FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 28, 1998
----------------
TELEPHONE AND DATA SYSTEMS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Iowa 1-8251 36-2669023
---- ------ ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
30 North LaSalle Street, Chicago, Illinois 60602
----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 630-1900
Not Applicable
--------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
-------------
On January 28, 1998, Telephone and Data Systems, Inc. announced its
fourth quarter financial results.
This Current Report on Form 8-K is being filed for the purpose of
filing the news release issued by the Company relating to such announcement as
an exhibit.
Item 7. Financial Statements and Exhibits
---------------------------------
Exhibits
--------
The exhibits accompanying this report are listed in the accompanying
Exhibit Index.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
Telephone and Data Systems, Inc.
(Registrant)
Date: January 28, 1998
By: /s/ GREGORY J. WILKINSON
--------------------------
Gregory J. Wilkinson
Vice President and Controller
(principal accounting officer)
3
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
99 News Release dated January 28, 1998
4
<PAGE>
Exhibit 99
Contact: Karen M. Stewart, Vice President - Investor Relations
(608) 828-8316 e-mail: [email protected]
FOR RELEASE: IMMEDIATE
TDS REPORTS STRONG GROWTH IN CUSTOMERS
AND REVENUES; CASH FLOW AND NET INCOME REDUCED BY
AERIAL START-UP AND CELLULAR MARKETING COSTS
January 28, 1998, Chicago, Illinois - Telephone and Data Systems, Inc.
[AMEX:TDS] today reported excellent fourth quarter 1997 growth in customers and
revenues. Both U.S. Cellular and Aerial Communications added subscriber units in
excess of internal targets. Because these new subscribers were added primarily
during the holiday marketing season, revenues from these units will not reach a
significant level until 1998, while the marketing costs incurred to add the
units were fully incurred and expensed during the fourth quarter of 1997. These
costs and costs related to the effects of competitive pressures at U.S. Cellular
and Aerial reduced cash flow and operating income during the quarter. Diluted
(loss) per share from operations, excluding gains, totaled $(.65) for the fourth
quarter of 1997 compared to diluted earnings per share of $.18, excluding gains,
in the fourth quarter of 1996.
Fourth Quarter Highlights:
o Revenues grew 29% over the fourth quarter of 1996, to $412
million, fueled by a 30% jump in cellular revenues and a 59% increase
in cellular customer units.
o Operating cash flow, excluding the effects of Aerial's start-up
activities, increased 10% to $102.4 million in the fourth quarter of
1997. Including Aerial, operating cash flow declined 56% to $41.2
million.
o Net (loss) available to common, excluding gains from asset sales,
was $(38.9) million in the fourth quarter of 1997 compared to net
income available to common of $10.9 million in the fourth quarter of
1996. Fourth quarter 1997 results reflect solid U.S. Cellular and TDS
Telecom performance, offset by Aerial losses which reduced net income
available to common by $49.7 million in the fourth quarter of 1997 and
$6.6 million in 1996.
o Primarily due to the effects of Aerial's operating losses, TDS
reported diluted (loss) per share of $(.65) in the fourth quarter of
1997, excluding gains from asset sales, compared to diluted earnings
per share of $.18, excluding gains, in 1996. The net loss associated
with Aerial's operations reduced earnings per share by $.83 in the
fourth quarter of 1997 and $.10 in the fourth quarter of 1996.
<PAGE>
o Gains from asset sales contributed $3.5 million, or $.06 per
share in the fourth quarter of 1997, compared to $755,000, or $.01 per
share, in the fourth quarter of 1996.
LeRoy T. Carlson, Jr., President and Chief Executive Officer, commented, "U.S.
Cellular had a very successful fourth quarter in terms of customer additions and
revenues in the face of increasing competition from existing carriers and new
PCS entrants. U.S. Cellular added 158,000 customer units during the quarter,
excluding acquisitions, which drove its penetration to 7.11% at the end of the
quarter. We are very pleased that U.S. Cellular exceeded its stated goal of
adding two points of penetration during 1997.
