cash flow (4)

$167 

  

$80 

  

$248 

  

$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. Accordingly, a reconciliation to net income is not available without unreasonable effort.

(4)     A reconciliation of Operating cash flow (Non-GAAP) to operating income (GAAP) for March 31, 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 (first quarter)

  

 — 

  

$

 — 

2014 (full year)

  

 1,541,850 

  

$

 39.1 

Total

  

 1,541,850 

  

$

 39.1 

 

 

 

5

 


 

 

Conference Call Information

TDS will hold a conference call on May 1, 2015 at 9:30 a.m. Central Time.

·          Access the live call on the Events & Presentations page of investors.tdsinc.com  or at http://www.videonewswire.com/event.asp?id=102201  

·         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 1000TM company, provides wireless; cable and wireline 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 March 31, 2015.

Visit www.tdsinc.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@tdsinc.com

 

Julie Mathews, Investor Relations Manager

312- 592-5341

 julie.mathews@tdsinc.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 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 

 

 

 

6

 


 

 

United States Cellular Corporation

Summary Operating Data (Unaudited)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

As of or for the Quarter Ended

3/31/2015

  

12/31/2014

  

9/30/2014

  

6/30/2014

  

3/31/2014

Retail Customers

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Postpaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 4,307,000 

  

  

 4,298,000 

  

  

 4,200,000 

  

  

 4,148,000 

  

  

 4,174,000 

  

  

Gross additions

  

 200,000 

  

  

 302,000 

  

  

 251,000 

  

  

 190,000 

  

  

 197,000 

  

  

Net additions (losses)

  

 9,000 

  

  

 98,000 

  

  

 52,000 

  

  

 (26,000) 

  

  

 (93,000) 

  

  

ARPU (1)

$

 54.87 

  

$

 56.51 

  

$

 56.37 

  

$

 56.82 

  

$

 57.59 

  

  

ARPA (2)

$

 134.94 

  

$

 136.13 

  

$

 132.99 

  

$

 131.95 

  

$

 132.03 

  

  

Churn rate (3)

  

1.5%

  

  

1.6%

  

  

1.6%

  

  

1.7%

  

  

2.3%

  

  

Smartphone penetration (4)

  

66.9%

  

  

64.8%

  

  

61.7%

  

  

58.4%

  

  

55.8%

  

Prepaid

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total at end of period

  

 360,000 

  

  

 348,000 

  

  

 350,000 

  

  

 352,000 

  

  

 356,000 

  

  

Gross additions

  

 73,000 

  

  

 60,000 

  

  

 64,000 

  

  

 65,000 

  

  

 85,000 

  

  

Net additions (losses)

  

 12,000 

  

  

 (2,000) 

  

  

 (2,000) 

  

  

 (4,000) 

  

  

 13,000 

  

  

ARPU (1)

$

 35.72 

  

$

 35.33 

  

$

 34.40 

  

$

 34.02 

  

$

 32.22 

  

  

Churn rate (3)

  

5.8%

  

  

5.9%

  

  

6.3%

  

  

6.5%

  

  

6.9%

Total customers at end of period

  

 4,775,000 

  

  

 4,760,000 

  

  

 4,674,000 

  

  

 4,653,000 

  

  

 4,684,000 

Billed ARPU (1)

$

 52.29 

  

$

 53.63 

  

$

 53.24 

  

$

 53.36 

  

$

 53.93 

Service revenue ARPU (1)

$

 58.01 

  

$

 60.10 

  

$

 60.92 

  

$

 60.32 

  

$

 60.19 

Smartphones sold as a percent of total

  handsets sold

  

85.7%

  

  

86.5%

  

  

80.8%

  

  

79.0%

  

  

78.2%

Total population

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (5)

  

 45,737,000 

  

  

 50,906,000 

  

  

 54,817,000 

  

  

 54,817,000 

  

  

 54,817,000 

  

  

Consolidated operating markets (5)

  

 31,814,000 

  

  

 31,729,000 

  

  

 31,729,000 

  

  

 31,729,000 

  

  

 31,729,000 

Market penetration at end of period

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Consolidated markets (6)

  

10.4%

  

  

9.4%

  

  

8.5%

  

  

8.5%

  

  

8.5%

  

  

Consolidated operating markets (6)

  

15.0%

  

  

15.0%

  

  

14.7%

  

  

14.7%

  

  

14.8%

Capital expenditures (000s)

$

 66,460 

  

$

 181,655 

  

$

 142,452 

  

$

 143,927 

  

$

 89,581 

Total cell sites in service

  

 6,219 

  

  

 6,220 

  

  

 6,209 

  

  

 6,183 

  

  

 6,165 

Owned towers (7)

  

 3,955 

  

  

 4,281 

  

  

 4,487 

  

  

 4,457 

  

  

 4,448 

 

(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.

