Exhibit 99.1
As previously announced, TDSTM will hold a teleconference Nov. 5, 2009 at 10:00 a.m. Chicago time. Interested parties may listen to the call live by accessing the Conference Calls page ofwww.teldta.com.
Contact: Jane W. McCahon, Vice President, Corporate Relations
(312) 592-5379 jane.mccahon@teldta.com
Julie D. Mathews, Manager, Investor Relations
(312) 592-5341 julie.mathews@teldta.com
FOR RELEASE: IMMEDIATE
TDS REPORTS THIRD QUARTER 2009 RESULTS
Completes stock repurchase program early
Note: Comparisons are year over year unless otherwise noted.
3Q 2009 Highlights
Enterprise/TDS Corporate
§ Operating revenues were $1,258.7 million.
§ Repurchased 1,149,046 TDS special common shares and 1,484,421 common shares for a total of $73.9 million.
Wireless/U.S. Cellular®
§ Postpay net additions were 8,000; prepaid net losses were 14,000.
§ Service revenues of $984.9 million, down 3 percent, due primarily to a $24.7 million decrease in inbound roaming revenues.
§ Retail service ARPU (average revenue per unit) increased from $46.97 to $47.02.
§ 34 percent increase in data revenues, to $174.3 million, representing 18 percent of service revenues. Data revenue per customer increased from $7.01 to $9.46.
§ Postpay churn was 1.7 percent; postpay customers comprised 96 percent of retail customers.
§ 7 percent increase in cell sites in service, to 7,161.
Wireline/TDS Telecom®
§ 18 percent increase in ILEC high-speed data customers, to 202,100.
§ 14 percent increase in ILEC data revenues, to $26.2 million, representing 17 percent of ILEC revenues.
§ ILEC equivalent access lines remained stable at 772,700, due in part to acquisitions; ILEC physical access lines decreased 5 percent to 539,400.
CHICAGO – Nov. 5, 2009–Telephone and Data Systems, Inc. [NYSE:TDS, TDS.S]reported operating revenues of $1,258.7 million for the third quarter of 2009, a decrease of 4 percent from $1,304.6 million in the comparable period one year ago. Net income attributable to TDS and related diluted earnings per share were $35.6 million and $0.33, respectively, for the third quarter of 2009, compared to $101.2 million and $0.87, respectively, in the comparable period one year ago. In the third quarter of 2008, TDS recorded a $31.7 million pre-tax gain on disposition of investments related to Rural Cellular Corporation.
“TDS made progress on several strategic fronts this quarter,” said LeRoy T. Carlson, Jr., TDS president and CEO. “Both U.S. Cellular and TDS Telecom continued to achieve strong growth in data revenues. While total revenues were down slightly, aggressive marketing and promotional programs at U.S. Cellular were well-received by customers, and TDS Telecom continued to drive sales of bundled services. Backed by TDS’ strong financial foundation, both businesses are investing in new technologies and network infrastructure to support future growth and to promote customer loyalty.
“U.S. Cellular accelerated the expansion of its 3G network, now reaching approximately 75 percent of its customer base,” continued Carlson. “This network enhancement will further promote the already robust growth in smartphone sales, messaging and data applications. The company is also making headway on the initial stages of long-term initiatives that are designed to spur customer growth and enable more targeted marketing and sales programs, while increasing efficiency. These initiatives will be a major focus for U.S. Cellular in 2010 and beyond.
“TDS Telecom continues to build its portfolio of broadband services and products for residential and commercial customers,” added Carlson. “The company is driving strong sales of triple play bundles of voice, broadband and DISH Network™ services, and enhancing its hosted solutions for commercial customers. Broadband penetration of TDS Telecom’s ILEC customer base is currently 37 percent, which leaves substantial room for future growth.
“And, as part of our ongoing efforts to increase shareholder value, TDS recently completed its second $250 million stock repurchase program, well ahead of schedule. Between June 2007 and October 2009, TDS repurchased more than 14 million shares, representing approximately 12 percent of shares outstanding.”
Guidance
Guidance for the year ending Dec. 31, 2009 is as follows. There can be no assurance that final results will not differ materially from this guidance.
U.S. Cellular 2009 guidance as of Nov. 5, 2009 remains unchanged from Aug. 6, 2009 and is as follows:
| Service revenue | $3,900-$3,950 million |
| Operating income(1) | $300-$375 million |
| Depreciation, amortization and accretion(1) | Approx. $600 million |
| Capital expenditures | Approx. $575 million |
TDS Telecom (ILEC and CLEC) 2009 guidance as of Nov. 5, 2009 is as follows:
| Operating revenues | $775-$800 million |
| Operating income(1)(2) | $80-$95 million |
| Depreciation, amortization and accretion(1)(2) | Approx. $170 million |
| Capital expenditures | Approx. $125 million |
(1) Includes losses on disposals of assets.
(2) Revised from guidance issued on Aug. 6, 2009
This guidance represents the views of management as of Nov. 5, 2009 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.