"TDS Telecom reported solid increases in access lines and minutes during the
fourth quarter. TDS Telecom's new ventures, its internet service and structured
wiring program, are growing nicely. We believe that these new ventures, along
with the commencement of CLEC services in Madison, Wisconsin this year, will
fuel TDS Telecom's growth in the future.
"Aerial Communications closed the year with 125,000 customer units in service,
almost double the customer unit count at September 30. We are most pleased that
Aerial exceeded its revised goal of reaching 120,000 customer units by year-end
1997. Aerial's minutes of use and average revenue per unit continue to exceed
its internal projections. We look forward to continued growth in customer units
and revenues in 1998.
"During 1998, we anticipate continued cash flow and earnings growth in our U.S.
Cellular and TDS Telecom groups. We also expect that the costs of Aerial's
operations will continue to reduce cash flow and earnings during 1998.
Thereafter, we look for a return to strong positive growth in cash flow and
earnings."
United States Cellular Corporation [AMEX:USM], TDS's 81.1%-owned subsidiary,
reported strong 59% customer growth during 1997. U.S. Cellular's customer units
in service totaled 1,710,000 at year-end 1997, including 195,000 net units added
as a result of the completion of an exchange transaction with BellSouth
Corporation. Net customer activations from marketing channels increased 19% in
the fourth quarter of 1997 to 158,000 compared to 133,000 net activations during
the fourth quarter of 1996.
U.S. Cellular's service revenues increased 29% to $234.8 million for the fourth
quarter of 1997 compared to $182.1 million for the fourth quarter of 1996.
Operating cash flow increased 35% to $56.8 million in the fourth quarter of 1997
compared to $42.1 million in the fourth quarter of 1996. U.S. Cellular plans to
invest approximately $330 million in capital equipment and business system
upgrades during 1998.
TDS Telecommunications Corporation ("TDS Telecom"), TDS's wholly owned
subsidiary, reported a 9% increase in revenues in the fourth quarter of 1997
versus the same period in 1996. TDS Telecom's landline telephone revenues
increased 7% on a 6% increase in access lines and a 10% increase in minutes of
use. Operating cash flow from the landline business declined 7% to $49.5 million
in the fourth quarter of 1997 from $53.4
<PAGE>
million in 1996 primarily due to non-recurring, one-time expense reductions
occurring in 1996. TDS Telecom's operating margin on its landline business was
24% during the fourth quarter of 1997 compared to 30% in 1996. The full-year
1997 margin of 25% reflects the impacts of slightly higher expenses for the
company's data network, increased advertising and sales promotion costs, and
full implementation of the network management center. In addition, TDS Telecom
is experiencing some downward pressure on certain revenue streams, and smaller
margins on new non-traditional product offerings such as DBS (Direct Broadcast
Satellite).
TDS Telecom generated approximately $4.3 million in revenues and $6.1 million in
expenses during the fourth quarter of 1997 related to its internet and
structured wiring service offerings. The company anticipates these programs will
be producing increasing revenues during the next several quarters. Additionally,
Telecom reported approximately $1.4 million in expenses during the quarter
related to the start-up of its CLEC operation in Madison, Wisconsin. The CLEC is
expected to commence service during the first quarter of 1998. TDS Telecom plans
to invest approximately $140 million in capital expenditures, including for the
CLEC operation, in 1998.
Aerial Communications, Inc. [NASDAQ:AERL], TDS's 82.5%-owned subsidiary,
reported 60,000 net customer activations during the fourth quarter of 1997.
Usage of Aerial's PCS networks continues to be strong, with average revenue per
user running nearly $70 per month and average minutes of use nearly 350 per
month.
Aerial's operating cash flow for the fourth quarter of 1997 was a negative $61.2
million. Both the customer churn rate and bad debt expense were higher than
anticipated for 1997. Aerial's churn rate was approximately 4% during 1997.
About 60% of the churn was at Aerial's direction, as it focused on clearing the
customer rolls on non-pay and slow-pay customers. Aerial recently launched a
pre-payment plan which is anticipated to reduce both customer churn and bad debt
expense in 1998. Aerial plans to invest approximately $75 million in capital
expenditures during 1998.
