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TMCNet:  TDS Reports Fourth Quarter 2012 Results And 2013 Financial Guidance

[February 26, 2013]

TDS Reports Fourth Quarter 2012 Results And 2013 Financial Guidance

CHICAGO, Feb. 26, 2013 /PRNewswire via COMTEX/ -- As previously announced, TDS will hold a teleconference Feb. 26, 2013 at 9:30 a.m. CST. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com.

Telephone and Data Systems, Inc. (NYSE:TDS) reported operating revenues of $1,346.2 million for the fourth quarter of 2012, an increase of 2 percent from $1,316.7 million in the comparable period one year ago. Net loss attributable to TDS shareholders was $41.8 million, or $0.39 per diluted share, respectively, for the fourth quarter of 2012, compared to $6.2 million and $0.06, respectively, in the comparable period one year ago.

As previously announced on Nov. 7, 2012, U.S. Cellular reached a definitive agreement to sell its Chicago, St. Louis, central Illinois and three other markets (the "Divestiture Markets") to subsidiaries of Sprint Nextel Corporation (NYSE: S) for $480 million (the "Divestiture Transaction"). The transaction is subject to regulatory approvals and is expected to close in mid-2013. In the fourth quarter of 2012, TDS' operating income was reduced by $44.5 million due to divestiture-related costs, including a $10.7 million write-down of assets, $12.6 million in employee-related costs, including severance, and $20 million in accelerated depreciation, amortization and accretion.

The table below provides pro forma performance highlights for U.S. Cellular's Total Consolidated Markets, Divestiture Markets, and Core Markets for the fourth quarter of 2012. Core Markets are the markets that U.S. Cellular will continue to own upon completion of the Divestiture Transaction.

U.S. Cellular ($ in millions except ARPU) Total Consolidated Markets Divestiture Markets (1) Core Markets (1) Postpaid gross additions 241,000 23,000 218,000 Postpaid churn 1.83% 3.35% 1.67% Postpaid net additions (losses) (41,000) (25,000) (16,000) Prepaid net additions (losses) 37,000 (1,000) 38,000 Service revenues (1) $1,008.9 $101.4 $907.5 Postpaid ARPU (1) $54.56 $60.91 $53.92 (1) Total Consolidated Markets amounts represent GAAP financial measures and Divestiture Markets and Core Markets amounts represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Divestiture Markets and Core Markets may be useful to investors and other users of its financial information.

The following table highlights the performance of U.S. Cellular's Core Markets and TDS Telecom for the fourth quarter of 2012 and 2011.

U.S. Cellular % ($ in millions except ARPU) Q4 2012 Q4 2011 Change Postpaid gross additions 218,000 209,000 4% Postpaid churn 1.67% 1.48% (13%) Postpaid net additions (losses) (16,000) (2,000) (>100%) Prepaid net additions 38,000 6,000 >100% Retail net additions 22,000 4,000 >100% Service revenues (1) $907.5 $917.5 (1%) Postpaid ARPU (1) $53.92 $52.62 2% Smartphones sold as % of total devices 62.9% 52.6% 20% 4G/LTE smartphones as % of total smartphones sold 74% 0% >100% Capital expenditures (1) $241 $253 (5%) Cell sites in service 6,292 6,154 2% Owned towers 3,847 3,755 2% TDS Telecom % Q4 2012 Q4 2011 Change Operating revenues $221.5 $206.8 7% ILEC triple play (voice, data and video) penetration 31% 29% 7% managedIP (ILEC and CLEC) 94,600 53,500 77% (1) The Core Markets amounts for Q4 2012 and Q4 2011 represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Core Markets may be useful to investors and other users of its financial information.

"U.S. Cellular and TDS Telecom continued to execute on their strategic initiatives, though profitability was impacted by smartphone subsidies, reductions in regulatory support, and investment spending," said LeRoy T. Carlson, Jr., TDS president and CEO.

"U.S. Cellular achieved strong growth in smartphone penetration as more customers had access to 4G LTE speeds and devices. U.S. Cellular's Core Markets also increased net retail customer additions, due to prepaid customer growth. While revenue from our customers increased, overall service revenues declined due to lower negotiated roaming rates which had a positive effect on roaming expenses. To further differentiate our superior customer experience, U.S. Cellular is working to provide seamless shopping and support across channels, identify more opportunities to expand distribution, and through the implementation of a new billing and operational support system, is also simplifying operations and processes to increase efficiency and reduce complexity and cost.

"TDS Telecom continued to build its residential customer base with TDS TV® and broadband offerings, and further increased momentum in commercial managedIP sales. TDS Telecom is focused on increasing residential TDS TV and broadband penetration in existing markets, and expanding broadband access through stimulus projects in progress nationwide. To grow the commercial customer base, TDS Telecom plans to expand the managedIP portfolio, and build its hosted and managed services business by providing integrated, end-to-end IT solutions, including ReliaCloudTM, to mid-market customers." Baja Broadband In a separate release today, TDS announced an agreement to acquire substantially all of the assets of Baja Broadband, LLC for a purchase price of $267.5 million.