 

 

 

7

 


 

 

TDS Telecom

Summary Operating Data (Unaudited)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Quarter Ended

3/31/2015

  

12/31/2014

  

9/30/2014

  

6/30/2014

  

3/31/2014

TDS Telecom

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Wireline

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Residential connections

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Voice (1)

  

333,400 

  

  

335,900 

  

  

340,300 

  

  

346,100 

  

  

348,700 

  

  

  

Broadband (2)

  

229,400 

  

  

229,200 

  

  

231,600 

  

  

232,700 

  

  

229,000 

  

  

  

IPTV (3)

  

25,600 

  

  

23,400 

  

  

20,700 

  

  

18,200 

  

  

15,900 

  

  

  

   Wireline residential connections

  

588,400 

  

  

588,500 

  

  

592,600 

  

  

597,000 

  

  

593,600 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total residential revenue per connection (4)

$

42.32 

  

$

41.56 

  

$

41.47 

  

$

41.05 

  

$

40.79 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Commercial connections

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Voice (1)

  

187,500 

  

  

193,200 

  

  

199,300 

  

  

206,200 

  

  

212,200 

  

  

  

Broadband (2)

  

24,300 

  

  

24,700 

  

  

25,300 

  

  

26,000 

  

  

26,600 

  

  

  

managedIP (5)

  

143,200 

  

  

140,200 

  

  

137,700 

  

  

133,300 

  

  

131,000 

  

  

  

   Wireline commercial connections

  

355,000 

  

  

358,100 

  

  

362,300 

  

  

365,500 

  

  

369,800 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total Wireline connections

  

943,400 

  

  

946,600 

  

  

954,900 

  

  

962,500 

  

  

963,400 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Cable

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Cable Connections

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Video (6)

  

109,700 

  

  

 110,400 

  

  

 109,100 

  

  

 69,700 

  

  

 68,700 

  

  

  

Broadband (7)

  

112,200 

  

  

 110,900 

  

  

 106,400 

  

  

 63,200 

  

  

 63,000 

  

  

  

Voice (7)

  

49,100 

  

  

 46,000 

  

  

 41,800 

  

  

 17,800 

  

  

 17,700 

  

  

  

   Cable connections

  

271,000 

  

  

267,300 

  

  

257,300 

  

  

 150,700 

  

  

 149,400 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 

 

(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

  

3/31/2015

  

  

12/31/2014

  

  

9/30/2014

  

  

6/30/2014

  

  

3/31/2014

Wireline

$

20,400 

  

$

51,400 

  

$

34,200 

  

$

27,400 

  

$

22,900 

Cable

  

11,600 

  

  

 14,600 

  

  

 7,600 

  

  

 7,200 

  

  

 6,200 

HMS

  

4,900 

  

  

13,400 

  

  

9,800 

  

  

10,600 

  

  

2,800 

  

$

36,900 

  

$

79,400 

  

$

51,600 

  

$

45,200 

  

$

31,900 

 

 

 

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

  

  

  

  

2015 

  

2014 

  

Amount

Percent

Operating revenues

  

  

  

  

  

  

  

  

  

  

  

U.S. Cellular

$

 965,245 

  

$

 925,811 

  

$

 39,434 

  

4%

  

TDS Telecom

  

 279,985 

  

  

 262,416 

  

  

 17,569 

  

7%

  

All Other (1)

  

 6,363 

  

  

 7,735 

  

  

 (1,372) 

  

(18%)

  

  

  

  

  

 1,251,593 

  

  

 1,195,962 

  

  

 55,631 

  

5%

Operating expenses

  

  

  

  

  

  

  

  

  

  

  

U.S. Cellular

  

  

  

  

  

  

  

  

  

  

  

  

Expenses excluding depreciation, amortization and accretion

  

 797,946 

  

  

 846,645 

  

  

 (48,699) 

  

(6%)

  

  

Depreciation, amortization and accretion

  

 147,085 

  

