TDS Reports First Quarter 2010 Results
CHICAGO, May 10 /PRNewswire-FirstCall/ --
Note: Comparisons are year over year unless otherwise noted.
1Q 2010 Highlights
Enterprise/TDS Corporate
- Operating revenues were $1.2 billion.
- Repurchased 510,902 TDS special common shares for a total of $14.8 million.
Wireless/U.S. Cellular
- 24,000 retail net additions, reflecting a gain of 33,000 prepaid customers and a loss of 9,000 postpay customers.
- Service revenues of $965.2 million decreased 2 percent due to reductions in voice and inbound roaming revenues, offset by higher data revenues.
- 28 percent increase in data revenues to $201.3 million, representing 21 percent of total service revenues.
- Retail service ARPU (average revenue per unit) increased to $46.99 from $46.87.
- Retail postpay churn low at 1.4 percent; postpay customers comprised 95 percent of retail customers.
- 5 percent increase in cell sites in service to 7,310.
Wireline/TDS Telecom
- 16 percent increase in ILEC high-speed data customers.
- 13 percent increase in ILEC high-speed data revenues, representing 19 percent of ILEC revenues.
- ILEC equivalent access lines remained stable at 778,700, due in part to acquisitions; ILEC physical access lines decreased 5 percent to 530,400.
- Managed IP stations (ILEC and CLEC) grew to 16,600 from 5,100.
As previously announced, TDS will hold a teleconference May 10, 2010 at 9:30 am 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 $1,222.6 million for the first quarter of 2010, a decrease of 3 percent from $1,258.4 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $49.1 million and $0.46, respectively, for the first quarter of 2010, compared to $74.5 million and $0.66, respectively, in the comparable period one year ago.
"Both of our businesses are dedicated to ensuring outstanding customer experiences," said LeRoy T. Carlson, Jr., TDS president and CEO, "and that means a focus on providing excellent data and broadband services. Increased customer use of data in the quarter led to strong growth in wireless data revenues, and U.S. Cellular's commitment to quality in all aspects of the customer experience reduced retail postpay churn to 1.4 percent. Data revenue growth helped to stabilize profitability in our wireline business, along with benefits from cost-reduction initiatives implemented in 2009. In a highly competitive communications industry, our businesses' shared focus on superior customer service is an important differentiator.
"U.S. Cellular continues to drive data revenue growth with its broad assortment of smartphones and data-intensive devices, and through its expanded 3G network. This growth has helped to offset a decline in service revenues due to lower voice and inbound roaming revenues. The company made progress on its major enablement initiatives in the quarter, including upgrading its marketing campaign management system to better target key customer segments. Though planned expenses related to these initiatives reduced profitability in the quarter, U.S. Cellular expects that the initiatives will ultimately reduce operational expenses and support its customer-focused strategy over the long term.
"TDS Telecom continued to attract customers to its high-speed data services, which led to a year-over-year increase in data revenues. Value-oriented bundles of voice, high-speed data and video services remained popular and helped to keep churn low. As part of its commitment to bringing critical broadband services to rural communities, TDS Telecom submitted 46 applications, totaling $136 million, to the Rural Utilities Service for the second round of broadband stimulus funding. To advance our strategy of growing through complementary businesses, TDS recently acquired VISI Incorporated. VISI, based in Minnesota, provides data center services and managed hosting primarily to small and medium sized businesses.
"Both of our businesses are increasingly well-positioned to capitalize on the growing customer interest in wireless data and wireline broadband services. U.S. Cellular plans to make 3G speeds available to 98 percent of its customers by the end of this summer, while it continues to develop its 4G/LTE rollout plans. Ninety-three percent of TDS Telecom's ILEC access lines are equipped for broadband services, and the company is focused on increasing the broadband speeds offered to customers. Both businesses have the support and financial strength to move forward with their customer-focused strategies."
Guidance
Guidance for the year ending Dec. 31, 2010 is shown below compared to previous guidance provided on Feb. 25, 2010. The company has commenced guidance for adjusted OIBDA. 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 May 10, 2010 is as follows: |
||||
Service revenue |
$3,975-$4,075 million |
Unchanged |
||
Adjusted OIBDA(1) |
$850-$950 million |
N/A |
||
Operating income |
$250-$350 million |
Unchanged |
||
Depreciation, amortization and accretion(2) |
Approx. $600 million |
Unchanged |
||
Capital expenditures |
Approx. $600 million |
Unchanged |
||
TDS Telecom (ILEC and CLEC) 2010 guidance as of May 10, 2010 is as follows: |
||||
Operating revenues |
$760-$790 million |
$740-$780 million |
||
Adjusted OIBDA(1) |
$250-$275 million |
N/A |
||
Operating income |
$80-$105 million |
$70-$100 million |
||
Depreciation, amortization and accretion(2) |
Approx. $170 million |
Unchanged |
||
Capital expenditures |
Approx. $155 million |
Approx. $140 million |
||
(1) 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 intangible assets (if any). This amount may also be commonly referred to by management as operating cash flow. This amount should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows. TDS did not previously provide guidance on adjusted OIBDA. (2) Includes estimated losses on disposals of assets but does not include an estimate for loss on impairment of intangible assets since this cannot be predicted. |
||||
This guidance represents the views of management as of May 10, 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.
