U.S. Cellular revises 2010 financial guidance
CHICAGO, Aug 05, 2010 /PRNewswire via COMTEX/ --
Note: Comparisons are year over year unless otherwise noted.
2Q 2010 Highlights
Enterprise/TDS Corporate
- Operating revenues were $1.2 billion.
- Repurchased 568,297 TDS Special Common Shares for $16.3 million.
Wireless/U.S. Cellular
- 7,000 retail net additions, reflecting a gain of 29,000 prepaid customers and a loss of 22,000 postpaid customers.
- Service revenues were $972.6 million.
- 33 percent increase in data revenues to $215.3 million, representing 22 percent of total service revenues.
- Retail service ARPU (average revenue per unit) was $46.81 compared to $46.82.
- Retail postpaid churn remained low at 1.4 percent; postpaid customers comprised 94 percent of retail customers.
- Expanded 3G network to cover approximately 98 percent of customers.
- 5 percent increase in cell sites in service to 7,416.
Wireline/TDS Telecom
- 13 percent increase in ILEC high-speed data customers.
- 26 percent increase in ILEC high-speed data revenues, representing 21 percent of ILEC revenues.
- ILEC equivalent access lines remained stable at 779,200, due in part to acquisitions; ILEC physical access lines decreased 4 percent to 525,000.
- Managed IP stations (ILEC and CLEC) grew to 19,700 from 7,600.
- Approved for $114.5 million in Broadband Stimulus projects, receiving $85.9 million in federal grants and providing $28.6 million of capital expenditures over the next several years.
As previously announced, TDS will hold a teleconference Aug. 5 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com.
Telephone and Data Systems, Inc. (NYSE: TDS, TDS.S) reported operating revenues of $1
232.2 million for the second quarter of 2010, a decrease of less than 1 percent from $1,242.1 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $40.3 million and $0.38, respectively, for the second quarter of 2010, compared to $66.4 million and $0.60, respectively, in the comparable period one year ago.
"While our results reflect the intense wireless and wireline competition and the ongoing consumer and business economic uncertainty, we achieved a number of positive performance results in the quarter," said LeRoy T. Carlson, Jr., TDS president and CEO. "Our focus on high-quality data experiences led to significant data revenue increases at U.S. Cellular and TDS Telecom. We achieved reduced postpaid and prepaid wireless churn, and churn among TDS Telecom's Triple Play customers--who represent nearly one quarter of the residential customer base--remains very low.
"U.S. Cellular continued to add high-demand smartphones and data-optimized devices to its lineup. The increase in data use and resulting data revenues is helping to offset lower voice revenues from value-priced plans. U.S. Cellular's prepaid additions in the quarter reflect the popularity of our prepaid plans that include data. U.S. Cellular recently substantially completed its 3G network. In July, we launched the first of several high-demand Android(TM)-powered phones that will come this year. While spending on major strategic initiatives is impacting profitability, the company is making progress on these efforts. One early success is that we implemented systems to provide more customized service and product recommendations in our retail stores and customer care centers.
"TDS Telecom continued to respond to changing customer needs and market conditions with very competitive offerings that led to increased revenues and profitability in the quarter. Residential customers are responding well to our competitive broadband offerings, and to bundles of voice, broadband and video services. While TDS Telecom's commercial business continues to be affected by cautious spending by business customers due to the slow economy, the company is benefiting from cost reductions and from the inclusion of its recently acquired managed services operation.
"TDS' financial position remains strong, and we are committed to funding the investments to support future growth in our businesses."
Guidance
Guidance for the year ending Dec. 31, 2010 as of Aug. 5, 2010 is provided below, compared to previous guidance provided on May 10, 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
Aug. 5, 2010 is as follows:
Service revenue $3,925-$4,000 million $3,975-$4,075 million
Adjusted OIBDA (1) $800-$850 million $850-$950 million
Operating income $200-$250 million $250-$350 million
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 Aug. 5, 2010 is
as follows:
Operating revenues $760-$790 million Unchanged
Adjusted OIBDA (1) $250-$275 million Unchanged
Operating income $80-$105 million Unchanged
Depreciation, amortization and
accretion (2) Approx. $170 million Unchanged
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 does not include an estimate for losses on impairment of
assets, since these cannot be predicted.
(3) The capital expenditure guidance does not include amounts awarded to
TDS Telecom through the Broadband Stimulus programs under the
American Recovery and Reinvestment Act.
The foregoing guidance represents the views of management as of Aug. 5, 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.
Stock repurchase summary
The following represents repurchases of TDS Common Shares and TDS Special Common Shares.
Cost (in
Repurchase Period # Shares millions)
----------------- -------- ---------
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 13,315,762 $407.3
========== ======
Conference call information
TDS will hold a conference call on Aug. 5, 2010 at 9:30 a.m. CDT.
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(R) company, provides wireless, local and long-distance telephone, and broadband services to approximately 7.3 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 June 30, 2010.
Visit www.teldta.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
About U.S. Cellular
United States Cellular Corporation, the nation's sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support and a high-quality network to approximately 6.1 million customers in 26 states. The Chicago-based company employed 8,900 full-time equivalent associates as of June 30, 2010.