2013 ESTIMATES Estimates of full-year 2013 results for U.S. Cellular, TDS Telecom and TDS, are shown below. Such estimates represent management's view as of the date of filing of TDS' Form 10-K for the year ended December 31, 2012. 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 the measures which it uses to present estimates of operating results. TDS now provides estimates for consolidated revenues and capital expenditures. In addition, TDS previously presented Adjusted OIBDA, defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets; and the net gain or loss on asset disposals and exchanges. TDS believes Adjusted income before income taxes, as defined below, is a measure which provides a more comprehensive and meaningful view of TDS' recurring results of operations.

2013 Estimated Results (1) U.S. Cellular (2) TDS Telecom (3) TDS (2)(3)(7) (Dollars in millions) Adjusted operating revenues (4) $3,765-$3,885 $850-$900 $4,660-$4,830 Adjusted income before income taxes (5) $780-$900 $220-$250 $995-$1,145 Capital expenditures Approx. $600 Approx. $155 Approx. $765 (1) These estimates are based on TDS' current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011 at U.S. Cellular and a multi-year deployment of IPTV which commenced in 2011 at TDS Telecom. New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services, costs to deploy, agreements for content or franchises, or possible acquisitions, dispositions or exchanges) could affect TDS' plans and, therefore, its 2013 estimated results.

(2) These estimates also assume the Divestiture Transaction closes July 1, 2013. Actual effects could vary significantly from these estimates as a result of a change in the expected timing of the Divestiture Transaction.

These estimates reflect U.S. Cellular's consolidated results for 2013. Estimated results reflecting U.S. Cellular's Divestiture Markets and Core Markets are shown in the table below: 2013 Estimated Results U.S. Cellular Core U.S. Cellular Divestiture U.S. Cellular Consolidated (6) Markets (6) Markets (6) (Dollars in millions) Adjusted operating revenues (4) $3,600-$3,700 $165-$185 $3,765-$3,885 Adjusted income before income taxes (5) $765-$865 $15-$35 $780-$900 Capital expenditures Approx. $600 -- Approx. $600 (3) These estimates do not reflect the effects of the acquisition of Baja Broadband, LLC.

(4) Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular Equipment sales revenues less U.S. Cellular Cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results. For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular Equipment sales revenues. TDS believes this measure provides useful information to investors regarding TDS' results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to Operating revenues as an indicator of the Company's operating performance.

(5) Adjusted income before income taxes is a non-GAAP financial measure defined as income before: Income taxes, Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs, and Interest expense. Adjusted income before income taxes is not a measure of financial performance under 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 meaningful measure of TDS' operating results before significant recurring non-cash charges, discrete gains and losses and financing charges (Interest expense). The following tables provide a reconciliation of Income before income taxes to Adjusted income before income taxes for 2013 Estimated Results and 2012, 2011 and 2010 actual results: 2013 Estimated Results U.S. Cellular Core U.S. Cellular Divestiture Markets (2)(6) U.S. Cellular Consolidated (6) TDS TDS (7) Markets (6) Telecom (Dollars in millions) Income before income taxes (8)(9) $165-$265 ($180)-($160) ($15)-$105 $25-$55 ($55)-$95 Depreciation, amortization and accretion Approx. $545 Approx. $195 Approx. $740 Approx. $195 Approx. $940 expense Interest expense Approx. $55 -- Approx. $55 -- Approx. $110 Adjusted income before income taxes $765-$865 $15-$35 $780-$900 $220-$250 $995-$1,145 2012 Actual Results U.S. Cellular Consolidated (6) TDS TDS (7) Telecom (Dollars in millions) Income before income taxes (9) $ 205.1 $ 45.0 $ 196.2 Depreciation, amortization and accretion expense 608.6 193.1 813.6 (Gain) loss on sale of business and other exit costs, net 21.0 - 21.1 Interest expense (Capitalized interest) 42.4 (1.5) 86.7 Adjusted income before income taxes $ 877.1 $ 236.6 $ 1,117.6 2011 Actual Results U.S. Cellular Consolidated (6) TDS TDS (7) Telecom (Dollars in millions) Income before income taxes $ 312.8 $ 107.5 $ 363.7 Depreciation, amortization and accretion expense 573.6 180.5 765.8 (Gain) loss on sale of business and other exit costs, net - - - Interest expense (Capitalized interest) 65.6 (2.6) 118.2 Adjusted income before income taxes $ 952.0 $ 285.4 $ 1,247.7 2010 Actual Results U.S. Cellular Consolidated (6) TDS TDS (7) Telecom (Dollars in millions) Income before income taxes $ 241.1 $ 101.3 $ 285.8 Depreciation, amortization and accretion expense 571.0 174.1 755.6 (Gain) loss on sale of business and other exit costs, net - - - Interest expense (Capitalized interest) 61.6 (0.8) 116.8 Adjusted income before income taxes $ 873.7 $ 274.6 $ 1,158.2 (6) The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets. As used herein, "Core Markets" represents U.S. Cellular's total consolidated markets excluding the Divestiture Markets. The Core Markets and Divestiture Markets amounts represent non-GAAP financial measures. TDS believes that the Core Markets and Divestiture Markets amounts may be useful to investors and other users of its financial information in evaluating the pro forma results for the Core Markets.