American Paging, Inc. [AMEX:APP], TDS's 81.9%-owned subsidiary, reported fourth
quarter results reflecting continuing modest progress in its turnaround efforts.
Customer units in service increased 18,300 since September 30, 1997, American
Paging's third consecutive quarterly increase in customer units. Revenues
declined 10% from the fourth quarter of 1996, primarily due to competitive price
pressures in the direct distribution channel. Customer churn was 2.3% for the
fourth quarter of 1997. American Paging recorded expenses related to its
proposed merger with TSR Paging, Inc., totaling $1.9 million in the fourth
quarter of 1997. As a result, operating cash flow was a negative $2.1 for the
fourth quarter of 1997 compared with a negative $2.5 million in the fourth
quarter of 1996.
Litigation As previously disclosed, TDS has offered to acquire all of the Common
Shares of U.S. Cellular and all of the Common Shares of Aerial which it does not
already own, pursuant to mergers between subsidiaries of TDS and each of U.S.
Cellular (the "U.S. Cellular Merger") and Aerial (the "Aerial Merger").
<PAGE>
On December 29, 1997, Airmont Plaza Associates, which claims to be a holder of
U.S. Cellular Common Shares, filed a putative class action complaint on behalf
of the minority shareholders of U.S. Cellular in the Court of Chancery of the
State of Delaware in New Castle County. The complaint names as defendants TDS,
U.S. Cellular and the directors of U.S. Cellular. The complaint alleges a breach
of fiduciary duties by the defendants in connection with the proposed U.S.
Cellular Merger and seeks to have the U.S. Cellular Merger enjoined or, if it is
consummated, to have it rescinded and to recover unspecified damages, fees and
expenses.
On January 5, 1998, Richard Greenfield, who claims to be a holder of Aerial
Common Shares, filed a putative class action complaint on behalf of the minority
shareholders of Aerial in the Court of Chancery of the State of Delaware in New
Castle County. The complaint names as defendants TDS, Aerial and the directors
of TDS and Aerial. The complaint alleges a breach of fiduciary duties by the
defendants in connection with the proposed Aerial Merger and seeks to have the
Aerial Merger enjoined or, if it is consummated, to have it rescinded and to
recover unspecified damages, fees and expenses.
The Company intends to vigorously defend against these lawsuits.
TDS is a Chicago-based telecommunications company with established cellular
telephone, local telephone and radio paging operations and developing PCS
operations. TDS strives to build value for its shareholders by providing
excellent communications services in attractive, closely related segments of the
telecommunications industry.
This news release contains "forward-looking" statements, as defined in the
private securities litigation reform act of 1995, that are based on current
expectations, estimates and projections. These statements contain potential
risks and uncertainties and, therefore, actual results may differ materially.
TDS undertakes no obligation to publicly update any forward-looking statements
whether as a result of new information, future events or otherwise.
In early April 1998, TDS's Annual Report on Form 10-K will be available, without
charge, to our investors, security analysts and other members of the investment
community. Please contact Julie Mathews, Senior Investor Relations Coordinator,
at (312) 630-1900 for further information.
