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TDS Reports Second Quarter Results
| Press Release | Source: Telephone and Data Systems, Inc. |
Thursday August 7, 8:02 am ET
CHICAGO, Aug. 7 /PRNewswire-FirstCall/ -- Telephone and Data Systems, Inc. (Amex: TDS - News, TDS.S - News) reported operating revenues of $1,274.4 million for the second quarter of 2008, an increase of seven percent from $1,192.8 million in the comparable period one year ago. The company recorded operating income of $149.7 million, down from $154 million in the second quarter of 2007. Net income available to common and diluted earnings per share were $87.7 million and $0.75, respectively, for the second quarter of 2008, compared to a net loss available to common and diluted loss per share of $8.6 million and $.08, respectively, in the comparable period one year ago.
"We continue to experience steady gains in service and data revenues and in average revenue per customer at our wireless business, U.S. Cellular®, and improved operating margins through cost controls at TDS Telecom, our wireline business," said LeRoy T. Carlson, Jr., TDS president and CEO. "The company overall increased its year-over-year operating revenues, and at the corporate level we continued the share repurchase program begun in 2007.
"Both businesses have challenges, as well as opportunities. The market for wireless voice services continues to mature, and the wireline sector has ongoing competition from cable and wireless companies. Consumer anxieties related to the slow economy might also be having an impact. At U.S. Cellular, however, the low churn rate for retail postpay customers, together with continued increases in data revenues and sales of high-ARPU plans and smartphones, demonstrate that customers believe in U.S. Cellular's commitment to excellent network quality, customer service, and product and service selection. As wireless voice penetration increases, customer loyalty and demand for data services are critical to ongoing wireless growth and profitability.
"TDS Telecom achieved double-digit increases in DSL customers and related revenues, and added equivalent access lines in its ILEC operation, although physical access lines continued to decline. The company also increased its operating income through effective cost controls, despite a decline in operating revenues.
"As part of its goal to be the preferred broadband provider in its markets, TDS Telecom continues to increase the broadband speeds offered to its residential and commercial customers, and to develop new broadband services. The company's Triple Play bundles of voice, high-speed data, and Dish Network(TM) TV services enable it to compete effectively with cable offerings. In the second quarter, TDS Telecom exceeded sales targets for both Triple Play bundles and DISH Network services."
Settlement of variable prepaid forward contracts
During the second quarter of 2008, the company settled all of its outstanding Deutsche Telekom (DT) forward contracts and disposed of its remaining DT shares. In the quarter, interest and dividend income decreased $130.3 million primarily due to a $118 million decrease in DT dividend income as a result of the disposition of DT shares prior to the 2008 dividend by DT. Additionally, interest expense decreased $19.7 million due to the settlement of the variable prepaid forward contracts. In the second quarter of 2007, the company recorded a $220.2 million loss related to its DT, Vodafone Group Plc and VeriSign marketable equity securities and related variable prepaid forward contracts.
Guidance
Guidance for the year ending Dec. 31, 2008 is as follows. There can be no assurance that final results will not differ materially from this guidance.
U.S. Cellular 2008 guidance as of Aug. 7, 2008 is as follows:
Net Retail Customer Additions 175,000 - 225,000
Service Revenues $3.9 - 4.0 billion*
Operating Income $385 - 435 million
Depreciation, Amortization & Accretion** Approx. $615 million*
Capital Expenditures $525 - 575 million
* Unchanged from guidance issued on May 7, 2008
** Includes losses on exchanges and disposals of assets
TDS Telecom (ILEC and CLEC) 2008 guidance as of Aug. 7, 2008 is as follows
and remains unchanged from previous guidance issued on May 7, 2008:
Operating Revenues $810 - 840 million
Operating Income $110 - 140 million
Depreciation, Amortization & Accretion Approx. $160 million
Capital Expenditures $130 - 160 million
This guidance represents the views of management as of August 7, 2008 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.
TDS special common share repurchase summary
In 2007, the TDS Board of Directors authorized the repurchase of up to $250 million in special common shares. As of June 30, 2008, $38.7 million remained under the authorization.
Repurchase Period # Shares Price (in millions)
2008 (second quarter) 1,015,650 $39.6
2008 (first quarter) 1,041,016 $45.1
2007 (full year) 2,076,979 $126.7
Total 4,133,645 $211.3
Conference call information
TDS will hold a conference call on August 7, 2008 at 10:00 a.m. Chicago time.