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
United States Cellular Corporation
Summary Operating Data
Quarter Ended 6/30/2010 3/31/2010 12/31/2009
--------- --------- ----------
Total population
Consolidated markets (1) 90,468,000 90,468,000 89,712,000
Consolidated operating
markets (1) 46,546,000 46,546,000 46,306,000
Market penetration at end
of period
Consolidated markets (2) 6.8% 6.8% 6.8%
Consolidated operating
markets (2) 13.2% 13.2% 13.3%
All customers
Total at end of period 6,144,000 6,147,000 6,141,000
Gross additions 349,000 358,000 399,000
Net additions (losses) (3,000) 6,000 10,000
Retail customers
Total at end of period 5,775,000 5,768,000 5,744,000
Gross additions 307,000 305,000 354,000
Net retail additions
(losses) (3) 7,000 24,000 39,000
Net postpaid additions
(losses) (22,000) (9,000) 26,000
Net prepaid additions
(losses) 29,000 33,000 13,000
Service revenues
components (000s)
Voice and other retail
service $648,565 $663,759 $677,107
Data service 215,271 201,280 189,759
------- ------- -------
Total retail service $863,836 $865,039 $866,866
Inbound roaming 60,902 51,942 61,728
Other 47,838 48,027 56,814
------ ------ ------
Total service revenues
(000s) (4) $972,576 $965,008 $985,408
Divided by average
customers (000s) 6,151 6,137 6,139
Divided by three months in
each quarter 3 3 3
--- --- ---
Average monthly revenue
per unit (5) $52.71 $52.41 $53.51
Voice and other retail
service (5) $35.14 $36.05 $36.77
Data service (5) $11.67 $10.93 $10.30
------ ------ ------
Total retail service (5) $46.81 $46.98 $47.07
Inbound roaming (5) $3.30 $2.82 $3.35
Other (5) $2.60 $2.61 $3.09
Postpaid churn rate (6) 1.4% 1.4% 1.6%
Capital expenditures
(000s) $133,500 $121,500 $189,000
Cell sites in service 7,416 7,310 7,279
Quarter Ended 9/30/2009 6/30/2009
--------- ---------
Total population
Consolidated markets (1) 85,118,000 83,726,000
Consolidated operating
markets (1) 46,306,000 46,306,000
Market penetration at end
of period
Consolidated markets (2) 7.2% 7.4%
Consolidated operating
markets (2) 13.2% 13.3%
All customers
Total at end of period 6,131,000 6,155,000
Gross additions 386,000 317,000
Net additions (losses) (24,000) (88,000)
Retail customers
Total at end of period 5,705,000 5,711,000
Gross additions 351,000 286,000
Net retail additions
(losses) (3) (6,000) (59,000)
Net postpaid additions
(losses) 8,000 (32,000)
Net prepaid additions
(losses) (14,000) (27,000)
Service revenues
components (000s)
Voice and other retail
service $690,576 $708,847
Data service 174,286 161,955
------- -------
Total retail service $864,862 $870,802
Inbound roaming 68,767 62,223
Other 50,289 41,323
------ ------
Total service revenues
(000s) (4) $983,918 $974,348
Divided by average
customers (000s) 6,138 6,199
Divided by three months in
each quarter 3 3
--- ---
Average monthly revenue
per unit (5) $53.43 $52.39
Voice and other retail
service (5) $37.51 $38.11
Data service (5) $9.46 $8.71
----- -----
Total retail service (5) $46.97 $46.82
Inbound roaming (5) $3.73 $3.35
Other (5) $2.73 $2.22
Postpaid churn rate (6) 1.7% 1.7%
Capital expenditures
(000s) $128,900 $91,200
Cell sites in service 7,161 7,043
(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) U.S. Cellular adjusted previously reported service revenues
for the three months ended March 31, 2010 and all quarterly periods
in
2009. Previously reported service revenues for the quarterly period
ended March 31, 2010 and for the quarterly periods ended
December 31, September 30, and June 30, 2009 (as reported in U.S.
Cellular's Form 8-K filed on May 10, 2010 for all such periods),
were $965.2 million, $984.9 million, $983.4 million and $974.1
million, respectively.
(5) Calculated by dividing the components of service revenues by
the average customers and number of months in the quarter.
(6) Calculated by dividing the total postpaid customer
disconnects during the quarter by the average postpaid customer base
for the
quarter.