Internet Home Pages: TDS http://www.teldta.com
USM http://www.uscc.com
AERL http://www.aerial1.com
APP http://www.americanpaging.com
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
SUMMARY OPERATING DATA
Quarter Ended 12/31/97 9/30/97 6/30/97 3/31/97 12/31/96
---------- --------- --------- --------- ---------
U.S. Cellular:
Total pops (1) 25,300 26,012 25,810 25,873 25,517
TDS's proportionate share 20,517 21,044 20,890 20,941 20,566
Consolidated Markets:
Pops owned (000s) 22,611 20,578 20,557 20,390 20,389
Total population (000s) 24,034 21,844 21,844 21,712 21,712
Customer units 1,710,000 1,357,000 1,263,000 1,164,000 1,073,000
Market penetration 7.11% 6.21% 5.78% 5.36% 4.94%
Markets in operation 134 132 132 131 131
Cell sites in service 1,748 1,556 1,485 1,377 1,328
Average monthly
revenue per unit (2) $ 49.88 $ 57.56 $ 58.41 $ 53.50 $ 60.84
Churn rate per month 2.0% 2.0% 1.8% 2.0% 1.9%
Marketing cost per net
customer add (2) $ 469 $ 603 $ 531 $ 550 $ 459
TDS Telecom:
Companies 106 105 105 105 105
Access lines 515,500 506,600 500,000 493,000 484,500
Growth in access lines
from prior quarter-end:
Acquisitions 3,200 --- --- --- ---
Internal growth 5,700 6,600 7,000 8,500 4,800
Average monthly revenue
per access line $ 70 $ 70 $ 67 $ 67 $ 70
Aerial Communications:
Total pops (1) 27,601 27,601 27,601 27,601 27,601
TDS's proportionate share 22,744 22,788 22,803 22,843 22,854
Customer units 125,000 65,000 28,000 --- ---
Market penetration 0.45% 0.24% 0.10% --- ---
American Paging:
Pagers in service 811,100 792,800 780,600 767,400 777,400
Average monthly
revenue per unit $ 8.74 $ 8.97 $ 9.34 $ 9.63 $ 9.75
Disconnect rate
per month 2.3% 2.5% 2.6% 3.0% 3.1%
Telephone and Data Systems:
Notes Payable $ 527,587 $ 451,329 $ 505,206 $ 299,468 $ 160,537
Long-term Debt,
excluding current $1,264,218 $1,228,175 $ 983,364 $ 983,911 $ 982,232
(1) Population equivalents ("Pops"), owned and acquirable, in thousands.
(2) Amounts for 1996 have been restated for a change in income statement
presentation.
(3) At December 31, 1997, 60.6 million TDS Common and Series A Common Shares
were outstanding and approximately 268,000 Common Shares were scheduled to
be issued in the future pursuant to definitive acquisition agreements. An
additional 926,000 Common Shares are registered for use in connection with
the Company's continuing acquisition program.
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
Three Months Ended December 31, 1997
(Unaudited, dollars in thousands, except per share amounts)
Increase (Decrease)
-------------------------
1997 1996 Amount Percent
--------- --------- ---------- ---------
Operating Revenues
U.S. Cellular $ 242,843 $ 186,737 * $ 56,106 30.0%
TDS Telecom 116,673 106,766 * 9,907 9.3%
Aerial Communications 30,161 --- 30,161 N/M
American Paging 22,655 25,042 (2,387) (9.5%)
--------- --------- ----------
412,332 318,545 93,787 29.4%
--------- --------- ----------
Operating Expenses Before
Depreciation and Amortization
U.S. Cellular 186,073 144,685 * 41,388 28.6%
TDS Telecom 68,949 53,251 * 15,698 29.5%
Aerial Communications 91,328 --- 91,328 N/M
American Paging 24,735 27,531 (2,796) (10.2%)
--------- --------- ----------
371,085 225,467 145,618 64.6%
--------- --------- ----------
Operating Cash Flow (Operating
Income Plus Depreciation
and Amortization)
U.S. Cellular 56,770 42,052 14,718 35.0%
TDS Telecom 47,724 53,515 * (5,791) (10.8%)
Aerial Communications (61,167) --- (61,167) N/M
American Paging (2,080) (2,489) 409 (16.4%)
--------- --------- ---------