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Stock repurchase summary
The following represents repurchases of both TDS common shares and TDS special common shares.
| Repurchase Period | | # Shares | | Cost (in millions) |
| 2009 (fourth quarter) | | 441,679 | | $ | 13.4 |
| 2009 (third quarter) | | 2,633,467 | | $ | 73.9 |
| 2009 (second quarter) | | 2,684,267 | | $ | 73.9 |
| 2009 (first quarter) | | 504,026 | | $ | 12.1 |
| 2008 (full year) | | 5,861,822 | | $ | 199.6 |
| 2007 (full year) | | 2,076,979 | | $ | 126.7 |
| Total 2009, 2008 and 2007 | | 14,202,240 | | $ | 499.6 |
Conference call information
TDS will hold a conference call on Nov. 5, 2009at 10:00 a.m. Chicago time.
· Access the live call on the Conference Calls page ofwww.teldta.com or athttp://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=67422&eventID=2517092
· Access the call by phone at 800/706-9695 (US/Canada) and use conference ID #38289990.
Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page ofwww.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 ofwww.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 Sept. 30, 2009.
Visitwww.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 fifth-largest, full-service 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 in26states. The Chicago-based company employed8,700full-time equivalent associates as of Sept. 30, 2009. For more information about U.S. Cellular, visitwww.uscellular.com. &n bsp;
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 current credit crisis affecting financial markets, and its effects on the overall economy; competition; theaccess 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 pressrelease to the SEC, which are incorporated by reference herein.
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For more information about TDS and its subsidiaries, visit:
TDS: www.teldta.com
USM:www.uscellular.com
TDS Telecom:www.tdstelecom.com
4
UNITED STATES CELLULAR CORPORATION SUMMARY OPERATING DATA | |
| | | | | | | | | | | | | | | | | | | | |
Quarter Ended | 9/30/2009 | | 6/30/2009 | | 3/31/2009 | | 12/31/2008 | | 9/30/2008 |
Total population | | | | | | | | | | | | | | | | | | | |
| Consolidated markets (1) | | 85,118,000 | | | | 83,726,000 | | | | 83,726,000 | | | | 83,014,000 | | | | 82,875,000 | |
| Consolidated operating markets (1) | | 46,306,000 | | | | 46,306,000 | | | | 46,306,000 | | | | 46,009,000 | | | | 45,493,000 | |
All customers | | | | | | | | | | | | | | | | | | | |
| Total at end of period | | 6,131,000 | | | | 6,155,000 | | | | 6,243,000 | | | | 6,196,000 | | | | 6,176,000 | |
| Gross additions | | 386,000 | | | | 317,000 | | | | 404,000 | | | | 395,000 | | | | 367,000 | |
| Net additions (losses) | | (24,000 | ) | | | (88,000 | ) | | | 47,000 | | | | 20,000 | | | | (18,000 | ) |
Market penetration at end of period | | | | | | | | | | | | | | | | | | | |
| Consolidated markets (2) | | 7.2 | % | | | 7.4 | % | | | 7.5 | % | | | 7.5 | % | | | 7.5 | % |
| Consolidated operating markets (2) | | 13.2 | % | | | 13.3 | % | | | 13.5 | % | | | 13.5 | % | | | 13.6 | % |
Retail customers | | | | | | | | | | | | | | | | | | | |
| Total at end of period | | 5,705,000 | | | | 5,711,000 | | | | 5,770,000 | | | | 5,707,000 | | | | 5,674,000 | |
| Gross additions | | 351,000 | | | | 286,000 | | | | 366,000 | | | | 352,000 | | | | 325,000 | |
| Net postpay additions (losses) | | 8,000 | | | | (32,000 | ) | | | 60,000 | | | | 41,000 | | | | 12,000 | |
| Net prepay additions (losses) | | (14,000 | ) | | | (27,000 | ) | | | 3,000 | | | | (8,000) | | | | (15,000 | ) |
| | | | | | | | | | | | | | | | | | | | |
Cell sites in service | | 7,161 | | | | 7,043 | | | | 6,942 | | | | 6,877 | | | | 6,716 | |
Average monthly revenue per unit (3) | $ | 53.49 | | | $ | 52.41 | | | $ | 52.54 | | | $ | 52.71 | | | $ | 54.59 | |
| Retail service revenue per unit (3) (5) | $ | 47.02 | | | $ | 46.85 | | | $ | 46.78 | | | $ | 46.43 | | | $ | 46.97 | |
| Inbound roaming revenue per unit (3) (5) | $ | 3.73 | | | $ | 3.35 | | | $ | 3.21 | | | $ | 4.25 | | | $ | 5.03 | |
