XML 44 R12.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Acquisitions Divestures And Exchanges | 9 Months Ended
--- | ---
Sep. 30, 2014
Disclosure Text Block |
Acquisitions, Divestures and Exchanges | 5. Acquisitions, Divestitures and Exchanges Acquisitions did not have a material impact o n TDS' consolidated financial statements for the periods presented and pro forma results, assuming acquisitions had occurred at the beginning of each period presented, would not be materially different from the results reported. Divestiture Transaction On November 6, 2012, U.S. Cellular entered into a Purchase and Sale Agreement with subsidiaries of Sprint Corp., fka Sprint Nextel Corporation (“Sprint”). Pursuant to t he Purchase and Sale Agreement, on May 16, 2013, U.S. Cellular transfer red customers and certain PCS license spec trum to Sprint in U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (“Divestiture Markets”) in consideration for $480 million in cash. The Purchase and Sale Agreement also contemplate d certain other agreements, together with the Purchase and Sale Agreement collectively referred to as the “Divestiture Transaction.” Pursuant to t he Purchase and Sale Agreement, U.S. Cellular and Sprint also entered into certain other agreements, including customer and network transition ser vices agreements, which require U.S. Cellular to provide customer, billing and network services to Sprint for a period of up to 24 months after the May 16, 2013 closing date. Sprint will reimburse U.S. Cellular for providing such services at a n amount equal to U.S. Cellular's estimated cost s, including applicable overhead allocations. These services were substantially complete as of March 31, 2014. In addition, these agreements require Sprint to reimburse U.S. Cellular up to $200 million (the “Sprint Cost Reimbursement”) for certain network decommissioning costs, network site lease rent and termination costs, network access termination costs, and employee termination benefits for specified engineering employees. It is estimated that u p to $175 million of the Sprint Cost Reimbursement will be recorded in (Gain) loss on sale of business and other exit costs, net and up to $25 million of the Sprint Cost Reimbursement will be recorded in Cost of services in the Consolidated Statement of Operations. For the nine months ended September 30, 2014, $52.0 million of the Sprint Cost Reimbursement ha d been received and recorded in Cash received from divestitures in the Consolidated Statement of Cash Flows. Financial impacts of the Divestiture Transaction are classified in the Consolidated Statement of Operations within Operating income. The table below describes the amounts TDS has recognize d and expects to recognize in the Consolidated Statement of Operations between the date the Purchase and Sale Agreement was signed and the end of the transition services period.
(Dollars in thousands) | Expected Period of Recognition |  | Projected Range |  | Cumulative Amount Recognized as of September 30, 2014 |  | Actual Amount Recognized Nine Months Ended September 30, 2014 |  | Actual Amount Recognized Nine Months Ended September 30, 2013 |  | Actual Amount Recognized Three Months Ended September 30, 2014 |  | Actual Amount Recognized Three Months Ended September 30, 2013
(Gain) loss on sale of business and other exit costs, net |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Proceeds from Sprint |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Purchase price |  | 2013 |  | $ | (480,000) |  | $ | (480,000) |  | $ | (480,000) |  | $ | - |  | $ | (480,000) |  | $ | - |  | $ | -
|  | Sprint Cost Reimbursement |  | 2013-2015 |  |  | (120,000) |  |  | (175,000) |  |  | (98,289) |  |  | (50,648) |  |  | (4,221) |  |  | (1,454) |  |  | (4,213)
| Net assets transferred |  | 2013 |  |  | 160,073 |  |  | 160,073 |  |  | 160,073 |  |  | - |  |  | 160,073 |  |  | - |  |  | -
| Non-cash charges for the write-off and write-down of property under construction and related assets |  | 2012-2015 |  |  | 10,000 |  |  | 15,000 |  |  | 10,965 |  |  | 290 |  |  | 54 |  |  | (48) |  |  | (27)
| Employee related costs including severance, retention and outplacement |  | 2012-2014 |  |  | 13,000 |  |  | 16,000 |  |  | 14,139 |  |  | (123) |  |  | 2,462 |  |  | 10 |  |  | (641)
| Contract termination costs |  | 2012-2015 |  |  | 70,000 |  |  | 100,000 |  |  | 81,377 |  |  | 21,793 |  |  | 18,781 |  |  | (9,040) |  |  | 2,176
| Transaction costs |  | 2012-2014 |  |  | 5,000 |  |  | 7,000 |  |  | 6,183 |  |  | 618 |  |  | 4,081 |  |  | 156 |  |  | 362
|  | Total (Gain) loss on sale of business and other exit costs, net |  |  |  | $ | (341,927) |  | $ | (356,927) |  | $ | (305,552) |  | $ | (28,070) |  | $ | (298,770) |  | $ | (10,376) |  | $ | (2,343)
Depreciation, amortization and accretion expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Incremental depreciation, amortization and accretion, net of salvage values |  | 2012-2014 |  |  | 215,000 |  |  | 216,000 |  |  | 215,238 |  |  | 16,667 |  |  | 134,000 |  |  | 3,582 |  |  | 45,676
(Increase) decrease in Operating income |  |  |  | $ | (126,927) |  | $ | (140,927) |  | $ | (90,314) |  | $ | (11,403) |  | $ | (164,770) |  | $ | (6,794) |  | $ | 43,333
Incremental depreciation, amortization and accretion, net of salvage values r epresents amounts recorded in the specified time periods as a result of a change in estimate for the remaining useful life and salvage value of certain assets and a change in estimate which accelerated the settlement dates of certain asset retirement obligations in conjunction with the Divestiture Transaction. Specifically, for the periods indicated, this is estimated depreciation, amortization and accretion recorded on assets and liabilities of the Divestiture Markets after the execution of the Purchase and Sale Agreement on November 6, 2012 less depreciation, amortization and accretion that would have been recorded on such assets and liabilities in the normal course, absent the Divestiture Transaction. During the third quarter of 2014, TDS recorded $3.6 mil lion of Depreciation, amortization and accretion expense for the Divestiture Markets due to higher asset retirement obligation remediation estimates.