(7) 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.

(8) This amount does not include any estimate for (Gain) loss on sale of business and other exit costs, net, as the timing of such amount is not readily estimable.

(9) The 2013 estimated amounts for depreciation, amortization and accretion expense in the U.S. Cellular Divestiture Markets include approximately $120 million of incremental accelerated depreciation resulting from the Divestiture Transaction. The 2012 actual results include $20.1 million of incremental accelerated depreciation resulting from the Divestiture Transaction.

Stock Repurchase The following represents repurchases of TDS Common Shares (including Special Common Shares that were reclassified as Common Shares in the Share Consolidation Amendment in January 2012).

Repurchase Period # Shares Cost (in millions) 2012 (full year) 867,841 $ 20.0 2011 (full year) 748,246 $ 21.5 2010 (full year) 2,394,476 $ 68.1 2009 (full year) 6,374,741 $ 176.6 2008 (full year) 5,861,822 $ 199.6 Total 16,247,126 $ 485.8 Conference Call Information TDS will hold a conference call on Feb. 26, 2013 at 9:30 a.m. CST.

-- Access the live call on the Investor Relations page of www.teldta.com or at http://ir.teldta.com/phoenix.zhtml c=67422&p=irol-eventDetails&EventId=4917451.

-- 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 the Investor Relations page of www.teldta.com. The call will be archived on the Conference Calls page of www.teldta.com.

About TDS Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless; broadband, TV and voice; and hosted and managed services to approximately 7 million customers in 36 states through its business units, U.S. Cellular, TDS Telecom and TDS Hosted & Managed Services. Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of Dec. 31, 2012.

Visit www.teldta.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 the pending acquisition and divestiture transactions, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transaction and the financial impacts of such transaction; 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 United States Cellular Corporation Total Markets Summary Operating Data (Unaudited) Quarter Ended 12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011 Total population Consolidated markets (1) 93,244,000 92,996,000 92,684,000 92,684,000 91,965,000 Consolidated operating markets (1) 46,966,000 46,966,000 46,966,000 46,966,000 46,888,000 Market penetration at end of period Consolidated markets (2) 6.2% 6.2% 6.3% 6.3% 6.4% Consolidated operating markets (2) 12.3% 12.4% 12.3% 12.4% 12.6% All customers Total at end of period 5,798,000 5,808,000 5,799,000 5,837,000 5,891,000 Gross additions 363,000 364,000 290,000 285,000 306,000 Net additions (losses) (10,000) 9,000 (38,000) (49,000) (41,000) Smartphones sold as a percent of total devices sold (3) 62.9% 53.0% 51.9% 54.1% 52.5% Retail customers Total at end of period 5,557,000 5,561,000 5,542,000 5,570,000 5,608,000 Postpaid smartphone penetration (3) (4) 41.8% 38.6% 36.8% 34.4% 30.5% Gross additions 348,000 350,000 277,000 273,000 298,000 Net retail additions (losses) (5) (4,000) 19,000 (28,000) (34,000) (13,000) Net postpaid additions (losses) (41,000) (38,000) (48,000) (38,000) (20,000) Net prepaid additions (losses) 37,000 57,000 20,000 4,000 7,000 Service revenue components (000s) Retail service $ 886,014 $ 884,219 $ 889,219 $ 888,527 $ 882,091 Inbound roaming 76,090 106,132 86,363 80,132 93,353 Other 46,820 46,019 54,160 55,161 54,601 Total service revenues (000s) $ 1,008,924 $ 1,036,370 $ 1,029,742 $ 1,023,820 $ 1,030,045 Total ARPU (6) $ 58.00 $ 59.57 $ 59.05 $ 58.21 $ 58.13 Billed ARPU (7) $ 50.94 $ 50.83 $ 50.99 $ 50.52 $ 49.78 Postpaid ARPU (8) $ 54.56 $ 54.34 $ 54.42 $ 54.00 $ 53.35 Postpaid churn rate (9) 1.8% 1.7% 1.6% 1.6% 1.6% Capital expenditures (000s) $ 253,100 $ 199,100 $ 183,200 $ 201,300 $ 276,400 Cell sites in service 8,028 7,984 7,932 7,875 7,882 (1) Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.

(2) 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®.

(3) Smartphones represent wireless devices which run on an Android(TM), BlackBerry®, or Windows Mobile® operating system, excluding tablets.

(4) Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5) Includes net postpaid additions (losses) and net prepaid additions (losses).

(6) Total ARPU - Average monthly service revenue per user includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.