-- Access the live call online at
http://www.videonewswire.com/event.asp?id=50620 or on the Conference
Calls page of http://www.teldta.com.
-- Access the call by phone at 800/723-6498 (US/Canada) and use conference
ID 6948709.
Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of http://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 http://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 nearly 7.4 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 11,700 full-time equivalent employees as of June 30, 2008. For more information about TDS, visit http://www.teldta.com.
About U.S. Cellular®
United States Cellular Corporation, the nation's sixth-largest, full-service wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to nearly 6.2 million customers in 26 states. The Chicago-based company employed 8,400 full-time equivalent associates as of June 30, 2008. For more information about U.S. Cellular, visit http://www.uscellular.com.
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 U.S. Cellular to successfully manage and grow the operations of more recently launched markets; changes in the overall economy, competition, the access to and pricing of unbundled network elements, the state and federal telecommunications regulatory environment, and 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; risks and uncertainties relating to restatements and possible future restatements; ability to remediate the material weakness; 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 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.
As Previously Announced, TDS(TM) will Hold a Teleconference Aug. 7, 2008, at 10:00 a.m. Chicago time. Interested parties may listen to the call live via the Internet by accessing the Conference Calls page of http://www.teldta.com.
UNITED STATES CELLULAR CORPORATION
SUMMARY OPERATING DATA
6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007
Quarter Ended
Total Population:
Consolidated
markets(1) 82,875,000 82,846,000 82,371,000 81,841,000 81,581,000
Consolidated
operating
markets(1) 45,493,000 45,262,000 44,955,000 44,955,000 44,955,000
All customers:
Customer
units(2) 6,194,000 6,175,000 6,102,000 6,058,000 6,010,000
Gross customer
unit additions 365,000 409,000 436,000 447,000 418,000
Net customer
unit additions 16,000 74,000 44,000 48,000 37,000
Market penetration
at end of period:
Consolidated
markets(3) 7.5% 7.5% 7.4% 7.4% 7.4%
Consolidated
operating
markets(3) 13.6% 13.6% 13.6% 13.5% 13.4%
Retail customers:
Customer
units(2) 5,677,000 5,640,000 5,564,000 5,500,000 5,448,000
Gross customer
unit additions 318,000 360,000 367,000 374,000 347,000
Net customer
unit additions 34,000 85,000 64,000 52,000 71,000
Cell sites in
service 6,596 6,452 6,383 6,255 6,140
Average monthly
revenue per
unit (4) $53.27 $52.24 $52.57 $52.73 $50.42
Retail service
revenue per
unit (4) $45.62 $45.30 $45.45 $45.02 $43.87
Inbound roaming
revenue per
unit (4) $3.40 $2.94 $3.09 $3.36 $2.68
Long-distance
/other revenue
per unit (4) $4.25 $4.00 $4.03 $4.35 $3.87
Minutes of use
(MOU) (5) 1,012 948 906 887 858
Retail postpay
churn rate per
month (6) 1.4% 1.4% 1.5% 1.6% 1.4%
Construction
Expenditures
(000s) $137,800 $111,700 $188,100 $130,600 $137,100
(1) "Total population of consolidated markets" and "Total population
of consolidated operating markets" are used only for the
purposes of calculating 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) All customer units and Retail customer units as of June 30, 2008
include one time adjustments, resulting from a review of U.S.
Cellular's customer reporting procedures.
(3) 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.
(4) Per unit revenue measurements are derived from Service Revenues
as reported in Financial Highlights for each respective quarter
as follows:
Service Revenues
per Financial
Highlights $987,352 $962,094 $957,896 $954,540 $906,218
Components:
Retail service
revenue during
quarter 845,564 834,213 828,169 814,948 788,535
Inbound roaming
revenue during
quarter 63,033 54,089 56,358 60,843 48,084
Long-distance
/other revenue
during quarter 78,755 73,792 73,369 78,749 69,599
Divided by
average
customers during
quarter (000s) 6,178 6,139 6,074 6,034 5,991
Divided by three
months in each
quarter 3 3 3 3 3
Average monthly
revenue per
unit $53.27 $52.24 $52.57 $52.73 $50.42
Retail service
revenue per
unit $45.62 $45.30 $45.45 $45.02 $43.87
Inbound roaming
revenue per unit $3.40 $2.94 $3.09 $3.36 $2.68
Long-distance
/other revenue
per unit $4.25 $4.00 $4.03 $4.35 $3.87
(5) Average monthly local minutes of use per customer (without
roaming).