TDS Telecom
Summary Operating Data
Quarter Ended 6/30/2010 3/31/2010 12/31/2009
--------- --------- ----------
TDS Telecom
ILEC
Equivalent access lines (1) 779,200 778,700 775,900
Physical access lines (2) 525,000 530,400 536,300
High-speed data customers
(3) 223,200 217,400 208,300
Long-distance customers 369,100 365,600 362,800
Managed IP stations (4) 2,700 2,300 1,900
Capital expenditures (000s) $28,200 $20,200 $26,900
CLEC
Equivalent access lines (1) 343,100 349,300 355,900
High-speed data customers
(3) 35,000 36,000 36,900
Managed IP stations (4) 17,000 14,300 12,000
Capital expenditures (000s) $5,400 $3,200 $6,800
Quarter Ended 9/30/2009 6/30/2009
--------- ---------
TDS Telecom
ILEC
Equivalent access lines (1) 772,700 775,800
Physical access lines (2) 539,400 548,000
High-speed data customers
(3) 202,100 197,100
Long-distance customers 356,500 354,100
Managed IP stations (4) 1,500 1,200
Capital expenditures (000s) $23,800 $26,200
CLEC
Equivalent access lines (1) 364,100 372,300
High-speed data customers
(3) 37,600 38,700
Managed IP stations (4) 9,600 6,400
Capital expenditures (000s) $4,700 $5,700
(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.
Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
Three Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
2010 2009 (1)
---- -------
Operating revenues
U.S. Cellular $1,029,893 $1,042,143
TDS Telecom 199,206 195,960
All Other (2) 3,120 3,967
----- -----
1,232,219 1,242,070
--------- ---------
Operating expenses
U.S. Cellular
Expenses excluding depreciation,
amortization
and accretion 820,684 761,917
Depreciation, amortization and
accretion 144,455 138,777
Loss on asset disposals, net 1,250 2,611
966,389 903,305
------- -------
TDS Telecom
Expenses excluding depreciation,
amortization
and accretion 131,565 134,898
Depreciation, amortization and
accretion 43,149 41,663
Loss on asset disposals, net (68) 402
--- ---
174,646 176,963
------- -------
All Other (2)
Expenses excluding depreciation and
amortization 2,117 5,283
Depreciation and amortization 2,654 3,072
Loss on asset disposals, net 32 8
4,803 8,363
----- -----
Total operating expenses 1,145,838 1,088,631
--------- ---------
Operating income (loss)
U.S. Cellular 63,504 138,838
TDS Telecom 24,560 18,997
All Other (2) (1,683) (4,396)
------ ------
86,381 153,439
------ -------
Investment and other income (expense)
Equity in earnings of unconsolidated
entities 25,997 18,363
Interest and dividend income 2,674 2,902
Interest expense (29,265) (32,534)
Other, net (1,929) (25)
------ ---
Total investment and other income
(expense) (2,523) (11,294)
------ -------
Income before income taxes 83,858 142,145
Income tax expense 31,469 55,242
------ ------
Net income 52,389 86,903
Less: Net income attributable to
noncontrolling
interests, net of tax (12,102) (20,539)
------- -------
Net income attributable to TDS
shareholders 40,287 66,364
Preferred dividend requirement (12) (13)
--- ---
Net income available to common
shareholders $40,275 $66,351
======= =======
Basic weighted average shares
outstanding 105,520 110,741
Basic earnings per share attributable
to
TDS shareholders $0.38 $0.60
Diluted weighted average shares
outstanding 105,907 110,971
Diluted earnings per share
attributable to
TDS shareholders $0.38 $0.60
Increase/
(Decrease)
---------
Amount Percent
------ -------
Operating revenues
U.S. Cellular $(12,250) (1)%
TDS Telecom 3,246 2 %
All Other (2) (847) (21)%
----
(9,851) (1)%
------
Operating expenses
U.S. Cellular
Expenses excluding depreciation,
amortization
and accretion 58,767 8 %
Depreciation, amortization and
accretion 5,678 4 %
Loss on asset disposals, net (1,361) (52)%
63,084 7 %
------
TDS Telecom
Expenses excluding depreciation,
amortization
and accretion (3,333) (2)%
Depreciation, amortization and
accretion 1,486 4 %
Loss on asset disposals, net (470) >(100)%
----
(2,317) (1)%
------
All Other (2)
Expenses excluding depreciation and
amortization (3,166) (60)%
Depreciation and amortization (418) (14)%
Loss on asset disposals, net 24 >100%
(3,560) (43)%
------
Total operating expenses 57,207 5 %
------
Operating income (loss)
U.S. Cellular (75,334) (54)%
TDS Telecom 5,563 29 %
All Other (2) 2,713 62 %
-----
(67,058) (44)%
-------
Investment and other income (expense)
Equity in earnings of unconsolidated
entities 7,634 42 %
Interest and dividend income (228) (8)%
Interest expense 3,269 10 %
Other, net (1,904) >100%
------
Total investment and other income
(expense) 8,771 78 %
-----
Income before income taxes (58,287) (41)%
Income tax expense (23,773) (43)%
-------
Net income (34,514) (40)%
Less: Net income attributable to
noncontrolling
interests, net of tax 8,437 41 %
-----
Net income attributable to TDS
shareholders (26,077) (39)%
Preferred dividend requirement 1 8 %
---
Net income available to common
shareholders $(26,076) (39)%
========
Basic weighted average shares
outstanding (5,221) (5)%
Basic earnings per share attributable
to
TDS shareholders $(0.22) (37)%
Diluted weighted average shares
outstanding (5,064) (5)%
Diluted earnings per share
attributable to
TDS shareholders $(0.22) (37)%
(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.
Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
Six Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
2010 2009 (1)
---- -------
Operating revenues
U.S. Cellular $2,053,750 $2,096,487
TDS Telecom 394,711 395,262
All Other (2) 6,193 8,547
----- -----
2,454,654 2,500,296
--------- ---------
Operating expenses
U.S. Cellular
Expenses excluding depreciation,
amortization
and accretion 1,618,508 1,556,069
Depreciation, amortization and
accretion 287,688 276,655
Loss on asset disposals, net 6,426 6,556
----- -----
1,912,622 1,839,280
--------- ---------
TDS Telecom
Expenses excluding depreciation,
amortization
and accretion 257,430 265,643
Depreciation, amortization and
accretion 86,572 83,526
Loss on asset disposals, net 277 617
--- ---
344,279 349,786
------- -------
All Other (2)
Expenses excluding depreciation and
amortization 4,047 11,641
Depreciation and amortization 5,387 6,324
Loss on asset disposals, net (58) 18
--- ---
9,376 17,983
----- ------
Total operating expenses 2,266,277 2,207,049
--------- ---------
Operating income (loss)
U.S. Cellular 141,128 257,207
TDS Telecom 50,432 45,476
All Other (2) (3,183) (9,436)
------ ------
188,377 293,247
------- -------
Investment and other income (expense)
Equity in earnings of unconsolidated
entities 50,900 43,700
Interest and dividend income 5,115 4,974
Interest expense (58,223) (63,044)
Other, net (2,119) 474
------ ---
Total investment and other income
(expense) (4,327) (13,896)
------ -------
Income before income taxes 184,050 279,351
Income tax expense 69,392 97,081
------ ------
Net income 114,658 182,270
Less: Net income attributable to
noncontrolling
interests, net of tax (25,957) (41,809)
------- -------
Net income attributable to TDS
shareholders 88,701 140,461
Preferred dividend requirement (25) (26)
--- ---
Net income available to common
shareholders $88,676 $140,435
======= ========
Basic weighted average shares
outstanding 105,728 111,486
Basic earnings per share attributable
to TDS
shareholders $0.84 $1.26
Diluted weighted average shares
outstanding 106,071 111,698
Diluted earnings per share
attributable to TDS
shareholders $0.83 $1.25
Increase/
(Decrease)
---------
Amount Percent
------ -------
Operating revenues
U.S. Cellular $(42,737) (2)%
TDS Telecom (551) -
All Other (2) (2,354) (28)%
------
(45,642) (2)%
-------
Operating expenses
U.S. Cellular
Expenses excluding depreciation,
amortization
and accretion 62,439 4%
Depreciation, amortization and
accretion 11,033 4%
Loss on asset disposals, net (130) (2)%
----
73,342 4%
------
TDS Telecom
Expenses excluding depreciation,
amortization
and accretion (8,213) (3)%
Depreciation, amortization and
accretion 3,046 4%
Loss on asset disposals, net (340) (55)%
----
(5,507) (2)%
------
All Other (2)
Expenses excluding depreciation and
amortization (7,594) (65)%
Depreciation and amortization (937) (15)%
Loss on asset disposals, net (76) >(100)%
---
(8,607) (48)%
------
Total operating expenses 59,228 3%
------
Operating income (loss)
U.S. Cellular (116,079) (45)%
TDS Telecom 4,956 11%
All Other (2) 6,253 66%
-----
(104,870) (36)%
--------
Investment and other income (expense)
Equity in earnings of unconsolidated
entities 7,200 16%
Interest and dividend income 141 3%
Interest expense 4,821 8%
Other, net (2,593) >(100)%
------
Total investment and other income
(expense) 9,569 69%
-----
Income before income taxes (95,301) (34)%
Income tax expense (27,689) (29)%
-------
Net income (67,612) (37)%
Less: Net income attributable to
noncontrolling
interests, net of tax 15,852 38%
------
Net income attributable to TDS
shareholders (51,760) (37)%
Preferred dividend requirement 1 4%
---
Net income available to common
shareholders $(51,759) (37)%
========
Basic weighted average shares
outstanding (5,758) (5)%
Basic earnings per share attributable
to TDS
shareholders $(0.42) (33)%
Diluted weighted average shares
outstanding (5,627) (5)%
Diluted earnings per share
attributable to TDS
shareholders $(0.42) (34)%
(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.
Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
ASSETS
June 30, December 31,
2010 2009 (1)
---- -------
Current assets
Cash and cash equivalents $378,477 $670,992
Short-term investments 379,227 113,275
Accounts receivable from customers and other 498,356 515,443
Inventory 124,810 156,987
Other current assets 185,377 190,974
------- -------
1,566,247 1,647,671
--------- ---------
Investments
Licenses 1,453,526 1,443,025
Goodwill 718,635 707,840
Other intangible assets 28,693 26,589
Investments in unconsolidated entities 200,352 203,799
Long-term investments 107,506 -
Other investments 9,447 9,785
----- -----
2,518,159 2,391,038
--------- ---------
Property, plant and equipment, net
U.S. Cellular 2,571,340 2,601,338
TDS Telecom 863,033 880,378
Other 28,368 26,129
------ ------
3,462,741 3,507,845
--------- ---------
Other assets and deferred charges 63,281 65,759
------ ------
Total assets $7,610,428 $7,612,313
========== ==========
(1) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2010 2009 (1)
---- -------
Current liabilities
Current portion of long-term debt $2,038 $2,509
Accounts payable 312,527 347,348
Customer deposits and deferred revenues 169,513 164,451
Accrued interest 12,208 12,227
Accrued taxes 84,346 62,568
Accrued compensation 71,722 93,524
Other current liabilities 98,467 117,081
------ -------
750,821 799,708
Deferred liabilities and credits
Net deferred income tax liability 492,657 517,762
Other deferred liabilities and credits 393,485 373,862
Long-term debt 1,492,500 1,492,908
Noncontrolling interests with redemption
features 746 727
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 2,098,380 2,088,807
Special Common and Common Treasury shares, at
cost (706,987) (681,649)
Accumulated other comprehensive loss (3,139) (2,710)
Retained earnings 2,420,862 2,358,580
--------- ---------
Total TDS shareholders' equity 3,810,386 3,764,298
Preferred shares 831 832
Noncontrolling interests 669,002 662,216
------- -------
Total equity 4,480,219 4,427,346
Total liabilities and equity $7,610,428 $7,612,313
========== ==========
(1) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
Telephone and Data Systems, Inc.
Balance Sheet Highlights
June 30, 2010
(Unaudited, dollars in thousands)
U.S. TDS TDS
Cellular Telecom Corporate
-------- ------- & Other
-------
Cash and cash equivalents $232,853 $33,190 $112,434
Affiliated cash investments - 333,562
Short-term investments 135,798 97,510 145,919
Notes receivable-affiliates - 8,809
--- -----
$368,651 $464,262 $267,162
======== ======== ========
Licenses, goodwill and
other intangibles $1,941,939 $450,330 $(191,415)
Investment in
unconsolidated entities 163,518 3,650 40,200
Long-term and other
investments 45,130 1,927 69,896
------ ----- ------
$2,150,587 $455,907 $(81,319)
========== ======== ========
Property, plant and
equipment, net $2,571,340 $863,033 $28,368
========== ======== =======
Notes payable-affiliates $ - $8,809 $333,562
=== === ====== ========
Long-term debt
Current portion $86 $391 $1,561
Non-current portion 867,880 2,081 622,539
------- ----- -------
$867,966 $2,472 $624,100
======== ====== ========
Preferred shares $ - $ - $831
=== === === === ====
Intercompany TDS
Eliminations Consolidated
------------ ------------
Cash and cash equivalents $ - $378,477
Affiliated cash investments (333,562) -
Short-term investments - 379,227
Notes receivable-affiliates (8,809) -
------ ---
$(342,371) $757,704
========= ========
Licenses, goodwill and
other intangibles $ - $2,200,854
Investment in
unconsolidated entities (7,016) 200,352
Long-term and other
investments - 116,953
--- -------
$(7,016) $2,518,159
======= ==========
Property, plant and
equipment, net $ - $3,462,741
=== === ==========
Notes payable-affiliates $(342,371) $ -
========= === ===
Long-term debt
Current portion $ - $2,038
Non-current portion - 1,492,500
--- ---------
$ - $1,494,538
=== === ==========
Preferred shares $ - $831
=== === ====
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"), as opposed to investing in
money market funds. 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 U.S. treasury securities,
commercial paper and certificates of deposit at June 30, 2010 and
December 31, 2009.
June 30, December 31,
2010 2009
---- ----
Cash and cash equivalents $378,477 $670,992
======== ========
Amounts included in short-term
investments
U.S. treasury securities 180,732 -
Certificates of deposit (1) 97,614 113,275
Commercial paper (2) 100,881 -
------- --
$379,227 $113,275
======== ========
Amounts included in long-term
investments (3)
U.S. treasury securities 30,181 -
Commercial paper (2) 77,325 -
------ --
$107,506 $ -
======== === ==
(1) TDS' investments in certificates of deposits are insured by
the FDIC.
(2) TDS' investments in commercial paper are insured by the FDIC
under its Temporary Liquidity
Guarantee Program.
(3) TDS' long-term investments have maturity dates between July
2011 and December 2012.