(7) Billed ARPU - Average monthly billed revenue per user is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.

(8) Postpaid ARPU - Average monthly revenue per postpaid user is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.

(9) Represents the percentage of the postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.

TDS Telecom Summary Operating Data (Unaudited) Quarter Ended 12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011 TDS Telecom ILEC: Residential Connections Physical access lines (1) 350,100 355,800 360,100 363,500 367,600 Broadband connections (2) 221,700 223,100 222,400 219,500 219,600 IPTV customers 7,900 6,700 5,600 4,900 4,600 ILEC residential connections 579,700 585,600 588,100 587,900 591,800 Commercial Connections Physical access lines (1) 107,600 109,800 111,100 112,600 114,400 Broadband connections (2) 18,500 18,500 18,400 18,200 18,200 managedIP connections (3) 17,200 15,000 13,200 10,800 8,600 ILEC commercial connections 143,300 143,300 142,700 141,600 141,200 CLEC: Residential Connections Physical access lines (1) 24,600 26,200 27,900 29,600 31,800 Broadband connections (2) 8,200 8,900 9,500 10,100 11,000 CLEC residential connections 32,800 35,100 37,400 39,700 42,800 Commercial Connections Physical access lines (1) 135,500 140,300 145,100 151,100 157,300 Broadband connections (2) 11,200 12,000 12,800 13,700 14,600 managedIP connections (3) 77,400 69,500 61,400 53,700 44,900 CLEC commercial connections 224,100 221,800 219,300 218,500 216,800 Total ILEC and CLEC Customer Connections 979,900 985,800 987,500 987,700 992,600 (1) Individual circuits 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 telephone handsets, data lines and IP trunks providing communications using IP networking technology.

TDS Telecom Capital Expenditures (000s) Quarter Ended 12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011 ILEC $ 43,400 $ 33,700 $ 32,500 $ 27,500 $ 50,300 CLEC 6,100 5,400 4,900 5,100 7,200 HMS 2,300 4,400 5,500 3,100 5,900 $ 51,800 $ 43,500 $ 42,900 $ 35,700 $ 63,400 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) Increase/ (Decrease) 2012 2011 Amount Percent Operating revenues U.S. Cellular $ 1,115,206 $ 1,099,633 $ 15,573 1% TDS Telecom 221,495 206,770 14,725 7% All Other (1) 9,508 10,324 (816) (8%) 1,346,209 1,316,727 29,482 2% Operating expenses U.S. Cellular Expenses excluding depreciation, amortization and accretion 979,461 937,473 41,988 4% Depreciation, amortization and accretion 169,242 141,976 27,266 19% Loss on asset disposals and exchanges, net 2,121 3,868 (1,747) (45%) (Gain) loss on sale of business and other exit costs, net 25,170 - 25,170 N/M 1,175,994 1,083,317 92,677 9% TDS Telecom Expenses excluding depreciation, amortization and accretion 165,585 144,748 20,837 14% Depreciation, amortization and accretion 49,455 46,168 3,287 7% Loss on asset disposals and exchanges, net 390 485 (95) (20%) 215,430 191,401 24,029 13% All Other (1) Expenses excluding depreciation and amortization 7,865 19,117 (11,252) (59%) Depreciation and amortization 2,767 3,735 (968) (26%) (Gain) loss on asset disposals and exchanges, net 514 (193) 707 >(100%) 11,146 22,659 (11,513) (51%) Total operating expenses 1,402,570 1,297,377 105,193 8% Operating income (loss) U.S. Cellular (60,788) 16,316 (77,104) >(100%) TDS Telecom 6,065 15,369 (9,304) (61%) All Other (1) (1,638) (12,335) 10,697 87% (56,361) 19,350 (75,711) >(100%) Investment and other income (expense) Equity in earnings of unconsolidated entities 19,071 18,507 564 3% Interest and dividend income 2,354 2,229 125 6% Gain (loss) on investment 10 (2,000) 2,010 >(100%) Interest expense (18,645) (24,017) 5,372 22% Other, net 524 2,157 (1,633) (76%) Total investment and other income (expense) 3,314 (3,124) 6,438 >100% Income (loss) before income taxes (53,047) 16,226 (69,273) >(100%) Income tax expense (benefit) (12,037) 18,239 (30,276) >(100%) Net loss (41,010) (2,013) (38,997) >100% Less: Net income attributable to noncontrolling interests, net of tax (837) (4,173) 3,336 80% Net loss attributable to TDS shareholders (41,847) (6,186) (35,661) >100% Preferred dividend requirement (12) (12) - - Net loss available to common shareholders $ (41,859) $ (6,198) $ (35,661) >100% Basic weighted average shares outstanding (2) 108,481 108,492 (11) - Basic loss per share attributable to TDS shareholders (2) $ (0.39) $ (0.06) $ (0.33) >100% Diluted weighted average shares outstanding (2) 108,481 108,492 (11) - Diluted loss per share attributable to TDS shareholders (2) $ (0.39) $ (0.06) $ (0.33) >100% (1) Consists of Suttle Straus printing and distribution operations, Airadigm, corporate operations and intercompany eliminations.