| Other revenue per unit (3) (5) | $ | 2.74 | | | $ | 2.21 | | | $ | 2.55 | | | $ | 2.03 | | | $ | 2.59 | |
Postpay churn rate (4) | | 1.7 | % | | | 1.7 | % | | | 1.5 | % | | | 1.6 | % | | | 1.6 | % |
Construction expenditures (000s) | $ | 128,900 | | | $ | 91,200 | | | $ | 137,700 | | | $ | 190,000 | | | $ | 146,100 | |
(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) Derived from Service revenues as reported in Financial Highlights for each respective quarter as follows:
| Service revenue (000s) | $ | 984,923 | | $ | 974,755 | | $ | 981,874 | | $ | 976,952 | | $ | 1,013,928 |
| Components | | | | | | | | | | | | | | |
| | Retail service revenue (000s) | | 865,867 | | | 871,209 | | | 874,098 | | | 860,503 | | | 872,397 |
| | Inbound roaming revenue (000s) | | 68,767 | | | 62,223 | | | 60,057 | | | 78,768 | | | 93,472 |
| | Other revenue (000s) | | 50,289 | | | 41,323 | | | 47,719 | | | 37,681 | | | 48,059 |
| | | | | | | | | | | | | | | | |
| Divided by average customers (000s) | | 6,138 | | | 6,199 | | | 6,229 | | | 6,178 | | | 6,191 |
| Divided by three months in each quarter | | 3 | | | 3 | | | 3 | | | 3 | | | 3 |
| | | | | | | | | | | | | | | | |
| Average monthly revenue per unit | $ | 53.49 | | $ | 52.41 | | $ | 52.54 | | $ | 52.71 | | $ | 54.59 |
| Retail service revenue per unit | $ | 47.02 | | $ | 46.85 | | $ | 46.78 | | $ | 46.43 | | $ | 46.97 |
| Inbound roaming revenue per unit | $ | 3.73 | | $ | 3.35 | | $ | 3.21 | | $ | 4.25 | | $ | 5.03 |
| Other revenue per unit | $ | 2.74 | | $ | 2.21 | | $ | 2.55 | | $ | 2.03 | | $ | 2.59 |
(4) Calculated by dividing the total postpay customer disconnects during the quarter by the average postpay customer base for the quarter.
(5) Long-distance revenue was reclassified in the fourth quarter of 2008 from Other revenue to Retail service revenue and Inbound roaming revenue. Previous quarters have been adjusted to reflect this change.
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TELEPHONE AND DATA SYSTEMS, INC. SUMMARY OPERATING DATA |
| | | | | | | | | | | | | | | | |
Quarter Ended | 9/30/2009 | | 6/30/2009 | | 3/31/2009 | | 12/31/2008 | | 9/30/2008 |
TDS Telecom | | | | | | | | | | | | | | |
ILEC | | | | | | | | | | | | | | |
| Equivalent access lines (1) | | 772,700 | | | 775,800 | | | 777,100 | | | 776,700 | | | 773,700 |
| Physical access lines (2) | | 539,400 | | | 548,000 | | | 556,800 | | | 566,200 | | | 568,900 |
| High-speed data customers (3) | | 202,100 | | | 197,100 | | | 188,100 | | | 178,300 | | | 171,300 |
| Managed IP stations (4) | | 1,500 | | | 1,200 | | | 1,000 | | | 600 | | | 500 |
| Long-distance customers | | 356,500 | | | 354,100 | | | 348,900 | | | 347,000 | | | 346,600 |
| Construction expenditures (000s) | $ | 23,800 | | $ | 26,200 | | $ | 21,400 | | $ | 50,200 | | $ | 33,300 |
CLEC | | | | | | | | | | | | | | |
| Equivalent access lines (1) | | 364,100 | | | 372,300 | | | 381,000 | | | 393,000 | | | 402,600 |
| High-speed data customers (3) | | 37,600 | | | 38,700 | | | 39,700 | | | 40,800 | | | 41,900 |
| Managed IP stations (4) | | 9,600 | | | 6,400 | | | 4,100 | | | 2,100 | | | 600 |
| Construction expenditures (000s) | $ | 4,700 | | $ | 5,700 | | $ | 5,000 | | $ | 7,200 | | $ | 4,500 |
| (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 Internetcircuit 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 September 30, |
(Unaudited, dollars and shares in thousands, except per share amounts) |
| | | | | | | | | | | | | | |
| | | | | | | | | | Increase/ (Decrease) |
| | | | 2009 | | 2008 | | Amount | | Percent |
Operating revenues | | | | | | | | | | | |
| U.S. Cellular | $ | 1,058,300 | | $ | 1,091,875 | | $ | (33,575) | | (3 | )% |
| TDS Telecom | | 196,542 | | | 205,992 | | | (9,450) | | (5 | )% |
| All Other(1) | | 3,900 | | | 6,731 | | | (2,831) | | (42 | )% |
| | | | | 1,258,742 | | | 1,304,598 | | | (45,856) | | (4 | )% |
Operating expenses | | | | | | | | | | | |
| U.S. Cellular | | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 849,651 | | | 819,600 | | | 30,051 | | 4 | % |
