EX-99.1 2 ex991.htm EX-99.1 ex991.htm - Generated by SEC Publisher for SEC Filing

NEWS RELEASE

 

 

As previously announced, TDS will hold a teleconference Nov. 4 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com.

 

Contact:

Jane W. McCahon, Vice President, Corporate Relations

(312) 592-5379; jane.mccahon@teldta.com

 

 

Julie D. Mathews, Manager, Investor Relations

(312) 592-5341; julie.mathews@teldta.com

 

FOR RELEASE: IMMEDIATE

 

TDS REPORTS THIRD QUARTER 2010 RESULTS

 

Note: Comparisons are year over year unless otherwise noted.

 

3Q 2010 Highlights

 

TDS Corporate

§         Operating revenues increased to $1.3 billion.

§         Repurchased 705,000 TDS Special Common Shares for $19.5 million.

§         12 percent increase in diluted earnings per share attributable to TDS shareholders.

U.S. Cellular

§         Service revenues were $983.5 million.

§         31 percent increase in data revenues to $228.9 million, representing 23 percent of total service revenues compared to 18 percent in 2009.

§         Retail service ARPU (average revenue per unit) increased to $47.12 from $46.97.

§         A net loss of 25,000 retail postpaid customers and no change in prepaid customers.

§         Retail postpaid churn improved to 1.6 percent from 1.7 percent; postpaid customers comprised 94 percent of retail customers.

§         5 percent increase in cell sites in service to 7,524.

TDS Telecom

§         Operating revenues increased 3 percent to $202 million.

§         24 percent increase in ILEC high-speed data revenues, representing 21 percent of ILEC revenues.

§         ILEC equivalent access lines remained stable at 773,800, due in part to acquisitions; ILEC physical access lines decreased 4 percent to 517,000.

§         Managed IP stations (ILEC and CLEC) grew to 23,400 from 11,100.

 

 

§         Approved for $123.5 million in the second round of Broadband Stimulus projects during the quarter (receiving $92.6 million in federal grants and providing $30.9 million of its own funds over the next several years). 

 

CHICAGO – Nov. 4, 2010 — Telephone and Data Systems, Inc. [NYSE:TDS, TDS.S] reported operating revenues of $1,266.4 million for the third quarter of 2010, an increase of 1 percent from $1,257.7 million in the comparable period one year ago.  Net income attributable to TDS shareholders and related diluted earnings per share were $40.6 million and $0.38, respectively, for the third quarter of 2010, compared to $36.8 million and $0.34, respectively, in the comparable period one year ago.

 

“TDS’ results improved in the third quarter with strong performance at TDS Telecom,” said LeRoy T. Carlson, Jr., TDS president and CEO. “Both U.S. Cellular and TDS Telecom drove strong data growth. Our businesses operate in very competitive markets, and we’re transforming them through innovation and customer focus for long-term success.

 

“On October 1, U.S. Cellular launched The Belief ProjectSM, a set of industry-first programs and features that eliminate wireless customers’ most common concerns, and actually reward customers for their loyalty. During the third quarter, significant resources throughout the organization were directed to the successful launch of this important project, and we maintained consistent year-over-year financial results in the midst of this effort. U.S. Cellular anticipates that it will improve its performance over time as it builds awareness about The Belief Project’s comprehensive benefits. The company’s award-winning network and strong smartphone lineup, including several popular Android™-powered devices, complement the attractive new Belief Plans and benefits.

 

“TDS Telecom’s residential broadband and commercial managed service offerings contributed to strong data revenue growth and improved operating results in the quarter. The company’s strategy to increase broadband market penetration was bolstered by federal broadband stimulus approvals from both the first and second rounds totaling $136 million, which includes $31 million of its owns funds for broadband expansion projects in rural areas. TDS Telecom continues to attract and retain residential customers with bundles of voice, data and video services. And, the company is focusing its commercial sales efforts on its robust managedIP product suite.

 

Guidance

Guidance for the year ending Dec. 31, 2010 as of Nov. 4, 2010 is provided below compared to previous guidance provided on Aug. 5, 2010. There can be no assurance that final results will not differ materially from this guidance.

 

 

 

Current guidance

Previous guidance

U.S. Cellular 2010 guidance as of Nov. 4, 2010 is as follows:

 

 

 

Service revenue

$3,925-$3,975 million

$3,925-$4,000 million

 

Adjusted OIBDA (1)

$800-$850 million

Unchanged

 

Operating income (2)

$200-$250 million

Unchanged

 

Depreciation, amortization and accretion (2)

Approx. $600 million

Unchanged

 

Capital expenditures

Approx. $600 million

Unchanged

 

 

 

 

 

 

Current guidance

Previous guidance

TDS Telecom (ILEC and CLEC) 2010 guidance as of Nov. 4, 2010 is as follows:

 

 

Operating revenues

$785 - $800 million

$760-$790 million

 

Adjusted OIBDA (1)

$265-$280 million

$250-$275 million

 

Operating income  (2)

$90 - $105 million

$80-$105 million

 

Depreciation, amortization and accretion (2)

Approx. $175 million

Approx. $170 million

 

Capital expenditures (3)

Approx. $155 million

Unchanged

 

(1)   Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows. 

(2)   The 2010 estimated results include estimated losses on disposals of assets, but do not include an estimate for losses on impairment of assets, since these cannot be predicted.

(3)   The capital expenditure guidance does not include federal grants awarded to TDS Telecom through the Broadband Stimulus programs under the American Recovery and Reinvestment Act.

 

The 2010 benefits and expenses associated with the Belief Project were incorporated into U.S. Cellular’s 2010 financial guidance from the beginning of the year.

 

The foregoing guidance represents the views of management as of Nov. 4, 2010 and should not be assumed to be accurate as of any other date. TDS undertakes no legal duty to update such information, whether as a result of new information, future events or otherwise.

 

2

 

 

 

Stock repurchase summary

The following represents repurchases of TDS Common Shares and TDS Special Common Shares.

 

 

Repurchase Period

 

# Shares

 

Cost (in millions)

 

2010 (third quarter)

 

 705,000 

 

$

19.5 

 

2010 (second quarter)

 

 568,297 

 

$

16.3 

 

2010 (first quarter)

 

 510,902 

 

$

14.8 

 

2009 (full year)

 

 6,374,741 

 

$

176.6 

 

2008 (full year)

 

 5,861,822 

 

$

199.6 

 

Total

 

 14,020,762 

 

$

426.8 

 

Conference call information

TDS will hold a conference call on Nov. 4, 2010 at 9:30 a.m. CDT.