Repurchase Period |
# Shares |
Cost (in millions) |
|||||
2010 (first quarter) |
510,902 |
$ |
14.8 |
||||
2009 (full year) |
6,374,741 |
$ |
176.6 |
||||
2008 (full year) |
5,861,822 |
$ |
199.6 |
||||
Total |
12,747,465 |
$ |
391.0 |
||||
Conference call information
TDS will hold a conference call on May 10, 2010 at 9:30 a.m. CDT.
- Access the live call on the Conference Calls page of www.teldta.com or at http://ir.teldta.com/phoenix.zhtml?p=irol-eventDetails&c=67422&eventID=3055234.
- Access the call by phone at 866-871-4351 (US/Canada) and use conference ID # 72053512.
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, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. The call will be archived on the Conference Calls page of www.teldta.com.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless, local and long-distance telephone, and broadband services to approximately 7.3 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 March 31, 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 March 31, 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 |
3/31/2010 |
12/31/2009 |
9/30/2009 |
6/30/2009 |
3/31/2009 |
|||||||||||||
Total population |
||||||||||||||||||
Consolidated markets (1) |
90,468,000 |
89,712,000 |
85,118,000 |
83,726,000 |
83,726,000 |
|||||||||||||
Consolidated operating markets (1) |
46,546,000 |
46,306,000 |
46,306,000 |
46,306,000 |
46,306,000 |
|||||||||||||
Market penetration at end of period |
||||||||||||||||||
Consolidated markets (2) |
6.8% |
6.8% |
7.2% |
7.4% |
7.5% |
|||||||||||||
Consolidated operating markets (2) |
13.2% |
13.3% |
13.2% |
13.3% |
13.5% |
|||||||||||||
All customers |
||||||||||||||||||
Total at end of period |
6,147,000 |
6,141,000 |
6,131,000 |
6,155,000 |
6,243,000 |
|||||||||||||
Gross additions |
358,000 |
399,000 |
386,000 |
317,000 |
404,000 |
|||||||||||||
Net additions (losses) |
6,000 |
10,000 |
(24,000) |
(88,000) |
47,000 |
|||||||||||||
Retail customers |
||||||||||||||||||
Total at end of period |
5,768,000 |
5,744,000 |
5,705,000 |
5,711,000 |
5,770,000 |
|||||||||||||
Gross additions |
305,000 |
354,000 |
351,000 |
286,000 |
366,000 |
|||||||||||||
Net retail additions (losses) (3) |
24,000 |
39,000 |
(6,000) |
(59,000) |
63,000 |
|||||||||||||
Net postpay additions (losses) |
(9,000) |
26,000 |
8,000 |
(32,000) |
60,000 |
|||||||||||||
Net prepaid additions (losses) |
33,000 |
13,000 |
(14,000) |
(27,000) |
3,000 |
|||||||||||||
Service revenues components (000s) |
||||||||||||||||||
Voice and other retail service |
$ |
663,939 |
$ |
676,554 |
$ |
690,106 |
$ |
708,609 |
$ |
718,885 |
||||||||
Data service |
201,280 |
189,759 |
174,286 |
161,955 |
156,954 |
|||||||||||||
Total retail service |
$ |
865,219 |
$ |
866,313 |
$ |
864,392 |
$ |
870,564 |
$ |
875,839 |
||||||||
Inbound roaming |
51,942 |
61,728 |
68,767 |
62,223 |
60,057 |
|||||||||||||
Other |
48,027 |
56,814 |
50,289 |
41,323 |
47,719 |
|||||||||||||
Total service revenues (000s) (4) |
$ |
965,188 |
$ |
984,855 |
$ |
983,448 |
$ |
974,110 |
$ |
983,615 |
||||||||
Divided by average customers (000s) |
6,137 |
6,139 |
6,138 |
6,199 |
6,229 |
|||||||||||||
Divided by three months in each quarter |
3 |
3 |
3 |
3 |
3 |
|||||||||||||
Average monthly revenue per unit (5) |
$ |
52.42 |
$ |
53.48 |
$ |
53.41 |
$ |
52.38 |
$ |
52.64 |
||||||||
Voice and other retail service (5) |
$ |
36.06 |
$ |
36.75 |
$ |
37.48 |
$ |
38.11 |
$ |
38.47 |
||||||||
Data service (5) |
$ |
10.93 |
$ |
10.30 |
$ |
9.46 |
$ |
8.71 |
$ |
8.40 |
||||||||
Total retail service (5) |
$ |
46.99 |
$ |
47.05 |
$ |
46.94 |
$ |
46.82 |
$ |
46.87 |
||||||||
Inbound roaming (5) |
$ |
2.82 |
$ |
3.35 |
$ |
3.73 |
$ |
3.35 |
$ |
3.21 |
||||||||
Other (5) |
$ |
2.61 |
$ |
3.08 |
$ |
2.74 |
$ |
2.21 |
$ |
2.56 |
||||||||
Postpay churn rate (6) |
1.4% |
1.6% |
1.7% |
1.7% |
1.5% |
|||||||||||||
Capital expenditures (000s) |
$ |
121,500 |