| | Depreciation, amortization and accretion | | 147,586 | | | 145,434 | | | 2,152 | | 1 | % |
| | Loss on asset disposals, net | | 3,371 | | | 6,884 | | | (3,513) | | (51 | )% |
| | | | | 1,000,608 | | | 971,918 | | | 28,690 | | 3 | % |
| TDS Telecom | | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 131,439 | | | 130,944 | | | 495 | | — | |
| | Depreciation, amortization and accretion | | 41,746 | | | 39,036 | | | 2,710 | | 7 | % |
| | Loss on asset disposals, net | | 1,135 | | | 151 | | | 984 | | N/M | |
| | | | | 174,320 | | | 170,131 | | | 4,189 | | 2 | % |
| All Other(1) | | | | | | | | | | | |
| | Expenses excluding depreciation and amortization | | 3,185 | | | 6,840 | | | (3,655) | | (53 | )% |
| | Depreciation and amortization | | 2,915 | | | 3,505 | | | (590) | | (17 | )% |
| | Loss on asset disposals, net | | 51 | | | 65 | | | (14) | | (22 | )% |
| | | | | 6,151 | | | 10,410 | | | (4,259) | | (41 | )% |
| | | | | | | | | | | | | | |
| | | Total operating expenses | | 1,181,079 | | | 1,152,459 | | | 28,620 | | 2 | % |
Operating income (loss) | | | | | | | | | | | |
| U.S. Cellular | | 57,692 | | | 119,957 | | | (62,265) | | (52 | )% |
| TDS Telecom | | 22,222 | | | 35,861 | | | (13,639) | | (38 | )% |
| All Other(1) | | (2,251) | | | (3,679) | | | 1,428 | | 39 | % |
| | | | | 77,663 | | | 152,139 | | | (74,476) | | (49 | )% |
Investment and other income (expense) | | | | | | | | | | | |
| Equity in earnings of unconsolidated entities | | 23,334 | | | 22,566 | | | 768 | | 3 | % |
| Interest and dividend income | | 3,461 | | | 8,617 | | | (5,156) | | (60 | )% |
| Gain on investments and financial instruments | | — | | | 31,997 | | | (31,997) | | N/M | |
| Interest expense | | (30,430) | | | (31,684) | | | 1,254 | | 4 | % |
| Other, net | | 1,030 | | | 383 | | | 647 | | N/M | |
| | | Total investment and other income (expense) | | (2,605) | | | 31,879 | | | (34,484) | | N/M | |
Income before income taxes | | 75,058 | | | 184,018 | | | (108,960) | | (59 | )% |
| Income tax expense | | 27,793 | | | 61,024 | | | (33,231) | | (54 | )% |
Net income | | 47,265 | | | 122,994 | | | (75,729) | | (62 | )% |
| Less: Net income attributable to noncontrolling interests, net of tax | | (11,620) | | | (21,771) | | | 10,151 | | 47 | % |
Net income attributable to TDS | | 35,645 | | | 101,223 | | | (65,578) | | (65 | )% |
| Preferred dividend requirement | | (13) | | | (13) | | | — | | — | |
Net income available to common | $ | 35,632 | | $ | 101,210 | | $ | (65,578) | | (65 | )% |
| | | | | | | | | | | | | | |
Basic weighted average shares outstanding | | 108,289 | | | 115,700 | | | (7,411) | | (6 | )% |
Basic earnings per share attributable to TDS shareholders | $ | 0.33 | | $ | 0.87 | | $ | (0.54) | | (62 | )% |
| | | | | | | | | | | | | | |
Diluted weighted average shares outstanding | | 108,565 | | | 116,193 | | | (7,628) | | (7 | )% |
Diluted earnings per share attributable to TDS shareholders | $ | 0.33 | | $ | 0.87 | | $ | (0.54) | | (62 | )% |
(1) | Consists of Suttle-Straus printing and distribution operations, corporate operations and intercompany eliminations. |
N/M — Percentage change not meaningful |
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Telephone and Data Systems, Inc. |
Consolidated Statement of Operations Highlights |
Nine Months Ended September 30, |
(Unaudited, dollars and shares in thousands, except per share amounts) |
| | | | | | | | | | | | | | |
| | | | | | | | | | Increase/ (Decrease) |
| | | | 2009 | | 2008 | | Amount | | Percent |
Operating revenues | | | | | | | | | | | |
| U.S. Cellular | $ | 3,153,614 | | $ | 3,190,323 | | $ | (36,709) | | (1 | )% |
| TDS Telecom | | 591,804 | | | 619,492 | | | (27,688) | | (4 | )% |
| All Other(1) | | 12,447 | | | 18,235 | | | (5,788) | | (32 | )% |
| | | | | 3,757,865 | | | 3,828,050 | | | (70,185) | | (2 | )% |
Operating expenses | | | | | | | | | | | |
| U.S. Cellular | | | | | | | | | | | |
| | Expenses excluding depreciation, amortizationand accretion | | 2,408,734 | | | 2,383,500 | | | 25,234 | | 1 | % |
| | Depreciation, amortization and accretion | | 423,851 | | | 433,222 | | | (9,371) | | (2 | )% |