§         Access the live call on the Conference Calls page of www.teldta.com or at http://www.videonewswire.com/event.asp?id=74003.

§         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 Conference Calls 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, local and long-distance telephone, and broadband services to approximately 7.2 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of September 30, 2010.

 

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: The ability of the company to successfully 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; 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; and changes in customer growth rates, average monthly revenue per unit, 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 used by TDS to furnish this press release to the 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     

 

3

 

 

 

United States Cellular Corporation

Summary Operating Data

 

Quarter Ended

9/30/2010

 

6/30/2010

 

3/31/2010

 

12/31/2009

 

9/30/2009

Total population

 

Consolidated markets (1)

 

 90,468,000

 

 

 

 90,468,000

 

 

 

 90,468,000

 

 

 

 89,712,000

 

 

 

 85,118,000

 

 

Consolidated operating markets (1)

 

 46,546,000

 

 

 

 46,546,000

 

 

 

 46,546,000

 

 

 

 46,306,000

 

 

 

 46,306,000

 

Market penetration at end of period

 

Consolidated markets (2)

 

6.7

%

 

 

6.8

%

 

 

6.8

%

 

 

6.8

%

 

 

7.2

%

 

Consolidated operating markets (2)

 

13.1

%

 

 

13.2

%

 

 

13.2

%

 

 

13.3

%

 

 

13.2

%

All customers

 

Total at end of period

 

6,103,000

 

 

 

6,144,000

 

 

 

6,147,000

 

 

 

6,141,000

 

 

 

6,131,000

 

 

Gross additions

 

338,000

 

 

 

349,000

 

 

 

358,000

 

 

 

399,000

 

 

 

386,000

 

 

Net additions (losses)

 

(41,000

)

 

 

(3,000

)

 

 

6,000

 

 

 

10,000

 

 

 

(24,000

)

Retail customers

 

Total at end of period

 

 5,750,000

 

 

 

 5,775,000

 

 

 

 5,768,000

 

 

 

 5,744,000

 

 

 

 5,705,000

 

 

Gross additions

 

 301,000

 

 

 

 307,000

 

 

 

 305,000

 

 

 

 354,000

 

 

 

 351,000

 

 

Net retail additions (losses) (3)

 

 (25,000

)

 

 

 7,000

 

 

 

 24,000

 

 

 

 39,000

 

 

 

 (6,000

)

 

 

Net postpaid additions (losses)

 

 (25,000

)

 

 

 (22,000

)

 

 

 (9,000

)

 

 

 26,000

 

 

 

 8,000

 

 

 

Net prepaid additions (losses)

 

 —

 

 

 

 29,000

 

 

 

 33,000

 

 

 

 13,000

 

 

 

 (14,000

)

Service revenues components (000s)

 

Voice and other retail service

$

 636,912

 

 

$

 648,565

 

 

$

 663,759

 

 

$

 677,107

 

 

$

 690,576

 

 

Data service (6)

 

228,854

 

 

 

 215,271

 

 

 

 201,280

 

 

 

 189,759

 

 

 

 174,286

 

 

Total retail service

$

865,766

 

 

$

 863,836

 

 

$

 865,039

 

 

$

 866,866

 

 

$

 864,862

 

 

Inbound roaming

 

72,901

 

 

 

 60,902

 

 

 

 51,942

 

 

 

 61,728

 

 

 

 68,767

 

 

Other

 

44,836

 

 

 

 47,838

 

 

 

 48,027

 

 

 

 56,814

 

 

 

 50,289

 

Total service revenues (000s)

$

 983,503

 

 

$

 972,576

 

 

$

 965,008

 

 

$

 985,408

 

 

$

 983,918

 

 

 

Divided by average customers (000s)

 

6,124

 

 

 

6,151

 

 

 

6,137

 

 

 

6,139

 

 

 

6,138

 

 

Divided by three months in each quarter

 

 3

 

 

 

 3

 

 

 

 3

 

 

 

 3

 

 

 

 3

 

 

Average monthly revenue per unit (4)

$

53.53

 

 

$

52.71

 

 

$

52.41

 

 

$

53.51

 

 

$

53.43

 

 

Voice and other retail service (4)

$

34.66

 

 

$

 35.14

 

 

$

 36.05

 

 

$

36.77

 

 

$

37.51

 

 

Data service (4) (6)

$

12.46

 

 

$

 11.67

 

 

$

 10.93

 

 

$

10.30

 

 

$

9.46

 

 

Total retail service (4)

$

47.12

 

 

$

46.81

 

 

$

46.98

 

 

$

47.07

 

 

$

46.97

 

 

 

Inbound roaming (4)

$

3.97

 

 

$

3.30

 

 

$

2.82

 

 

$

3.35

 

 

$

3.73

 

 

Other (4)

$

2.44

 

 

$

2.60

 

 

$

2.61

 

 

$

3.09

 

 

$

2.73

 

Postpaid churn rate (5)

 

1.6

%

 

 

1.4

%

 

 

1.4

%

 

 

1.6

%

 

 

1.7

%

Capital expenditures (000s)

$

124,700

 

 

$

133,500

 

 

$

121,500

 

 

$

189,000

 

 

$

128,900

 

Cell sites in service

 

7,524

 

 

 

7,416

 

 

 

7,310

 

 

 

7,279

 

 

 

7,161

 

 

(1)     Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).

(2)     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)     Calculated by adding net postpaid additions (losses) and net prepaid additions (losses).

(4)     Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.

(5)     Calculated by dividing the total postpaid customer disconnects during the quarter by the average postpaid customer base for the quarter.

(6)     Effective for the fourth quarter of 2010, revenues from data products and services will no longer be separately disclosed as the determination of such revenues is increasingly dependent on allocations of bundled service prices to multiple bundled elements.