$ |
189,000 |
$ |
128,900 |
$ |
91,200 |
$ |
137,700 |
||||||||
Cell sites in service |
7,310 |
7,279 |
7,161 |
7,043 |
6,942 |
|||||||||||||
(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 postpay additions (losses) and net prepaid additions (losses). (4) U.S. Cellular revised previously reported Service revenues for all quarterly periods in 2009 to reflect certain corrections. See "Revision of Prior Period Amounts" section for additional details. Previously reported Service revenues were $986.3 million, $984.9 million, $974.8 million and $981.9 million for the three month periods ended December 31, September 30, June 30 and March 31, 2009, 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 postpay customer disconnects during the quarter by the average postpay customer base for the quarter. |
||||||||||||||||||
TELEPHONE AND DATA SYSTEMS, INC. SUMMARY OPERATING DATA |
||||||||||||||||||
Quarter Ended |
3/31/2010 |
12/31/2009 |
9/30/2009 |
6/30/2009 |
3/31/2009 |
|||||||||||||
TDS Telecom |
||||||||||||||||||
ILEC |
||||||||||||||||||
Equivalent access lines (1) |
778,700 |
775,900 |
772,700 |
775,800 |
777,100 |
|||||||||||||
Physical access lines (2) |
530,400 |
536,300 |
539,400 |
548,000 |
556,800 |
|||||||||||||
High-speed data customers (3) |
217,400 |
208,300 |
202,100 |
197,100 |
188,100 |
|||||||||||||
Long-distance customers |
365,600 |
362,800 |
356,500 |
354,100 |
348,900 |
|||||||||||||
Managed IP stations (4) |
2,300 |
1,900 |
1,500 |
1,200 |
1,000 |
|||||||||||||
Capital expenditures (000s) |
$ |
20,200 |
$ |
26,900 |
$ |
23,800 |
$ |
26,200 |
$ |
21,400 |
||||||||
CLEC |
||||||||||||||||||
Equivalent access lines (1) |
349,300 |
355,900 |
364,100 |
372,300 |
381,100 |
|||||||||||||
High-speed data customers (3) |
36,000 |
36,900 |
37,600 |
38,700 |
39,700 |
|||||||||||||
Managed IP stations (4) |
14,300 |
12,000 |
9,600 |
6,400 |
4,100 |
|||||||||||||
Capital expenditures (000s) |
$ |
3,200 |
$ |
6,800 |
$ |
4,700 |
$ |
5,700 |
$ |
5,000 |
||||||||
(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. |
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Telephone And Data Systems, Inc. |
|||||||||||||||||
Consolidated Statement of Operations Highlights |
|||||||||||||||||
Three Months Ended March 31, |
|||||||||||||||||
(Unaudited, dollars and shares in thousands, except per share amounts) |
|||||||||||||||||
Increase/ (Decrease) |
|||||||||||||||||
2010 |
2009 (1) |
Amount |
Percent |
||||||||||||||
Operating revenues |
|||||||||||||||||
U.S. Cellular |
$ |
1,024,037 |
$ |
1,054,505 |
$ |
(30,468) |
(3)% |
||||||||||
TDS Telecom |
195,505 |
199,302 |
(3,797) |
(2)% |
|||||||||||||
All Other (2) |
3,073 |
4,580 |
(1,507) |
(33)% |
|||||||||||||
1,222,615 |
1,258,387 |
(35,772) |
(3)% |
||||||||||||||
Operating expenses |
|||||||||||||||||
U.S. Cellular |
|||||||||||||||||
Expenses excluding depreciation, amortization |
|||||||||||||||||
and accretion |
796,843 |
793,743 |
3,100 |
— |
|||||||||||||
Depreciation, amortization and accretion |
143,233 |
137,878 |
5,355 |
4 % |
|||||||||||||
Loss on asset disposals, net |
5,176 |
3,945 |
1,231 |
31 % |
|||||||||||||
945,252 |
935,566 |
9,686 |
1 % |
||||||||||||||
TDS Telecom |
|||||||||||||||||
Expenses excluding depreciation, amortization |
|||||||||||||||||
and accretion |
125,865 |
130,745 |
(4,880) |
(4)% |
|||||||||||||
Depreciation, amortization and accretion |
43,423 |
41,863 |
1,560 |
4 % |
|||||||||||||
Loss on asset disposals, net |
345 |
215 |
130 |
60 % |
|||||||||||||
169,633 |
172,823 |
(3,190) |
(2)% |
||||||||||||||
All Other (2) |
|||||||||||||||||
Expenses excluding depreciation and amortization |
1,930 |
6,358 |
(4,428) |
(70)% |
|||||||||||||
Depreciation and amortization |
2,733 |
3,252 |
(519) |
(16)% |
|||||||||||||
Loss on asset disposals, net |
(90) |
10 |
(100) |
>(100)% |
|||||||||||||
4,573 |
9,620 |
(5,047) |
(52)% |