| | Loss on asset disposals, net | | 7,648 | | | 16,776 | | | (9,128) | | (54 | )% |
| | | | | 2,840,233 | | | 2,833,498 | | | 6,735 | | — | |
| TDS Telecom | | | | | | | | | | | |
| | Expenses excluding depreciation, amortizationand accretion | | 398,002 | | | 392,661 | | | 5,341 | | 1 | % |
| | Depreciation, amortization and accretion | | 125,272 | | | 117,615 | | | 7,657 | | 7 | % |
| | Loss on asset disposals, net | | 1,752 | | | 349 | | | 1,403 | | N/M | |
| | | | | 525,026 | | | 510,625 | | | 14,401 | | 3 | % |
| All Other(1) | | | | | | | | | | | |
| | Expenses excluding depreciation and amortization | | 14,826 | | | 17,049 | | | (2,223) | | (13 | )% |
| | Depreciation and amortization | | 9,239 | | | 11,322 | | | (2,083) | | (18 | )% |
| | Loss on asset disposals, net | | 69 | | | 65 | | | 4 | | 6 | % |
| | | | | 24,134 | | | 28,436 | | | (4,302) | | (15 | )% |
| | | | | | | | | | | | | | |
| | | Total operating expenses | | 3,389,393 | | | 3,372,559 | | | 16,834 | | — | |
Operating income (loss) | | | | | | | | | | | |
| U.S. Cellular | | 313,381 | | | 356,825 | | | (43,444) | | (12 | )% |
| TDS Telecom | | 66,778 | | | 108,867 | | | (42,089) | | (39 | )% |
| All Other(1) | | (11,687) | | | (10,201) | | | (1,486) | | (15 | )% |
| | | | | 368,472 | | | 455,491 | | | (87,019) | | (19 | )% |
Investment and other income (expense) | | | | | | | | | | | |
| Equity in earnings of unconsolidated entities | | 67,034 | | | 66,945 | | | 89 | | — | |
| Interest and dividend income | | 8,435 | | | 35,818 | | | (27,383) | | (76 | )% |
| Interest expense | | (92,780) | | | (108,634) | | | 15,854 | | 15 | % |
| Loss on investments and financial instruments | | — | | | 31,595 | | | (31,595) | | N/M | |
| Other, net | | 1,504 | | | 2,086 | | | (582) | | (28 | )% |
| | Total investment and other income (expense) | | (15,807) | | | 27,810 | | | (43,617) | | N/M | |
Income before income taxes | | 352,665 | | | 483,301 | | | (130,636) | | (27 | )% |
| Income tax expense | | 121,467 | | | 163,536 | | | (42,069) | | (26 | )% |
Net income | | 231,198 | | | 319,765 | | | (88,567) | | (28 | )% |
| Less: Net income attributable to noncontrolling interests, net of tax | | (53,814) | | | (57,298) | | | 3,484 | | 6 | % |
Net income attributable to TDS | | 177,384 | | | 262,467 | | | (85,083) | | (32 | )% |
| Preferred dividend requirement | | (38) | | | (39) | | | 1 | | 3 | % |
Net income available to common | $ | 177,346 | | $ | 262,428 | | $ | (85,082) | | (32 | )% |
| | | | | | | | | | | | | | |
Basic weighted average shares outstanding | | 110,408 | | | 116,510 | | | (6,102) | | (5 | )% |
Basic earnings per share attributable to TDS shareholders | $ | 1.61 | | $ | 2.25 | | $ | (0.64) | | (28 | )% |
| | | | | | | | | | | | | | |
Diluted weighted average shares outstanding | | 110,633 | | | 117,065 | | | (6,432) | | (5 | )% |
Diluted earnings per share attributable to TDS shareholders | $ | 1.60 | | $ | 2.24 | | $ | (0.64) | | (29 | )% |
(1) | Consists of Suttle-Straus printing and distribution operations, corporate operations and intercompany eliminations. |
N/M — Percentage change not meaningful |
8
Telephone and Data Systems, Inc. |
Consolidated Balance Sheet Highlights |
(Unaudited, dollars in thousands) |
| | | | | | | | |
ASSETS |
| | | | | | | | |
| | | | | | | | |
| | | | September 30, | | December 31, |
| | | | 2009 | | 2008 |
Current assets | | | | | |
| Cash and cash equivalents | $ | 778,159 | | $ | 777,309 |
| Short-term investments | | 136,400 | | | 27,705 |
| Accounts receivable from customers and other | | 541,211 | | | 516,849 |
| Inventory | | 126,007 | | | 122,377 |
| Other current assets | | 196,247 | | | 184,696 |
| | | | | 1,778,024 | | | 1,628,936 |
| | | | | | | | |
Investments | | | | | |
| Licenses | | 1,453,526 | | | 1,441,440 |
| Goodwill | | 707,840 | | | 707,079 |
| Customer lists | | 25,577 | | | 34,032 |
| Investments in unconsolidated entities | | 219,760 | | | 205,768 |
| Other investments | | 9,996 | | | 10,623 |
| | | | | 2,416,699 | | | 2,398,942 |