 

4

 

 

 

TDS Telecom

Summary Operating Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

9/30/2010

 

6/30/2010

 

3/31/2010

 

12/31/2009

 

9/30/2009

TDS Telecom

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ILEC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equivalent access lines (1)

 

773,800

 

 

779,200

 

 

778,700

 

 

775,900

 

 

772,700

 

Physical access lines (2)

 

517,000

 

 

525,000

 

 

530,400

 

 

536,300

 

 

539,400

 

High-speed data customers (3)

 

225,400

 

 

223,200

 

 

217,400

 

 

208,300

 

 

202,100

 

Long-distance customers

 

370,800

 

 

369,100

 

 

365,600

 

 

362,800

 

 

356,500

 

Managed IP stations (4)

 

3,100

 

 

2,700

 

 

2,300

 

 

1,900

 

 

1,500

 

Capital expenditures (000s)

$

33,000

 

$

28,200

 

$

20,200

 

$

26,900

 

$

23,800

CLEC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equivalent access lines (1)

 

338,700

 

 

343,100

 

 

349,300

 

 

355,900

 

 

364,100

 

High-speed data customers (3)

 

33,900

 

 

35,000

 

 

36,000

 

 

36,900

 

 

37,600

 

Managed IP stations (4)

 

20,300

 

 

17,000

 

 

14,300

 

 

12,000

 

 

9,600

 

Capital expenditures (000s)

$

5,500

 

$

5,400

 

$

3,200

 

$

6,800

 

$

4,700

 

(1)     Sum of physical access lines and high-capacity data lines, adjusted to estimate the equivalent number of physical access lines in terms of capacity, plus the number of managed IP stations.

(2)     Individual circuits connecting customers to a telephone company's central office facilities.

(3)     The number of customers provided high-capacity data circuits via various technologies, including digital subscriber line (“DSL”), managed Internet Protocol (“Managed IP”) and dedicated Internet circuit technologies. 

(4)     The number of telephone handsets providing communications using packet networking technology.

 

5

 

 

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Increase/ (Decrease)

 

 

 

 

2010

 

2009 (1)

 

Amount

 

Percent

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Cellular

$

1,060,781

 

 

$

1,057,295

 

 

$

3,486

 

 

—

 

 

TDS Telecom

 

202,030

 

 

 

196,542

 

 

 

5,488

 

 

3

%

 

All Other (2)

 

3,605

 

 

 

3,900

 

 

 

(295

)

 

 (8

)%

 

 

 

 

 

1,266,416

 

 

 

1,257,737

 

 

 

8,679

 

 

1

%

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Cellular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses excluding depreciation, amortization and accretion

 

854,250

 

 

 

849,610

 

 

 

4,640

 

 

1

%

 

 

Depreciation, amortization and accretion

 

144,717

 

 

 

146,052

 

 

 

(1,335

)

 

 (1

)%

 

 

Loss on asset disposals, net

 

1,981

 

 

 

2,085

 

 

 

(104

)

 

 (5

)%

 

 

 

 

 

1,000,948

 

 

 

997,747

 

 

 

3,201

 

 

—

 

 

TDS Telecom

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses excluding depreciation, amortization and accretion

 

133,412

 

 

 

131,439

 

 

 

1,973

 

 

2

%

 

 

Depreciation, amortization and accretion

 

43,645

 

 

 

41,746

 

 

 

1,899

 

 

5

%

 

 

Loss on asset disposals, net

 

390

 

 

 

1,135

 

 

 

(745

)

 

 (66

)%

 

 

 

 

 

177,447

 

 

 

174,320

 

 

 

3,127

 

 

2

%

 

All Other (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses excluding depreciation and amortization

 

2,243

 

 

 

3,185

 

 

 

(942

)

 

 (30

)%

 

 

Depreciation and amortization

 

2,610

 

 

 

2,915

 

 

 

(305

)

 

 (10

)%

 

 

Loss on asset disposals, net

 

7

 

 

 

51

 

 

 

(44

)

 

 (86

)%

 

 

 

 

 

4,860

 

 

 

6,151

 

 

 

(1,291

)

 

 (21

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

1,183,255

 

 

 

1,178,218

 

 

 

5,037

 

 

—

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Cellular

 

59,833

 

 

 

59,548

 

 

 

285

 

 

—

 

 

TDS Telecom

 

24,583

 

 

 

22,222

 

 

 

2,361

 

 

11

%

 

All Other (2)

 

(1,255

)

 

 

(2,251

)

 

 

996

 

 

44

%

 

 

 

 

 

83,161

 

 

 

79,519

 

 

 

3,642

 

 

5

%

Investment and other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

24,147

 

 

 

23,334

 

 

 

813

 

 

3

%

 

Interest and dividend income

 

2,785

 

 

 

3,461

 

 

 

(676

)

 

 (20

)%

 

Interest expense

 

(28,297

)

 

 

(30,854

)

 

 

2,557

 

 

8

%

 

Other, net

 

(438

)

 

 

1,030

 

 

 

(1,468

)

 

>(100

)%

 

 

 

Total investment and other income (expense)

 

(1,803

)

 

 

(3,029

)

 

 

1,226

 

 

40

%

Income before income taxes

 

81,358

 

 

 

76,490

 

 

 

4,868

 

 

6

%

 

Income tax expense

 

28,775

 

 

 

28,331

 

 

 

444

 

 

2

%

 

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

 

(11,958

)

 

 

(11,384

)

 

 

(574

)

 

 (5

)%

Net income attributable to TDS shareholders

 

40,625

 

 

 

36,775

 

 

 

3,850

 

 

10

%

 

Preferred dividend requirement

 

(12

)

 

 

(13

)

 

 

1

 

 

8

%

Net income available to common shareholders

$

40,613

 

 

$

36,762

 

 

$

3,851

 

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

104,881

 

 

 

108,289

 

 

 

(3,408

)

 

 (3

)%

Basic earnings per share attributable to TDS shareholders

$

0.39

 

 

$

0.34

 

 

$

0.05

 

 

15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

105,298

 

 

 

108,565

 

 

 

(3,267

)

 

 (3

)%

Diluted earnings per share attributable to TDS shareholders

$

0.38

 

 

$

0.34

 

 

$

0.04

 

 

12

%

 

(1)     Amounts have been adjusted.  See “Revision of Prior Period Amounts” section for additional details.

(2)     Consists of a non-reportable segment (Suttle-Straus printing and distribution operations), corporate operations, intercompany eliminations and corporate investments.