||||||||||||||
Total operating expenses |
1,119,458 |
1,118,009 |
1,449 |
— |
|||||||||||||
Operating income (loss) |
|||||||||||||||||
U.S. Cellular |
78,785 |
118,939 |
(40,154) |
(34)% |
|||||||||||||
TDS Telecom |
25,872 |
26,479 |
(607) |
(2)% |
|||||||||||||
All Other (2) |
(1,500) |
(5,040) |
3,540 |
70 % |
|||||||||||||
103,157 |
140,378 |
(37,221) |
(27)% |
||||||||||||||
Investment and other income (expense) |
|||||||||||||||||
Equity in earnings of unconsolidated entities |
24,903 |
25,337 |
(434) |
(2)% |
|||||||||||||
Interest and dividend income |
2,441 |
2,072 |
369 |
18 % |
|||||||||||||
Interest expense |
(28,720) |
(30,370) |
1,650 |
5 % |
|||||||||||||
Other, net |
(190) |
499 |
(689) |
>(100)% |
|||||||||||||
Total investment and other income (expense) |
(1,566) |
(2,462) |
896 |
36 % |
|||||||||||||
Income before income taxes |
101,591 |
137,916 |
(36,325) |
(26)% |
|||||||||||||
Income tax expense |
38,465 |
42,106 |
(3,641) |
(9)% |
|||||||||||||
Net income |
63,126 |
95,810 |
(32,684) |
(34)% |
|||||||||||||
Less: Net income attributable to noncontrolling |
|||||||||||||||||
interests, net of tax |
(14,011) |
(21,350) |
7,339 |
34 % |
|||||||||||||
Net income attributable to TDS shareholders |
49,115 |
74,460 |
(25,345) |
(34)% |
|||||||||||||
Preferred dividend requirement |
(12) |
(13) |
1 |
8 % |
|||||||||||||
Net income available to common shareholders |
$ |
49,103 |
$ |
74,447 |
$ |
(25,344) |
(34)% |
||||||||||
Basic weighted average shares outstanding |
105,938 |
112,238 |
(6,300) |
(6)% |
|||||||||||||
Basic earnings per share attributable to |
|||||||||||||||||
TDS shareholders |
$ |
0.46 |
$ |
0.66 |
$ |
(0.20) |
(30)% |
||||||||||
Diluted weighted average shares outstanding |
106,250 |
112,427 |
(6,177) |
(5)% |
|||||||||||||
Diluted earnings per share attributable to |
|||||||||||||||||
TDS shareholders |
$ |
0.46 |
$ |
0.66 |
$ |
(0.20) |
(30)% |
||||||||||
(1) Amounts have been revised. 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. |
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Telephone and Data Systems, Inc. |
|||||||||
Consolidated Balance Sheet Highlights |
|||||||||
(Unaudited, dollars in thousands) |
|||||||||
ASSETS |
|||||||||
March 31, |
December 31, |
||||||||
2010 |
2009 (1) |
||||||||
Current assets |
|||||||||
Cash and cash equivalents |
$ |
645,466 |
$ |
670,992 |
|||||
Short-term investments |
148,364 |
113,275 |
|||||||
Accounts receivable from customers and other |
486,778 |
515,443 |
|||||||
Inventory |
157,935 |
156,987 |
|||||||
Other current assets |
200,522 |
190,974 |
|||||||
1,639,065 |
1,647,671 |
||||||||
Investments |
|||||||||
Licenses |
1,446,825 |
1,443,025 |
|||||||
Goodwill |
713,013 |
707,840 |
|||||||
Other intangible assets |
31,823 |
26,589 |
|||||||
Investments in unconsolidated entities |
221,112 |
203,799 |
|||||||
Other investments |
9,627 |
9,785 |
|||||||
2,422,400 |
2,391,038 |
||||||||
Property, plant and equipment, net |
|||||||||
U.S. Cellular |
2,578,460 |
2,601,338 |
|||||||
TDS Telecom |
871,232 |
880,378 |
|||||||
Other |
25,963 |
26,129 |
|||||||
3,475,655 |
3,507,845 |
||||||||
Other assets and deferred charges |
64,651 |
65,759 |
|||||||
Total assets |
$ |
7,601,771 |
$ |
7,612,313 |
|||||
(1) Amounts have been revised. 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 |
|||||||||||
March 31, |
December 31, |
||||||||||
2010 |
2009 (1) |
||||||||||
Current liabilities |
|||||||||||
Current portion of long-term debt |
$ |
2,277 |
$ |
2,509 |
|||||||
Accounts payable |
307,423 |
347,348 |
|||||||||
Customer deposits and deferred revenues |
166,080 |
164,451 |
|||||||||
Accrued interest |
21,330 |
12,227 |
|||||||||
Accrued taxes |
99,432 |
57,087 |
|||||||||
Accrued compensation |
62,021 |
93,524 |
|||||||||
Other current liabilities |
99,023 |
117,081 |
|||||||||
757,586 |
794,227 |
||||||||||
Deferred liabilities and credits |