(2) On January 13, 2012 TDS shareholders approved a Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS. Shares outstanding at December 31, 2012, as well as average basic and diluted shares outstanding used to calculate earnings per share as of the beginning of all periods presented, have been retroactively restated to reflect the impact of the increased shares outstanding as a result of the Share Consolidation Amendment.

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) Increase/ (Decrease) 2012 2011 Amount Percent Operating revenues U.S. Cellular $ 4,452,084 $ 4,343,346 $ 108,738 3% TDS Telecom 854,506 815,388 39,118 5% All Other (1) 38,687 21,737 16,950 78% 5,345,277 5,180,471 164,806 3% Operating expenses U.S. Cellular Expenses excluding depreciation, amortization and accretion 3,647,685 3,490,882 156,803 4% Depreciation, amortization and accretion 608,633 573,557 35,076 6% (Gain) loss on asset disposals and exchanges, net 18,088 (1,873) 19,961 >(100%) (Gain) loss on sale of business and other exit costs, net 21,022 - 21,022 N/M 4,295,428 4,062,566 232,862 6% TDS Telecom Expenses excluding depreciation, amortization and accretion 619,503 534,964 84,539 16% Depreciation, amortization and accretion 193,094 180,530 12,564 7% Loss on asset disposals and exchanges, net 1,167 1,243 (76) (6%) 813,764 716,737 97,027 14% All Other (1) Expenses excluding depreciation and amortization 39,283 27,157 12,126 45% Depreciation and amortization 11,899 11,689 210 2% Loss on impairment of assets 515 - 515 N/M (Gain) loss on asset disposals and exchanges, net 525 (180) 705 >(100%) 52,222 38,666 13,556 35% Total operating expenses 5,161,414 4,817,969 343,445 7% Operating income (loss) U.S. Cellular 156,656 280,780 (124,124) (44%) TDS Telecom 40,742 98,651 (57,909) (59%) All Other (1) (13,535) (16,929) 3,394 20% 183,863 362,502 (178,639) (49%) Investment and other income (expense) Equity in earnings of unconsolidated entities 92,867 82,538 10,329 13% Interest and dividend income 9,248 9,145 103 1% Gain (loss) on investment (3,718) 24,103 (27,821) >(100%) Interest expense (86,745) (118,201) 31,456 27% Other, net 720 3,658 (2,938) (80%) Total investment and other income (expense) 12,372 1,243 11,129 >100% Income before income taxes 196,235 363,745 (167,510) (46%) Income tax expense 73,582 113,503 (39,921) (35%) Net income 122,653 250,242 (127,589) (51%) Less: Net income attributable to noncontrolling interests, net of tax (40,792) (49,676) 8,884 18% Net income attributable to TDS shareholders 81,861 200,566 (118,705) (59%) Preferred dividend requirement (50) (50) - - Net income available to common shareholders $ 81,811 $ 200,516 $ (118,705) (59%) Basic weighted average shares outstanding (2) 108,671 108,562 109 - Basic earnings per share attributable to TDS shareholders (2) $ 0.75 $ 1.85 $ (1.10) (59%) Diluted weighted average shares outstanding (2) 108,937 109,098 (161) - Diluted earnings per share attributable to TDS shareholders (2) $ 0.75 $ 1.83 $ (1.08) (59%) (1) Consists of Suttle Straus printing and distribution operations, Airadigm, corporate operations and intercompany eliminations.

(2) On January 13, 2012 TDS shareholders approved a Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS. Shares outstanding at December 31, 2012, as well as average basic and diluted shares outstanding used to calculate earnings per share as of the beginning of all periods presented, have been retroactively restated to reflect the impact of the increased shares outstanding as a result of the Share Consolidation Amendment.