| | | | | | | | |
Property, plant and equipment, net | | | | | |
| U.S. Cellular | | 2,561,766 | | | 2,620,376 |
| TDS Telecom | | 880,838 | | | 918,454 |
| Other | | 30,265 | | | 30,094 |
| | | | | 3,472,869 | | | 3,568,924 |
| | | | | | | | |
Other assets and deferred charges | | 65,583 | | | 55,614 |
| | | | | | | | |
Total assets | $ | 7,733,175 | | $ | 7,652,416 |
9
Telephone and Data Systems, Inc. |
Consolidated Balance Sheet Highlights |
(Unaudited, dollars in thousands) |
| | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | September 30, 2009 | | December 31, 2008 |
| | | | |
Current liabilities | | | | | | | |
| Current portion of long-term debt | $ | 15,126 | | | $ | 15,337 | |
| Accounts payable | | 297,249 | | | | 319,575 | |
| Customer deposits and deferred revenues | | 170,493 | | | | 174,101 | |
| Accrued interest | | 24,129 | | | | 14,236 | |
| Accrued taxes | | 66,661 | | | | 25,192 | |
| Accrued compensation | | 84,125 | | | | 90,512 | |
| Other current liabilities | | 116,041 | | | | 134,334 | |
| | | | | 773,824 | | | | 773,287 | |
Deferred liabilities and credits | | | | | | | |
| Net deferred income tax liability | | 499,002 | | | | 471,623 | |
| Other deferred liabilities and credits | | 384,032 | | | | 368,045 | |
| | | | | 883,034 | | | | 839,668 | |
| | | | | | | | | | |
Long-term debt | | 1,620,979 | | | | 1,621,422 | |
| | | | | | | | | | |
Noncontrolling interests with mandatory redemption features | | 708 | | | | 589 | |
| | | | | | | | | | |
Equity | | | | | | | |
| TDS stockholders' 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 | | 2,084,481 | | | | 2,066,597 | |
| | Treasury shares, at cost: | | | | | | | |
| | | Common Shares | | (206,244 | ) | | | (163,017 | ) |
| | | Special Common Shares | | (462,788 | ) | | | (350,091 | ) |
| | Accumulated other comprehensive loss | | (12,951 | ) | | | (16,812 | ) |
| | Retained earnings | | 2,370,595 | | | | 2,229,540 | |
| | | Total TDS stockholders' equity | | 3,774,363 | | | | 3,767,487 | |
| | | | | | | | | | |
| Preferred shares | | 845 | | | | 852 | |
| Noncontrolling interests | | 679,422 | | | | 649,111 | |
| | | | | | | | | | |
| | Total equity | | 4,454,630 | | | | 4,417,450 | |
| | | | | | | | | | |
Total liabilities and equity | $ | 7,733,175 | | | $ | 7,652,416 | |
10
Telephone and Data System, Inc. |
Balance Sheet Highlights |
Three Months Ended September 30, 2009 |
(Unaudited, dollars in thousands) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | U.S. Cellular | | TDS Telecom | | TDS Corporate & Other | | Intercompany Eliminations | | TDS Consolidated |
Cash and cash equivalents | $ | 404,894 | | $ | 28,336 | | $ | 344,929 | | $ | — | | $ | 778,159 |
Affiliated cash investments | | — | | | 523,179 | | | — | | | (523,179) | | | — |
| Short-term investments | | 180 | | | 136,220 | | | — | | | — | | | 136,400 |
Notes receivable—affiliates | | — | | | — | | | 253,582 | | | (253,582) | | | — |
| | | $ | 405,074 | | $ | 687,735 | | $ | 598,511 | | $ | (776,761) | | $ | 914,559 |
| | | | | | | | | | | | | | | | |
Licenses, goodwill and customer lists | $ | 1,945,511 | | $ | 435,836 | | $ | (194,404) | | $ | — | | $ | 2,186,943 |
Investment in unconsolidated entities | | 177,497 | | | 3,656 | | | 44,249 | | | (5,642) | | | 219,760 |
Other investments | | 4,247 | | | 2,307 | | | 3,442 | | | — | | | 9,996 |
| | | $ | 2,127,255 | | $ | 441,799 | | $ | (146,713) | | $ | (5,642) | | $ | 2,416,699 |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Property, plant and equipment, net | $ | 2,561,766 | | $ | 880,838 | | $ | 30,265 | | $ | — | | $ | 3,472,869 |
| | | | | | | | | | | | | | | | |
Notes payable—affiliates | $ | — | | $ | 253,582 | | $ | 523,179 | | $ | (776,761) | | $ | — |
| | | | | | | | | | | | | | | | |
Long-term debt | | | | | | | | | | | | | | |
| Current portion | $ | 10,088 | | $ | 428 | | $ | 4,610 | | $ | — | | $ | 15,126 |
| Non-current portion | | 997,552 | | | 2,347 | | | 621,080 | | | — | | | 1,620,979 |
| | Total | $ | 1,007,640 | | $ | 2,775 | | $ | 625,690 | | $ | — | | $ | 1,636,105 |