|||||||||||
Net deferred income tax liability |
506,453 |
516,919 |
|||||||||
Other deferred liabilities and credits |
371,698 |
373,862 |
|||||||||
878,151 |
890,781 |
||||||||||
Long-term debt |
1,492,666 |
1,492,908 |
|||||||||
Noncontrolling interests with redemption features |
752 |
727 |
|||||||||
Equity |
|||||||||||
TDS shareholders' equity |
|||||||||||
Common Shares, par value $.01 |
571 |
571 |
|||||||||
Special Common Shares, par value $.01 |
634 |
634 |
|||||||||
Series A Common Shares, par value $.01 |
65 |
65 |
|||||||||
Capital in excess of par value |
2,095,636 |
2,088,807 |
|||||||||
Treasury shares, at cost: |
|||||||||||
Common Shares |
(216,249) |
(217,381) |
|||||||||
Special Common Shares |
(477,140) |
(464,268) |
|||||||||
Accumulated other comprehensive loss |
(2,966) |
(2,710) |
|||||||||
Retained earnings |
2,399,321 |
2,363,759 |
|||||||||
Total TDS shareholders' equity |
3,799,872 |
3,769,477 |
|||||||||
Preferred shares |
831 |
832 |
|||||||||
Noncontrolling interests |
671,913 |
663,361 |
|||||||||
Total equity |
4,472,616 |
4,433,670 |
|||||||||
Total liabilities and equity |
$ |
7,601,771 |
$ |
7,612,313 |
|||||||
(1) Amounts have been revised. See "Revision of Prior Period Amounts" section for additional details. |
|||||||||||
Telephone and Data Systems, Inc. |
|||||||||||||||||||||
Balance Sheet Highlights |
|||||||||||||||||||||
Three Months Ended March 31, 2010 |
|||||||||||||||||||||
(Unaudited, dollars in thousands) |
|||||||||||||||||||||
U.S. Cellular |
TDS Telecom |
TDS Corporate & Other |
Intercompany Eliminations |
TDS Consolidated |
|||||||||||||||||
Cash and cash equivalents |
$ |
289,658 |
$ |
33,691 |
$ |
322,117 |
$ |
— |
$ |
645,466 |
|||||||||||
Affiliated cash investments |
— |
310,856 |
— |
(310,856) |
— |
||||||||||||||||
Short-term investments |
25,534 |
97,510 |
25,320 |
— |
148,364 |
||||||||||||||||
Notes receivable—affiliates |
— |
— |
8,809 |
(8,809) |
— |
||||||||||||||||
$ |
315,192 |
$ |
442,057 |
$ |
356,246 |
$ |
(319,665) |
$ |
793,830 |
||||||||||||
Licenses, goodwill and other intangibles |
$ |
1,936,429 |
$ |
451,282 |
$ |
(196,050) |
$ |
— |
$ |
2,191,661 |
|||||||||||
Investment in unconsolidated entities |
178,903 |
3,661 |
45,120 |
(6,572) |
221,112 |
||||||||||||||||
Other investments |
4,179 |
2,072 |
3,376 |
— |
9,627 |
||||||||||||||||
$ |
2,119,511 |
$ |
457,015 |
$ |
(147,554) |
$ |
(6,572) |
$ |
2,422,400 |
||||||||||||
Property, plant and equipment, net |
$ |
2,578,460 |
$ |
871,232 |
$ |
25,963 |
$ |
— |
$ |
3,475,655 |
|||||||||||
Notes payable—affiliates |
$ |
— |
$ |
8,809 |
$ |
310,856 |
$ |
(319,665) |
$ |
— |
|||||||||||
Long-term debt |
|||||||||||||||||||||
Current portion |
$ |
84 |
$ |
391 |
$ |
1,802 |
$ |
— |
$ |
2,277 |
|||||||||||
Non-current portion |
867,662 |
2,181 |
622,823 |
— |
1,492,666 |
||||||||||||||||
Total |
$ |
867,746 |
$ |
2,572 |
$ |
624,625 |
$ |
— |
$ |
1,494,943 |
|||||||||||
Preferred shares |
$ |
— |
$ |
— |
$ |
831 |
$ |
— |
$ |
831 |
|||||||||||
Capital expenditures |
|||||||||||||||||||||
Quarter ended 3/31/2010 |
$ |
121,514 |
$ |
23,376 |
$ |
1,732 |
$ |
— |
$ |
146,622 |
|||||||||||
TDS Telecom Highlights |
|||||||||||||||||
Three Months Ended March 31, |
|||||||||||||||||
(Unaudited, dollars in thousands) |
|||||||||||||||||
Increase (Decrease) |
|||||||||||||||||
2010 |
2009 |
Amount |
Percent |
||||||||||||||
Local Telephone Operations |
|||||||||||||||||
Operating revenues |
|||||||||||||||||
Voice |
$ |
44,558 |
$ |
48,578 |
$ |
(4,020) |
(8)% |
||||||||||
Data |
28,298 |
25,060 |
3,238 |
13% |
|||||||||||||
Network access |
67,942 |
67,831 |
111 |
— |
|||||||||||||
Miscellaneous |
9,358 |
8,718 |
640 |
7% |
|||||||||||||
150,156 |
150,187 |
(31) |
— |
||||||||||||||
Operating expenses |
|||||||||||||||||
Cost of services and products |
46,492 |
47,684 |
(1,192) |
(2)% |
|||||||||||||