  

 167,753 

  

  

 (20,668) 

  

(12%)

  

  

(Gain) loss on asset disposals, net

  

 4,251 

  

  

 1,934 

  

  

 2,317 

  

>100%

  

  

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

  

 (111,477) 

  

  

 (6,900) 

  

  

 (104,577) 

  

>100%

  

  

(Gain) loss on license sales and exchanges, net

  

 (122,873) 

  

  

 (91,446) 

  

  

 (31,427) 

  

(34%)

  

  

  

  

  

 714,932 

  

  

 917,986 

  

  

 (203,054) 

  

(22%)

  

TDS Telecom

  

  

  

  

  

  

  

  

  

  

  

  

Expenses excluding depreciation, amortization and accretion

  

 200,460 

  

  

 190,303 

  

  

 10,157 

  

5%

  

  

Depreciation, amortization and accretion

  

 57,163 

  

  

 53,775 

  

  

 3,388 

  

6%

  

  

(Gain) loss on asset disposals, net

  

 1,130 

  

  

 344 

  

  

 786 

  

>100%

  

  

  

  

  

 258,753 

  

  

 244,422 

  

  

 14,331 

  

6%

  

All Other (1)

  

  

  

  

  

  

  

  

  

  

  

  

Expenses excluding depreciation and amortization

  

 5,262 

  

  

 9,326 

  

  

 (4,064) 

  

(44%)

  

  

Depreciation and amortization

  

 2,327 

  

  

 3,391 

  

  

 (1,064) 

  

(31%)

  

  

(Gain) loss on asset disposals, net

  

 (4) 

  

  

 152 

  

  

 (156) 

  

>(100%)

  

  

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

  

 (12,306) 

  

  

 - 

  

  

 (12,306) 

  

N/M

  

  

  

  

  

 (4,721) 

  

  

 12,869 

  

  

 (17,590) 

  

>(100%)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Total operating expenses

  

 968,964 

  

  

 1,175,277 

  

  

 (206,313) 

  

(18%)

Operating income (loss)

  

  

  

  

  

  

  

  

  

  

  

U.S. Cellular

  

 250,313 

  

  

 7,825 

  

  

 242,488 

  

>100%

  

TDS Telecom

  

 21,232 

  

  

 17,994 

  

  

 3,238 

  

18%

  

All Other  (1)

  

 11,084 

  

  

 (5,134) 

  

  

 16,218 

  

>(100%)

  

  

  

  

  

 282,629 

  

  

 20,685 

  

  

 261,944 

  

>100%

Investment and other income (expense)

  

  

  

  

  

  

  

  

  

  

  

Equity in earnings of unconsolidated entities

  

 34,641 

  

  

 37,327 

  

  

 (2,686) 

  

(7%)

  

Interest and dividend income

  

 8,385 

  

  

 2,486 

  

  

 5,899 

  

>100%

  

Interest expense

  

 (33,830) 

  

  

 (28,707) 

  

  

 (5,123) 

  

(18%)

  

Other, net

  

 (4) 

  

  

 160 

  

  

 (164) 

  

>(100%)

  

  

Total investment and other income

  

 9,192 

  

  

 11,266 

  

  

 (2,074) 

  

(18%)

Income before income taxes

  

 291,821 

  

  

 31,951 

  

  

 259,870 

  

>100%

  

Income tax expense (benefit)

  

 116,020 

  

  

 11,657 

  

  

 104,363 

  

>100%

Net income

  

 175,801 

  

  

 20,294 

  

  

 155,507 

  

>100%

  

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

  

 30,061 

  

  

 2,040 

  

  

 28,021 

  

>100%

Net income attributable to TDS shareholders

  

 145,740 

  

  

 18,254 

  

  

 127,486 

  

>100%

  

TDS Preferred dividend requirement

  

 (12) 

  

  

 (12) 

  

  

 — 

  

Net income available to common shareholders

$

 145,728 

  

$

 18,242 

  

$

 127,486 

  

>100%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Basic weighted average shares outstanding

  

 108,169 

  

  

 108,988 

  

  

 (819) 

  

(1%)

Basic earnings per share attributable to TDS shareholders

$

 1.35 

  

$

 0.17 

  

$

 1.18 

  

>100%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Diluted weighted average shares outstanding

  

 108,946 

  

  

 109,672 

  

  

 (726) 

  

(1%)

Diluted earnings per share attributable to TDS shareholders

$

 1.33 

  

$

 0.16 

  

$

 1.17 

  

>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.

