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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q |
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(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 30, 2013 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
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Commission file number 001-14157 |
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TELEPHONE AND DATA SYSTEMS, INC. |
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(Exact name of Registrant as specified in its charter) |
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Delaware |
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36-2669023 |
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
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30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602 (Address of principal executive offices) (Zip code) |
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Registrant’s telephone number, including area code: (312) 630-1900 |
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Indicate by check mark |
Yes |
No |
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• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |
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• whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). |
x |
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• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. |
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |
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x |
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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. |
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Class |
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Outstanding at June 30, 2013 |
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Common Shares, $0.01 par value |
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101,140,130 Shares |
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Series A Common Shares, $0.01 par value |
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7,148,768 Shares |
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Telephone and Data Systems, Inc. |
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Quarterly Report on Form 10-Q |
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For the Quarterly Period Ended June 30, 2013 |
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Index |
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Page No. |
Part I. |
Financial Information |
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Item 1. |
Financial Statements (Unaudited) |
1 |
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Consolidated Statement of Operations |
1 |
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Three and Six Months Ended June 30, 2013 and 2012 |
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Consolidated Statement of Comprehensive Income |
2 |
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Three and Six Months Ended June 30, 2013 and 2012 |
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Consolidated Statement of Cash Flows |
3 |
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Six Months Ended June 30, 2013 and 2012 |
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Consolidated Balance Sheet June 30, 2013 and December 31, 2012 |
4 |
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Consolidated Statement of Changes in Equity |
6 |
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Six Months Ended June 30, 2013 and 2012 |
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Notes to Consolidated Financial Statements |
8 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
25 |
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Overview |
25 |
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2013 Estimates |
29 |
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Six Months Ended June 30, 2013 and 2012 |
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Results of Operations — Consolidated |
32 |
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Results of Operations — U.S. Cellular |
34 |
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Results of Operations — TDS Telecom |
39 |
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Three Months Ended June 30, 2013 and 2012 |
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Results of Operations — Consolidated |
44 |
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Results of Operations — U.S. Cellular |
46 |
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Results of Operations — TDS Telecom |
48 |
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Recent Accounting Pronouncements |
51 |
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Financial Resources |
51 |
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Liquidity and Capital Resources |
53 |
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Application of Critical Accounting Policies and Estimates |
56 |
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Safe Harbor Cautionary Statement |
57 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
60 |
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Item 4. |
Controls and Procedures |
61 |
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Part II. |
Other Information |
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Item 1. |
Legal Proceedings |
62 |
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Item 1A. |
Risk Factors |
62 |
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Item 5. |
Other Information |
63 |
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Item 6. |
Exhibits |
64 |
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Signatures |
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Part I. Financial Information |
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|||
Item 1. Financial Statements |
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|||
Telephone and Data Systems, Inc. Consolidated Statement of Operations (Unaudited) |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
||||||||
(Dollars and shares in thousands, except per share amounts) |
2013 |
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2012 |
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2013 |
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2012 |
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Operating revenues |
$ |
1,228,166 |
|
$ |
1,323,169 |
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$ |
2,536,739 |
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$ |
2,628,960 |
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Operating expenses |
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Cost of services and products (excluding Depreciation, amortization and accretion expense reported below) |
