EX-12 2 exhibit12.htm EX12

Exhibit 12

TELEPHONE AND DATA SYSTEMS, INC.

RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS (1)

|  |  |  |  | Nine Months Ended
|  |  |  |  | September 30,
|  |  |  |  | 2015 |  | 2014
(Dollars in thousands) |  |  |  |  |
EARNINGS: |  |  |  |  |
| Income (loss) before income taxes (2) | $ | 443,476 |  | $ | (119,355)
| Add (deduct): |  |  |  |  |
|  | Equity in earnings of unconsolidated entities |  | (109,823) |  |  | (108,198)
|  | Distributions from unconsolidated entities |  | 45,047 |  |  | 74,864
|  | Amortization of capitalized interest |  | 5,581 |  |  | 5,575
|  | Income attributable to noncontrolling interests in subsidiaries that do not have fixed charges |  | (6,094) |  |  | (633)
|  |  |  |  |  | 378,187 |  |  | (147,747)
| Add fixed charges: |  |  |  |  |
|  | Consolidated interest expense (3) |  | 102,792 |  |  | 83,775
|  | Interest portion (1/3) of consolidated rent expense |  | 46,262 |  |  | 47,156
|  |  |  |  | $ | 527,241 |  | $ | (16,816)
FIXED CHARGES: |  |  |  |  |
|  | Consolidated interest expense (3) | $ | 102,792 |  | $ | 83,775
|  | Capitalized interest |  | 5,578 |  |  | 6,563
|  | Interest portion (1/3) of consolidated rent expense |  | 46,262 |  |  | 47,156
|  |  |  |  | $ | 154,632 |  | $ | 137,494
RATIO OF EARNINGS TO FIXED CHARGES |  | 3.41 |  |  | *
|  | Tax-effected preferred dividends | $ | 67 |  | $ | 43
|  | Fixed charges |  | 154,632 |  |  | 137,494
|  | Fixed charges and preferred dividends | $ | 154,699 |  | $ | 137,537
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS |  | 3.41 |  |  | *
(1) | Considering, among other things, recent significant divestitures and an increasing amount of rental income in proportion to gross rent expense, TDS revised its approach in the fourth quarter of 2014 in calculating the above ratios to use gross rent expense, rather than net rent expense, for estimating the interest portion of rent expense. Prior periods have been revised to conform to this presentation.
(2) | Includes Gain on sale of business and other exit costs, net of $129.9 million and $9.1 million in 2015 and 2014, respectively. Additionally, includes $146.9 million and $91.4 million in Gain on license sales and exchanges, net in 2015 and 2014, respectively, and Loss on impairment of asse ts of $84.0 million in 2014.
(3) | Interest expense on income tax contingencies is not included in fixed charges.
* | Earnings for the nine months ended September 30, 2014 were inadequate to cover Fixed charges by $154.3 million and Fixed charges and preferred dividends by $154.4 million.