(6) Retail postpay churn rate per month is calculated by dividing
the total monthly retail postpay customer disconnects during
the quarter by the average retail postpay customer base for the
quarter.
TELEPHONE AND DATA SYSTEMS, INC.
SUMMARY OPERATING DATA
6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007
Quarter Ended
TDS Telecom
ILEC:
Access line
equivalents(1) 774,300 767,100 762,700 763,000 761,200
Access lines 577,000 579,200 585,600 595,100 601,600
Digital
Subscriber
Lines (DSL)
customers 164,100 154,800 143,500 135,500 127,400
Long Distance
customers 346,100 344,900 345,200 346,400 346,500
Construction
Expenditures
(000s) $22,800 $14,600 $41,300 $23,500 $30,900
CLEC:
Access line
equivalents(1) 417,200 426,700 435,000 443,700 448,400
Percent of access
lines on-switch 94.4% 94.3% 94.0% 93.9% 93.7%
Digital Subscriber
Lines (DSL)
customers 42,500 43,100 43,300 43,600 43,800
Construction
Expenditures
(000s) $4,700 $3,500 $5,700 $3,400 $4,800
(1) Equivalent access lines are the sum of physical access lines and
high-capacity data lines adjusted to estimate the equivalent number of
physical access lines in terms of capacity. A physical access line is
the individual circuit connecting a customer to a telephone company's
central office facilities.
TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS HIGHLIGHTS
Three Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Increase
(Decrease)
2008 2007 Amount Percent
Operating Revenues
U.S. Cellular $1,060,592 $971,646 $88,946 9.2%
TDS Telecom 207,424 216,301 (8,877) (4.1)%
All Other(1) 6,335 4,887 1,448 29.6%
1,274,351 1,192,834 81,517 6.8%
Operating Expenses
U.S. Cellular
Expenses excluding
depreciation,
amortization
and accretion 791,213 699,318 91,895 13.1%
Depreciation,
amortization and
accretion 145,258 146,024 (766) (0.5)%
(Gain) Loss on asset
disposals, net 6,219 2,832 3,387 N/M
942,690 848,174 94,516 11.1%
TDS Telecom
Expenses excluding
depreciation,
amortization and
accretion 132,911 144,805 (11,894) (8.2)%
Depreciation,
amortization and
accretion 39,071 38,444 627 1.6%
(Gain) Loss on asset
disposals, net 219 --- 219 N/M
172,201 183,249 (11,048) (6.0)%
All Other(1)
Expenses excluding
depreciation and
amortization 6,020 4,227 1,793 42.4%
Depreciation and
amortization 3,697 3,229 468 14.5%
9,717 7,456 2,261 30.3%
Total Operating
Expenses 1,124,608 1,038,879 85,729 8.3%
Operating Income (Loss)
U.S. Cellular 117,902 123,472 (5,570) (4.5)%
TDS Telecom 35,223 33,052 2,171 6.6%
All Other(1) (3,382) (2,569) (813) (31.6)%
149,743 153,955 (4,212) (2.7)%
Investment and Other Income (Expense)
Equity in earnings of
unconsolidated entities 22,909 23,875 (966) (4.0)%
Interest and dividend
income 17,455 147,768 (130,313) (88.2)%
Gain (loss) on investments
and financial
instruments 3,088 (220,199) 223,287 N/M
Interest expense (35,570) (55,245) 19,675 35.6%
Other, net 1,902 (1,868) 3,770 N/M
9,784 (105,669) 115,453 N/M
Income Before Income Taxes
and Minority Interest 159,527 48,286 111,241 N/M
Income tax expense 53,261 26,700 26,561 99.5%
Income Before Minority
Interest 106,266 21,586 84,680 N/M
Minority share of income (18,509) (30,213) 11,704 38.7%
Net Income (Loss) 87,757 (8,627) 96,384 N/M
Preferred dividend
requirement 13 13 --- 0.0%
Net Income (Loss) Available
to Common $87,744 $(8,640) $96,384 N/M
Basic Weighted Average
Common Shares Outstanding 116,267 117,031 (764) (0.7)%
Basic Earnings (Loss) Per
Share $0.75 $(0.07) $0.82 N/M
Diluted Weighted Average
Common Shares Outstanding 116,814 117,031 (217) (0.2)%
Diluted Earnings (Loss)
Per Share $0.75 $(0.08) $0.83 N/M
(1) Consists of Suttle Straus printing and distribution operations and
intercompany eliminations.