N/M - Percentage change not meaningful Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands) ASSETS December 31, December 31, 2012 2011 Current assets Cash and cash equivalents $ 740,481 $ 563,275 Short-term investments 115,700 246,273 Accounts receivable from customers and others 574,328 542,577 Inventory 160,692 130,044 Net deferred income tax asset 43,411 40,898 Prepaid expenses 86,385 80,628 Income taxes receivable 9,625 85,636 Other current assets 32,815 16,349 1,763,437 1,705,680 Assets held for sale 163,242 49,647 Investments Licenses 1,480,039 1,494,014 Goodwill 797,194 797,077 Other intangible assets, net 58,522 50,734 Investments in unconsolidated entities 179,921 173,710 Long-term investments 50,305 45,138 Other investments 824 3,072 2,566,805 2,563,745 Property, plant and equipment, net U.S. Cellular 3,022,588 2,790,302 TDS Telecom 934,188 936,757 Other 40,490 57,476 3,997,266 3,784,535 Other assets and deferred charges 133,150 97,398 Total assets $ 8,623,900 $ 8,201,005 Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands) LIABILITIES AND EQUITY December 31, December 31, 2012 2011 Current liabilities Current portion of long-term debt $ 1,233 $ 1,509 Accounts payable 377,291 364,746 Customer deposits and deferred revenues 222,345 207,633 Accrued interest 6,565 7,456 Accrued taxes 48,237 41,069 Accrued compensation 134,932 107,719 Other current liabilities 134,005 144,001 924,608 874,133 Liabilities held for sale 19,594 1,051 Deferred liabilities and credits Net deferred income tax liability 862,580 808,713 Other deferred liabilities and credits 438,727 383,567 Long-term debt 1,721,571 1,529,857 Noncontrolling interests with redemption features 493 1,005 Equity TDS shareholders' equity Series A Common and Common Shares, par value $.01 (1) 1,327 1,326 Capital in excess of par value (1) 2,304,122 2,268,711 Treasury shares, at cost (1) (750,099) (750,921) Accumulated other comprehensive loss (8,132) (8,854) Retained earnings (1) 2,464,318 2,451,899 Total TDS shareholders' equity 4,011,536 3,962,161 Preferred shares 825 830 Noncontrolling interests 643,966 639,688 Total equity 4,656,327 4,602,679 Total liabilities and equity $ 8,623,900 $ 8,201,005 (1) The December 31, 2011 amounts reflect the impact of the Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS, as approved by the TDS shareholders on January 13, 2012.

Balance Sheet Highlights December 31, 2012 (Unaudited, dollars in thousands) U.S. TDS TDS Corporate Intercompany TDS Cellular Telecom & Other Eliminations Consolidated Cash and cash equivalents $ 378,358 $ 89,479 $ 272,644 $ - $ 740,481 Affiliated cash investments - 356,414 - (356,414) - Short-term investments 100,676 - 15,024 - 115,700 $ 479,034 $ 445,893 $ 287,668 $ (356,414) $ 856,181 Licenses, goodwill and other intangible assets $ 1,878,639 $ 582,909 $ (125,793) $ - $ 2,335,755 Investment in unconsolidated entities 144,531 3,809 37,932 (6,351) 179,921 Long-term and other investments 50,305 824 - - 51,129 $ 2,073,475 $ 587,542 $ (87,861) $ (6,351) $ 2,566,805 Property, plant and equipment, net $ 3,022,588 $ 934,188 $ 40,490 $ - $ 3,997,266 Long-term debt: Current portion $ 92 $ 95 $ 1,046 $ - $ 1,233 Non-current portion 878,858 749 841,964 - 1,721,571 Total $ 878,950 $ 844 $ 843,010 $ - $ 1,722,804 Preferred shares $ - $ - $ 825 $ - $ 825 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, 2012 and December 31, 2011.

December 31, December 31, 2012 2011 Cash and cash equivalents $ 740,481 $ 563,275 Amounts included in short-term investments (1) (2) Government-backed securities (3) 115,700 218,829 Certificates of deposit - 27,444 $ 115,700 $ 246,273 Amounts included in long-term investments (1) (4) Government-backed securities (3) 50,305 45,138 Total cash and cash equivalents and investments $ 906,486 $ 854,686 (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.

(3) Includes U.S treasury securities and corporate notes guaranteed under the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program.

(4) Maturities range between 14 and 23 months from the balance sheet date.

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows Twelve Months Ended December 31, (Unaudited, dollars in thousands) 2012 2011 Cash flows from operating activities Net income $ 122,653 $ 250,242 Add (deduct) adjustments to reconcile net income to net cash flows from operating activities Depreciation, amortization and accretion 813,626 765,776 Bad debts expense 74,695 68,611 Stock-based compensation expense 41,871 36,837 Deferred income taxes, net 58,785 202,547 Equity in earnings of unconsolidated entities (92,867) (82,538) Distributions from unconsolidated entities 84,884 92,231 Loss on impairment of assets 515 - (Gain) loss on asset disposals and exchanges, net 19,741 (810) (Gain) loss on sale of business and other exit costs, net 21,061 - (Gain) loss on investment 3,718 (24,103) Noncash interest expense (572) 18,849 Other operating activities 1,393 1,067 Changes in assets and liabilities from operations Accounts receivable (81,107) (95,426) Inventory (29,917) (13,382) Accounts payable (12,332) 29,291 Customer deposits and deferred revenues 32,981 35,457 Accrued taxes 77,458 (27,871) Accrued interest (891) 3,351 Other assets and liabilities (30,523) (4,418) 1,105,172 1,255,711 Cash flows from investing activities Cash used for additions to property, plant and equipment (995,517) (971,759) Cash paid for acquisitions and licenses (163,382) (105,508) Cash paid for investments (120,000) (180,920) Cash received for divestitures 50,182 - Cash received for investments 243,444 393,246 Other investing activities (12,796) (1,148) (998,069) (866,089) Cash flows from financing activities Repayment of short-term debt - (32,671) Repayment of long-term debt (2,566) (614,639) Issuance of long-term debt 195,358 643,700 TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments (1,119) 32 U.S. Cellular Common Shares reissued for benefit plans, net of tax payments (2,205) 1,935 Repurchase of TDS Common and Special Common Shares (20,026) (21,500) Repurchase of U.S. Cellular Common Shares (20,045) (62,294) Dividends paid (53,165) (48,670) Payment of debt issuance costs (8,242) (21,657) Distributions to noncontrolling interests (20,856) (16,236) Payments to acquire additional interests in subsidiaries (3,167) - Other financing activities 6,136 3,970 70,103 (168,030) Net increase in cash and cash equivalents 177,206 221,592 Cash and cash equivalents Beginning of period 563,275 341,683 End of period $ 740,481 $ 563,275 TDS Telecom Highlights Three Months Ended December 31, (Unaudited, dollars in thousands) Increase (Decrease) 2012 2011 Amount Percent Local Telephone Operations Operating revenues Residential $ 69,680 $ 69,745 $ (65) - Commercial 24,665 24,039 626 3% Wholesale 50,900 53,840 (2,940) (5%) 145,245 147,624 (2,379) (2%) Operating expenses Cost of services and products 48,549 48,313 236 - Selling, general and administrative expenses 44,020 43,784 236 1% Depreciation, amortization and accretion 37,669 36,489 1,180 3% Loss on asset disposals and exchanges, net 269 532 (263) (49%) 130,507 129,118 1,389 1% Operating income $ 14,738 $ 18,506 $ (3,768) (20%) Competitive Local Exchange Carrier Operations Operating revenues Residential $ 3,871 $ 4,910 $ (1,039) (21%) Commercial 34,900 34,514 386 1% Wholesale 3,856 4,973 (1,117) (22%) 42,627 44,397 (1,770) (4%) Operating expenses Cost of services and products 22,457 22,654 (197) (1%) Selling, general and administrative expenses 17,574 16,790 784 5% Depreciation, amortization and accretion 5,490 5,450 40 1% (Gain) loss on asset disposals and exchanges, net 118 (105) 223 >100% 45,639 44,789 850 2% Operating loss $ (3,012) $ (392) $ (2,620) >(100)% Hosted and Managed Services Operations Revenues $ 36,148 $ 17,258 $ 18,890 >100% Operating expenses Cost of services and products 25,585 9,729 15,856 >100% Selling, general and administrative expenses 9,925 5,987 3,938 66% Depreciation, amortization and accretion 6,296 4,229 2,067 49% Loss on asset disposals and exchanges, net 3 58 (55) (95%) 41,809 20,003 21,806 >100% Operating loss $ (5,661) $ (2,745) $ (2,916) >(100)% Intercompany revenues $ (2,525) $ (2,509) $ (16) (1%) Intercompany expenses (2,525) (2,509) (16) (1%) Total TDS Telecom operating income $ 6,065 $ 15,369 $ (9,304) (61%) TDS Telecom Highlights Twelve Months Ended December 31, (Unaudited, dollars in thousands) Increase (Decrease) 2012 2011 Amount Percent Local Telephone Operations Operating revenues Residential $ 279,400 $ 279,858 $ (458) - Commercial 97,382 98,581 (1,199) (1%) Wholesale 201,630 219,372 (17,742) (8%) 578,412 597,811 (19,399) (3%) Operating expenses Cost of services and products 192,514 191,591 923 - Selling, general and administrative expenses 170,493 158,302 12,191 8% Depreciation, amortization and accretion 150,557 145,687 4,870 3% Loss on asset disposals and exchanges, net 574 1,043 (469) (45%) 514,138 496,623 17,515 4% Operating income $ 64,274 $ 101,188 $ (36,914) (36%) Competitive Local Exchange Carrier Operations Operating revenues Residential $ 17,192 $ 22,006 $ (4,814) (22%) Commercial 138,637 138,230 407 - Wholesale 17,568 20,096 (2,528) (13%) 173,397 180,332 (6,935) (4%) Operating expenses Cost of services and products 89,949 91,348 (1,399) (2%) Selling, general and administrative expenses 66,886 64,509 2,377 4% Depreciation, amortization and accretion 21,969 21,976 (7) - Loss on asset disposals and exchanges, net 485 85 400 >100% 179,289 177,918 1,371 1% Operating income (loss) $ (5,892) $ 2,414 $ (8,306) >(100)% Hosted and Managed Services Operations Revenues $ 113,010 $ 47,180 $ 65,830 >100% Operating expenses Cost of services and products 75,781 23,502 52,279 >100% Selling, general and administrative expenses 34,193 15,647 18,546 >100% Depreciation, amortization and accretion 20,568 12,867 7,701 60% Loss on asset disposals and exchanges, net 108 115 (7) (6%) 130,650 52,131 78,519 >100% Operating loss $ (17,640) $ (4,951) $ (12,689) >(100)% Intercompany revenues $ (10,313) $ (9,935) $ (378) (4%) Intercompany expenses (10,313) (9,935) (378) (4%) Total TDS Telecom operating income $ 40,742 $ 98,651 $ (57,909) (59%) Telephone and Data Systems, Inc.

Financial Measures and Reconciliations (Unaudited, dollars in thousands) Consolidated Three Months Ended December 31, 2012 U.S. Cellular TDS Telecom (1) All Other (2) Total Operating revenues $ 1,115,206 $ 221,495 $ 9,508 $ 1,346,209 Deduct: U.S. Cellular equipment sales revenue 106,282 Service revenues 1,008,924 Operating income (loss) (60,788) 6,065 (1,638) (56,361) Add (Deduct): Depreciation, amortization and accretion 169,242 49,455 2,767 221,464 Loss on impairment of assets - - - - Loss on asset disposals and exchanges, net 2,121 390 514 3,025 (Gain) loss on sale of business and other exit costs, net 25,170 - - 25,170 Adjusted OIBDA (3) $ 135,745 $ 55,910 $ 1,643 $ 193,298 Adjusted OIBDA margin (4) 13.5% 25.2% Consolidated Three Months Ended December 31, 2011 U.S. Cellular TDS Telecom (1) All Other (2) Total Operating revenues $ 1,099,633 $ 206,770 $ 10,324 $ 1,316,727 Deduct: U.S. Cellular equipment sales revenue 69,588 Service revenues 1,030,045 Operating income (loss) 16,316 15,369 (12,335) 19,350 Add (Deduct): Depreciation, amortization and accretion 141,976 46,168 3,735 191,879 Loss on impairment of assets - - - - (Gain) loss on asset disposals and exchanges, net 3,868 485 (193) 4,160 Adjusted OIBDA (3) $ 162,160 $ 62,022 $ (8,793) $ 215,389 Adjusted OIBDA margin (4) 15.7% 30.0% TDS Consolidated Three Months Ended December 31, 2012 2011 Cash flows from operating activities $ 344,636 $ 316,510 Deduct: Cash used for additions to property, plant, 264,620 369,999 and equipment Free cash flow (5) $ 80,016 $ (53,489) Telephone and Data Systems, Inc.

Financial Measures and Reconciliations (Unaudited, dollars in thousands) Consolidated Twelve Months Ended December 31, 2012 U.S. Cellular TDS Telecom (1) All Other (2) Total Operating revenues $ 4,452,084 $ 854,506 $ 38,687 $ 5,345,277 Deduct: U.S. Cellular equipment sales revenue 353,228 Service revenues 4,098,856 Operating income (loss) 156,656 40,742 (13,535) 183,863 Add (Deduct): Depreciation, amortization and accretion 608,633 193,094 11,899 813,626 Loss on impairment of assets - - 515 515 Loss on asset disposals and exchanges, net 18,088 1,167 525 19,780 (Gain) loss on sale of business and other exit costs, net 21,022 - - 21,022 Adjusted OIBDA (3) $ 804,399 $ 235,003 $ (596) $ 1,038,806 Adjusted OIBDA margin (4) 19.6% 27.5% Consolidated Twelve Months Ended December 31, 2011 U.S. Cellular TDS Telecom (1) All Other (2) Total Operating revenues $ 4,343,346 $ 815,388 $ 21,737 $ 5,180,471 Deduct: U.S. Cellular equipment sales revenue 289,549 Service revenues 4,053,797 Operating income (loss) 280,780 98,651 (16,929) 362,502 Add (Deduct): Depreciation, amortization and accretion 573,557 180,530 11,689 765,776 Loss on impairment of assets - - - - (Gain) loss on asset disposals and exchanges, net (1,873) 1,243 (180) (810) Adjusted OIBDA (3) $ 852,464 $ 280,424 $ (5,420) $ 1,127,468 Adjusted OIBDA margin (4) 21.0% 34.4% TDS Consolidated Twelve Months Ended December 31, 2012 2011 Cash flows from operating activities $ 1,105,172 $ 1,255,711 Deduct: Cash used for additions to property, plant, 995,517 971,759 and equipment Free cash flow (5) $ 109,655 $ 283,952 (1) Includes ILEC, CLEC and HMS intercompany eliminations.

(2) Consists of Suttle-Straus and Airadigm (as of September 23, 2011), which represents TDS' Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom and corporate operations. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.

(3) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets (if any); the net gain or loss on asset disposals and exchanges (if any); and the net gain or loss on sale of business and other exit costs (if any).

(4) Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues (U.S. Cellular) and operating revenues (TDS Telecom). Equipment revenues are excluded from the denominator of the U.S. Cellular calculation since equipment is generally sold at a net negative margin, and the net equipment subsidy is effectively a cost for purposes of assessing business results and is already reflected in adjusted OIBDA. TDS believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular's business results. Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.

(5) Free cash flow is defined as cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure. TDS believes that free cash flow as reported by TDS is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

SOURCE Telephone and Data Systems, Inc.

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