TDS Telecom Highlights
Three Months Ended June 30,
(Unaudited, dollars in thousands)
2010 2009
---- ----
Local Telephone Operations
Operating revenues
Voice $45,738 $46,879
Data 31,993 25,491
Network access 66,951 67,118
Miscellaneous 9,576 8,720
---- ----
154,258 148,208
------ ------
Operating expenses
Cost of services and products (excluding
Depreciation, amortization and accretion
expense reported below) 49,302 48,406
Selling, general and administrative
expenses 44,167 45,083
Depreciation, amortization and accretion 36,847 35,302
Loss on asset disposals, net (228) 283
---- --
130,088 129,074
------ ------
Operating income $24,170 $19,134
------- -------
Competitive Local Exchange Carrier
Operations
Revenues $47,325 $50,093
------- -------
Expenses (excluding Depreciation,
amortization
and accretion expense reported below) 40,473 43,750
Depreciation, amortization and accretion 6,302 6,361
Loss on asset disposals, net 160 119
-- --
46,935 50,230
----- -----
Operating income (loss) $390 $(137)
--- -----
Intercompany revenues $(2,377) $(2,341)
Intercompany expenses (2,377) (2,341)
------ ------
- -
-- --
Total TDS Telecom operating income $24,560 $18,997
======= =======
Increase (Decrease)
-------------------
Amount Percent
------ -------
Local Telephone Operations
Operating revenues
Voice $(1,141) (2)%
Data 6,502 26%
Network access (167) -
Miscellaneous 856 10%
--
6,050 4%
----
Operating expenses
Cost of services and products (excluding
Depreciation, amortization and accretion
expense reported below) 896 2%
Selling, general and administrative
expenses (916) (2)%
Depreciation, amortization and accretion 1,545 4%
Loss on asset disposals, net (511) >(100)%
----
1,014 1%
----
Operating income $5,036 26%
------
Competitive Local Exchange Carrier
Operations
Revenues $(2,768) (6)%
-------
Expenses (excluding Depreciation,
amortization
and accretion expense reported below) (3,277) (7)%
Depreciation, amortization and accretion (59) (1)%
Loss on asset disposals, net 41 34%
--
(3,295) (7)%
------
Operating income (loss) $527 >100%
---
Intercompany revenues $(36) (2)%
Intercompany expenses (36) (2)%
---
-
--
Total TDS Telecom operating income $5,563 29%
======
TDS Telecom Highlights
Six Months Ended June 30,
(Unaudited, dollars in thousands)
2010 2009
---- ----
Local Telephone Operations
Operating revenues
Voice $90,296 $95,457
Data 60,291 50,551
Network access 134,893 134,949
Miscellaneous 18,934 17,438
----- -----
304,414 298,395
------ ------
Operating expenses
Cost of services and products (excluding
Depreciation, amortization and accretion
expense reported below) 95,794 96,090
Selling, general and administrative
expenses 85,904 86,112
Depreciation, amortization and accretion 73,905 71,388
Loss on asset disposals, net 32 421
-- --
255,635 254,011
------ ------
Operating income $48,779 $44,384
------- -------
Competitive Local Exchange Carrier
Operations
Revenues $95,068 $101,282
------- --------
Expenses (excluding Depreciation,
amortization
and accretion expense reported below) 80,503 87,856
Depreciation, amortization and accretion 12,667 12,138
Loss on asset disposals, net 245 196
-- --
93,415 100,190
----- ------
Operating income $1,653 $1,092
------ ------
Intercompany revenues $(4,771) $(4,415)
Intercompany expenses (4,771) (4,415)
------ ------
- -
-- --
Total TDS Telecom operating income $50,432 $45,476
======= =======
Increase (Decrease)
-------------------
Amount Percent
------ -------
Local Telephone Operations
Operating revenues
Voice $(5,161) (5)%
Data 9,740 19%
Network access (56) -
Miscellaneous 1,496 9%
----
6,019 2%
----
Operating expenses
Cost of services and products (excluding
Depreciation, amortization and accretion
expense reported below) (296) -
Selling, general and administrative
expenses (208) -
Depreciation, amortization and accretion 2,517 4%
Loss on asset disposals, net (389) (92)%
----
1,624 1%
----
Operating income $4,395 10%
------
Competitive Local Exchange Carrier
Operations
Revenues $(6,214) (6)%
-------
Expenses (excluding Depreciation,
amortization
and accretion expense reported below) (7,353) (8)%
Depreciation, amortization and accretion 529 4%
Loss on asset disposals, net 49 25%
--
(6,775) (7)%
------
Operating income $561 51%
---
Intercompany revenues $(356) (8)%
Intercompany expenses (356) (8)%
----
-
--
Total TDS Telecom operating income $4,956 11%
======
Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
--------
2010 2009 (1)
---- -------
(Dollars in thousands)
Cash flows from operating
activities
Net income $114,658 $182,270
Add (deduct) adjustments to
reconcile net income to net cash
flows
from operating activities
Depreciation, amortization and
accretion 379,647 366,505
Bad debts expense 39,633 42,761
Stock-based compensation expense 16,743 14,394
Deferred income taxes, net (28,881) 18,882
Equity in earnings of
unconsolidated entities (50,900) (43,700)
Distributions from unconsolidated
entities 48,740 13,239
Loss on asset disposals, net 6,645 7,191
Other operating activities 3,381 2,125
Changes in assets and liabilities
from operations
Accounts receivable (20,985) (68,283)
Inventory 32,177 (9,928)
Accounts payable (35,572) (63,963)
Customer deposits and deferred
revenues 4,217 (5,151)
Accrued taxes 24,209 60,406
Accrued interest 102 513
Other assets and liabilities (31,468) (73,300)
------- -------
502,346 443,961
------- -------
Cash flows from investing
activities
Additions to property, plant and
equipment (317,950) (290,821)
Cash paid for acquisitions and
licenses (28,264) (15,042)
Cash paid for investments (385,000) (109,055)
Cash received for investments 15,661 -
Other investing activities 1,479 2,040
----- -----
(714,074) (412,878)
-------- --------
Cash flows from financing
activities
Repayment of long-term debt (1,280) (1,655)
TDS Common Shares and Special
Common Shares reissued for benefit
plans,
net of tax payments 845 743
U.S. Cellular Common Shares
reissued for benefit plans, net of
tax payments 144 (405)
Repurchase of TDS Special Common
Shares (31,092) (86,565)
Repurchase of U.S. Cellular Common
Shares (21,423) (19,332)
Dividends paid (23,732) (23,814)
Payment of debt issuance costs - (9,959)
Distributions to noncontrolling
interests (4,314) (3,417)
Other financing activities 65 769
--- ---
(80,787) (143,635)
------- --------
Net decrease in cash and cash
equivalents (292,515) (112,552)
Cash and cash equivalents
Beginning of period 670,992 777,309
------- -------
End of period $378,477 $664,757
======== ========
(1) Amounts have been adjusted. See "Revision of Prior Period
Amounts" section for additional details.
Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
U.S. TDS Telecom
Three Months Ended June 30, 2010 Cellular (1)
-------------------------------- -------- ------------
Operating revenues $1,029,893 $199,206
Deduct:
U.S. Cellular equipment sales
revenue 57,317
------
Service revenues $972,576
Operating income $63,504 $24,560
Add:
Depreciation, amortization and
accretion 144,455 43,149
(Gain) Loss on asset disposals 1,250 (68)
----- ---
Adjusted OIBDA (3)(6) $209,209 $67,641
======== =======
Adjusted OIBDA margin (4) 21.5% 34.0%
U.S.
Cellular TDS Telecom
Three Months Ended June 30, 2009 (7) (1)(7)
-------------------------------- --------- ------------
Operating revenues $1,042,143 $195,960
Deduct:
U.S. Cellular equipment sales
revenue 67,795
------
Service revenues $974,348
Operating income $138,838 $18,997
Add (Deduct):
Depreciation, amortization and
accretion 138,777 41,663
Loss on asset disposals 2,611 402
----- ---
Adjusted OIBDA (3)(6) $280,226 $61,062
======== =======
Adjusted OIBDA margin (4) 28.8% 31.2%
TDS Consolidated
----------------
Three Months Ended June 30, 2010 2009
--------------------------- ---- ----
Cash flows from operating
activities $291,686 $220,711
Deduct:
Capital expenditures 171,328 125,585
------- -------
Free cash flow (5) $120,358 $95,126
======== =======
All Other Consolidated
Three Months Ended June 30, 2010 (2) Total
-------------------------------- ---------- -----
Operating revenues $3,120 $1,232,219
Deduct:
U.S. Cellular equipment sales
revenue
Service revenues
Operating income $(1,683) $86,381
Add:
Depreciation, amortization and
accretion 2,654 190,258
(Gain) Loss on asset disposals 32 1,214
--- -----
Adjusted OIBDA (3)(6) $1,003 $277,853
====== ========
Adjusted OIBDA margin (4)
Consolidated
All Other
Three Months Ended June 30, 2009 (2) Total (7)
-------------------------------- ---------- ---------
Operating revenues $3,967 $1,242,070
Deduct:
U.S. Cellular equipment sales
revenue
Service revenues
Operating income $(4,396) $153,439
Add (Deduct):
Depreciation, amortization and
accretion 3,072 183,512
Loss on asset disposals 8 3,021
--- -----
Adjusted OIBDA (3)(6) $(1,316) $339,972
======= ========
Adjusted OIBDA margin (4)
Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
U.S. TDS Telecom
Six Months Ended June 30, 2010 Cellular (1)
------------------------------ -------- ------------
Operating revenues $2,053,750 $394,711
Deduct:
U.S. Cellular equipment sales
revenue 116,166
-------
Service revenues $1,937,584
Operating income $141,128 $50,432
Add:
Depreciation, amortization and
accretion 287,688 86,572
(Gain) Loss on asset disposals 6,426 277
----- ---
Adjusted OIBDA (3)(6) $435,242 $137,281
======== ========
Adjusted OIBDA margin (4) 22.5% 34.8%
U.S.