Selling, general and administrative expenses |
41,737 |
41,029 |
708 |
2% |
|||||||||||||
Depreciation, amortization and accretion |
37,058 |
36,086 |
972 |
3% |
|||||||||||||
Loss on asset disposals, net |
260 |
138 |
122 |
88% |
|||||||||||||
125,547 |
124,937 |
610 |
— |
||||||||||||||
Operating income |
$ |
24,609 |
$ |
25,250 |
$ |
(641) |
(3)% |
||||||||||
Competitive Local Exchange Carrier Operations |
|||||||||||||||||
Revenues |
$ |
47,743 |
$ |
51,189 |
$ |
(3,446) |
(7)% |
||||||||||
Expenses excluding depreciation, amortization |
|||||||||||||||||
and accretion |
40,030 |
44,106 |
(4,076) |
(9)% |
|||||||||||||
Depreciation, amortization and accretion |
6,365 |
5,777 |
588 |
10% |
|||||||||||||
Loss on asset disposals, net |
85 |
77 |
8 |
10% |
|||||||||||||
46,480 |
49,960 |
(3,480) |
(7)% |
||||||||||||||
Operating income |
$ |
1,263 |
$ |
1,229 |
$ |
34 |
3% |
||||||||||
Intercompany revenues |
$ |
(2,394) |
$ |
(2,074) |
$ |
(320) |
(15)% |
||||||||||
Intercompany expenses |
(2,394) |
(2,074) |
(320) |
(15)% |
|||||||||||||
— |
— |
— |
|||||||||||||||
Total TDS Telecom operating income |
$ |
25,872 |
$ |
26,479 |
$ |
(607) |
(2)% |
||||||||||
Telephone and Data Systems, Inc. |
|||||||||||||
Consolidated Statement of Cash Flows |
|||||||||||||
(Unaudited) |
|||||||||||||
Three Months Ended |
|||||||||||||
March 31, |
|||||||||||||
2010 |
2009 (1) |
||||||||||||
(Dollars in thousands) |
|||||||||||||
Cash flows from operating activities |
|||||||||||||
Net income |
$ |
63,126 |
$ |
95,810 |
|||||||||
Add (deduct) adjustments to reconcile net income to net cash flows |
|||||||||||||
from operating activities |
|||||||||||||
Depreciation, amortization and accretion |
189,389 |
182,993 |
|||||||||||
Bad debts expense |
20,245 |
20,303 |
|||||||||||
Stock-based compensation expense |
7,444 |
5,556 |
|||||||||||
Deferred income taxes, net |
(13,874) |
5,603 |
|||||||||||
Equity in earnings of unconsolidated entities |
(24,903) |
(25,337) |
|||||||||||
Distributions from unconsolidated entities |
7,243 |
6,029 |
|||||||||||
Loss on asset disposals, net |
5,431 |
4,170 |
|||||||||||
Other operating activities |
948 |
52 |
|||||||||||
Changes in assets and liabilities from operations |
|||||||||||||
Accounts receivable |
9,648 |
(10,936) |
|||||||||||
Inventory |
(947) |
7,720 |
|||||||||||
Accounts payable |
(40,676) |
(48,271) |
|||||||||||
Customer deposits and deferred revenues |
784 |
(1,010) |
|||||||||||
Accrued taxes |
35,641 |
34,893 |
|||||||||||
Accrued interest |
9,212 |
9,358 |
|||||||||||
Other assets and liabilities |
(58,051) |
(63,683) |
|||||||||||
210,660 |
223,250 |
||||||||||||
Cash flows from investing activities |
|||||||||||||
Additions to property, plant and equipment |
(146,622) |
(165,236) |
|||||||||||
Cash paid for acquisitions and licenses |
(21,118) |
(14,582) |
|||||||||||
Cash paid for investments |
(50,000) |
(26,248) |
|||||||||||
Cash received for investments |
15,561 |
— |
|||||||||||
Other investing activities |
439 |
1,010 |
|||||||||||
(201,740) |
(205,056) |
||||||||||||
Cash flows from financing activities |
|||||||||||||
Repayment of long-term debt |
(697) |
(993) |
|||||||||||
TDS Common Shares and Special Common Shares reissued for benefit plans, |
|||||||||||||
net of tax payments |
463 |
383 |
|||||||||||
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments |
486 |
356 |
|||||||||||
Repurchase of TDS Special Common Shares |
(14,810) |
(12,237) |
|||||||||||
Repurchase of U.S. Cellular Common Shares |
(5,186) |
(13,291) |
|||||||||||
Dividends paid |
(11,891) |
(12,057) |
|||||||||||
Distributions to noncontrolling interests |
(2,284) |
(1,458) |
|||||||||||
Other financing activities |
(527) |
61 |
|||||||||||
(34,446) |
(39,236) |
||||||||||||
Net decrease in cash and cash equivalents |
(25,526) |
(21,042) |
|||||||||||
Cash and cash equivalents |
|||||||||||||
Beginning of period |