| | | | | | | | | | | | | | | | |
Preferred shares | $ | — | | $ | — | | $ | 845 | | $ | — | | $ | 845 |
| | | | | | | | | | | | | | | | |
Construction expenditures | | | | | | | | | | | | | | |
| Quarter ended 9/30/09 | $ | 128,900 | | $ | 28,500 | | $ | 2,400 | | $ | — | | $ | 159,800 |
| Nine months ended 9/30/09 | $ | 357,800 | | $ | 86,800 | | $ | 6,000 | | $ | — | | $ | 450,600 |
11
| | TDS Telecom Highlights |
| | Three Months Ended September 30, |
| | (Unaudited, dollars in thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | Increase (Decrease) |
| | | 2009 | | 2008 | | Amount | | Percent |
Local Telephone Operations | | | | | | | | | | | |
| Operating revenues | | | | | | | | | | | |
| | Voice | $ | 46,462 | | $ | 51,222 | | $ | (4,760) | | (9 | )% |
| | Data | | 26,166 | | | 22,964 | | | 3,202 | | 14 | % |
| | Network access | | 66,963 | | | 69,199 | | | (2,236) | | (3 | )% |
| | Miscellaneous | | 10,068 | | | 9,604 | | | 464 | | 5 | % |
| | | | 149,659 | | | 152,989 | | | (3,330) | | (2 | )% |
| Operating expenses | | | | | | | | | | | |
| | Cost of services and products | | 50,352 | | | 47,337 | | | 3,015 | | 6 | % |
| | Selling, general and administrative expenses | | 41,397 | | | 40,311 | | | 1,086 | | 3 | % |
| | Depreciation, amortization and accretion | | 35,652 | | | 33,469 | | | 2,183 | | 7 | % |
| | Loss on asset disposals, net | | 1,072 | | | 78 | | | 994 | | N/M | |
| | | | 128,473 | | | 121,195 | | | 7,278 | | 6 | % |
| | | | | | | | | | | | | |
| Operating income | $ | 21,186 | | $ | 31,794 | | $ | (10,608) | | (33 | )% |
| | | | | | | | | | | | | |
Competitive Local Exchange Carrier Operations | | | | | | | | | | | |
| | Revenues | $ | 49,153 | | $ | 54,690 | | $ | (5,537) | | (10 | )% |
| | | | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 41,960 | | | 44,983 | | | (3,023) | | (7 | )% |
| | Depreciation, amortization and accretion | | 6,094 | | | 5,567 | | | 527 | | 9 | % |
| | Loss on asset disposals, net | | 63 | | | 73 | | | (10) | | (14 | )% |
| | | | 48,117 | | | 50,623 | | | (2,506) | | (5 | )% |
| | | | | | | | | | | | | |
| Operating income | $ | 1,036 | | $ | 4,067 | | $ | (3,031) | | (75 | )% |
| | | | | | | | | | | | | |
Intercompany revenues | $ | (2,270) | | $ | (1,687) | | $ | (583) | | (35 | )% |
Intercompany expenses | | (2,270) | | | (1,687) | | | (583) | | (35 | )% |
| | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 22,222 | | $ | 35,861 | | $ | (13,639) | | (38 | )% |
N/M — Percentage change not meaningful. | | | | | |
12
| | TDS Telecom Highlights |
| | Nine Months Ended September 30, |
| | (Unaudited, dollars in thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | Increase (Decrease) |
| | | 2009 | | 2008 | | Amount | | Percent |
Local Telephone Operations | | | | | | | | | | | |
| Operating revenues | | | | | | | | | | | |
| | Voice | $ | 141,919 | | $ | 153,723 | | $ | (11,804) | | (8 | )% |
| | Data | | 76,717 | | | 65,888 | | | 10,829 | | 16 | % |
| | Network access | | 201,912 | | | 210,008 | | | (8,096) | | (4 | )% |
| | Miscellaneous | | 27,506 | | | 28,384 | | | (878) | | (3 | )% |
| | | | 448,054 | | | 458,003 | | | (9,949) | | (2 | )% |
| Operating expenses | | | | | | | | | | | |
| | Cost of services and products | | 146,442 | | | 139,044 | | | 7,398 | | 5 | % |
| | Selling, general and administrative expenses | | 128,254 | | | 124,208 | | | 4,046 | | 3 | % |
| | Depreciation, amortization and accretion | | 107,040 | | | 100,595 | | | 6,445 | | 6 | % |
| | Loss on asset disposals, net | | 1,493 | | | 32 | | | 1,461 | | N/M | |
| | | | 383,229 | | | 363,879 | | | 19,350 | | 5 | % |
| | | | | | | | | | | | | |
| Operating income | $ | 64,825 | | $ | 94,124 | | $ | (29,299) | | (31 | )% |
| | | | | | | | | | | | | |
Competitive Local Exchange Carrier Operations | | | | | | | | | | | |
| | Revenues | $ | 150,435 | | $ | 166,707 | | $ | (16,272) | | (10 | )% |
| | | | | | | | | | | | | |
| | Expenses excluding depreciation, amortization and accretion | | 129,991 | | | 134,627 | | | (4,636) | | (3 | )% |
| | Depreciation, amortization and accretion | | 18,232 | | | 17,020 | | | 1,212 | | 7 | % |
| | Loss on asset disposals, net | | 259 | | | 317 | | | (58) | | (18 | )% |
| | | | 148,482 | | | 151,964 | | | (3,482) | | (2 | )% |
| | | | | | | | | | | | | |
| Operating income | $ | 1,953 | | $ | 14,743 | | $ | (12,790) | | (87 | )% |
| | | | | | | | | | | | | |
Intercompany revenues | $ | (6,685) | | $ | (5,218) | | $ | (1,467) | | (28 | )% |
Intercompany expenses | | (6,685) | | | (5,218) | | | (1,467) | | (28 | )% |
| | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | |
Total TDS Telecom operating income | $ | 66,778 | | $ | 108,867 | | $ | (42,089) | | (39 | )% |
N/M — Percentage change not meaningful. | | | | | | |
13
Telephone and Data Systems, Inc. |
| | | | | | | | | |
Consolidated Statement of Cash Flows |
(Unaudited) |
| | | | | | | | | |
| | | | | Nine Months Ended |
| | | | | September 30, |
| | | | | 2009 | | 2008 |
| | | | | (Dollars in thousands) |
Cash flows from operating activities | | | | | |
| Net income | $ | 231,198 | | $ | 319,765 |
| Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | | | | | |
| | | Depreciation, amortization and accretion | | 558,362 | | | 562,159 |
| | | Bad debts expense | | 78,941 | | | 59,452 |
| | | Stock-based compensation expense | | 24,523 | | | 15,961 |
| | | Deferred income taxes, net | | 25,935 | | | (298,200) |
| | | Gain on investments and financial instruments, net | | — | | | (31,595) |
| | | Equity in earnings of unconsolidated entities | | (67,034) | | | (66,945) |
| | | Distributions from unconsolidated entities | | 51,668 | | | 51,224 |
| | | Loss on asset disposals, net | | 9,469 | | | 17,190 |
| | | Noncash interest expense | | 2,160 | | | 8,573 |
| | | Excess tax benefit from stock awards | | (5) | | | (1,832) |
| | | Other operating activities | | (41) | | | (1,955) |
| | Changes in assets and liabilities from operations | | | | | |
| | | Accounts receivable | | (102,137) | | | (82,857) |
| | | Inventory | | (3,595) | | | (12,929) |
| | | Accounts payable | | (29,401) | | | 7,140 |
| | | Customer deposits and deferred revenues | | (3,609) | | | 9,827 |
| | | Accrued taxes | | 82,267 | | | 109,269 |
| | | Accrued interest | | 9,893 | | | 5,528 |
| | | Other assets and liabilities | | (68,643) | | | (37,951) |
| | | | | | 799,951 | | | 631,824 |
| | | | | | | | | |
Cash flows from investing activities | | | | | |
| Additions to property, plant and equipment | | (450,594) | | | (485,028) |
| Cash paid for acquisitions and licenses | | (15,242) | | | (336,259) |
| Cash received from divestitures | | 50 | | | 6,838 |
| Proceeds from disposition of investments | | — | | | 259,017 |
| Cash paid to settle derivative liabilities | | — | | | (17,404) |
| Cash paid for short-term investments | | (109,055) | | | — |
| Other investing activities | | 3,285 | | | (832) |
| | | | | | (571,556) | | | (573,668) |
| | | | | | | | | |
Cash flows from financing activities | | | | | |
| Issuance of notes payable | | — | | | 100,000 |
| Repayment of notes payable | | — | | | (100,000) |
| Repayment of variable prepaid forward contracts | | — | | | (47,357) |
| Repayment of long-term debt | | (2,507) | | | (8,296) |
| TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments | | 1,296 | | | 1,916 |
| U.S. Cellular Common Shares reissued for benefit plans, net of tax payments | | (119) | | | (1,286) |
| Excess tax benefit from stock awards | | 5 | | | 1,832 |
| Repurchase of TDS Common and Special Common Shares | | (152,918) | | | (111,769) |
| Repurchase of U.S. Cellular Common Shares | | (24,283) | | | (23,146) |
| Dividends paid | | (35,389) | | | (35,783) |
| Payment of debt issuance costs | | (10,074) | | | — |
| Distributions to noncontrolling interests | | (4,962) | | | (6,539) |
| Other financing activities | | 1,406 | | | 3,909 |
| | | | | | (227,545) | | | (226,519) |
| | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | 850 | | | (168,363) |
| | | | | | | | | |
Cash and cash equivalents | | | | | |
| Beginning of period | | 777,309 | | | 1,174,446 |
| End of period | $ | 778,159 | | $ | 1,006,083 |
14