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,

  

  

2015 

  

2014 

Current assets

  

  

  

  

  

  

Cash and cash equivalents

$

 635,120 

  

$

 471,901 

  

Accounts receivable from customers and others

  

 658,888 

  

  

 683,681 

  

Inventory, net

  

 178,313 

  

  

 273,707 

  

Net deferred income tax asset

  

 92,791 

  

  

 107,686 

  

Prepaid expenses

  

 97,707 

  

  

 86,506 

  

Income taxes receivable

  

 853 

  

  

 113,708 

  

Other current assets

  

 29,132 

  

  

 29,766 

  

  

  

 1,692,804 

  

  

 1,766,955 

  

  

  

  

  

  

  

Assets held for sale

  

 29,771 

  

  

 103,343 

  

  

  

  

  

  

  

Investments

  

  

  

  

  

  

Licenses

  

 1,837,238 

  

  

 1,453,574 

  

Goodwill

  

 771,674 

  

  

 771,352 

  

Franchise rights

  

 244,300 

  

  

 244,300 

  

Other intangible assets, net

  

 59,708 

  

  

 64,499 

  

Investments in unconsolidated entities

  

 343,382 

  

  

 321,729 

  

Other investments

  

 485 

  

  

 508 

  

  

  

 3,256,787 

  

  

 2,855,962 

  

  

  

  

  

  

  

Property, plant and equipment, net

  

  

  

  

  

  

U.S. Cellular

  

 2,645,117 

  

  

 2,728,217 

  

TDS Telecom

  

 1,077,924 

  

  

 1,093,671 

  

Other

  

 23,793 

  

  

 24,237 

  

  

  

 3,746,834 

  

  

 3,846,125 

  

  

  

  

  

  

  

Other assets and deferred charges

  

 270,042 

  

  

 334,554 

  

  

  

  

  

  

  

Total assets

$

 8,996,238 

  

$

 8,906,939 

 

 

 

10

 


 

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

  

  

  

  

  

  

  

  

  

LIABILITIES AND EQUITY

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

March 31,

  

December 31,

  

  

  

  

2015 

  

2014 

Current liabilities

  

  

  

  

  

  

  

Current portion of long-term debt

$

 805 

  

$

 808 

  

  

Accounts payable

  

 312,091 

  

  

 387,125 

  

  

Customer deposits and deferred revenues

  

 338,076 

  

  

 324,318 

  

  

Accrued interest

  

 17,376 

  

  

 7,919 

  

  

Accrued taxes

  

 174,043 

  

  

 46,734 

  

  

Accrued compensation

  

 68,838 

  

  

 114,549 

  

  

Other current liabilities

  

 145,871 

  

  

 181,803 

  

  

  

  

  

 1,057,100 

  

  

 1,063,256 

  

  

  

  

  

  

  

  

  

Liabilities held for sale

  

 406 

  

  

 21,643 

  

  

  

  

  

  

  

  

  

Deferred liabilities and credits

  

  

  

  

  

  

  

Net deferred income tax liability

  

 878,809 

  

  

 941,519 

  

  

Other deferred liabilities and credits

  

 441,745 

  

  

 430,774 

  

  

  

  

  

  

  

  

  

Long-term debt

  

 1,993,457 

  

  

 1,993,586 

  

  

  

  

  

  

  

  

  

Noncontrolling interests with redemption features

  

 6,619 

  

  

 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

  

 2,344,274 

  

  

 2,336,511 

  

  

Treasury shares, at cost

  

 (745,590) 

  

  

 (748,199) 

  

  

Accumulated other comprehensive loss

  

 6,012 

  

  

 6,452 

  

  

Retained earnings

  

 2,460,323 

  

  

 2,330,187 

  

  

  

   Total TDS shareholders' equity

  

 4,066,346 

  

  

 3,926,278 

  

  

  

  

  

  

  

  

  

  

Preferred shares

  

 824 

  

  

 824 

  

Noncontrolling interests

  

 550,932 

  

  

 527,909 

  

  

  

  

  

  

  

  

  

  

  

Total equity

  

 4,618,102 

  

  

 4,455,011 

  

  

  

  

  

  

  

  

  

Total liabilities and equity

$

 8,996,238 

  

$

 8,906,939 

 

 

 

11

 


 

 

Balance Sheet Highlights

March 31, 2015

(Unaudited, dollars in thousands)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

U.S.