670,992 |
777,309 |
|||||||||||
End of period |
$ |
645,466 |
$ |
756,267 |
|||||||||
(1) Amounts have been revised. See "Revision of Prior Period Amounts" section for additional details. |
|||||||||||||
Telephone and Data Systems, Inc. |
||||||||||||||||
Financial Measures and Reconciliations |
||||||||||||||||
(Unaudited, dollars in thousands) |
||||||||||||||||
Consolidated |
||||||||||||||||
Three Months Ended March 31, 2010 |
U.S. Cellular |
TDS Telecom (1) |
All Other (2) |
Total |
||||||||||||
Operating revenues |
$ |
1,024,037 |
$ |
195,505 |
$ |
3,073 |
$ |
1,222,615 |
||||||||
Deduct: |
||||||||||||||||
U.S. Cellular equipment sales revenue |
58,849 |
|||||||||||||||
Service revenues |
$ |
965,188 |
||||||||||||||
Operating income |
$ |
78,785 |
$ |
25,872 |
$ |
(1,500) |
$ |
103,157 |
||||||||
Add: |
||||||||||||||||
Depreciation, amortization and accretion |
143,233 |
43,423 |
2,733 |
189,389 |
||||||||||||
(Gain) Loss on asset disposals |
5,176 |
345 |
(90) |
5,431 |
||||||||||||
Adjusted OIBDA (3)(6) |
$ |
227,194 |
$ |
69,640 |
$ |
1,143 |
$ |
297,977 |
||||||||
Adjusted OIBDA margin (4) |
23.5% |
35.6% |
||||||||||||||
Consolidated |
||||||||||||||||
Three Months Ended March 31, 2009 |
U.S. Cellular (7) |
TDS Telecom (1) |
All Other (2) |
Total (7) |
||||||||||||
Operating revenues |
$ |
1,054,505 |
$ |
199,302 |
$ |
4,580 |
$ |
1,258,387 |
||||||||
Deduct: |
||||||||||||||||
U.S. Cellular equipment sales revenue |
70,890 |
|||||||||||||||
Service revenues |
$ |
983,615 |
||||||||||||||
Operating income |
$ |
118,939 |
$ |
26,479 |
$ |
(5,040) |
$ |
140,378 |
||||||||
Add (Deduct): |
||||||||||||||||
Depreciation, amortization and accretion |
137,878 |
41,863 |
3,252 |
182,993 |
||||||||||||
Loss on asset disposals |
3,945 |
215 |
10 |
4,170 |
||||||||||||
Adjusted OIBDA (3)(6) |
$ |
260,762 |
$ |
68,557 |
$ |
(1,778) |
$ |
327,541 |
||||||||
Adjusted OIBDA margin (4) |
26.5% |
34.4% |
||||||||||||||
TDS Consolidated |
||||||||||||||||
Three Months Ended March 31, |
2010 |
2009 |
||||||||||||||
Cash flows from operating activities |
$ |
210,660 |
$ |
223,250 |
||||||||||||
Deduct: |
||||||||||||||||
Capital expenditures |
146,622 |
165,236 |
||||||||||||||
Free cash flow (5) |
$ |
64,038 |
$ |
58,014 |
||||||||||||
(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 intangible assets (if any). This amount may also be commonly referred to by management as operating cash flow. This amount should not be confused with Cash flows from operating activities, which is a component of the consolidated statement of cash flows. (4) 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) 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) Excludes the net gain or loss on asset disposals and loss on impairment of intangible 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. Accordingly, you should be aware that TDS may incur such amounts in the future. (7) Previously reported GAAP amounts have been revised. 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 service revenues and sales tax liabilities. These errors resulted in the overstatement of operating revenues and understatement of sales tax liabilities for 2009, 2008 and 2007. 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 quarter 2010, TDS believes the impact would have been significant to the first quarter and would impact comparisons to prior periods. As permitted by SAB 108, TDS revised in the current filing and plans to revise in the next filings of its quarterly and annual consolidated financial statements previously reported annual and quarterly results for 2009, 2008 and 2007 for these immaterial amounts. In addition to recording these adjustments, TDS recorded and plans to record other adjustments to prior-year amounts to correct other immaterial items, which include adjustments related to rent expense, as disclosed in TDS' 2009 Form 10-K.