N/M - Percentage change not meaningful
TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS HIGHLIGHTS
Six Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
Increase/
(Decrease)
2008 2007 Amount Percent
Operating Revenues
U.S. Cellular $2,098,448 $1,906,320 $192,128 10.1%
TDS Telecom 413,500 433,923 (20,423) (4.7)%
All Other(1) 11,504 9,148 2,356 25.8%
2,523,452 2,349,391 174,061 7.4%
Operating Expenses
U.S. Cellular
Expenses excluding
depreciation,
amortization and
accretion 1,563,900 1,376,212 187,688 13.6%
Depreciation,
amortization and
accretion 287,788 291,976 (4,188) (1.4)%
Loss on asset disposals,
net 9,892 6,137 3,755 61.2%
1,861,580 1,674,325 187,255 11.2%
TDS Telecom
Expenses excluding
depreciation,
amortization and
accretion 261,717 285,001 (23,284) (8.2)%
Depreciation, amortization
and accretion 78,579 78,349 230 0.3%
(Gain) on asset disposals,
net 198 --- 198 N/M
340,494 363,350 (22,856) (6.3)%
All Other(1)
Expenses excluding
depreciation and
amortization 10,209 9,588 621 6.5%
Depreciation and
amortization 7,817 5,376 2,441 45.4%
18,026 14,964 3,062 20.5%
Total Operating
Expenses 2,220,100 2,052,639 167,461 8.2%
Operating Income (Loss)
U.S. Cellular 236,868 231,995 4,873 2.1%
TDS Telecom 73,006 70,573 2,433 3.4%
All Other(1) (6,522) (5,816) (706) (12.1)%
303,352 296,752 6,600 2.2%
Investment and Other Income (Expense)
Equity in earnings of
unconsolidated entities 44,379 47,571 (3,192) (6.7)%
Interest and dividend
income 27,201 163,964 (136,763) (83.4)%
Gain (loss) on investments
and financial instruments (402) 35,671 (36,073) N/M
Interest expense (76,950) (113,046) 36,096 31.9%
Other, net 1,703 (4,092) 5,795 N/M
(4,069) 130,068 (134,137) N/M
Income Before Income Taxes
and Minority Interest 299,283 426,820 (127,537) (29.9)%
Income tax expense 102,512 167,938 (65,426) (39.0)%
Income Before Minority
Interest 196,771 258,882 (62,111) (24.0)%
Minority share of income (35,527) (48,184) 12,657 26.3%
Net Income 161,244 210,698 (49,454) (23.5)%
Preferred dividend
requirement 26 26 --- 0.0%
Net Income Available to
Common $161,218 $210,672 $(49,454) (23.5)%
Basic Weighted Average
Common Shares Outstanding 116,919 116,935 (16) (0.0)%
Basic Earnings Per Share $1.38 $1.80 $(0.42) (23.3)%
Diluted Weighted Average
Common Shares Outstanding 117,500 118,432 (932) (0.8)%
Diluted Earnings Per Share $1.37 $1.76 $(0.39) (22.2)%
(1) Consists of Suttle Straus printing and distribution operations and
intercompany eliminations.
N/M - Percentage change not meaningful
TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
ASSETS
June 30, December 31,
2008 2007
Current Assets
Cash and cash equivalents $1,125,163 $1,174,446
Marketable equity securities 32,020 1,917,893
Accounts receivable from customers and
other 542,664 530,421
Inventory 126,083 115,818
Other current assets 144,569 137,010
1,970,499 3,875,588
Investments
Licenses 1,829,014 1,516,629
Goodwill 695,696 679,129
Customer lists 29,069 25,851
Investments in unconsolidated entities 209,053 206,418
Other investments 11,032 11,509
2,773,864 2,439,536
Property, Plant and Equipment, net
U.S. Cellular 2,566,940 2,595,096
TDS Telecom 888,521 900,267
Other 29,752 29,739
3,485,213 3,525,102
Other Assets and Deferred Charges 51,910 53,917
Total Assets $8,281,486 $9,894,143
TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2008 2007
Current Liabilities
Notes payable $50,000 $ ---
Prepaid forward contracts --- 1,005,512
Current portion of long-term debt 4,390 3,860
Derivative liability --- 711,692
Accounts payable 307,572 308,882
Customer deposits and deferred revenues 176,574 166,191
Accrued interest 14,676 18,456
Accrued taxes 310,861 40,439
Accrued compensation 61,840 91,703
Net deferred income tax liability --- 327,162
Other current liabilities 122,877 125,622
1,048,790 2,799,519
Deferred Liabilities and Credits
Net deferred income tax liability 595,420 555,593
Asset retirement obligation 182,495 173,468
Other deferred liabilities and credits 149,726 154,602
927,641 883,663
Long-Term Debt 1,635,147 1,632,226
Minority Interest in Subsidiaries 679,938 651,537
Preferred Shares 860 860
Common Stockholders' Equity
Common Shares, $.01 par value 566 566
Special Common Shares, $.01 par value 630 629
Series A Common Shares, $.01 par value 65 64
Capital in excess of par value 2,055,677 2,048,110
Treasury Shares, at cost
Common Shares (118,506) (120,544)
Special Common Shares (283,682) (204,914)
Accumulated other comprehensive income 9,546 511,776
Retained earnings 2,324,814 1,690,651
3,989,110 3,926,338
Total Liabilities and Stockholders' Equity $8,281,486 $9,894,143
BALANCE SHEET HIGHLIGHTS
June 30, 2008
(Unaudited, dollars in thousands)
TDS
U.S. TDS Corporate Intercompany TDS
Cellular Telecom & Other Eliminations Consolidated
Cash and cash
equivalents $101,155 $3,542 $1,020,466 $--- $1,125,163
Affiliated cash
investments --- 1,154,070 --- (1,154,070) ---
Marketable equity
securities 16,508 --- 15,512 --- 32,020
Notes receivable
-- affiliates --- --- 260,582 (260,582) ---
$117,663 $1,157,612 $1,296,560 $(1,414,652) $1,157,183
Licenses,
goodwill
and customer
lists $2,299,097 $417,827 $(163,145) $--- $2,553,779
Investment in
unconsolidated
entities 157,162 6,512 $50,711 (5,332) 209,053
Other
investments 4,359 2,957 3,716 --- 11,032
$2,460,618 $427,296 $(108,718) $(5,332) $2,773,864
Property,
Plant and
Equipment,
net $2,566,940 $888,521 $29,752 $--- $3,485,213
Notes payable:
external $50,000 $--- $--- $--- $50,000
Long-term Debt:
Current portion $455 $474 $1,418,113 $(1,414,652) $4,390
Non-current
portion 1,007,054 2,872 625,221 --- 1,635,147
Total $1,007,509 $3,346 $2,043,334 $(1,414,652) $1,639,537
Preferred Shares $--- $--- $860 $--- $860
Construction
expenditures:
Quarter ended
6/30/08 $137,810 $27,511 $1,275 - $166,596
Six months
ended 6/30/08 $249,500 $45,593 $3,968 - $299,061
TDS Telecom Highlights
Three Months Ended June 30,
(Unaudited, dollars in thousands)
Increase
(Decrease)
2008 2007 Amount Percent
Local Telephone Operations
Operating Revenues
Voice $50,925 $56,447 $(5,522) (9.8)%
Data 21,738 17,541 4,197 23.9%
Network access 70,727 77,029 (6,302) (8.2)%
Miscellaneous 9,809 8,086 1,723 21.3%
153,199 159,103 (5,904) (3.7)%
Operating Expenses
Cost of services and products 46,873 50,717 (3,844) (7.6)%
Selling, general and
administrative expenses 41,416 44,060 (2,644) (6.0)%
Depreciation, amortization and
accretion 33,502 32,224 1,278 4.0%
(Gain) on asset disposals (25) --- (25) N/M
121,766 127,001 (5,235) (4.1)%
Operating Income $31,433 $32,102 $(669) (2.1)%
Competitive Local Exchange
Carrier Operations
Revenues $55,888 $58,767 $(2,879) (4.9)%
Expenses excluding
depreciation, amortization and
accretion 46,285 51,597 (5,312) (10.3)%
Depreciation, amortization and
accretion 5,569 6,220 (651) (10.5)%
Loss on asset disposals 244 --- 244 N/M
52,098 57,817 (5,719) (9.9)%
Operating Income $3,790 $950 $2,840 N/M
Intercompany revenues (1,663) (1,569) (94) N/M
Intercompany expenses (1,663) (1,569) (94) N/M
--- --- ---
Total TDS Telecom Operating Income $35,223 $33,052 $2,171 6.6%
N/M - Percentage change not meaningful.
TDS Telecom Highlights
Six Months Ended June 30,
(Unaudited, dollars in thousands)
Increase
(Decrease)
2008 2007 Amount Percent
Local Telephone Operations
Operating Revenues
Voice $102,501 $113,969 $(11,468)(10.1)%
Data 42,924 33,963 8,961 26.4 %
Network access 140,809 153,202 (12,393) (8.1)%
Miscellaneous 18,780 15,561 3,219 20.7 %
305,014 316,695 (11,681) (3.7)%
Operating Expenses
Cost of services and products 91,707 99,814 (8,107) (8.1)%
Selling, general and
administrative expenses 83,897 85,919 (2,022) (2.4)%
Depreciation, amortization and
accretion 67,126 66,270 856 1.3 %
(Gain) on asset disposals (46) --- (46) N/M
242,684 252,003 (9,319) (3.7)%
Operating Income $62,330 $64,692 $(2,362) (3.7)%
Competitive Local Exchange Carrier Operations
Revenues $112,017 $120,117 $(8,100) (6.7)%
Expenses excluding
depreciation, amortization
and accretion 89,644 102,157 (12,513)(12.2)%
Depreciation, amortization and
accretion 11,453 12,079 (626) (5.2)%
Loss on asset disposals 244 --- 244 N/M
101,341 114,236 (12,895)(11.3)%
Operating Income $10,676 $5,881 $4,795 81.5 %
Intercompany revenues (3,531) (2,889) (642) N/M
Intercompany expenses (3,531) (2,889) (642) N/M
--- --- ---
Total TDS Telecom Operating Income $73,006 $70,573 $2,433 3.4%
N/M - Percentage change not meaningful.
TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30,
(Unaudited, dollars in thousands)
2008 2007
(Dollars in thousands)
Cash Flows from Operating Activities
Net income $ 161,244 $ 210,698
Add (Deduct) adjustments to reconcile net
income to net cash provided by operating
activities
Depreciation, amortization and
accretion 374,184 375,701
Bad debts expense 36,806 26,991
Stock-based compensation expense 9,022 10,879
Deferred income taxes (316,269) (61,814)
(Gain) loss on investments and
financial instruments 402 (35,671)
Equity in earnings of unconsolidated
entities (44,379) (47,571)
Distributions from unconsolidated
entities 45,810 43,435
Minority share of income 35,527 48,184
Loss on asset disposals, net 10,090 6,137
Noncash interest expense 7,930 10,635
Other noncash expense 247 1,788
Excess tax benefit from stock awards (1,706) (17,598)
Other operating activities (2,350) (5,000)
Changes in assets and liabilities
Change in accounts receivable (59,440) (43,884)
Change in inventory (20,830) (1,213)
Change in accounts payable (4,171) (5,792)
Change in customer deposits and
deferred revenues 10,303 19,469
Change in accrued taxes 304,231 128,672
Change in accrued interest (3,780) (712)
Change in other assets and
liabilities (47,432) (44,784)
495,439 618,550
Cash Flows from Investing Activities
Additions to property, plant and
equipment (299,061) (304,559)
Cash paid for acquisitions (334,350) (20,569)
Cash received from divestitures 6,838 4,277
Proceeds from sale of investments 226,644 10,547
Settlement of derivative liabilities (17,404) -
Other investing activities (934) (242)
(418,267) (310,546)
Cash Flows from Financing Activities
Issuance of notes payable 100,000 25,000
Issuance of long-term debt - 2,857
Repayment of notes payable (50,000) (60,000)
Repayment of variable prepaid forward
contracts (47,357) -
Repayment of long-term debt (6,442) (1,679)
TDS Common Shares and Special Common
Shares reissued for benefit
plans, net of tax payments 1,494 74,339
U.S. Cellular Common Shares reissued for
benefit plans, net of tax payments (1,878) 9,223
Excess tax benefit from stock awards 1,706 17,598
Repurchase of TDS Special Common Shares (83,013) (7,036)
Repurchase of U.S. Cellular Common Shares (14,516) (49,057)
Dividends paid (23,922) (22,798)
Distributions to minority partners (4,594) (4,676)
Other financing activities 2,067 (1,869)
(126,455) (18,098)
Net Increase (Decrease) in Cash and Cash
Equivalents (49,283) 289,906
Cash and Cash Equivalents -
Beginning of period 1,174,446 1,013,325
End of period $ 1,125,163 $ 1,303,231
Source: Telephone and Data Systems, Inc.