  

TDS

  

TDS Corporate

  

Intercompany

  

TDS

  

  

  

Cellular

  

Telecom

  

& Other

  

Eliminations

  

Consolidated

Cash and cash equivalents

$

 336,893 

  

$

 68,221 

  

$

 230,006 

  

$

 ― 

  

$

 635,120 

Affiliated cash investments

  

 ― 

  

  

 407,200 

  

  

 ― 

  

  

 (407,200) 

  

  

 ― 

  

  

$

 336,893 

  

$

 475,421 

  

$

 230,006 

  

$

 (407,200) 

  

$

 635,120 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Licenses, goodwill and other intangible assets

$

 2,197,253 

  

$

 853,625 

  

$

 (137,958) 

  

$

 ― 

  

$

 2,912,920 

Investment in unconsolidated entities

  

 304,501 

  

  

 3,805 

  

  

 39,898 

  

  

 (4,822) 

  

  

 343,382 

Long-term and other investments

  

 ― 

  

  

 484 

  

  

 ― 

  

  

 ― 

  

  

 485 

  

  

  

$

 2,501,754 

  

$

 857,914 

  

$

 (98,060) 

  

$

 (4,822) 

  

$

 3,256,787 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Property, plant and equipment, net

$

 2,645,117 

  

$

 1,077,924 

  

$

 23,990 

  

$

 (197) 

  

$

 3,746,834 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Long-term debt:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Current portion

$

 57 

  

$

 25 

  

$

 723 

  

$

 ― 

  

$

 805 

  

Non-current portion

  

 1,151,901 

  

  

 1,406 

  

  

 840,150 

  

  

 ― 

  

  

 1,993,457 

  

  

  

$

 1,151,958 

  

$

 1,431 

  

$

 840,873 

  

$

 ― 

  

$

 1,994,262 

 

 

 

12

 


 

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Three Months Ended March 31,

(Unaudited, dollars in thousands)

  

  

  

  

  

2015 

  

2014 

Cash flows from operating activities

  

  

  

  

  

  

Net income (loss)

$

 175,801 

  

$

 20,294 

  

  

Add (deduct) adjustments to reconcile net income to cash flows

  from operating activities

  

  

  

  

  

  

  

  

  

Depreciation, amortization and accretion

  

 206,575 

  

  

 224,919 

  

  

  

  

Bad debts expense

  

 29,849 

  

  

 21,559 

  

  

  

  

Stock-based compensation expense

  

 8,096 

  

  

 6,759 

  

  

  

  

Deferred income taxes, net

  

 (47,466) 

  

  

 (14,510) 

  

  

  

  

Equity in earnings of unconsolidated entities

  

 (34,641) 

  

  

 (37,327) 

  

  

  

  

Distributions from unconsolidated entities

  

 12,988 

  

  

 12,820 

  

  

  

  

(Gain) loss on asset disposals, net

  

 5,377 

  

  

 2,430 

  

  

  

  

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

  

 (123,783) 

  

  

 (6,900) 

  

  

  

  

(Gain) loss on license sales and exchanges, net

  

 (122,873) 

  

  

 (91,446) 

  

  

  

  

Noncash interest expense

  

 670 

  

  

 506 

  

  

  

  

Other operating activities

  

 - 

  

  

 47 

  

  

Changes in assets and liabilities from operations

  

  

  

  

  

  

  

  

  

Accounts receivable

  

 21,240 

  

  

 90,555 

  

  

  

  

Equipment installment plans receivable

  

 (36,498) 

  

  

 2,394 

  

  

  

  

Inventory

  

 95,395 

  

  

 19,656 

  

  

  

  

Accounts payable

  

 (13,592) 

  

  

 (53,403) 

  

  

  

  

Customer deposits and deferred revenues

  

 13,319 

  

  

 (1,447) 

  

  

  

  

Accrued taxes

  

 251,510 

  

  

 (1,634) 

  

  

  

  

Accrued interest

  

 9,460 

  

  

 9,136 

  

  

  

  

Other assets and liabilities

  

 (96,121) 

  

  

 (99,471) 

  

  

  

  

  

  

 355,306 

  

  

 104,937 

  

  

  

  

  

  

  

  

  

  

Cash flows from investing activities