 

6

 

 

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

 

 

 Increase/ (Decrease)

 

2010

 

2009 (1)

 

Amount

 

Percent

Operating revenues

 

U.S. Cellular

$

3,114,531

 

 

$

3,153,782

 

 

$

(39,251

)

 

 

 (1

)%

 

TDS Telecom

 

596,741

 

 

 

591,804

 

 

 

4,937

 

 

 

1

%

 

All Other (2)

 

9,798

 

 

 

12,447

 

 

 

(2,649

)

 

 

 (21

)%

 

 

 

 

 

3,721,070

 

 

 

3,758,033

 

 

 

(36,963

)

 

 

 (1

)%

Operating expenses

 

U.S. Cellular

 

 

Expenses excluding depreciation, amortization and accretion

 

2,472,758

 

 

 

2,405,679

 

 

 

67,079

 

 

 

3

%

 

 

Depreciation, amortization and accretion

 

432,405

 

 

 

422,707

 

 

 

9,698

 

 

 

2

%

 

 

Loss on asset disposals, net

 

8,407

 

 

 

8,641

 

 

 

(234

)

 

 

 (3

)%

 

 

 

 

 

2,913,570

 

 

 

2,837,027

 

 

 

76,543

 

 

 

3

%

 

TDS Telecom

 

 

Expenses excluding depreciation, amortization and accretion

 

390,842

 

 

 

397,082

 

 

 

(6,240

)

 

 

 (2

)%

 

 

Depreciation, amortization and accretion

 

130,217

 

 

 

125,272

 

 

 

4,945

 

 

 

4

%

 

 

Loss on asset disposals, net

 

667

 

 

 

1,752

 

 

 

(1,085

)

 

 

 (62

)%

 

 

 

 

 

521,726

 

 

 

524,106

 

 

 

(2,380

)

 

 

—

 

 

All Other (2)

 

 

Expenses excluding depreciation and amortization

 

6,290

 

 

 

14,826

 

 

 

(8,536

)

 

 

 (58

)%

 

 

Depreciation and amortization

 

7,997

 

 

 

9,239

 

 

 

(1,242

)

 

 

 (13

)%

 

 

Loss on asset disposals, net

 

(51

)

 

 

69

 

 

 

(120

)

 

 

>(100

)%

 

 

 

 

 

14,236

 

 

 

24,134

 

 

 

(9,898

)

 

 

 (41

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

3,449,532

 

 

 

3,385,267

 

 

 

64,265

 

 

 

2

%

Operating income (loss)

 

U.S. Cellular

 

200,961

 

 

 

316,755

 

 

 

(115,794

)

 

 

 (37

)%

 

TDS Telecom

 

75,015

 

 

 

67,698

 

 

 

7,317

 

 

 

11

%

 

All Other  (2)

 

(4,438

)

 

 

(11,687

)

  

 

7,249

 

 

 

62

%

 

 

 

 

 

271,538

 

 

 

372,766

 

 

 

(101,228

)

 

 

 (27

)%

Investment and other income (expense)

 

Equity in earnings of unconsolidated entities

 

75,047

 

 

 

67,034

 

 

 

8,013

 

 

 

12

%

 

Interest and dividend income

 

7,900

 

 

 

8,435

 

 

 

(535

)

 

 

 (6

)%

 

Interest expense

 

(86,520

)

 

 

(93,898

)

 

 

7,378

 

 

 

8

%

 

Other, net

 

(2,557

)

 

 

1,504

 

 

 

(4,061

)

 

 

>(100

)%

 

 

Total investment and other income (expense)

 

(6,130

)

 

 

(16,925

)

 

 

10,795

 

 

 

64

%

Income before income taxes

 

265,408

 

 

 

355,841

 

 

 

(90,433

)

 

 

 (25

)%

 

Income tax expense

 

98,167

 

 

 

125,412

 

 

 

(27,245

)

 

 

 (22

)%

Net income

 

167,241

 

 

 

230,429

 

 

 

(63,188

)

 

 

 (27

)%

 

 

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

 

(37,915

)

 

 

(53,193

)

 

 

15,278

 

 

 

29

%

Net income attributable to TDS shareholders

 

129,326

 

 

 

177,236

 

 

 

(47,910

)

 

 

 (27

)%

 

Preferred dividend requirement

 

(37

)

 

 

(38

)

 

 

1

 

 

 

3

%

Net income available to common shareholders

$

129,289

 

 

$

177,198

 

 

$

(47,909

)

 

 

 (27

)%

 

Basic weighted average shares outstanding

 

105,443

 

 

 

110,408

 

 

 

(4,965

)

 

 

 (4

)%

Basic earnings per share attributable to TDS shareholders

$

1.23

 

 

$

1.60

 

 

$

(0.37

)

 

 

 (23

)%

 

Diluted weighted average shares outstanding

 

105,800

 

 

 

110,633

 

 

 

(4,833

)

 

 

 (4

)%

Diluted earnings per share attributable to TDS shareholders

$

1.22

 

 

$

1.60

 

 

$

(0.38

)

 

 

 (24

)%

 

(1)     Amounts have been adjusted.  See “Revision of Prior Period Amounts” section for additional details.

(2)     Consists of a non-reportable segment (Suttle-Straus printing and distribution operations), corporate operations, intercompany eliminations and corporate investments.

 

7

 

 

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

2010 

 

December 31,

2009 (1)

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

390,008

 

$

670,992

 

Short-term investments

 

389,052

 

 

113,275

 

Accounts receivable from customers and others

 

504,441

 

 

515,443

 

Inventory

 

124,417

 

 

156,987

 

Net deferred income tax asset

 

29,948

 

 

29,874

 

Prepaid expenses

 

93,406

 

 

94,336

 

Prepaid taxes

 

50,865

 

 

3,718

 

Other current assets

 

60,802

 

 

63,046

 

 

 

1,642,939

 

 

1,647,671

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

Licenses

 

1,453,526

 

 

1,443,025

 

Goodwill

 

718,635

 

 

707,840

 

Other intangible assets

 

25,924

 

 

26,589

 

Investments in unconsolidated entities

 

214,114

 

 

203,799

 

Long-term investments

 

121,441

 

 

 —

 

Other investments

 

9,123

 

 

9,785

 

 

 

2,542,763

 

 

2,391,038

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

 

 

 

 

U.S. Cellular

 

2,553,873

 

 

2,601,338

 