Cellular TDS Telecom
Six Months Ended June 30, 2009 (7) (1)(7)
------------------------------ --------- ------------
Operating revenues $2,096,487 $395,262
Deduct:
U.S. Cellular equipment sales
revenue 138,685
-------
Service revenues $1,957,802
Operating income $257,207 $45,476
Add (Deduct):
Depreciation, amortization and
accretion 276,655 83,526
Loss on asset disposals 6,556 617
----- ---
Adjusted OIBDA (3)(6) $540,418 $129,619
======== ========
Adjusted OIBDA margin (4) 27.6% 32.8%
TDS Consolidated
----------------
Six Months Ended June 30, 2010 2009
------------------------- ---- ----
Cash flows from operating
activities $502,346 $443,961
Deduct:
Capital expenditures 317,950 290,821
------- -------
Free cash flow (5) $184,396 $153,140
All Other Consolidated
Six Months Ended June 30, 2010 (2) Total
------------------------------ ---------- -----
Operating revenues $6,193 $2,454,654
Deduct:
U.S. Cellular equipment sales
revenue
Service revenues
Operating income $(3,183) $188,377
Add:
Depreciation, amortization and
accretion 5,387 379,647
(Gain) Loss on asset disposals (58) 6,645
--- -----
Adjusted OIBDA (3)(6) $2,146 $574,669
====== ========
Adjusted OIBDA margin (4)
Consolidated
All Other
Six Months Ended June 30, 2009 (2) Total (7)
------------------------------ ---------- ---------
Operating revenues $8,547 $2,500,296
Deduct:
U.S. Cellular equipment sales
revenue
Service revenues
Operating income $(9,436) $293,247
Add (Deduct):
Depreciation, amortization and
accretion 6,324 366,505
Loss on asset disposals 18 7,191
--- -----
Adjusted OIBDA (3)(6) $(3,094) $666,943
======= ========
Adjusted OIBDA margin (4)
(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.
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.
The Consolidated Balance Sheet at December 31, 2009 was revised to reflect the cumulative effect of these errors, which resulted in a decrease to retained earnings of $13.0 million. Also, in accordance with SAB 108, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows have been revised as follows:
Consolidated Balance Sheet - December 31, 2009
As previously
(Dollars in thousands) reported (1) Adjustment Revised
----------- ---------- -------
Accounts receivable from customers and
others $511,914 $3,529 $515,443
Total current assets 1,644,142 3,529 1,647,671
Total assets 7,608,784 3,529 7,612,313
Customer deposits and deferred revenues 167,963 (3,512) 164,451
Accrued taxes 39,644 22,924 62,568
Total current liabilities 780,296 19,412 799,708
Retained earnings 2,371,587 (13,007) 2,358,580
Total TDS shareholders' equity 3,777,305 (13,007) 3,764,298
Noncontrolling interests 665,092 (2,876) 662,216
Total equity 4,443,229 (15,883) 4,427,346
Total liabilities and equity 7,608,784 3,529 7,612,313
Consolidated Statement of Operations - Three Months Ended June 30, 2009
(Dollars in thousands, As previously
except per share amounts) reported (2) Adjustment Revised
----------- ---------- -------
Operating revenues $1,242,477 $(407) $1,242,070
Total operating expenses 1,087,877 754 1,088,631
Operating income 154,600 (1,161) 153,439
Interest expense (32,245) (289) (32,534)
Total investment and other
income (expense) (11,005) (289) (11,294)
Income before income taxes 143,595 (1,450) 142,145
Income tax expense 53,036 2,206 55,242
Net income 90,559 (3,656) 86,903
Net income attributable to
noncontrolling interests,
net of tax (20,828) 289 (20,539)
Net income attributable to TDS
shareholders 69,731 (3,367) 66,364
Net income available to common
shareholders 69,718 (3,367) 66,351
Basic earnings attributable to
TDS shareholders 0.63 (0.03) 0.60
Diluted earnings attributable
to TDS shareholders 0.63 (0.03) 0.60
Consolidated Statement of Operations - Six Months Ended June 30, 2009
(Dollars in thousands, As previously
except per share amounts) reported (2) Adjustment Revised
----------- ---------- -------
Operating revenues $2,499,123 $1,173 $2,500,296
Total operating expenses 2,208,314 (1,265) 2,207,049
Operating income 290,809 2,438 293,247
Interest expense (62,350) (694) (63,044)
Total investment and other
income (expense) (13,202) (694) (13,896)
Income before income taxes 277,607 1,744 279,351
Income tax expense 93,674 3,407 97,081
Net income 183,933 (1,663) 182,270
Net income attributable to
noncontrolling interests,
net of tax (42,194) 385 (41,809)
Net income attributable to TDS
shareholders 141,739 (1,278) 140,461
Net income available to common
shareholders 141,713 (1,278) 140,435
Basic earnings attributable to
TDS shareholders 1.27 (0.01) 1.26
Diluted earnings attributable
to TDS shareholders 1.27 (0.02) 1.25
Consolidated Statement of Cash Flows - Six Months Ended June 30, 2009
As previously
(Dollars in thousands) reported (2) Adjustment Revised
----------- ---------- -------
Net income $183,933 $(1,663) $182,270
Depreciation, amortization and
accretion 366,115 390 366,505
Deferred income taxes, net 16,237 2,645 18,882
Loss on asset disposals 4,912 2,279 7,191
Change in accounts receivable (62,870) (5,413) (68,283)
Change in customer deposits and
deferred revenues (4,824) (327) (5,151)
Change in accrued taxes 56,741 3,665 60,406
Change in other assets and
liabilities (71,724) (1,576) (73,300)
Cash flows from operating
activities 443,961 - 443,961
(1) In Annual Report on Form 10-K for the year ended December 31,
2009 filed on February 25, 2010.
(2) In Quarterly Report on Form 10-Q for the period ended June 30, 2009
filed on August 6, 2009.
SOURCE Telephone and Data Systems, Inc.