|  | As a result of the transaction, TDS recognized the following amounts in the Consolidated Balance Sheet:
|  |  |  |  |  | Nine Months Ended September 30, 2014 |  |  |
(Dollars in thousands) | Balance December 31, 2013 |  | Costs Incurred |  | Cash Settlements (1) |  | Adjustments (2) |  | Balance September 30, 2014
Accrued compensation |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Employee related costs including severance, retention, outplacement | $ | 2,053 |  | $ | 99 |  | $ | (1,121) |  | $ | (221) |  | $ | 810
Accounts payable |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Contract termination costs | $ | - |  | $ | 4,018 |  | $ | - |  | $ | (1,070) |  | $ | 2,948
Other current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Contract termination costs | $ | 13,992 |  | $ | 12,703 |  | $ | (19,390) |  | $ | 1,367 |  | $ | 8,672
Other deferred liabilities and credits |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Contract termination costs | $ | 30,849 |  | $ | 24,171 |  | $ | (3,380) |  | $ | (29,707) |  | $ | 21,933
(1) | Cash settlement amounts are included in either the Net income, changes in Accounts payable or changes in Other assets and liabilities line items as part of Cash flows from operating activities on the Consolidated Statement of Cash Flows.
(2) | Adjustment to liability represents changes to previously accrued amounts.
Airadigm Transaction On May 23, 2014 (the “Signing Date”), U.S. Cellular entered into a License Purchase and Customer Recommendation Agreement with A iradigm. Pursuant to the License Purchase and Customer Recommendation Agreement, on September 10, 2014, Airadigm transfer red to U.S. Cellular Federal Communications Commission (“FCC”) spectrum licenses and certain tower assets in certain markets in Wisconsin, Iowa, Minnesota and Michigan, in consideration for $91.5 million in cash. Since both parties to this transaction are controlled by TDS, upon closing, U.S. Cellular recorded the transferred assets at Airadigm's net book value. The transaction also impacts the expected realization of Airadigm's federal net operating loss carryforwards and t herefore TDS reduced its valuation allowance by $10.8 milli on upon the transaction closing and recognize d an income tax benefit for this same amount. See Note 3 — Income Taxes. Airadigm has shut down operation of its consumer wireless business and most of the associated network. Except for certain non-consumer related operations that will be continued, Airadigm's assets not acquired by U.S. Cellular will be sold or otherwise disposed of, its tower leases, interconnection and other agreements will be terminated and most of its employees will be terminated. The shut-down of Airadigm's consumer wireless business was substantially complete in the third quarter of 2014 while network decommissioning is ongoing. As a result of the Agreement and the related impacts from the shut-down of Airadigm's consumer wireless business discussed herein, TDS recognize d expenses related to exit and disposal activities within Operating income in its Statement of Operations between the Signing Date and September 30, 2014:
(Dollars in thousands) | Projected Range |  | Actual Amount Recognized Nine Months Ended September 30, 2014 |  | Actual Amount Recognized Three Months Ended September 30, 2014
(Gain) loss on sale of business and other exit costs, net |  |  |  |  |  |  |  |  |  |  |
| Charges for the impairment and decommissioning of various operating assets | $ | 8,000 |  | $ | 12,000 |  | $ | 8,719 |  | $ | (3,495)
| Employee related costs including severance, retention and outplacement |  | 500 |  |  | 1,500 |  |  | 647 |  |  | 147
| Contract termination costs |  | 10,000 |  |  | 15,000 |  |  | 11,450 |  |  | 11,042
|  | Total (Gain) loss on sale of business and other exit costs, net | $ | 18,500 |  | $ | 28,500 |  | $ | 20,816 |  | $ | 7,694
|  | As a result of the transaction, TDS recognized the following amounts in the Consolidated Balance Sheet:
|  |  |  |  |  | Nine Months Ended September 30, 2014 |  |  |
(Dollars in thousands) | Balance May 23, 2014 |  | Costs Incurred |  | Cash Settlements (1) |  | Adjustments (2) |  | Balance September 30, 2014
Accrued compensation |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Employee related costs including severance, retention and outplacement | $ | - |  | $ | 647 |  | $ | (247) |  | $ | - |  | $ | 400
Other current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Contract termination costs | $ | - |  | $ | 7,475 |  | $ | (1,770) |  | $ | - |  | $ | 5,705
Other deferred liabilities and credits |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Contract termination costs | $ | - |  | $ | 3,975 |  | $ | - |  | $ | - |  | $ | 3,975
(1) | Cash settlement amounts are included in either the Net income or changes in Other assets and liabilities line items as part of Cash flows from operating activities on the Consolidated Statement of Cash Flows.