41,247 93,078 (51,831) (55.7%)
--------- --------- ---------
Depreciation and Amortization*
U.S. Cellular 37,738 29,623 8,115 27.4%
TDS Telecom 24,920 24,518 * 402 1.6%
Aerial Communications 19,214 --- 19,214 N/M
American Paging 8,382 6,790 1,592 23.4%
*includes amortization of $13,044--------- --------- ---------
and $11,246, respectively 90,254 60,931 29,323 48.1%
--------- --------- ---------
Operating (Loss) Income
U.S. Cellular 19,032 12,429 6,603 53.1%
TDS Telecom 22,804 28,997 * (6,193) (21.4%)
Aerial Communications (80,381) --- (80,381) N/M
American Paging (10,462) (9,279) (1,183) 12.7%
--------- --------- --------
(49,007) 32,147 (81,154) N/M
--------- --------- --------
Investment and Other Income
Interest and Dividend Income 3,738 5,521 (1,783) (32.3%)
Minority Share of Loss (Income) 8,248 (2,293) 10,541 N/M
Cellular Investment Income, Net 18,349 16,578 * 1,771 10.7%
PCS Development Costs --- (19,638) 19,638 (100.0%)
Gain on Sale of Cellular and
Other Investments 17,073 2,686 14,387 N/M
Other (Expense) Income, Net (1,477) 1,748 (3,225) (184.5%)
--------- --------- --------
45,931 4,602 41,329 N/M
--------- --------- --------
(Loss) Income Before Interest
and Income Taxes (3,076) 36,749 (39,825) (108.4%)
Interest Expense 30,688 12,510 18,178 145.3%
--------- --------- --------
(Loss)Income Before Income Taxes (33,764) 24,239 (58,003) N/M
Income Tax Expense 1,242 12,150 (10,908) (89.8%)
--------- --------- --------
Net (Loss) Income (35,006) 12,089 (47,095) N/M
Preferred Dividend Requirement (470) (483) 13 (2.7%)
--------- --------- --------
Net (Loss) Income Available
to Common $ (35,476) $ 11,606 $(47,082) N/M
========= ========= ========
Average Common Shares
Outstanding (000s) 60,099 61,127 (1,028) (1.7%)
Earnings Per Common Share
(Basic) $ (0.59) $ 0.19 $ (0.78) N/M
========= ========= =========
Earnings Per Common Share
(Diluted) $ (0.59) $ 0.19 $ (0.78) N/M
========= ========= =========
Diluted EPS--Operations $ (0.65) $ 0.18 $ (0.83) N/M
Diluted EPS--Gains $ 0.06 $ 0.01 $ 0.05 N/M
N/M - Percentage change not meaningful
* Amounts reclassified for change in current year presentation.
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
Twelve Months Ended December 31, 1997
(Dollars in thousands, except per share amounts)
Increase (Decrease)
-----------------------------
1997 1996 Amount Percent
---------- ---------- --------- ---------
Operating Revenues
U.S. Cellular $ 876,965 $ 680,068 * $ 196,897 29.0%
TDS Telecom 444,203 395,602 * 48,601 12.3%
Aerial Communications 55,952 --- 55,952 N/M
American Paging 94,413 104,187 (9,774) (9.4%)
---------- ---------- ---------
1,471,533 1,179,857 291,676 24.7%
---------- ---------- ---------
Operating Expenses Before
Depreciation and Amortization
U.S. Cellular 615,043 483,863 * 131,180 27.1%
TDS Telecom 247,524 204,435 * 43,089 21.1%
Aerial Communications 213,432 --- 213,432 N/M
American Paging 97,680 107,036 (9,356) (8.7%)
---------- ---------- ---------
1,173,679 795,334 378,345 47.6%
---------- ---------- ---------
Operating Cash Flow (Operating Income
Plus Depreciation and Amortization)
U.S. Cellular 261,922 196,205 65,717 33.5%
TDS Telecom 196,679 191,167 * 5,512 2.9%
Aerial Communications (157,480) --- (157,480) N/M
American Paging (3,267) (2,849) (418) 14.7%
---------- ---------- ---------
297,854 384,523 (86,669) (22.5%)
---------- ---------- ---------
Depreciation and Amortization*
U.S. Cellular 132,379 108,839 23,540 21.6%
TDS Telecom 98,066 88,459 * 9,607 10.9%
Aerial Communications 39,071 --- 39,071 N/M