TDS Telecom

 

859,733

 

 

880,378

 

Other

 

31,553

 

 

26,129

 

 

 

3,445,159

 

 

3,507,845

 

 

 

 

 

 

 

Other assets and deferred charges

 

62,970

 

 

65,759

 

 

 

 

 

 

 

Total assets

$

7,693,831

 

$

7,612,313

 

(1)     Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

8

 

 

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

2010

 

December 31,

2009 (1)

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Current portion of long-term debt

$

1,804

 

 

$

2,509

 

 

Accounts payable

 

299,039

 

 

 

347,348

 

 

Customer deposits and deferred revenues

 

167,659

 

 

 

164,451

 

 

Accrued interest

 

21,387

 

 

 

12,227

 

 

Accrued taxes

 

81,563

 

 

 

62,568

 

 

Accrued compensation

 

87,932

 

 

 

93,524

 

 

Other current liabilities

 

98,554

 

 

 

117,081

 

 

 

 

 

 

757,938

 

 

 

799,708

 

 

 

 

 

 

 

 

 

 

 

 

Deferred liabilities and credits

 

 

 

 

 

 

 

 

Net deferred income tax liability

 

566,268

 

 

 

517,762

 

 

Other deferred liabilities and credits

 

390,941

 

 

 

373,862

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

1,492,022

 

 

 

1,492,908

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests with redemption features

 

791

 

 

 

727

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

TDS shareholders’ equity

 

 

 

 

 

 

 

 

 

Series A Common, Special Common and Common Shares, par value $.01

 

1,270

 

 

 

1,270

 

 

 

Capital in excess of par value

 

2,101,882

 

 

 

2,088,807

 

 

 

Special Common and Common Treasury shares, at cost

 

(724,533

)

 

 

(681,649

)

 

 

Accumulated other comprehensive loss

 

(3,395

)

 

 

(2,710

)

 

 

Retained earnings

 

2,449,060

 

 

 

2,358,580

 

 

 

 

Total TDS shareholders' equity

 

3,824,284

 

 

 

3,764,298

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

 

830

 

 

 

832

 

 

Noncontrolling interests

 

660,757

 

 

 

662,216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

4,485,871

 

 

 

4,427,346

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$

7,693,831

 

 

$

7,612,313

 

 

(1)     Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

9

 

 

 

Telephone and Data Systems, Inc.

Balance Sheet Highlights

September 30, 2010

(Unaudited, dollars in thousands)

 

 

 

U.S.

Cellular

 

TDS

Telecom

 

TDS Corporate

& Other

 

Intercompany

Eliminations

 

TDS

Consolidated

Cash and cash equivalents

$

269,292

 

$

32,095

 

$

88,621

 

 

$

 —

 

 

$

390,008

Affiliated cash investments

 

 —

 

 

363,321

 

 

 —

 

 

 

(363,321

)

 

 

 —

Short-term investments

 

120,771

 

 

97,510

 

 

170,771

 

 

 

 —

 

 

 

389,052

Notes receivable—affiliates

 

 —

 

 

 —

 

 

9,814

 

 

 

(9,814

)

 

 

 —

 

 

$

390,063

 

$

492,926

 

$

269,206

 

 

$

(373,135

)

 

$

779,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses, goodwill and other intangibles

$

1,941,107

 

$

449,214

 

$

(192,236

)

 

$

 —

 

 

$

2,198,085

Investment in unconsolidated entities

 

177,075

 

 

3,807

 

 

40,764

 

 

 

(7,532

)

 

 

214,114

Long-term and other investments

 

50,263

 

 

1,640

 

 

78,661

 

 

 

 —

 

 

 

130,564

 

 

$

2,168,445

 

$

454,661

 

$

(72,811

)

 

$

(7,532

)

 

$

2,542,763

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

$

2,553,873

 

$

859,733

 

$

31,553

 

 

$

 —

 

 

$

3,445,159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable—affiliates

$

 —

 

$

9,814

 

$

363,321

 

 

$

(373,135

)

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion

$

91

 

$

391

 

$

1,322

 

 

$

 —

 

 

$

1,804

 

Non-current portion

 

867,790

 

 

1,981

 

 

622,251

 

 

 

 —

 

 

 

1,492,022

 

 

$

867,881

 

$

2,372

 

$

623,573

 

 

$

 —

 

 

$

1,493,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

$

 —

 

$

 —

 

$

830

 

 

$

 —

 

 

$

830

 
10
 
 
 

 

Telephone and Data Systems, Inc.

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)

 

In an effort to improve investment returns, during the second quarter of 2010, TDS elected to use a portion of its cash balance to directly purchase U.S. treasury securities and securities insured by the Federal Deposit Insurance Corporation (“FDIC”).  The maturity dates of such direct investments were staggered in order to maintain cash balances and liquidity at targeted levels.  TDS also continues to invest in certificates of deposit that are insured by the FDIC.  The following table presents TDS’ cash and cash equivalents; and investments in government-backed securities and certificates of deposit at September 30, 2010 and December 31, 2009.

 

 

September 30,

2010 

 

December 31,

2009 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

390,008

 

$

670,992

 

Amounts included in short-term investments (1) (2)

 

 

 

 

 

 

 

Government-backed securities (3)

 

291,292

 

 

 —

 

 

Certificates of deposit (4)

 

97,760

 

 

113,275

 

 

 

$

389,052

 

$

113,275

 

 

 

 

 

 

 

 

 

Amounts included in long-term investments (1) (5)

 

 

 

 

 

 

 

Government-backed securities (3)

$

121,441

 

$

 —

 

(1)     Designated as held-to-maturity investments and are recorded at amortized cost on the Consolidated Balance Sheet.

(2)     Maturities are less than twelve months from the respective balance sheet dates.

(3)     Includes U.S. treasuries and corporate notes that are guaranteed under the FDIC’s Temporary Liquidity Guarantee Program.

(4)     TDS’ investments in certificates of deposits are insured by the FDIC.

(5)     TDS’ long-term investments have maturity dates between November 2011 and December 2012. 

 

11

 

 

 

TDS Telecom Highlights

Three Months Ended September 30,

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease)

 

 

 

 

2010

 

2009

 

Amount

 

Percent

Local Telephone Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice

$

 45,363

 

 

$

 46,462

 

 

$

 (1,099

)

 

 (2

)%

 

 

Data

 

 32,473

 

 

 

 26,166

 

 

 

 6,307

 

 

24

%

 

 

Network access

 

 69,032

 

 

 

 66,963

 

 

 

 2,069

 

 

3

%

 

 

Miscellaneous

 

 10,518

 

 

 

 10,068

 

 

 

 450

 

 

4

%

 

 

 

 

 

 157,386

 

 

 

 149,659

 

 

 

 7,727

 

 

5

%

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and products (excluding Depreciation, amortization and accretion expense reported below)

 

 51,820

 

 

 

 50,352

 

 

 

 1,468

 

 

3

%

 

 

Selling, general and administrative expenses

 

 43,195

 

 

 

 41,397

 

 

 

 1,798

 

 

4

%

 

 

Depreciation, amortization and accretion

 

 37,528

 

 

 

 35,652

 

 

 

 1,876

 

 

5

%

 

 

Loss on asset disposals, net

 

 312

 

 

 

 1,072

 

 

 

 (760

)

 

 (71

)%

 

 

 

 

 

 132,855

 

 

 

 128,473

 

 

 

 4,382

  

 

3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

 24,531

 

 

$

 21,186

 

 

$

 3,345

 

 

16

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Competitive Local Exchange Carrier Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 47,038

 

 

$

 49,153

 

 

$

 (2,115

)

 

 (4

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Depreciation, amortization and accretion expense reported below)

 

 40,791

 

 

 

 41,960

 

 

 

 (1,169

)

 

 (3

)%

 

 

Depreciation, amortization and accretion

 

 6,117

 

 

 

 6,094

 

 

 

 23

 

 

—

 

 

 

Loss on asset disposals, net

 

 78

 

 

 

 63

 

 

 

 15

 

 

24

%

 

 

 

 

 

 46,986

 

 

 

 48,117

 

 

 

 (1,131

)

 

 (2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

 52

 

 

$

 1,036

 

 

$

 (984

)

 

 (95

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intercompany revenues

$

 (2,394

)

 

$

 (2,270

)

 

$

 (124

)

 

 (5

)%

Intercompany expenses

 

 (2,394

)

 

 

 (2,270

)

 

 

 (124

)

 

 (5

)%

 

 

 

1 

 

 —

 

 

 

 —

 

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total TDS Telecom operating income

$

 24,583

 

 

$

 22,222

 

 

$

 2,361

 

 

11

%

 
12
 
 

 

TDS Telecom Highlights

Nine Months Ended September 30,

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease)

 

 

 

 

2010

 

2009

 

Amount

 

Percent

Local Telephone Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice

$

 135,659

 

 

$

 141,919

 

 

$

 (6,260

)

 

 (4

)%

 

 

Data

 

 92,764

 

 

 

 76,717

 

 

 

 16,047

 

 

21

%

 

 

Network access

 

 203,925

 

 

 

 201,912

 

 

 

 2,013

 

 

1

%

 

 

Miscellaneous

 

 29,452

 

 

 

 27,506

 

 

 

 1,946

 

 

7

%

 

 

 

 

 

 461,800

 

 

 

 448,054

 

 

 

 13,746

 

 

3

%

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and products (excluding Depreciation, amortization and accretion expense reported below)

 

 147,614

 

 

 

 146,442

 

 

 

 1,172

 

 

1

%

 

 

Selling, general and administrative expenses

 

 129,099

 

 

 

 127,509

 

 

 

 1,590

 

 

1

%

 

 

Depreciation, amortization and accretion

 

 111,433

 

 

 

 107,040

 

 

 

 4,393

 

 

4

%

 

 

Loss on asset disposals, net

 

 344

 

 

 

 1,493

 

 

 

 (1,149

)

 

 (77

)%

 

 

 

 

 

 388,490

 

 

 

 382,484

 

 

 

 6,006

 

 

2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

 73,310

 

 

$

 65,570

 

 

$

 7,740

  

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Competitive Local Exchange Carrier Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 142,106

 

 

$

 150,435

 

 

$

 (8,329

)

 

 (6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Depreciation, amortization and accretion expense reported below)

 

 121,294

 

 

 

 129,816

 

 

 

 (8,522

)

 

 (7

)%

 

 

Depreciation, amortization and accretion

 

 18,784

 

 

 

 18,232

 

 

 

 552

 

 

3

%

 

 

Loss on asset disposals, net

 

 323

 

 

 

 259

 

 

 

 64

 

 

25

%

 

 

 

 

 

 140,401

 

 

 

 148,307

 

 

 

 (7,906

)

 

 (5

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

 1,705

 

 

$

 2,128

 

 

$

 (423

)

 

 (20

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intercompany revenues

$

 (7,165

)

 

$

 (6,685

)

 

$

 (480

)

 

 (7

)%

Intercompany expenses

 

 (7,165

)

 

 

 (6,685

)

 

 

 (480

)

 

 (7

)%

 

 

 

1 

 

 —

 

 

 

 —

 

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total TDS Telecom operating income

$

 75,015

 

 

$

 67,698

 

 

$

 7,317

 

 

11

%

 
13
 
 

 

Telephone and Data Systems, Inc.

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

 

 

 

 

2010

 

2009 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

$

167,241

 

 

$

230,429

 

 

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

570,619

 

 

 

557,218

 

 

 

 

Bad debts expense

 

61,087

 

 

 

78,941

 

 

 

 

Stock-based compensation expense

 

26,055

 

 

 

24,523

 

 

 

 

Deferred income taxes, net

 

55,102

 

 

 

29,157

 

 

 

 

Equity in earnings of unconsolidated entities

 

(75,047

)

 

 

(67,034

)

 

 

 

Distributions from unconsolidated entities

 

59,519

 

 

 

51,668

 

 

 

 

Loss on asset disposals, net

 

9,023

 

 

 

10,462

 

 

 

 

Other operating activities

 

4,645

 

 

 

2,114

 

 

 

Changes in assets and liabilities from operations

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(48,891

)

 

 

(107,254

)

 

 

 

Inventory

 

32,571

 

 

 

(3,595

)

 

 

 

Accounts payable

 

(49,034

)

 

 

(29,401

)

 

 

 

Customer deposits and deferred revenues

 

2,363

 

 

 

(4,936

)

 

 

 

Accrued taxes

 

(42,843

)

 

 

88,098

 

 

 

 

Accrued interest

 

9,343

 

 

 

9,893

 

 

 

 

Other assets and liabilities

 

(16,973

)

 

 

(70,332

)

 

 

 

 

 

764,780

 

 

 

799,951

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(486,138

)

 

 

(450,594

)

 

Cash paid for acquisitions and licenses

 

(28,264

)

 

 

(15,242

)

 

Cash paid for investments

 

(433,750

)

 

 

(109,055

)

 

Cash received for investments

 

40,765

 

 

 

—

 

 

Other investing activities

 

1,681

 

 

 

3,335

 

 

 

 

 

 

(905,706

)

 

 

(571,556

)

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repayment of long-term debt

 

(2,182

)

 

 

(2,507

)

 

TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments

 

1,183

 

 

 

1,296

 

 

U.S. Cellular Common Shares reissued for benefit plans, net of tax payments

 

738

 

 

 

(119

)

 

Repurchase of TDS Special Common Shares

 

(50,543

)

 

 

(152,918

)

 

Repurchase of U.S. Cellular Common Shares

 

(40,520

)

 

 

(24,283

)

 

Dividends paid

 

(35,502

)

 

 

(35,389

)

 

Payment of debt issuance costs

 

—

 

 

 

(10,074

)

 

Distributions to noncontrolling interests

 

(5,828

)

 

 

(4,962

)

 

Other financing activities

 

(7,404

)

 

 

1,411

 

 

 

 

 

 

(140,058

)

 

 

(227,545

)

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(280,984

)

 

 

850

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

Beginning of period

 

670,992

 

 

 

777,309

 

 

End of period

$

390,008

 

 

$

778,159

 

 

(1)     Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details.

 

14

 

 

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

Three Months Ended September 30, 2010

   U.S. Cellular   TDS Telecom (1)   All Other (2)   Consolidated Total

 
 

Operating revenues

   $ 1,060,781     $ 202,030     $ 3,605     $ 1,266,416
  Deduct:                              
    U.S. Cellular equipment sales revenue     77,278                        
      Service revenues   $ 983,503                        
 
  Operating income   $ 59,833     $ 24,583     $ (1,255 )   $ 83,161
  Add:                              
    Depreciation, amortization and accretion     144,717       43,645       2,610       190,972
    Loss on asset disposals     1,981       390       7       2,378
      Adjusted OIBDA (3)(6)   $ 206,531     $ 68,618     $ 1,362     $ 276,511
                                     
      Adjusted OIBDA margin (4)     21.0 %     34.0 %              
 

Three Months Ended September 30, 2009

   U.S. Cellular (7)   TDS Telecom (1)   All Other (2)   Consolidated Total (7)

 
 

Operating revenues

   $ 1,057,295     $ 196,542     $ 3,900     $ 1,257,737
  Deduct:                              
    U.S. Cellular equipment sales revenue     73,377                        
      Service revenues   $ 983,918                        
 
  Operating income   $ 59,548     $ 22,222     $ (2,251 )   $ 79,519
  Add:                              
    Depreciation, amortization and accretion     146,052       41,746       2,915       190,713
    Loss on asset disposals     2,085       1,135       51       3,271
      Adjusted OIBDA (3)(6)   $ 207,685     $ 65,103     $ 715     $ 273,503
                                     
      Adjusted OIBDA margin (4)     21.1 %     33.1 %              
 
 
  TDS Consolidated  
Three Months Ended September 30,   2010   2009  
   
  Cash flows from operating activities   $ 262,434     $ 355,990    
  Deduct:                  
    Capital expenditures     168,188       159,773    
      Free cash flow (5)   $ 94,246     $ 196,217    
   
See footnotes defined on next page.
 
15
 
 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

Nine Months Ended September 30, 2010

   U.S. Cellular   TDS Telecom (1)   All Other (2)   Consolidated Total

 
 

Operating revenues

   $ 3,114,531     $ 596,741     $ 9,798     $ 3,721,070
  Deduct:                              
    U.S. Cellular equipment sales revenue     193,444                        
      Service revenues   $ 2,921,087                        
 
  Operating income   $ 200,961     $ 75,015     $ (4,438 )   $ 271,538
  Add:                              
    Depreciation, amortization and accretion     432,405       130,217       7,997       570,619
    Loss on asset disposals     8,407       667       (51 )      9,023
      Adjusted OIBDA (3)(6)   $ 641,773     $ 205,899     $ 3,508     $ 851,180
                                     
      Adjusted OIBDA margin (4)     22.0 %     34.5 %              
 

Nine Months Ended September 30, 2009

   U.S. Cellular (7)   TDS Telecom (1)   All Other (2)   Consolidated Total (7)

 
 

Operating revenues

   $ 3,153,782     $ 591,804     $ 12,447     $ 3,758,033
  Deduct:                            
    U.S. Cellular equipment sales revenue     212,062                        
      Service revenues   $ 2,941,720                        
 
  Operating income   $ 316,755     $ 67,698     $ (11,687 )   $ 372,766
  Add:                              
    Depreciation, amortization and accretion     422,707       125,272       9,239       557,218
    Loss on asset disposals     8,641       1,752       69       10,462
      Adjusted OIBDA (3)(6)   $ 748,103     $ 194,722     $ (2,379 )    $ 940,446
                                     
      Adjusted OIBDA margin (4)     25.4 %     32.9 %              
 
 
  TDS Consolidated  
Nine Months Ended September 30,   2010   2009  
   
  Cash flows from operating activities   $ 764,780     $ 799,951    
  Deduct:                  
    Capital expenditures     486,138       450,594    
      Free cash flow (5)   $ 278,642     $ 349,357    

 

(1)     Includes ILEC and CLEC intercompany eliminations.

(2)     Consists of a non-reportable segment (Suttle-Straus), corporate operations, intercompany eliminations between U.S. Cellular, TDS Telecom and corporate investments. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.

(3)     Adjusted OIBDA is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance.  Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow.  This measure should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows. 

(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 equipment subsidy is effectively a cost for purposes of assessing business results.   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 minus capital expenditures. 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.

(6)     Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.

(7)     Amounts have been adjusted. See “Revision of Prior Period Amounts” section for additional details. 

 

16

 

 

 

Revision of Prior Period Amounts

 

In preparing its financial statements for the three months ended March 31, 2010, TDS discovered certain errors related to accounting for operating revenues and sales tax liabilities.  The quantification of these errors was subsequently refined during the second quarter of 2010.  These errors resulted in the overstatement of operating revenues and understatement of sales tax liabilities for the years ended December 31, 2009, 2008, 2007, and the three months ended March 31, 2010. In addition to recording these adjustments, TDS recorded other adjustments to prior-year amounts to correct other immaterial items. In accordance with SEC Staff Accounting Bulletin Nos. 99 and 108 (“SAB 99 and SAB 108”), TDS evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports was not required. However, if the adjustments to correct the cumulative errors had been recorded in the first or second quarter of 2010, TDS believes the impact would have been significant to those respective periods and would impact comparisons to prior periods. As permitted by SAB 108, TDS revised in the current filing its comparative consolidated financial statements for these immaterial amounts. In addition, on August 5, 2010, TDS filed a Current Report on Form 8-K (Items 8.01 and 9.01) with the SEC to revise financial statements and other financial information previously included in its Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the period ended March 31, 2010.  Such Form 8-K contains revisions to the December 31, 2009 Consolidated Balance Sheet, originally filed on February 25, 2010 in TDS’ Annual Report on Form 10-K.  Also, in accordance with SAB 108, the Consolidated Balance Sheet, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the following comparative periods have been revised as follows: 

 

Consolidated Balance Sheet — September 30, 2009
 
  (Dollars in thousands)

As previously
reported (1)

   Adjustment   Revised
 
  Accounts receivable from customers and others $ 384,213     $ 3,817     $ 388,030  
  Prepaid expenses   95,677       8,413       104,090  
  Total current assets   1,778,024        12,230       1,790,254  
  Total assets   7,733,175       12,230       7,745,405  
  Customer deposits and deferred revenues   170,493       (2,241 )     168,252  
  Accrued taxes   66,661       23,193     89,854  
  Total current liabilities   773,824       20,952       794,776  
  Other deferred liabilities and credits   384,032       1,314       385,346  
  Total deferred liabilities and credits   883,034       1,314       884,348  
  Retained earnings   2,370,595       (8,218 )     2,362,377  
  Total TDS shareholders’ equity   3,774,363       (8,218 )     3,766,145  
  Noncontrolling interests   679,422       (1,818 )     677,604  
  Total equity   4,454,630       (10,036 )     4,444,594  
  Total liabilities and equity   7,733,175       12,230       7,745,405  
 
 
Consolidated Statement of Operations — Three Months Ended September 30, 2009
 
  (Dollars in thousands, except per share amounts)

As previously
reported (1)

   Adjustment   Revised
 
  Operating revenues $ 1,258,742     $ (1,005 )   $ 1,257,737  
  Cost of services and products (Excluding Depreciation, amortization and accretion)   477,116       153       477,269  
  Selling, general and administrative expenses   507,159       (194 )     506,965  
  Depreciation, amortization and accretion   192,247       (1,534 )     190,713  
  Loss on asset disposals, net   4,557       (1,286 )     3,271  
  Total operating expenses   1,181,079       (2,861 )     1,178,218  
  Operating income   77,663       1,856       79,519  
  Interest expense   (30,430 )     (424 )     (30,854 )
  Total investment and other income (expense)   (2,605 )     (424 )     (3,029 )
  Income before income taxes   75,058       1,432       76,490  
  Income tax expense   27,793       538       28,331  
  Net income   47,265       894       48,159  
  Net income attributable to noncontrolling interests, net of tax   (11,620 )     236       (11,384 )
  Net income attributable to TDS shareholders   35,645       1,130       36,775  
  Net income available to common shareholders   35,632       1,130       36,762  
  Basic earnings per share attributable to TDS shareholders   0.33       0.01       0.34  
  Diluted earnings per share attributable to TDS shareholders   0.33       0.01       0.34  

 

17

 

 
Consolidated Statement of Operations — Nine Months Ended September 30, 2009
 
  (Dollars in thousands, except per share amounts)

As previously
reported (1)

   Adjustment   Revised
 
  Operating revenues $ 3,757,865     $ 168   $ 3,758,033  
  Cost of services and products (Excluding Depreciation, amortization and accretion)   1,375,642       41       1,375,683  
  Selling, general and administrative expenses   1,445,920       (4,016 )     1,441,904  
  Depreciation, amortization and accretion   558,362       (1,144 )     557,218  
  Loss on asset disposals, net   9,469       993     10,462  
  Total operating expenses   3,389,393       (4,126 )     3,385,267  
  Operating income   368,472       4,294       372,766  
  Interest expense   (92,780 )     (1,118 )     (93,898 )
  Total investment and other income (expense)   (15,807 )     (1,118 )     (16,925 )
  Income before income taxes   352,665       3,176       355,841  
  Income tax expense   121,467       3,945       125,412  
  Net income   231,198       (769 )      230,429  
  Net income attributable to noncontrolling interests, net of tax   (53,814 )     621       (53,193 )
  Net income attributable to TDS shareholders   177,384       (148 )      177,236  
  Net income available to common shareholders   177,346       (148 )      177,198  
  Basic earnings per share attributable to TDS shareholders   1.61       (0.01 )      1.60  
  Diluted earnings per share attributable to TDS shareholders   1.60       —       1.60  

 

Consolidated Statement of Cash Flows — Nine Months Ended September 30, 2009
 
  (Dollars in thousands)

As previously
reported (1)

   Adjustment   Revised
 
  Net income $ 231,198     $ (769 )    $ 230,429  
  Depreciation, amortization and accretion   558,362       (1,144 )      557,218  
  Deferred income taxes, net   25,935        3,222       29,157  
  Loss on asset disposals, net   9,469       993       10,462  
  Change in accounts receivable   (102,137 )      (5,117 )     (107,254 ) 
  Change in customer deposits and deferred revenues   (3,609 )      (1,327 )    (4,936 ) 
  Change in accrued taxes   82,267       5,831       88,098  
  Change in other assets and liabilities   (68,643 )      (1,689 )      (70,332 ) 
  Cash flows from operating activities   799,951       —       799,951  

(1)     In Quarterly Report on Form 10-Q for the period ended September 30, 2009 filed on November 5, 2009.

 

18