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 $7.8 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 Statement of Operations -- Three Months Ended March 31, 2009 |
||||||||||||||
As previously |
||||||||||||||
(Dollars in thousands) |
reported |
Adjustment |
Revised |
|||||||||||
Operating revenues |
$ |
1,256,646 |
$ |
1,741 |
$ |
1,258,387 |
||||||||
Total operating expenses |
1,120,437 |
(2,428) |
1,118,009 |
|||||||||||
Operating income |
136,209 |
4,169 |
140,378 |
|||||||||||
Interest expense |
(30,105) |
(265) |
(30,370) |
|||||||||||
Total investment and other income (expense) |
(2,197) |
(265) |
(2,462) |
|||||||||||
Income before income taxes |
134,012 |
3,904 |
137,916 |
|||||||||||
Income tax expense |
40,638 |
1,468 |
42,106 |
|||||||||||
Net income |
93,374 |
2,436 |
95,810 |
|||||||||||
Net income attributable to noncontrolling interests, |
||||||||||||||
net of tax |
(21,366) |
16 |
(21,350) |
|||||||||||
Net income attributable to TDS shareholders |
72,008 |
2,452 |
74,460 |
|||||||||||
Net income available to common shareholders |
71,995 |
2,452 |
74,447 |
|||||||||||
Basic earnings attributable to TDS shareholders |
0.64 |
0.02 |
0.66 |
|||||||||||
Diluted earnings attributable to TDS shareholders |
0.64 |
0.02 |
0.66 |
|||||||||||
Consolidated Balance Sheet -- December 31, 2009 |
||||||||||||||
As previously |
||||||||||||||
(Dollars in thousands) |
reported |
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 |
17,443 |
57,087 |
|||||||||||
Total current liabilities |
780,296 |
13,931 |
794,227 |
|||||||||||
Net deferred income tax liability |
517,762 |
(843) |
516,919 |
|||||||||||
Total deferred liabilities and credits |
891,624 |
(843) |
890,781 |
|||||||||||
Retained earnings |
2,371,587 |
(7,828) |
2,363,759 |
|||||||||||
Total TDS shareholders' equity |
3,777,305 |
(7,828) |
3,769,477 |
|||||||||||
Noncontrolling interests |
665,092 |
(1,731) |
663,361 |
|||||||||||
Total equity |
4,443,229 |
(9,559) |
4,433,670 |
|||||||||||
Total liabilities and equity |
7,608,784 |
3,529 |
7,612,313 |
|||||||||||
Consolidated Statement of Cash Flows -- Three Months Ended March 31, 2009 |
||||||||||||||
As previously |
||||||||||||||
(Dollars in thousands) |
reported |
Adjustment |
Revised |
|||||||||||
Net income |
$ |
93,374 |
$ |
2,436 |
$ |
95,810 |
||||||||
Depreciation, amortization and accretion |
182,766 |
227 |
182,993 |
|||||||||||
Deferred income taxes, net |
4,934 |
669 |
5,603 |
|||||||||||
Loss on asset disposals |
2,416 |
1,754 |
4,170 |
|||||||||||
Change in accounts receivable |
(6,272) |
(4,664) |
(10,936) |
|||||||||||
Change in customer deposits and deferred revenues |
(823) |
(187) |
(1,010) |
|||||||||||
Change in accrued taxes |
34,865 |
28 |
34,893 |
|||||||||||
Change in other assets and liabilities |
(63,420) |
(263) |
(63,683) |
|||||||||||
Cash flows from operating activities |
223,250 |
— |
223,250 |
|||||||||||
SOURCE Telephone and Data Systems, Inc.
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