American Paging 32,040 33,777 (1,737) (5.1%)
---------- ---------- ---------
*includes amortization of $49,281
and $43,937, respectively 301,556 231,075 70,481 30.5%
---------- ---------- ---------
Operating (Loss) Income
U.S. Cellular 129,543 87,366 42,177 48.3%
TDS Telecom 98,613 102,708 * (4,095) (4.0%)
Aerial Communications (196,551) --- (196,551) N/M
American Paging (35,307) (36,626) 1,319 (3.6%)
---------- ---------- ---------
(3,702) 153,448 (157,150) (102.4%)
---------- ---------- ---------
Investment and Other Income
Interest and Dividend Income 13,660 15,569 (1,909) (12.3%)
Minority Share of Loss (Income) 6,813 (26,690) 33,503 (125.5%)
Cellular Investment Income, Net 77,620 54,799 * 22,821 41.6%
PCS Development Costs (21,614) (43,950) 22,336 (50.8%)
Gain on Sale of Cellular and
Other Investments 41,438 138,735 (97,297) (70.1%)
Other (Expense) Income, Net (3,938) 2,727 (6,665) N/M
---------- ---------- ---------
113,979 141,190 (27,211) (19.3%)
---------- ---------- ---------
(Loss) Income Before Interest
and Income Taxes 110,277 294,638 (184,361) (62.6%)
Interest Expense 91,267 42,853 48,414 113.0%
---------- ---------- ---------
(Loss) Income Before Income Taxes 19,010 251,785 (232,775) (92.4%)
Income Tax Expense 28,559 123,646 (95,087) (76.9%)
---------- ---------- ---------
Net (Loss) Income (9,549) 128,139 (137,688) (107.5%)
Preferred Dividend Requirement (1,892) (1,957) 65 (3.3%)
---------- ---------- ---------
Net (Loss) Income Available
to Common $ (11,441) $ 126,182 $(137,623) (109.1%)
========== ========== =========
Average Common Shares
Outstanding (000s) 60,211 60,464 (253) (0.4%)
Earnings Per Common Share
(Basic) $ (0.19) $ 2.09 $ (2.28) (109.1%)
========== ========== =========
Earnings Per Common Share
(Diluted) $ (0.19) $ 2.07 $ (2.26) (109.2%)
========== ========== =========
Diluted EPS--Operations $ (0.45) $ 1.02 $ (1.47) (144.1%)
Diluted EPS--Gains $ 0.26 $ 1.05 $ (0.79) (75.2%)
N/M - Percentage change not meaningful.
* Amounts reclassified for change in current year presentation.
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
BALANCE SHEET HIGHLIGHTS
DECEMBER 31, 1997
(Dollars in thousands)
U.S TDS Aerial American
Cellular Telecom Communications Paging
----------- ----------- ----------- ---------
Cash and Cash Equivalents $ 13,851 $ 22,640 $ 5,012 $ 3,058
Affiliated Cash Investments --- 161,941 --- ---
Temporary Cash Investments 218 21,658 197 61
Notes Receivable-Affiliates --- 3,746 --- ---
----------- ----------- ----------- ----------
$ 14,069 $ 209,985 $ 5,209 $ 3,119
----------- ----------- ----------- ----------
Marketable Equity Securities $ --- $ 1,621 $ --- $ ---
Marketable Non-equity Securities 870 22,107 788 244
License and Franchise
Costs, net 1,150,924 220,332 297,043 60,901
Cellular Minority Interests 128,810 8,912 510 ---
Other Investments 10,673 12,453 --- 185
----------- ----------- ----------- ----------
$ 1,291,277 $ 265,425 $ 298,341 $ 61,330
=========== =========== =========== ==========
Property, Plant and
Equipment, net $ 940,253 $ 830,767 $ 604,104 $ 43,230
=========== =========== =========== ==========
Notes Payable: external $ 1,302 $ --- $ --- $ ---
intercompany --- 83,473 448,234 179,990
----------- ----------- ----------- ----------
$ 1,302 $ 83,473 $ 448,234 $ 179,990
=========== =========== =========== ==========
Long-term Debt:
Current Portion $ --- $ 14,577 $ --- $ ---
Non-current Portion 515,330 307,158 196,439 ---
----------- ----------- ----------- ----------
Total $ 515,330 $ 321,735 $ 196,439 $ ---