(2) | Adjustment to liability represents changes to previously accrued amounts.
Other Acquisitions, Divestitures and Exchanges In September 2014, U.S. Cellular entered into definitive agreements with third parties to transfer certain of its non-operating market licenses (“unbuilt licenses”) representing approximately 148 million MHz/pops. In exchange, t he third parties will transfer to U.S. Cellular licenses representing approximately 46 million MHz/pops located in U.S. Cellular's operating markets plus $145 million of cash. These transactions are subject to regulatory approvals and are expected to close in 2015. In accordance with GAAP, the book value of the licenses have been accounted for and disclosed as “Assets held for sale” in the Consolidated Balance Sheet at September 30, 2014. TDS expects to record a gain upon consummation of these transactions. On September 1, 2014, TDS acquired substantially all of the assets of a group of companies operating as BendBroadband (“Bend”), headquartered in Bend, Oregon for $261.0 million in cash, less $1.0 million relating to a preliminary working capital adjustment and other adjustments. Bend is a full-service communications company, offering an extensive range of broadband, fiber connectivity, cable television and telephone services for commercial and residential customers in Central Oregon. As part of the agreement, TDS also acquired a Tier III data center providing colocation and managed services and a cable advertising and broadcast business. Bend service offerings complement the current portfolio of products offered through TDS Telecom businesses. Goodwill was recorded due primarily to the expectation of future growth and synergies in Cable segment operations. The operations of the data center are included in the HMS segment. The operations of the cable and the advertising and broadcast businesses are included in the Cable segment. On March 5, 2014, U.S. Cellular sold the majority of its St. Louis area non-operating market spectrum license for $92.3 million. A gain of $75.8 million was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations in the first quarter of 2014. On February 14, 2014, U.S. Cellular completed an exchange whereby U.S. Cellular received one E block PCS spectrum license covering Milwaukee, WI in exchange for one D block PCS spectrum license covering Milwaukee, WI. The exchange of licenses provided U.S. Cellular with spectrum to meet anticipated future capacity and coverage requirements. No cash, customers, network assets, other assets or liabilities were included in the exchange. As a result of this transaction, TDS recognized a gain of $15.7 million, representing the difference between the $15.9 million fair value of the license surrendered, calculated using a market approach valuation method, and the $0.2 million carrying value of the license surrendered. This gain was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations in the first quarter of 2014.
| TDS' acquisitions during the nine months ended September 30, 2014 and 2013 and the allocation of the purchase price for these acquisitions were as follows:
|  |  |  |  |  | Allocation of Purchase Price
|  |  | Purchase Price (1) |  | Goodwill (2) |  | Licenses |  | Franchise Rights |  | Intangible Assets Subject to Amortization (3) |  | Net Tangible Assets/(Liabilities)
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Cellular licenses | $ | 41,707 |  | $ | - |  | $ | 41,707 |  | $ | - |  | $ | - |  | $ | -
TDS Telecom cable business (4) |  | 261,786 |  |  | 33,002 |  |  | 2,703 |  |  | 115,629 |  |  | 13,613 |  |  | 96,839
| Total | $ | 303,493 |  | $ | 33,002 |  | $ | 44,410 |  | $ | 115,629 |  | $ | 13,613 |  | $ | 96,839
2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Cellular licenses | $ | 16,540 |  | $ | - |  | $ | 16,540 |  | $ | - |  | $ | - |  | $ | -
TDS Telecom cable business |  | 264,089 |  |  | 61,270 |  |  | - |  |  | 123,668 |  |  | 11,542 |  |  | 67,609
| Total | $ | 280,629 |  | $ | 61,270 |  | $ | 16,540 |  | $ | 123,668 |  | $ | 11,542 |  | $ | 67,609
(1) | Cash amounts paid for acquisitions may differ from the purchase price due to cash acquired in the transactions and the timing of cash payments related to the respective transactions.
(2) | The entire amount of Goodwill acquired in 2014 and 2013 was amortizable for income tax purposes.
(3) | At the date of acquisition, the weighted average amortization period for Intangible Assets Subject to Amortization acquired was 4.5 years in 2014 and 2.9 years in 2013.
(4) | The allocation of purchase price for Bend is preliminary subject to the final valuation of the tangible assets.

X
- Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
Name: | us-gaap_MergersAcquisitionsAndDispositionsDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration