0000096966-95-000037.txt : 19950815
0000096966-95-000037.hdr.sgml : 19950815
ACCESSION NUMBER: 0000096966-95-000037
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950814
SROS: AMEX
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TELEPHONE & DATA SYSTEMS INC
CENTRAL INDEX KEY: 0000096966
STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
IRS NUMBER: 362669023
STATE OF INCORPORATION: IA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-08251
FILM NUMBER: 95562247
BUSINESS ADDRESS:
STREET 1: P O BOX 628010**********
CITY: MIDDLETON
STATE: WI
ZIP: 53562-8010
BUSINESS PHONE: 6088288324
MAIL ADDRESS:
STREET 1: P O BOX 628010*****
CITY: MIDDLETON
STATE: WI
ZIP: 53562-8010
FORMER COMPANY:
FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC STOCK OPTION PLANS
DATE OF NAME CHANGE: 19741118
FORMER COMPANY:
FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC
DATE OF NAME CHANGE: 19740509
10-Q
1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
---------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8251
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TELEPHONE AND DATA SYSTEMS, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Iowa 36-2669023
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x/ No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
Common Shares, $1 par value 50,913,105 Shares
Series A Common Shares, $1 par value 6,879,661 Shares
-------------------------------------------------------------------------------
TELEPHONE AND DATA SYSTEMS, INC.
2ND QUARTER REPORT ON FORM 10-Q
INDEX
Page No.
Part I. Financial Information
Management's Discussion and Analysis of
Results of Operations and Financial Condition 2-20
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 1995 and 1994 21
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994 22
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 23-24
Notes to Consolidated Financial Statements 25-27
Part II. Other Information 28-29
Signatures 30
-1-
PART I. FINANCIAL INFORMATION
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Six Months Ended 6/30/95 Compared to Six Months Ended 6/30/94
CONSOLIDATED
Telephone and Data Systems, Inc.'s ("TDS" or the "Company") consolidated
results of operations for the first half of 1995 reflect:
o rapid growth in cellular customer units which resulted in a
substantial increase in revenues,
o steady growth in telephone access lines and revenues,
o improvements in economies of scale and cost-containment measures in
the cellular business unit which resulted in improved cash flow and
operating results,
o rapid growth in pagers served but significantly higher operating
costs,
o gains from sales and trades of non-strategic cellular assets,
o increases in interest and income tax expense and
o an increase in weighted average shares outstanding due to the
Company's continuing acquisition program.
Operating revenues grew 33% to $442.1 million in the first half of 1995
over 1994, operating cash flow increased 27% to $153.1 million and operating
income rose 23% to $63.0 million. Gains on sales of cellular interests and other
investments of $18.7 million (after income taxes and USM's minority share) were
recognized in 1995. Net income before the cumulative effect of an accounting
change rose 86% to $45.8 million in the first half of 1995 over 1994. Earnings
per share before the cumulative effect of an accounting change grew 75% to $.77
in 1995 from $.44 in 1994, reflecting the significantly improved operating
results and the gains on sales of cellular interests, offset somewhat by a 10%
increase in weighted average common shares. Net income and earnings per share in
1994 were reduced by $723,000 and $.01, respectively, due to TDS's adoption of a
new accounting standard for postemployment benefits. On a comparable basis,
excluding nonrecurring and unusual items, net income available to common
increased 18% to $26.1 million and earnings per share rose 7% to $.45.
United States Cellular Corporation (AMEX symbol "USM"), TDS's
80.9%-owned subsidiary, has added a net of 14 markets to consolidated operations
since June 30, 1994, through acquisitions, divestitures and the initiation of
cellular operations. USM currently provides cellular service through systems
serving 137 majority-owned and managed markets. TDS Telecommunications
Corporation ("TDS Telecom"), TDS's wholly owned subsidiary, has acquired seven
telephone companies and one long-distance company since June 30, 1994. These
acquisitions added 32,600 access lines while internal growth added 19,100 lines.
American Paging, Inc. (AMEX symbol "APP"), TDS's 82.4%-owned subsidiary, has
acquired one paging system since June 30, 1994, which added approximately 35,000
pagers. APP provides service to its customers through 36 sales and service
operating centers.
-2-
In March 1995, American Portable Telecommunications, Inc. ("APT"), TDS's
wholly owned subsidiary, was the successful bidder for eight broadband Personal
Communications Services ("PCS") licenses. The eight 30 megahertz PCS licenses
cover the Major Trading Areas of Minneapolis-St. Paul, Tampa-St.
Petersburg-Orlando, Houston, Pittsburgh, Kansas City, Columbus, Alaska and
Guam-N. Mariana Islands, and account for 27.9 million population equivalents.
Operating revenues grew 33% ($109.7 million) in 1995 primarily as a
result of the growth in customers served. Cellular telephone revenues increased
as a result of the 66% customer growth in majority-owned and managed markets.
This customer growth resulted in increased local retail and access revenue, and
increased roaming revenue, offset somewhat by a 8% decline in average monthly
service revenue per customer. Telephone revenues increased primarily due to
acquisitions and internal access line growth. Radio paging revenues increased
primarily as a result of the 38% growth in the number of pagers in service,
offset somewhat by a 14% decline in average monthly service revenue per unit due
to changes in distribution channel mix and pricing declines within the
distribution channels.
Operating expenses rose 35% ($98.0 million) in 1995 as a result of the
continued rapid growth in USM's operations and the steady growth in TDS
Telecom's and APP's operations. Telephone operating expenses increased due to
the effects of acquisitions and growth in internal operations. APP expenses
increased due to significantly higher selling and advertising expenses in an
attempt to stimulate customer growth through its direct and reseller
distribution channels, increased provisions for bad debts, depreciation and
additional costs to serve the increased customer base.
Operating income increased 23% to $63.0 million in the first half of
1995 from $51.3 million in 1994. The increase in operating income reflects
primarily improved operating results in the cellular telephone business unit, as
shown in the following table.
Six Months Ended June 30,
1995 1994 Change
---------- ---------- ---------
(Dollars in thousands)
CONSOLIDATED OPERATING INCOME
Cellular Telephone Operations $ 18,916 $ 4,519 $ 14,397
Telephone Operations 48,104 45,572 2,532
Radio Paging Operations (4,039) 1,218 (5,257)
-------- -------- --------
$ 62,981 $ 51,309 $ 11,672
======== ======== ========
Operating Margins:
Cellular Telephone* 9% 3%
Telephone 28% 32%
Radio Paging* (9%) 3%
* Computed on Service Revenues
Management anticipates increasing growth in cellular and paging units in
service and revenues as USM and APP continue their expansion and development
programs. Marketing and system operations expenses associated with this rapid
expansion may reduce the rate of growth in operating cash flow and operating
income over the next several quarters. Additionally, management believes there
exits a seasonality at USM in both service revenues, which tend to
-3-
increase more slowly in the first quarter, and operating expenses, which tend to
be higher in the fourth quarter due to increased marketing activities and
customer growth, which may cause operating income to vary from quarter to
quarter.
Investment and other income increased to $45.8 million in 1995 from
$11.2 million in 1994. Cellular investment income, net increased $7.1 million to
$18.0 million, reflecting improvement in USM'sGain on sale of cellular interests
and other investments was $36.4 million in the first half of 1995. USM
recognized $35.4 million in gains on the sale of three 100%-owned markets, four
minority interests and the sale of marketable equity securities. TDS recognized
a gain of $1.0 million as a result of the sale of a minority cellular interest
held by one of its telephone subsidiaries. Minority share of income increased
$8.6 million in the first half of 1995 over 1994, as shown in the following
table.
Minority share of (income) loss includes (a) the minority shareholders'
share of USM's net income, (b) the minority partners' share of income or loss of
the cellular markets majority-owned by USM, (c) the minority shareholders' share
of income of a telephone company majority-owned by TDS and (d) the minority
shareholders' share of APP's loss. The minority shareholders' share of USM's net
income increased $8.3 million in the first half of 1995 over 1994 due to the
improvement in USM's operating results and gains on the sale of cellular
interests and other investments.
MINORITY SHARE OF (INCOME) LOSS
Six Months Ended June 30,
1995 1994 Change
--------- ---------- ----------
(Dollars in thousands)
United States Cellular
Minority Shareholders' Share $ (9,066) $ (743) $ (8,323)
Minority Partners' Share (3,763) (2,314) (1,449)
-------- -------- --------
(12,829) (3,057) (9,772)
TDS Telecom (811) (828) 17
American Paging 1,185 -- 1,185
-------- -------- --------
$(12,455) $ (3,885) $ (8,570)
======== ======== ========
Interest expense increased 45% ($8.4 million) in 1995. Interest on
long-term debt increased 30% ($5.4 million) in 1995 compared to 1994. Long-term
debt outstanding increased to $891.7 million as of June 30, 1995 from $527.4
million as of June 30, 1994 due in part to the completion of convertible debt
financing at USM. The Company's balance of short-term notes payable increased to
$177.3 million in 1995 from $38.8 million in 1994, resulting in an increase in
short-term interest expense of $3.0 million in the first half of 1995 compared
with the first half of 1994.
Income tax expense increased 87% ($16.7 million) in 1995 compared with
1994 as pretax income increased. The effective income tax rate was 44% in the
first half of 1995 and 1994. State income taxes increased $8.3 million in 1995,
due primarily to the increase in pretax income.
Net income before the cumulative effect of a change in accounting
principle improved to $45.8 million in 1995 from $24.5 million in 1994. Earnings
per common share before the cumulative effect of a change in accounting
principle were $.77 in 1995 and $.44 in 1994. The weighted average number of
common shares outstanding increased 10% in 1995. The increase
-4-
is primarily due to the issuance of 4.7 million Common Shares since June 30,
1994 in connection with acquisitions.
Cumulative effect of accounting change: Effective January 1, 1994, the
Company adopted Statement of Financial Accounting Standards ("SFAS") No. 112,
"Employers' Accounting for Postemployment Benefits." The cumulative effect of
the new principle on years prior to 1994 reduced 1994 net income and earnings
per share by $723,000 and $.01, respectively.
CELLULAR TELEPHONE OPERATIONS
Six Months Ended June 30,
1995 1994 Change
----------- --------- --------
(Dollars in thousands, except per unit amounts)
Operating Revenues
Service $ 209,900 $ 140,426 $ 69,474
Equipment Sales 6,972 6,464 508
--------- --------- ----------
216,872 146,890 69,982
Operating Expenses
System Operations 30,441 21,804 8,637
Marketing and Selling 43,633 30,031 13,602
Cost of Equipment Sold 24,037 17,021 7,016
General and Administrative 59,140 43,206 15,934
Depreciation 25,452 18,142 7,310
Amortization 15,253 12,167 3,086
-------- --------- ----------
197,956 142,371 55,585
-------- --------- ----------
Operating Income $ 18,916 $ 4,519 $ 14,397
======== ========= ==========
Cellular Telephone Revenues as a
Percent of Total Revenues 49% 44%
Additions to Property, Plant and Equipment* $ 104,856 59,777
Identifiable Assets $1,806,216 $1,460,030
Majority-Owned, Managed and Consolidated
Markets:
Population Equivalents (000s) 19,826 19,118
Total population (000s) 22,430 20,344
Customers 550,000 331,000
Market penetration 2.45% 1.63%
Markets in operation 137 123
Cell sites in service 940 610
Average monthly service revenue per
customer $ 73 $ 79
Churn rate per month 2.0% 2.2%
Marketing cost per net customer addition $ 589 $ 665
* Includes (in thousands) $3,592 and $(9,674), respectively, of noncash amounts
for current year additions less cash amounts for prior year additions.
USM owns, operates and invests in cellular markets. USM owns or has the
right to acquire interests, both majority and minority, in 208 cellular
telephone markets at June 30, 1995, representing 24.8 million population
equivalents. USM manages the operations in 148 markets at June 30, 1995. USM
expects to divest its controlling interests in five of these markets and manage
the operations of four additional markets in the future. In total, USM expects
to manage 147 markets under agreements in place as of June 30, 1995. The
remaining interests in 61
-5-
markets are managed by others. USM's consolidated results of operations include
100% of the revenues and expenses of the systems serving its majority-owned and
managed markets. The results of operations of 137 markets are included in 1995
consolidated results compared to 123 markets in 1994.
Operating revenues increased 48% ($70.0 million) in 1995. The revenue
increase is primarily the result of 66% customer growth in the systems serving
its majority-owned and managed markets, growth in roaming revenues and
acquisitions. Acquisitions and start-ups increased revenues 10% ($14.4 million).
While the number of customers and amount of revenues earned continued to grow,
average revenue per customer and monthly local minutes of use per customer
declined. Average monthly service revenue per customer declined to $73 in 1995
from $79 in 1994. Monthly local minutes of use averaged 91 in the first half of
1995 compared to 96 in the same period in 1994. The decline in average local
minutes of use follows an industry-wide trend and is believed to be related to
the tendency of the early customers in a market to be the heaviest users. It
also reflects USM's and the cellular industry's continued penetration of the
consumer market, which tends to include more lower-usage customers. Management
anticipates that average local minutes of use and average monthly service
revenue per customer will continue to decline as USM adds more customers.
Service revenues from local customers' usage of USM's systems increased
51% ($43.3 million) in 1995. Growth in the number of customers in USM's
consolidated markets was the primary reason for the increase in local revenue,
offset somewhat by the decrease in average monthly local minutes of use. The
decrease in average minutes of use resulted in a decrease in average monthly
retail revenue per customer, to $45 in 1995 from $48 in 1994. Inbound roaming
revenues, earned when customers of other systems use USM's cellular systems when
roaming, increased 44% ($19.9 million). The increase is attributable to an
increase in the number of customers from other systems using USM's systems as
well as an increased number of USM-managed systems and cell sites within those
systems offset somewhat by a reduction in monthly inbound roaming revenue per
customer. Monthly inbound roaming revenue per customer averaged $23 in 1995 and
$25 in 1994. Long-distance revenues increased 49% ($4.8 million) as the volume
of long-distance calls billed by USM increased.
Equipment sales revenue reflects the sale of 121,700 and 63,200 cellular
telephone units in 1995 and 1994, respectively, plus installation and
accessories revenue. The average revenue per telephone unit sold was $57 in 1995
compared to $102 in 1994. The average revenue decline partially reflects USM's
decision to reduce sales prices on cellular telephones to increase the number of
customers, to maintain its market position and to meet competitive prices as
well as to reflect reduced manufacturers' prices.
Operating expenses increased 39% ($55.6 million) in 1995. The increase
in expenses was primarily the result of increased customer activations,
acquisitions and increased depreciation and amortization expense related to
increases in fixed assets and license costs. Acquisitions and start-ups
increased operating expenses 9% ($12.2 million) in 1995.
System operations expenses increased 40% ($8.6 million) in 1995 as a
result of increases in customer usage expenses and costs associated with
operating USM's cellular systems. Customer usage expenses represent charges from
other telecommunications service providers for local interconnection to the
landline network, toll charges and roaming expenses from USM's customers' use of
systems other than their local systems, offset somewhat by increased
pass-through roaming revenue. Customer usage expenses increased 34% ($3.4
million) in 1995.
-6-
Maintenance, utility and cell site expenses grew 44% ($5.3 million) in 1995,
reflecting growth in the number of cells to 940 in 1995 from 610 in 1994 and the
effects of acquisitions and start-ups.
Marketing and selling expenses increased 45% ($13.6 million) in 1995,
due primarily to the increased number of gross customer activations in 1995 and
the effects of acquisitions and start-ups. Marketing and selling expenses
primarily consist of salaries, commissions and expenses of field sales and
retail personnel and offices, agent commissions, promotional expenses, local
advertising and public relations expenses. Management expects that marketing and
selling costs will continue to increase as additional customers are added to
USM's systems.
Cost of equipment sold reflects the increased unit sales related to the
increase in gross customer activations offset somewhat by falling manufacturers'
prices. The average cost of a telephone unit sold was $197 in 1995 compared to
$269 in 1994.
General and administrative expenses increased 37% ($15.9 million) in
1995. These expenses include the costs of operating USM's local business offices
and its corporate expenses. The increase results from the growth in the number
of consolidated markets, the growth in the customer base in existing markets and
an expansion of both local administrative office and corporate staff,
necessitated by growth in USM's business and the acquisition of and start-up of
additional operations. USM is using an ongoing clustering strategy to combine
local operations wherever feasible in order to gain operational efficiencies and
reduce its administrative expenses.
Depreciation expense increased 40% ($7.3 million) in 1995, reflecting a
60% increase in average fixed assets since the second half of 1994. Amortization
expense, primarily amortization of license costs, increased 25% ($3.1 million)
in 1995. This additional amortization reflects a 8% ($80.6 million) increase in
license costs for consolidated operational markets since June 30, 1994.
Operating income was $18.9 million in 1995 compared to $4.5 million in
1994. Operating margin on service revenues improved to 9% in 1995 from 3% in
1994. The increase in operating income was primarily due to improved results in
the more established markets and increased revenues from growth in the customer
base, offset somewhat by costs associated with the growth of USM's operations
and increased losses on equipment sales. USM expects to add a net of one market
to consolidated operations by the end of 1995, through the acquisition of
majority interests in six operational markets and the divestiture of five
markets currently majority-owned and managed by USM. USM expects that the costs
related to acquiring and operating new markets may exceed new market revenues
over the next few quarters. As a result, the rate of growth in operating income
could be reduced over the next several quarters.
Cellular investment income includes USM's and TDS's share of the net
income or loss of cellular markets in which they have a minority interest and
for which they follow the equity method of accounting, net of amortization of
license costs related to these minority interests. Cellular investment income
increased 65% ($7.1 million) in 1995, due to improved results in markets managed
by others.
Net income from cellular telephone operations was $38.6 million in 1995
compared to $3.6 million in 1994. The 1995 improvement resulted from the gains
on sales of cellular interests, improved operating results and increased
investment income. Such net income excludes the USM minority shareholders' share
of such income. Net income from cellular telephone operations does not include
income taxes from the inclusion of USM in the TDS consolidated federal tax
return. Under a tax allocation agreement between TDS and USM, TDS does not
reimburse USM
-7-
currently for income tax benefits and credits. Instead, such benefits and
credits are carried forward until they can be used by USM.
TDS owned an aggregate of 67,052,931 shares of common stock of USM at
June 30, 1995, representing 80.9% of the combined total of USM's outstanding
Common and Series A Common Shares and 95.8% of their combined voting power.
Assuming USM's Common Shares are issued in all instances in which USM has the
choice to issue its Common Shares or other consideration and assuming all
issuances of USM's common stock to TDS and third parties for completed and
pending acquisitions and redemptions of USM Preferred Stock and TDS Preferred
Shares had been completed at June 30, 1995, TDS would have owned 79.9% of the
total outstanding common stock of USM and controlled 95.6% of the combined
voting power of both classes of its common stock.
In addition, as discussed below under "Financial Resources and
Liquidity," USM has issued debt which may be converted into USM Common Shares.
The conversion of such debt would also reduce TDS's equity ownership and voting
control of USM. In the event TDS's ownership of USM falls below 80% of the total
value of all of the outstanding shares of USM's stock, TDS and USM would be
deconsolidated for tax purposes. If this occurs, TDS would lose the ability to
offset any tax losses against the taxable income of USM and its subsidiaries,
and certain other benefits which the tax consolidation of TDS and USM permits.
TDS and USM have structured certain acquisition transactions involving
the issuance of USM Common Shares to permit delivery of TDS Common Shares and/or
cash in lieu of USM Common Shares. In addition, at the election of USM, any
conversion of the convertible debt issue by USM may be satisfied by the payment
of cash equal to the value of the USM Common Shares issuable at the time of
conversion. These and other arrangements are designed to permit TDS and USM to
defer a tax deconsolidation. Nevertheless, the continued issuance of USM Common
Shares to parties other than TDS (e.g., under employee benefit plans) may
eventually result in the tax deconsolidation of TDS and USM unless other actions
are taken to defer or prevent such a deconsolidation.
TDS and USM are parties to a legal proceeding before the FCC involving
a cellular license in a Wisconsin Rural Service Area. TDS and USM have entered
into definitive settlement agreements with all of the private parties to that
proceeding. The proposed settlements followed extensive discovery by the FCC and
other parties. On July 31, 1995, TDS, USM and the Wireless Telecommunications
Bureau of the FCC jointly proposed that the judge presiding in the FCC
proceeding issue a decision finding that TDS and its affiliates, (including
USM), are fully qualified to be FCC licensees. The settlements and the proposed
decision are subject to the final action of the presiding judge. See Note 12 of
Notes to Consolidated Financial Statements, Legal Proceedings (La Star and
Wisconsin RSA 8 Applications), in the Company's 1994 Annual Report on Form 10-K
for further discussion of the proceeding involving the Wisconsin RSA.
-8-
TELEPHONE OPERATIONS
Six Months Ended June 30,
---------------------------------------------------------------------
Change Change
Due To Excluding
1995 1994 Change Acquisitions Acquisitions
-------- ------ ------- ------------ ------------
(Dollars in thousands, except per access line amounts)
Operating Revenues
Local Service $ 46,391 $ 39,498 $ 6,893 $ 2,736 $ 4,157
Network Access and
Long-Distance 105,301 82,300 23,001 18,048 4,953
Miscellaneous 20,719 19,550 1,169 607 562
--------- -------- -------- -------- --------
172,411 141,348 31,063 21,391 9,672
Operating Expenses
Network Operations 32,838 21,700 11,138 9,220 1,918
Customer Operations 24,021 20,284 3,737 1,988 1,749
Corporate and Other 29,353 22,697 6,656 3,739 2,917
Depreciation 35,460 29,296 6,164 2,845 3,319
Amortization 2,635 1,799 836 238 598
--------- -------- -------- -------- --------
124,307 95,776 28,531 18,030 10,501
--------- -------- -------- -------- --------
Operating Income $ 48,104 $ 45,572 $ 2,532 $ 3,361 $ (829)
========= ======== ======== ======== ========
Telephone Revenues as
a Percent of Total
Revenues 39% 43%
Additions to Property, Plant
and Equipment* $ 38,166 $ 33,797
Identifiable Assets $ 1,041,317 $ 835,421
Companies 100 93
Access Lines 416,000 364,300
Growth in access lines for
six months:
Acquisitions 12,900 --
Internal growth 10,600 8,100
Average monthly revenue
per access line $ 73 $ 66
* Includes (in thousands) $(9,915) and $(6,273), respectively, of noncash
amounts for current year additions less cash amounts for prior year additions.
Operating revenues from telephone operations increased 22% ($31.1
million) in the first half of 1995 compared to 1994. The increase in revenues
was primarily due to the effects of acquisitions, internal access line growth
and recovery of increased costs of providing network access to long-distance
providers. Acquisitions increased telephone revenues 15% ($21.4 million) in
1995. TDS has acquired seven telephone companies serving 32,600 access lines and
a long-distance company serving approximately 30,000 customers since June 30,
1994. Telephone results of operations include the results of these acquired
companies since the respective dates of acquisition.
Local service revenues increased 17% ($6.9 million) in 1995 with
acquisitions increasing such revenues 7% ($2.7 million). Internal access line
growth and sales of custom-calling and other features increased revenues 7%
($2.7 million). Certain extended community calling ("ECC")
-9-
revenues previously reported as network access revenues increased local service
revenues 1% ($588,000). Rate increases added 1% ($409,000) to local service
revenue in 1995.
Network access and long-distance revenues increased 28% ($23.0 million)
in 1995 with acquisitions increasing such revenues 22% ($18.0 million). These
revenues increased 3% ($2.7 million) due to recovery of increased costs of
providing access to long-distance carriers. Increased usage of the network
generated 2% ($1.4 million) of additional network access and long-distance
revenue. Settlements received from toll pools relating to prior years' activity
increased these revenues 2% ($1.4 million). Rate increases for certain companies
increased these revenues by 1% ($674,000). These revenues decreased 1%
($566,000) in 1995 as certain ECC revenues are now reported as local service
revenues. Also, network access revenues in 1994 include an additional $415,000
in settlements relating to prior periods due primarily from retroactively billed
access services.
Miscellaneous revenues increased 6% ($1.2 million) in 1995, with
acquisitions increasing such revenues 3% ($607,000). Higher sales and leases of
customer premise equipment increased these miscellaneous revenues 2% ($395,000).
Operating expenses increased 30% ($28.5 million) in 1995. The effects of
acquisitions increased expenses 19% ($18.0 million).
Network operations expenses increased 51% ($11.1 million) with
acquisitions increasing these expenses 42% ($9.2 million). The remainder of the
increase was primarily due to salary and work force changes along with the
effects of general inflation. Customer operations expenses increased 18% ($3.7
million) with acquisitions increasing such expenses 10% ($2.0 million). The
remaining increase was primarily due to increases in wages, staffing levels and
general inflation. Corporate and other expenses increased 29% ($6.7 million)
with acquisitions increasing such expenses 16% ($3.7 million). The remaining
increase was due primarily to increases in wages, staffing levels and general
inflation. Depreciation expense increased 21% ($6.2 million) with acquisitions
increasing such expenses 10% ($2.8 million). The remaining increase was due
primarily to increases in plant facilities.
Operating income from telephone operations increased 6% ($2.5 million)
in 1995, with acquisitions increasing such income 7% ($3.4 million). The
telephone operating margin was 28% in 1995 compared to 32% in 1994. The 1995
operating margin was reduced to 28% by the acquisition of a long-distance
company which produces lower margins than the local telephone operations and
earnings pressures from regulatory agencies and long-distance providers. The
1994 operating margin of 32% was unusually high due to the recognition of access
revenues for services provided in the previous year and the recognition of a
$780,000 refund of health and life insurance premiums. The operating margin in
the remainder of 1995 is anticipated to be lower than in 1994 due to the
long-distance company acquired in 1994 mentioned above, continued regulatory
pressure on revenues and pressure from long-distance providers to reduce network
access rates.
-10-
RADIO PAGING OPERATIONS
Six Months Ended June 30,
1995 1994 Change
---------- --------- ---------
(Dollars in thousands, except per unit amounts)
Service Operations
Revenue $ 45,103 $ 36,963 $ 8,140
--------- --------- ---------
Costs and Expenses
Cost of Services 11,425 8,669 2,756
Selling and Advertising 8,451 6,098 2,353
General and Administrative 18,083 13,484 4,599
Depreciation 9,388 6,363 3,025
Amortization 1,896 1,203 693
-------- --------- --------
49,243 35,817 13,426
-------- --------- --------
Service Operating (Loss) Income (4,140) 1,146 (5,286)
-------- --------- --------
Equipment Sales
Revenue 7,680 7,186 494
Cost of Equipment Sold 7,579 7,114 465
-------- --------- --------
Equipment Sales Income 101 72 29
-------- --------- --------
Operating (Loss) Income $ (4,039) $ 1,218 $ (5,257)
======== ========= =========
Radio Paging Revenues as a
Percent of Total Revenues 12% 13%
Additions to Property and Equipment* $ 16,521 $ 12,594
Identifiable Assets $149,928 $ 77,133
Pagers in service 738,600 535,100
Average monthly service revenue per unit $ 11 $ 12
Transmitters in service 964 856
Disconnect rate per month 2.4% 2.8%
Marketing cost per net customer unit addition $ 98 $ 83
* Includes (in thousands) $(420) and $(3,156), respectively, of noncash amounts
for current year additions less cash amounts for prior year additions.
Service revenues increased 22% ($8.1 million) in the first half of 1995
from 1994, primarily as a result of the 38% growth in the number of pagers in
service. A net additional 203,500 pagers have been placed in service since June
30, 1994. However, a continuing decline in average service revenue per pager has
slowed service revenue growth. Average monthly service revenue per pager
declined 14% to $11 in the first half of 1995 from $12 in the same period of
1994. Of the decline, 9% was due to a change in distribution channel mix and 5%
was due to pricing declines within the distribution channels. Declining average
monthly service revenue per pager is related to a shift toward lower revenue
producing distribution channels such as resellers and retail stores as well as
competitive factors.
Service operating expenses increased 37% ($13.4 million) in 1995 from
1994, primarily due to additional costs of serving new customers and system
expansion as well as significantly higher selling and advertising expenses,
increased provisions for bad debts and payroll and franchise taxes and
additional depreciation. In addition, service operating expenses for the first
half of 1994 benefitted from a $540,000 pre-tax health and life insurance
premium refund. Cost of services increased 32% ($2.8 million) in 1995 reflecting
the additional costs of providing service to the increased customer base ($1.4
million) and the costs of upgrading and expanding the systems to improve system
reliability and coverage ($1.4 million). APP's transmitters in service increased
to 964 at June 30, 1995 from 856 at June 30, 1994. Selling and advertising
expense increased 39% ($2.4 million) in 1995 over 1994 primarily to stimulate
growth in the direct and reseller distribution channels. General and
administrative expense increased 34% ($4.6 million) due
-11-
primarily to increases in the customer base ($1.4 million), employee-related
expenses such as salary increases, relocation costs and severance related to a
10% staff reduction ($1.0 million), bad debt expense ($931,000), maintenance of
the customer billing system ($365,000) and payroll taxes ($300,000).
Depreciation charges increased 48% ($3.0 million) in 1995 reflecting an increase
of approximately $1.8 million in depreciation expense due to the change in
depreciable lives of pagers and transmitters that occurred July 1, 1994, as well
as an increase due to the increased investment in pagers and related equipment.
Equipment sales revenue increased 7% ($494,000) due to APP's increased
emphasis on selling pagers to customers, particularly through retail stores and
resellers. Cost of equipment sold increased 7% ($465,000) also due to the
increased focus on pager sales.
Operating loss was $4.0 million in 1995 compared to operating income of
$1.2 million in 1994. The decrease in operating results reflects i) a continuing
decline in average monthly service revenue per unit and ii) increased operating
expenses due to the growth in customers, efforts to expand the customer base,
increased bad debts from the consumer market and increased depreciation charges.
Net loss from radio paging operations totalled $5.6 million in 1995
compared with net income of $222,000 in 1994. The 1995 decrease relates to the
increase in operating loss and the increase in APP's interest expense of $1.8
million.
-12-
PARENT AND SERVICE COMPANY OPERATIONS
Other income, net includes the gross income of TDS's computer, printing
and other service companies and costs of corporate operations including APT.
Six Months Ended
June 30,
---------------------------
1995 1994
------------ ------------
(Dollars in thousands)
Addition Property and Equipment* $ 3,471 $ 3,471
Identifiable Assets** $ 348,649 $ 83,915
* Includes (in thousands) $513 and $(512), respectively, of noncash amounts for
current year additions less cash amounts for prior year additions.
** Includes PCS license cost of $289.2 million in 1995.
Three Months Ended 6/30/95 Compared to Three Months Ended 6/30/94
CONSOLIDATED
Operating revenues grew 34% ($58.5 million) in the second quarter of
1995 primarily as a result of the growth in customers served. Operating expenses
rose 37% ($53.7 million) in 1995 as a result of the continued rapid growth in
USM's cellular telephone operations and the steady growth in TDS Telecom's and
APP's operations. Operating income increased 17% to $33.8 million in the second
quarter of 1995 from $29.0 million in 1994. The increase in operating income
principally reflects improved operating results in the cellular telephone
business unit.
Three Months Ended June 30,
-------------------------------------
1995 1994 Change
---------- ------------ ---------
(Dollars in thousands)
CONSOLIDATED OPERATING INCOME
Cellular Telephone Operations 10,852 $ 5,523 $ 5,329
Telephone Operations 24,983 22,834 2,149
Radio Paging Operations (2,010) 648 (2,658)
-------- -------- --------
$ 33,825 $ 29,005 $ 4,820
======== ======== ========
Operating Margins:
Cellular Telephone* 10% 7%
Telephone 28% 32%
Radio Paging* (9)% 3%
* Computed on Service Revenues
Investment and other income increased $14.4 million in the second
quarter of 1995 over 1994. Cellular investment income increased 14% ($1.0
million), reflecting improvement in USM's equity-method markets managed by
others. Minority share of income increased $3.6 million as shown in the
following table.
Minority share of income includes (a) the minority shareholders' share
of USM's net income (b) the minority partners' share of income or loss of the
cellular markets majority-owned by USM,
-13-
(c) the minority shareholders' share of income of a telephone company
majority-owned by TDS and (d) the minority shareholders' share of APP's loss.
MINORITY SHARE OF (INCOME) LOSS
Three Months Ended June 30,
-----------------------------------
1995 1994 Change
----------- ----------- ---------
(Dollars in thousands)
United States Cellular
Minority Shareholders' Share $ (4,594) $ (1,085) $ (3,509)
Minority Partners' Share (1,875) (1,196) (679)
----------- ----------- ---------
(6,469) (2,281) (4,188)
TDS Telecom (528) (407) (121)
American Paging 704 -- 704
----------- ----------- ---------
$ (6,293) $ (2,688) $ (3,605)
=========== =========== =========
Interest expense increased 55% ($5.2 million) in 1995, reflecting higher
interest rates and increases in long-term and short-term debt. Income tax
expense increased 51% ($5.7 million) in 1995 compared with 1994 as pretax income
increased. The effective income tax rate was 43% in the second quarter of 1995
and 44% in 1994.
Net income increased to $22.6 million in the second quarter of 1995 from
$14.3 million in 1994. Earnings per common share were $.38 in 1995 and $.26 in
1994. The weighted average number of common shares outstanding increased 10% in
1995.
CELLULAR TELEPHONE OPERATIONS
Three Months Ended June 30,
1995 1994 Change
------------------------------
(Dollars in thousands)
Operating Revenues
Service $113,500 $ 77,065 $ 36,435
Equipment Sales 3,624 3,592 32
-------- -------- --------
117,124 80,657 36,467
-------- -------- --------
Operating Expenses
System Operations 17,239 12,074 5,165
Marketing and Selling 23,711 15,977 7,734
Cost of Equipment Sold 12,838 9,012 3,826
General and Administrative 31,473 22,480 8,993
Depreciation 13,188 9,520 3,668
Amortization 7,823 6,071 1,752
-------- -------- --------
106,272 75,134 31,138
-------- -------- --------
Operating Income $ 10,852 $ 5,523 $ 5,329
======== ======== ========
Operating revenues increased 47% ($36.4 million) in the second quarter
of 1995. The revenue increase is primarily the result of 66% customer growth in
the systems serving USM's majority-owned and managed markets, growth in roamer
revenues and the effects of acquisitions and start-ups. Average monthly service
revenue per customer declined to $75 in 1995 from $82 in 1994. Monthly local
minutes of use averaged 95 in the second quarter of 1995 compared to 103 in
1994. Revenues from local customers' usage of USM's systems increased 51% ($23.3
-14-
million) in 1995 primarily due to the increased number of customers served.
Inbound roaming revenues increased 40% ($10.1 million) in 1995. The increase in
inbound roaming revenues is primarily due to the increased number of other
carriers' customers using USM's systems and the growth in the number of cell
sites within those systems. Long-distance revenues increased 48% ($2.6 million)
as the volume of long-distance calls billed by USM increased.
Equipment sales revenue reflects the sale of 67,300 and 34,500 cellular
telephone units in 1995 and 1994, respectively. The average revenue per
telephone unit sold was $54 in 1995 compared to $104 in 1994.
Operating expenses increased 41% ($31.1 million) in the second quarter
of 1995 for reasons generally the same as for the first six months.
Operating income was $10.9 million in 1995 compared to $5.5 million in
1994. Operating margin on service revenues improved to 10% in 1995 from 7% in
1994. The improvement in operating income was primarily due to increased
revenues and cost efficiencies, partially offset by the costs associated with
the growth of USM's operations and the addition of new markets.
Cellular investment income includes USM's and TDS's share of the net
incomes or losses of cellular markets in which they have a minority interest and
for which they follow the equity method of accounting, net of amortization of
license cost related to those minority interests. Cellular investment income
increased 14% ($1.0 million) in the second quarter of 1995, due to improved
results in markets managed by others.
Net income from cellular telephone operations was $19.5 million in 1995
compared to $5.1 million in 1994. Such net income excludes the USM minority
shareholders' share of such income. Net income from cellular telephone
operations does not include income taxes from inclusion in the TDS consolidated
federal tax return. Under a tax allocation agreement between TDS and USM, TDS
does not reimburse USM currently for income tax benefits and credits. Instead,
such benefits and credits are carried forward until they can be used by USM.
-15-
TELEPHONE OPERATIONS
Three Months Ended June 30,
------------------------------------------------------
Change Change
Due To Excluding
1995 1994 Change Acquisitions Acquisitions
--------- -------- -------- --------- ------------
(Dollars in thousands)
Operating Revenues
Local Service $ 23,753 $ 20,103 $ 3,650 $ 1,555 $ 2,095
Network Access
Long-Distance 54,135 40,497 13,638 9,141 4,497
Miscellaneous 10,214 9,688 526 214 312
-------- -------- -------- -------- --------
88,102 70,288 17,814 10,910 6,904
-------- -------- -------- -------- --------
Operating Expenses
Network Operations 16,550 10,631 5,919 4,622 1,297
Customer Operations 12,223 9,965 2,258 1,194 1,064
Corporate and Other 15,226 11,206 4,020 2,085 1,935
Depreciation 17,738 14,743 2,995 1,548 1,447
Amortization 1,382 909 473 (241) 714
-------- -------- -------- -------- --------
63,119 47,454 15,665 9,208 6,457
-------- -------- -------- -------- --------
Operating Income $ 24,983 $ 22,834 $ 2,149 $ 1,702 $ 447
======== ======== ======== ======== ========
Operating revenues from telephone operations increased 25% ($17.8
million) in the second quarter of 1995 compared to 1994. The increase in
revenues was primarily due to the effects of acquisitions, internal access line
growth, recovery of increased costs of providing network access and sales of
custom-calling and other features. Local service revenues increased 18% ($3.7
million) in 1995, network access and long-distance revenues increased 34% ($13.6
million), and miscellaneous revenues increased 5% ($526,000) for reasons
generally the same as for the first six months. Operating expenses increased 33%
($15.7 million) in 1995, for reasons generally the same as for the first six
months.
RADIO PAGING OPERATIONS
Three Months Ended June 30,
1995 1994 Change
-------- -------- ---------
(Dollars in thousands)
Service Operations
Revenues $ 22,866 $ 18,824 $ 4,042
-------- -------- --------
Costs and Expenses
Cost of Services 5,973 4,462 1,511
Selling and Advertising 4,309 3,078 1,231
General and Administrative 9,019 6,708 2,311
Depreciation 4,801 3,256 1,545
Amortization 923 601 322
-------- -------- --------
25,025 18,105 6,920
-------- -------- --------
Service Operating (Loss) Income (2,159) 719 (2,878)
-------- -------- --------
Equipment Sales
Revenue 3,999 3,816 183
Cost of Equipment Sold 3,850 3,887 (37)
-------- -------- --------
Equipment Sales Income (Loss) 149 (71) 220
-------- -------- --------
Operating (Loss) Income $ (2,010) $ 648 $ (2,658)
======== ======== ========
-16-
Service revenues increased 21% ($4.0 million) in the second quarter of
1995 from 1994, primarily as a result of the 38% growth in the number of pagers
in service. Service operating expenses increased 38% ($6.9 million) in 1995 from
1994, for reasons generally the same as for the first six months. Operating loss
was $2.0 million in 1995 compared to operating income of $648,000 in 1994. Net
loss from radio paging operations totalled $3.3 million in 1995 compared to net
income of $210,000 in 1994.
FINANCIAL RESOURCES AND LIQUIDITY
Cash flows from operating activities totalled $96.3 million in the first
half of 1995 compared to $104.6 million in 1994. Consolidated operating cash
flow (operating income plus depreciation and amortization) totalled $153.1
million in 1995 compared to $120.3 million in 1994. The 27% increase in
operating cash flow reflects primarily improved operating cash flow in cellular
telephone operations.
Six Months Ended June 30,
-----------------------------------
1995 1994 Change
--------- -------- --------
(Dollars in thousands)
OPERATING CASH FLOW
Cellular Telephone Operations $ 59,621 $ 34,828 $ 24,793
Telephone Operations 86,199 76,667 9,532
Radio Paging Operations 7,245 8,784 (1,539)
-------- -------- --------
$153,065 $120,279 $ 32,786
======== ======== ========
Cash flows from other operating activities (investment and other income,
interest and income tax expense, and changes in working capital and other assets
and liabilities) required $56.8 million in the first half of 1995 compared to
$15.7 million in the first half of 1994.
Cash flows from financing activities totalled $373.7 million in the
first half of 1995 compared to $60.3 million in 1994. Long-term borrowings,
primarily due to the convertible debt financing completed at USM (see discussion
below), provided most of the Company's external financial requirements during
the first half of 1995. Sales of common stock by TDS and APP and long-and
short-term borrowings provided most of the Company's external financing
requirements during the first half of 1994. TDS has used short-term debt to
finance its cellular telephone and radio paging operations, for acquisitions and
for general corporate purposes. Proceeds from the sale of long-term debt and
equity securities from time to time have retired such short-term debt.
Cash flows from investing activities required cash of $443.6 million in
the first half of 1995 compared to $174.4 million in 1994. In the first half of
1995, $312.3 million was paid for broadband and narrowband PCS licenses. The
remaining cash flows requiring the use of cash primarily consist of additions to
property, plant and equipment, acquisitions, and for investments in cellular
telephone partnerships.
Additions to cellular telephone plant and equipment totalled $104.9
million for the first half of 1995. Management expects such cellular telephone
expenditures during 1995 to total about $180 million for enhancements of
existing majority-owned systems and for the construction of switching offices
and cell sites. These additions will be financed by a combination of the
Company's short-term bank financing, vendor financing and sales of USM equity
and/or debt securities.
-17-
Additions to telephone plant and equipment totalled $38.2 million for
the first half of 1995. Management expects that plant and equipment additions
will total about $110 million in 1995, exclusive of acquisitions. This
construction budget includes $37 million for new digital switches and $54
million for outside plant upgrades such as the installation of fiber optic
cables. The Company plans to finance its telephone construction programs
primarily using internally generated funds supplemented by long-term financing
obtained under federal government programs.
Additions to radio paging property and equipment totalled $16.5 million
for the first half of 1995. Management expects that such property and equipment
additions will total about $35 million in 1995, primarily for the purchase of
pagers. The Company's short-term bank financing along with radio paging
operations' internally generated cash will finance these property additions.
Other fixed asset additions totalled $6.7 million for the first half of
1995. Management expects that these additions will total about $25 million in
1995 and will be financed primarily using short-term bank notes along with
internally generated cash.
Cash flows used for acquisitions, net of cash acquired, totalled $45.7
million in the first half of 1995 compared to $25.5 million in 1994. During the
first half of 1995, TDS purchased controlling interests in 10 cellular markets
and several minority cellular interests representing a total of 1.4 million
population equivalents and four telephone companies. Some of the entities
acquired during 1995 were subject to acquisition agreements prior to 1995. The
aggregate consideration for the acquisitions completed in 1995 was $175.4
million, consisting of 2.8 million TDS Common Shares ($121.9 million), $40.9
million in cash and 415,000 USM Common Shares ($12.6 million).
TDS's acquisition program may require external financing during the
remainder of 1995. TDS and its subsidiaries had agreements pending at June 30,
1995, to acquire controlling interests in two telephone companies and one paging
company and a minority cellular interest for an aggregate consideration of
approximately $41.2 million. If all of these pending acquisitions are completed
as planned, TDS will issue approximately 841,000 TDS Common Shares ($36.8
million) and will pay approximately $4.4 million in cash. Any cellular interests
acquired by TDS are expected to be assigned to USM, and at the time this occurs
USM will reimburse TDS for TDS's consideration delivered and costs incurred in
such acquisitions in the form of USM Common Shares, notes payable and cash.
At June 30, 1995, USM had agreements pending to exchange controlling
interests in three markets for controlling interests in six markets. In
addition, USM had agreements pending to divest controlling interests in three
other markets and to settle litigation related to an investment interest which
was divested earlier in 1995. Pursuant to the divestiture agreements, USM will
divest 475,000 population equivalents and receive $81.5 million in cash.
Management believes the acquisitions and exchanges currently pending will
enhance USM's clustering strategy by divesting markets which are less strategic
for cash or markets which add to its current clusters. All of the pending
exchange, divestiture and litigation settlement agreements discussed above are
expected to be completed during 1995. Certain of the divestitures and the
litigation settlement will generate substantial gains for book and tax purposes.
TDS and USM plan to continue to acquire additional cellular interests in
markets that strengthen USM's position, and are currently negotiating agreements
for the acquisition of
-18-
additional cellular interests. TDS and APP are also currently negotiating
agreements for the acquisition of additional telephone and paging companies,
respectively.
APP was the successful bidder in 1994 for five regional narrowband PCS
licenses, providing equivalent coverage to that of a nationwide license, at
auction by the FCC. APP's bids for the licenses aggregated $53.6 million which
has been paid. APP is currently evaluating several uses for the licenses. APP
does not intend to begin deploying PCS services until 1996 and does not believe
that it will incur significant additional capital spending in 1995 related to
these licenses. However, significant additional funds will be required when APP
begins expanding its infrastructure to accommodate the services that these
licenses will allow.
APT's successful bid commitment totalled $289.2 million for the eight
broadband PCS licenses, or $10.35 per population equivalent. The final payment
on the licenses was made in June of 1995. Management anticipates that initial
construction will begin in late 1995 or early 1996 following detailed
engineering and site procurement. Marketing and selling activities along with
commercial operations are anticipated to commence in late 1996 or early 1997.
APT anticipates that construction, development and introduction of PCS
networks and services will require substantial capital and operating
expenditures over the next several years. While construction (including
microwave relocation), start-up and market development activities may be
impacted by many factors, APT estimates that between now and the year 2000, it
will need approximately $500-550 million for capital expenditures and $180-200
million for working capital, start-up costs and market development activities.
TDS anticipates that start-up and development of high-quality networks and the
marketing of systems in APT's major markets may reduce the rate of growth in
TDS's operating and net income from levels which would otherwise be achieved
during 1995 and future years.
TDS plans to finance APT's 1995 and 1996 capital and operating
expenditures using a variety of resources, including internally generated cash.
As discussed below, USM recently received approximately $221 million in net
proceeds from the sale of convertible debt securities, of which $208.4 million
was used to repay its borrowings from TDS. TDS has also arranged sales of
non-strategic cellular and other assets involving estimated total proceeds of
more than $150 million, of which approximately $85 million have been completed.
In addition, TDS finalized a $300 million short-term credit facility to provide
the interim funding needed until the long-term funding activities mentioned
above are completed.
USM sold $745 million principal amount at maturity of zero coupon
convertible debt in June of 1995. The net proceeds to USM of approximately $221
million from the sale of the 20-year fixed-rate securities were used to repay
variable-rate borrowings from TDS. This convertible debt in the form of Liquid
Yield Option(TM) Notes ("LYON"(TM)) ((TM) trademark of Merrill Lynch & Co.,
Inc.) is subordinated to all senior indebtedness of USM. The issue price of each
LYON was $306.46 for each $1,000 principal amount at maturity, which represents
a yield to maturity of 6%. Each LYON is convertible at the option of the holder
at any time on or prior to maturity at a conversion rate of 9.475 USM Common
Shares per LYON. Upon conversion, USM may elect the delivery of its Common
Shares or cash equal to the market value of the Common Shares into which the
LYONs are convertible. Beginning five years after the date of issue, the LYONs
may be redeemed at any time for cash at the option of USM at redemption prices
equal to the issue price plus accrued original issue discount through the date
of redemption. On the fifth anniversary of the issue date, USM will purchase
LYONs at the option of the holder at the issue price plus accrued original issue
discount through that date. At that time, USM will have the option of
-19-
purchasing such LYONs with cash, USM Common Shares or TDS common equity
securities, or any combination thereof.
Liquidity. Management believes that TDS has adequate internal and
external resources to finance its business development, construction and
acquisition programs. TDS and its subsidiaries had unrestricted cash and
temporary investments totalling $72.5 million and longer-term investments
totalling $64.7 million at June 30, 1995. These investments are primarily the
result of telephone operations' internally generated cash. While certain
regulated telephone subsidiaries' debt agreements place limits on intercompany
dividend payments, these restrictions are not expected to affect the Company's
ability to meet its cash obligations.
TDS and its subsidiaries had $468.0 million of bank lines of credit for
general corporate purposes at June 30, 1995, $443.0 million of which were
committed. Unused amounts of such lines totalled $291.8 million, $266.8 million
of which were committed. Such bank lines of credit include a one-year $300
million revolving credit agreement dated May 19, 1995. The outstanding balance
on this agreement bears interest at the Eurodollar Rate
plus .32%. As of June 30, 1995, $129 million was unused and available under this
agreement. The remaining line of credit agreements provide for borrowings at
negotiated rates up to the prime rate.
TDS and USM also have access to debt and equity capital markets,
including shelf registration statements to issue common stock and preferred
stock for acquisitions. TDS's shelf registration statement for Common Shares for
acquisitions had 1.1 million unissued shares at June 30, 1995. TDS has a
universal shelf registration statement which may be used from time to time to
issue debt securities and/or Common Shares for cash. At June 30, 1995, $238.4
million remained unused on the universal shelf. The unused amount may be used
for debt or equity security issuances including the sale of debt under TDS's
$150 million Series C Medium-Term Note Program, of which $110.8 million is
unused.
Management believes that TDS's internal cash flow and funds available
from cash and cash investments provide substantial financial flexibility. TDS
also has substantial lines of credit and longer-term financing commitments for
use in connection with its short- and longer-term financing needs. Moreover,
TDS, USM and APP have access to public and private capital markets and
anticipate issuing debt and equity securities when capital requirements
(including acquisitions), financial market conditions and other factors warrant.
-20-
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------------------
1995 1994 1995 1994
---------------------------------------------------------
(Dollars in thousands, except per share amounts)
OPERATING REVENUES
Cellular telephone $ 117,124 $ 80,657 $ 216,872 $ 146,890
Telephone 88,102 70,288 172,411 141,348
Radio paging 26,865 22,640 52,783 44,149
--------- --------- --------- ---------
232,091 173,585 442,066 332,387
--------- --------- --------- ---------
OPERATING EXPENSES
Cellular telephone 106,272 75,134 197,956 142,371
Telephone 63,119 47,454 124,307 95,776
Radio paging 28,875 21,992 56,822 42,931
--------- --------- --------- ---------
198,266 144,580 379,085 281,078
--------- --------- --------- ---------
OPERATING INCOME 33,825 29,005 62,981 51,309
INVESTMENT AND OTHER INCOME --------- --------- --------- ---------
Interest and dividend income 2,710 2,456 5,805 4,504
Minority share of income (6,293) (2,688) (12,455) (3,885)
Cellular investment income, net of
license cost amortization 8,294 7,301 17,966 10,884
Gain on sale of cellular interests
and other investments 16,886 -- 36,374 --
Other (expense), net (1,197) (1,060) (1,863) (291)
--------- --------- --------- --------
20,400 6,009 45,827 11,212
--------- --------- --------- --------
INCOME BEFORE INTEREST
AND INCOME TAXES 54,225 35,014 108,808 62,521
Interest expense 14,656 9,444 27,070 18,693
--------- --------- --------- --------
INCOME BEFORE INCOME TAXES 39,569 25,570 81,738 43,828
Income tax expense 16,989 11,250 35,965 19,284
--------- --------- --------- --------
NET INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES 22,580 14,320 45,773 24,544
Cumulative effect of accounting
changes -- -- -- (723)
--------- --------- --------- --------
NET INCOME 22,580 14,320 45,773 23,821
Preferred Dividend Requirement (494) (510) (973) (1,137)
--------- --------- --------- ---------
NET INCOME AVAILABLE TO
COMMON $ 22,086 $ 13,810 $ 44,800 $ 22,684
========= ========= ========= =========
WEIGHTED AVERAGE COMMON
SHARES (000s) 58,508 53,217 57,919 52,758
EARNINGS PER COMMON SHARE:
Before cumulative effect of
accounting changes $ .38 $ .26 $ .77 $ .44
Cumulative effect of accounting
changes -- -- -- (.01)
--------- --------- --------- ---------
Net Income $ .38 $ .26 $ .77 $ .43
========= ========= ========= =========
DIVIDENDS PER COMMON AND
SERIES A COMMON SHARE $ .095 $ .09 $ .19 $ .18
========= ========= ========= =========
The accompanying notes to financial statements are an integral part of
these statements.
-21-
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Six Months Ended
June 30,
---------------------------
1995 1994
------------ ------------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 45,773 $ 23,821
Add (Deduct) adjustments to reconcile net income
to net cash provided by operating activities
Cumulative effect of accounting changes -- 723
Depreciation and amortization 96,158 74,211
Deferred taxes 6,672 9,484
Investment income (20,447) (12,909)
Minority share of income 12,455 3,885
Gain on sale of cellular interests
and other investments (36,374) --
Other noncash expense 8,589 3,022
Change in accounts receivable (16,142) (16,403)
Change in accounts payable (10,228) 12,000
Change in accrued taxes 7,184 3,136
Change in other assets and liabilities 2,617 3,620
---------- ---------
96,257 104,590
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt borrowings 325,673 10,305
Repayments of long-term debt (14,946) (20,996)
Change in notes payable 74,643 32,416
Common stock issued 5,150 5,983
Minority partner capital distributions (5,035) (1,923)
Redemption of preferred stock (534) (268)
Dividends paid (11,946) (10,219)
Sale of stock by a subsidiary 665 45,032
--------- --------
373,670 60,330
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (172,101) (129,254)
Investments in and advances to cellular
minority partnerships (9,332) (12,906)
Distributions from partnerships 4,905 8,962
Investments in PCS Licenses (312,312) --
Proceeds from investment sales 86,213 --
Other investments 7,264 (14,187)
Acquisitions, excluding cash acquired (45,679) (25,541)
Change in temporary investments (2,520) (1,487)
-------- --------
(443,526) (174,413)
-------- --------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 26,365 (9,493)
CASH AND CASH EQUIVALENTS -
Beginning of period 24,733 55,666
-------- --------
End of period $ 51,098 $ 46,173
========== ==========
The accompanying notes to financial statements are an integral part
of these statements.
-22-
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
June 30, 1995 December 31, 1994
------------- -----------------
(Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 51,098 $ 24,733
Temporary investments 21,386 19,833
Accounts receivable from customers
and others 131,358 110,266
Materials and supplies, at average cost,
and other current assets 36,170 31,086
----------- -----------
240,012 185,918
----------- -----------
INVESTMENTS
Cellular limited partnership interests 131,467 111,733
Cellular license acquisition costs, net 86,373 94,470
Marketable equity securities 3,165 25,604
Marketable non-equity securities 64,701 71,314
Other 64,655 60,806
------------ -----------
350,361 363,927
------------ -----------
PROPERTY, PLANT AND EQUIPMENT
Cellular telephone plant and
license costs, net 1,475,352 1,289,837
Telephone plant and franchise costs, net 803,618 760,221
Radio paging, net 74,511 70,817
Other, net 34,474 32,700
------------ -----------
2,387,955 2,153,575
------------ -----------
OTHER ASSETS AND DEFERRED CHARGES
PCS licenses and deposits 343,916 74,501
Other 23,866 12,206
------------ -----------
367,782 86,707
------------ -----------
$ 3,346,110 $ 2,790,127
============ ===========
The accompanying notes to financial statements
are an integral part of these statements.
-23-
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
June 30, 1995 December 31, 1994
------------- -----------------
(Dollars in thousands)
CURRENT LIABILITIES
Current portion of long-term debt
and preferred shares $ 36,575 $ 37,447
Notes payable 177,278 98,608
Accounts payable 100,599 112,967
Due to FCC-PCS licenses -- 42,897
Advance billings and customer deposits 22,912 20,898
Accrued interest 11,178 10,054
Accrued taxes 11,922 3,894
Other current liabilities 27,406 19,419
----------- -----------
387,870 346,184
----------- ------------
DEFERRED LIABILITIES AND CREDITS 121,854 119,076
----------- -----------
LONG-TERM DEBT, excluding current portion 869,215 536,509
----------- -----------
REDEEMABLE PREFERRED SHARES,
excluding current portion 1,775 13,209
----------- -----------
MINORITY INTEREST in subsidiaries 311,202 272,292
----------- -----------
NONREDEEMABLE PREFERRED SHARES 29,537 29,819
----------- -----------
COMMON STOCKHOLDERS' EQUITY
Common Shares, par value $1 per share 50,898 47,938
Series A Common Shares, par value
$1 per share 6,880 6,887
Common Shares issuable (31,431 and
41,908 shares, respectively) 1,496 1,995
Capital in excess of par value 1,404,012 1,288,453
Retained earnings 161,371 127,765
----------- -----------
1,624,657 1,473,038
----------- -----------
$ 3,346,110 $ 2,790,127
=========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
-24-
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest annual
report on Form 10-K.
The accompanying unaudited consolidated financial statements contain all
adjustments (consisting of only normal recurring items) necessary to
present fairly the financial position as of June 30, 1995 and December 31,
1994, and the results of operations and cash flows for the six months
ended June 30, 1995 and 1994. The results of operations for the six months
ended June 30, 1995 and 1994, are not necessarily indicative of the
results to be expected for the full year.
2. Earnings per Common Share were computed by dividing Net Income Available
to Common by the weighted average number of common and common equivalent
shares outstanding during the period. Dilutive common stock equivalents at
June 30, 1995, consist of dilutive Common Share options.
3. Assuming that acquisitions accounted for as purchases during the period
January 1, 1994, to June 30, 1995, had taken place on January 1, 1994,
unaudited pro forma results of operations from continuing operations would
have been as follows:
Six Months Ended
June 30,
1995 1994
----------- ----------
(Dollars in thousands,except
per share amounts)
Operating revenues $ 459,145 $ 382,311
Net income before
cumulative effect of
accounting change 35,012 15,228
Earnings per share before
cumulative effect of
accounting change $ .58 $ .24
4. Supplemental Cash Flow Information
Cash and cash equivalents includes cash and those short-term, highly
liquid investments with original maturities of three months or less. Those
investments with original maturities of greater than three months to
twelve months are classified as temporary investments.
-25-
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TDS acquired certain cellular licenses and operating companies in 1995 and
1994. TDS also acquired four telephone companies during the first half of
1995. In conjunction with these acquisitions, the following assets were
acquired and liabilities assumed, and Common Shares and Preferred Shares
issued.
Six Months Ended
June 30,
1995 1994
-------------------------
(Dollars in thousands)
Property, plant and equipment $ 68,875 $ 6,648
Cellular licenses 120,909 120,412
Decrease in equity method
investment in cellular interests (356) (4,816)
Long-term debt (8,933) --
Deferred credits (214) --
Other assets and liabilities,
excluding cash and cash equivalents 1,340 (1,234)
Minority interest (1,515) 701
Common Shares issued and issuable (121,864) (94,891)
USM Stock issued and issuable (12,563) (1,279)
---------- --------
Decreae in cash due to acquisitions $ 45,679 $ 25,541
========== ========
The following table summarizes interest and income taxes paid, and other
noncash transactions.
Six Months Ended
June 30,
1995 1994
--------------------------
(Dollars in thousands)
Interest paid $ 25,762 $ 19,095
Income taxes paid 20,725 10,397
Common Shares issued by TDS and Subsidiary
for conversion of TDS Preferred Stock $ 13,534 $ 197
5. Notes Payable
In May, 1995, the Company signed a one year, unsecured $300 million
revolving credit agreement. The agreement bears interest at the rate of
the Eurodollar Rate plus .32%. Among the
covenants, TDS is required to maintain a BB+ or better debt rating by
Standard & Poor's and maintain a minimum consolidated net worth greater
than $800,000,000.
-26-
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Long-Term Debt
USM sold $745 million principal amount at maturity of zero coupon
convertible debt in June of 1995. The net proceeds to USM from the sale of
the 20-year fixed-rate securities were approximately $221 million. This
convertible debt in the form of Liquid Yield Option(TM) Notes ("LYON"(TM))
((TM) trademark of Merrill Lynch & Co., Inc.) is subordinated to all
senior indebtedness of USM. The issue price of each LYON was $306.46 for
each $1,000 principal amount at maturity, which represents a yield to
maturity of 6%. Each LYON is convertible at the option of the holder at
any time on or prior to maturity at a conversion rate of 9.475 USM Common
Shares per LYON. Upon conversion, USM may elect the delivery of its Common
Shares or cash equal to the market value of the Common Shares into which
the LYONs are convertible. Beginning five years after the date of issue,
the LYONs may be redeemed at any time for cash at the option of USM at
redemption prices equal to the issue price plus accrued original issue
discount through the date of redemption. On the fifth anniversary of the
issue date, USM will purchase LYONs at the option of the holder at the
issue price plus accrued original issue discount through that date. At
that time, USM will have the option of purchasing such LYONs with cash,
USM Common Shares or TDS common equity securities, or any combination
thereof.
7. Contingencies
The Company's material contingencies as of June 30, 1995, include the
collectibility of a $5.4 million note receivable under a long-term
financing agreement with cellular company and a $9.9 million standby
letter of credit in support of a bank loan to an entity minority-owned by
the Company. For further discussion of these contingencies, see Note 14 of
Notes to Consolidated Financial Statements included in the Company's 1994
Report on Form 10-K for the year ended December 31, 1994.
-27-
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
At the Annual Meeting of Shareholders of TDS, held on May 19, 1995, the
following numbers of votes were cast for the matters indicated:
1.a. Election of one Class II Director of the Company by the holders of
Common Shares and holders of Preferred Shares issued before October 31,
1981:
Broker
Nominee For Withhold Non-Vote
-------------- ---------- ---------- --------
James Barr III 41,605,374 2,424,498 -0-
1.b. Election of three Class III Directors of the Company by the holders of
Series A Common Shares and the holders of Preferred Shares issued after
October 31, 1981:
Broker
Nominee For Withhold Non-Vote
------- --- -------- --------
LeRoy T. Carlson, Jr. 68,183,195 4,491 -0-
Donald C. Nebergall 68,169,702 17,984 -0-
Murray L. Swanson 68,169,702 17,984 -0-
2. Proposal to Approve the 1994 Long-Term Incentive Plan of the Company:
Broker
For Against Abstain Non-Vote
----------- --------- ------- ----------
108,179,651 3,371,648 674,238 1,020
3. Proposal to Ratify the Selection of Arthur Andersen LLP as Independent
Public Accountants for 1995:
Broker
For Against Abstain Non-Vote
----------- --------- ------- --------
111,861,617 43,694 312,246 -0-
-28-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11 - Computation of earnings per common share.
(b) Exhibit 12 - Statement regarding computation of ratios.
(c) Exhibit 27 - Financial Data Schedule
(d) Exhibit 99.1 - Unaudited Consolidated Statements of Income
for the Twelve Months Ended June 30, 1995 and 1994.
(e) Reports on Form 8-K filed during the quarter ended June 30, 1995:
TDS filed a Current Report on Form 8-K dated May 19, 1995 which
included a copy of a $300 million Revolving Credit Agreement with
First National Bank of Boston, as Agent, that was signed by the
Company.
-29-
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 thereunto duly authorized.
TELEPHONE AND DATA SYSTEMS, INC.
(Registrant)
Date August 11, 1995 MURRAY L. SWANSON
------------------- --------------------------------
Murray L. Swanson,
Executive Vice President-Finance
Date August 11, 1995 GREGORY J. WILKINSON
------------------- -------------------------------
Gregory J. Wilkinson,
Vice President and Controller
(Principal Accounting Officer)
-30-
EX-11
2
EXHIBIT 11
Exhibit 11
Telephone and Data Systems, Inc.
Computation of Earnings Per Common Share
(in thousands, except per share amounts)
Three Months Ended June 30, 1995 1994
-----------------------------------------------------------------
Primary Earnings
Net Income before cumulative effect
of accounting change $ 22,580 $ 14,320
Dividends on Preferred Shares (494) (510)
-------- --------
Net Income Available to Common $ 22,086 $ 13,810
======== ========
Primary Shares
Weighted average number of Common and
Series A Common Shares Outstanding 57,712 52,690
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 155 176
Convertible Preferred Shares 610 309
Common Shares Issuable 31 42
-------- --------
Primary Shares 58,508 53,217
======== ========
Primary Earnings per Common Share $ .38 $ .26
======== ========
Fully Diluted Earnings*
Net Income before cumulative effect
of accounting change $ 22,580 $ 14,320
Dividends on Preferred Shares (345) (446)
-------- --------
Net Income Available to Common $ 22,235 $ 13,874
======== ========
Fully Diluted Shares
Weighted average number of Common and
Series A Common Shares Outstanding 57,712 52,690
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 156 180
Convertible Preferred Shares 1,105 579
Common Shares Issuable 31 42
-------- --------
Fully Diluted Shares 59,004 53,491
======== ========
Fully Diluted Earnings per Common Share $ .38 $ .26
======== ========
* This calculation is submitted in accordance with Securities
Act of 1934 Release No. 9083 although not required by footnote
2 to paragraph 14 of APB Opinion No. 15 because it results in
dilution of less than 3%.
Exhibit 11
Telephone and Data Systems, Inc.
Computation of Earnings Per Common Share
(in thousands, except per share amounts)
Six Months Ended June 30, 1995 1994
-----------------------------------------------------------------
Primary Earnings
Net Income before cumulative effect
of accounting change $ 45,773 $ 24,544
Dividends on Preferred Shares (973) (1,137)
--------- ---------
Net income before cumulative effect
of accounting change applicable
to Common 44,800 23,407
Cumulative effect of accounting
change - (723)
--------- ---------
Net Income Available to Common $ 44,800 $ 22,684
========= =========
Primary Shares
Weighted average number of Common and
Series A Common Shares Outstanding 57,031 52,490
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 162 189
Convertible Preferred Shares 691 40
Common Shares Issuable 35 39
--------- ---------
Primary Shares 57,919 52,758
========= =========
Primary Earnings per Common Share
Net Income before cumulative effect
of accounting change $ .77 $ .44
Cumulative effect of accounting change - (.01)
--------- ---------
Net Income $ .77 $ .43
========= =========
Fully Diluted Earnings*
Net Income before cumulative effect
of accounting change $ 45,773 $ 24,544
Dividends on Preferred Shares (761) (1,094)
--------- ---------
Net income before cumulative effect
of accounting change applicable
to Common 45,012 23,450
Cumulative effect of accounting change - (723)
--------- ---------
Net Income Available to Common $ 45,012 $ 22,727
========= =========
Fully Diluted Shares
Weighted average number of Common and
Series A Common Shares Outstanding 57,031 52,490
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 154 184
Convertible Preferred Shares 1,016 140
Common Shares Issuable 35 39
--------- ---------
Fully Diluted Shares 58,236 52,853
========= =========
Fully Diluted Earnings per Common Share
Net Income before cumulative effect
of accounting change $ .77 $ .44
Cumulative effect of accounting change - (.01)
--------- ---------
Net Income $ .77 $ .43
========= =========
* This calculation is submitted in accordance with Securities
Act of 1934 Release No. 9083 although not required by footnote
2 to paragraph 14 of APB Opinion No. 15 because it results in
dilution of less than 3%.
EX-12
3
EXHIBIT 12
Exhibit 12
TELEPHONE AND DATA SYSTEMS, INC.
RATIOS OF EARNINGS TO FIXED CHARGES
For the Six Months June 30, 1995
(Dollars In Thousands)
EARNINGS:
Income from Continuing Operations before
income taxes $ 81,738
Add (Deduct):
Minority Share of Losses (1,251)
Earnings on Equity Method (20,447)
Distributions from Minority Subsidiaries 4,905
Amortization of Non-Telephone Capitalized
Interest 14
Minority interest in majority-owned subsidiaries
that have fixed charges 10,056
------------
75,015
Add fixed charges:
Consolidated interest expense 26,981
Interest Portion (1/3) of Consolidated
Rent Expense 2,551
Amortization of debt expense and discount on
indebtedness 90
-----------
$ 104,637
===========
FIXED CHARGES:
Consolidated interest expense $ 26,981
Interest Portion (1/3) of Consolidated Rent
Expense 2,551
Amortization of debt expense and discount
on indebtedness 90
-----------
$ 29,622
===========
RATIO OF EARNINGS TO FIXED CHARGES 3.53
===========
Tax-Effected Redeemable Preferred Dividends $ 968
Fixed Charges 29,622
-----------
Fixed Charges and Redeemable Preferred
Dividends $ 30,590
===========
RATIO OF EARNINGS TO FIXED CHARGES
AND REDEEMABLE PREFERRED DIVIDENDS 3.42
===========
Tax-Effected Preferred Dividends $ 2,252
Fixed Charges 29,622
-----------
Fixed Charges and Preferred Dividends $ 31,874
===========
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS 3.28
===========
EX-27
4
EXHIBIT 27
5
1,000
6-MOS
DEC-31-1995
JUN-30-1995
51,098
3,165
101,108
3,319
19,235
240,012
3,094,195
706,240
3,346,110
387,870
869,215
57,778
1,775
29,537
1,566,879
3,346,110
0
442,066
0
379,085
(45,827)
0
27,070
81,738
35,965
45,773
0
0
0
45,773
0.77
0.77
EX-99
5
EXHIBIT 99-1
Exhibit 99.1
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Unaudited
---------
Twelve Months Ended
--------------------------
June 30,
--------------------------
1995 1994
------------ ----------
(Dollars in thousands, except per share amounts)
OPERATING REVENUES
Cellular telephone $ 402,386 $ 269,180
Telephone 337,404 279,264
Radio paging 100,699 84,033
------------ ----------
Total operating revenues 840,489 632,477
------------ ----------
OPERATING EXPENSES
Cellular telephone 370,604 270,497
Telephone 243,266 195,324
Radio paging 106,125 81,765
------------ ----------
Total operating expenses 719,995 547,586
------------ ----------
OPERATING INCOME 120,494 84,891
------------ ----------
INVESTMENT AND OTHER INCOME
Interest and dividend income 11,913 9,040
Minority share of income (17,602) (4,082)
Cellular investment income,
net of license cost amortization 33,100 20,456
Gain on sale of cellular interests
and other investments 43,831 4,851
Other income, net (2,941) (1,042)
------------ ----------
68,301 29,223
------------ ----------
INCOME BEFORE INTEREST AND
INCOME TAXES 188,795 114,114
Interest expense 49,628 38,076
------------ ----------
INCOME BEFORE INCOME TAXES 139,167 76,038
Income tax expense 57,394 33,368
------------ ----------
NET INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 81,773 42,670
Cumulative effect of accounting changes (723)
------------ ----------
NET INCOME 81,773 41,947
Preferred Dividend Requirement (1,797) (2,307)
------------ ----------
NET INCOME AVAILABLE TO COMMON $ 79,976 $ 39,640
============ ==========
WEIGHTED AVERAGE COMMON SHARES (000s) 56,588 50,988
EARNINGS PER COMMON SHARE:
Before cumulative effect of
accounting changes $ 1.41 $ .79
Cumulative effect of
accounting changes (.01)
------------ ----------
Net Income $ 1.41 $ .78
============ ==========
DIVIDENDS PER COMMON AND SERIES A
COMMON SHARE $ .37 $ .35
============ ==========