=========== =========== =========== ==========
Preferred Stock $ --- $ --- $ --- $ ---
=========== =========== =========== ==========
Trusted Originated
Preferred Securities $ --- $ --- $ --- $ ---
========== =========== =========== ==========
Total outstanding debt
and Preferred Stock $ 516,632 $ 405,208 $ 644,673 $ 179,990
========== =========== =========== ==========
Construction Expenditures:
Quarter Ended 12/31/97 $ 66,291 $ 57,347 $ 74,296 $ 5,030
Twelve months ended 12/31/97 $ 283,577 $ 148,426 $ 327,119 $ 18,624
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
BALANCE SHEET HIGHLIGHTS
DECEMBER 31, 1997
(Dollars in thousands)
(Continued)
TDS Corporate Intercompany TDS
& Other Eliminations Consolidated
------------- ------------ ------------
Cash and Cash Equivalents $ 6,447 $ --- $ 51,008
Affiliated Cash Investments --- (161,941) ---
Temporary Cash Investments 2,425 --- 24,559
Notes Receivable-Affiliates 711,763 (715,509) ---
------------- ------------ ------------
$ 720,635 $ (877,450) $ 75,567
============= ============ ============
Marketable Equity Securities $ --- $ --- $ 1,621
Marketable Non-equity Securities 7,015 --- 31,024
License and Franchise Costs, net 22,622 (14) 1,751,808
Cellular Minority Interests 2,752 (2,617) 138,367
Other Investments 2,436,241 (2,409,788) 49,764
------------- ------------ ------------
$ 2,468,630 $ (2,412,419) $ 1,972,584
============= ============ ============
Property, Plant and
Equipment, net $ 47,299 $ --- $ 2,465,653
============= ============ ============
Notes Payable: external $ 526,285 $ --- $ 527,587
intercompany 165,753 (877,450) ---
------------- ------------ ------------
$ 692,038 $ (877,450) $ 527,587
============= ============ ============
Long-term Debt:
Current Portion $ 239 $ --- $ 14,816
Non-current Portion 245,291 --- 1,264,218
------------- ------------ ------------
Total $ 245,530 $ --- $ 1,279,034
============= ============ ============
Preferred Stock $ 31,167 $ --- $ 31,167
============= ============ ============
Trust Originated Preferred
Securities $ 150,000 $ --- $ 150,000
============= ============ ============
Total outstanding debt and
Preferred Stock $ 1,118,735 $ (877,450) $ 1,987,788
============= ============ ============
Construction Expenditures:
Quarter ended 12/31/97 $ 5,921 $ --- $ 208,885
Twelve months ended 12/31/97 $ 23,418 $ --- $ 801,164
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
Three Months Ended December 31, 1997
(Unaudited, dollars in thousands, except per share amounts)
Increase (Decrease)
--------------------
1997 1996 Amount Percent
--------- --------- --------- ---------
Local Telephone Operating Revenues
Local Service $ 31,443 $ 29,353 $ 2,090 7.1%
Network Access and Long-Distance 60,904 57,841 3,063 5.3%
Miscellaneous 14,832 13,397 1,435 10.7%
--------- --------- ---------
107,179 100,591 6,588 6.5%
--------- --------- ---------
Local Telephone Operating Expenses
Network Operations 22,460 15,850 6,610 41.7%
Customer Operations 16,248 13,804 2,444 17.7%
Corporate Expenses 18,937 17,543 1,394 7.9%
--------- --------- ---------
57,645 47,197 10,448 22.1%
--------- --------- ---------
Local Telephone Operating
Cash Flow 49,534 53,394 (3,860) (7.2%)
--------- --------- ---------
Local Telephone Depreciation
and Amortization
Depreciation 23,024 22,055 969 4.4%
Amortization 1,211 1,613 (402) (24.9%)
--------- --------- ---------
24,235 23,668 567 2.4%
--------- --------- ---------
Local Telephone Operating Income 25,299 29,726 (4,427) (14.9%)
--------- --------- ---------
Long-Distance Operations
Revenues 5,593 5,681 (88) (1.5%)
Expenses before Depreciation
and Amortization 4,639 4,623 16 0.3%
--------- --------- ---------
Long-Distance Operating Cash Flow 954 1,058 (104) (9.8%)
Long-Distance Depreciation
and Amortization 374 513 (139) (27.1%)
--------- --------- ---------
Long-Distance Operating Income 580 545 35 6.4%
--------- --------- ---------
Other Services (1)
Revenue 4,345 715 3,630 N/M
Expenses before Depreciation 7,109 1,652 5,457 N/M
--------- --------- ---------
Other Services Operating Cash Flow (2,764) (937) (1,827) 195.0%
Other Services Depreciation 311 337 (26) (7.7%)
--------- --------- ---------
Other Services Operating (Loss) (3,075) (1,274) (1,801) 141.4%
--------- --------- ---------
Intercompany Revenues (444) (221) (223) 100.9%
Intercompany Expenses (444) (221) (223) 100.9%
--------- --------- ---------
--- --- --- N/M
--------- --------- ---------
Total TDS Telecom Operating Income $ 22,804 $ 28,997 $ (6,193) (21.4%)
========= ========= =========
(1) Cellular revenues and expenses included in prior reports have been
reclassified to non-operating income.
N/M - Percentage change not meaningful.
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
Twelve Months Ended December 31, 1997
(Dollars in thousands, except per share amounts)
Increase (Decrease)
--------------------
1997 1996 Amount Percent
--------- ---------- --------- ---------
Local Telephone Operating Revenues
Local Service $ 122,826 $ 110,501 $ 12,325 11.2%
Network Access and Long-Distance 235,725 213,113 22,612 10.6%
Miscellaneous 53,829 48,299 5,530 11.4%
--------- ---------- ---------
412,380 371,913 40,467 10.9%
--------- ---------- ---------
Local Telephone Operating Expenses
Network Operations 80,487 67,521 12,966 19.2%
Customer Operations 65,167 53,764 11,403 21.2%
Corporate Expenses 68,454 62,276 6,178 9.9%
--------- ---------- ---------
214,108 183,561 30,547 16.6%
--------- ---------- ---------
Local Telephone Operating
Cash Flow 198,272 188,352 9,920 5.3%
--------- ---------- ---------
Local Telephone Depreciation
and Amortization
Depreciation 89,177 79,931 9,246 11.6%
Amortization 6,101 5,644 457 8.1%
--------- ---------- ---------
95,278 85,575 9,703 11.3%
--------- ---------- ---------
Local Telephone Operating Income 102,994 102,777 217 0.2%
--------- ---------- ---------
Long-Distance Operations
Revenues 22,969 23,102 (133) (0.6%)
Expenses before Depreciation
and Amortization 19,376 18,631 745 4.0%
--------- ---------- ---------
Long-Distance Operating Cash Flow 3,593 4,471 (878) (19.6%)
Long-Distance Depreciation
and Amortization 1,533 2,321 (788) (34.0%)
--------- ---------- ---------
Long-Distance Operating Income 2,060 2,150 (90) (4.2%)
--------- ---------- ---------
Other Services (1)
Revenue 10,547 1,645 8,902 N/M
Expenses before Depreciation 15,733 3,301 12,432 N/M
--------- ---------- ---------
Other Services Operating Cash Flow (5,186) (1,656) (3,530) N/M
Other Services Depreciation 1,255 563 692 122.9%
--------- ---------- ---------
Other Services Operating (Loss) (6,441) (2,219) (4,222) 190.3%
--------- ---------- ---------
Intercompany Revenues (1,693) (1,058) (635) 60.0%
Intercompany Expenses (1,693) (1,058) (635) 60.0%
--------- ---------- ---------
--- --- --- N/M
--------- ---------- ---------
Total TDS Telecom Operating Income $ 98,613 $ 102,708 $ (4,095) (4.0%)
========= ========== =========
(1) Cellular revenues and expenses included in prior reports have been
reclassified to non-operating income.
N/M - Percentage change not meaningful.
<PAGE>