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515,731 |
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527,670 |
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1,075,623 |
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1,036,881 |
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Selling, general and administrative |
|
470,720 |
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502,404 |
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957,623 |
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1,010,003 |
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|
Depreciation, amortization and accretion |
|
254,203 |
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198,509 |
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|
496,280 |
|
|
395,943 |
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|
Loss on impairment of assets |
|
- |
|
|
515 |
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- |
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|
515 |
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|
Loss on asset disposals, net |
|
8,319 |
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2,995 |
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13,935 |
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5,074 |
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|
(Gain) loss on sale of business and other exit costs, net |
|
(303,034) |
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- |
|
|
(296,103) |
|
|
(4,174) |
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|
|
Total operating expenses |
|
945,939 |
|
|
1,232,093 |
|
|
2,247,358 |
|
|
2,444,242 |
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|
|
|
|
|
|
|
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|
|
Operating income |
|
282,227 |
|
|
91,076 |
|
|
289,381 |
|
|
184,718 |
|||
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|
Investment and other income (expense) |
|
|
|
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|
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|
|
|
|||
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Equity in earnings of unconsolidated entities |
|
35,605 |
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|
25,392 |
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|
62,694 |
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|
48,781 |
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|
Interest and dividend income |
|
2,600 |
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|
2,352 |
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|
4,178 |
|
|
4,535 |
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|
Gain (loss) on investments |
|
14,518 |
|
|
(3,728) |
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|
14,518 |
|
|
(3,728) |
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|
Interest expense |
|
(23,749) |
|
|
(23,139) |
|
|
(48,247) |
|
|
(47,603) |
||
|
Other, net |
|
(197) |
|
|
(249) |
|
|
(351) |
|
|
(21) |
||
|
|
Total investment and other income (expense) |
|
28,777 |
|
|
628 |
|
|
32,792 |
|
|
1,964 |
|
|
|
|
|
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|
|
|
|
|
|
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|
|
Income before income taxes |
|
311,004 |
|
|
91,704 |
|
|
322,173 |
|
|
186,682 |
|||
|
Income tax expense |
|
132,607 |
|
|
35,765 |
|
|
136,787 |
|
|
63,177 |
||
Net income |
|
178,397 |
|
|
55,939 |
|
|
185,386 |
|
|
123,505 |
|||
Less: Net income attributable to noncontrolling interests, net of tax |
|
(22,320) |
|
|
(13,602) |
|
|
(27,890) |
|
|
(28,914) |
|||
Net income attributable to TDS shareholders |
|
156,077 |
|
|
42,337 |
|
|
157,496 |
|
|
94,591 |
|||
TDS Preferred dividend requirement |
|
(12) |
|
|
(12) |
|
|
(25) |
|
|
(25) |
|||
Net income available to common shareholders |
$ |
156,065 |
|
$ |
42,325 |
|
$ |
157,471 |
|
$ |
94,566 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
108,385 |
|
|
108,732 |
|
|
108,320 |
|
|
108,693 |
|||
Basic earnings per share attributable to TDS shareholders |
$ |
1.44 |
|
$ |
0.39 |
|
$ |
1.45 |
|
$ |
0.87 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding |
|
108,913 |
|
|
109,022 |
|
|
108,827 |
|
|
108,964 |
|||
Diluted earnings per share attributable to TDS shareholders |
$ |
1.42 |
|
$ |
0.39 |
|
$ |
1.44 |
|
$ |
0.86 |
|||
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|
|
|
|
|
|
|
|
|
|
Dividends per share to TDS shareholders |
$ |
0.1275 |
|
$ |
0.1225 |
|
$ |
0.2550 |
|
$ |
0.2450 |
|||
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|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
1
Telephone and Data Systems, Inc. Consolidated Statement of Comprehensive Income (Unaudited) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
|
|
June 30, |
|
June 30, |
||||||||
(Dollars in thousands) |
2013 |
|
2012 |
|
2013 |
|
2012 |
||||||||
Net income |
$ |
178,397 |
|
$ |
55,939 |
|
$ |
185,386 |
|
$ |
123,505 |
||||
Net change in accumulated other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Change in net unrealized gain (loss) on equity investments |
|
51 |
|
|
49 |
|
|
51 |
|
|
49 |
|||
|
Change in foreign currency translation adjustment |
|
- |
|
|
- |
|
|
15 |
|
|
- |
|||
|
Change related to retirement plan |
|
|
|
|
|
|
|
. |
|
|
|
|||
|
|
Amounts included in net periodic benefit cost for the period |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
Amortization of prior service cost |
|
(902) |
|
|
(934) |
|
|
(1,804) |
|
|
(1,868) |
|
|
|
|
Amortization of unrecognized net loss |
|
602 |
|
|
623 |
|
|
1,204 |
|
|
1,246 |
|
|
|
|
|
|
|
(300) |
|
|
(311) |
|
|
(600) |
|
|
(622) |
|
|
|
Change in deferred income taxes |
|
114 |
|
|
463 |
|
|
228 |
|
|
933 |
|
|
|
Change related to retirement plan, net of tax |
|
(186) |
|
|
152 |
|
|
(372) |
|
|
311 |
||
|
Net change in accumulated other comprehensive income (loss) |
|
(135) |
|
|
201 |
|
|
(306) |
|
|
360 |
|||
Comprehensive income |
|
178,262 |
|
|
56,140 |
|
|
185,080 |
|
|
123,865 |
||||
|
Less: Comprehensive income attributable to noncontrolling interest |
|
(22,320) |
|
|
(13,602) |
|
|
(27,890) |
|
|
(28,914) |
|||
Comprehensive income attributable to TDS shareholders |
$ |
155,942 |
|
$ |
42,538 |
|
$ |
157,190 |
|
$ |
94,951 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
2
Telephone and Data Systems, Inc. Consolidated Statement of Cash Flows (Unaudited) |
|||||||||
|
|
|
|
|
Six Months Ended |
||||
|
|
|
|
|
June 30, |
||||
(Dollars in thousands) |
2013 |
|
2012 |
||||||
Cash flows from operating activities |
|
|
|
|
|
||||
|
Net income |
$ |
185,386 |
|
$ |
123,505 |
|||
|
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities |
|
|
|
|
|
|||
|
|
|
Depreciation, amortization and accretion |
|
496,280 |
|
|
395,943 |
|
|
|
|
Bad debts expense |
|
35,187 |
|
|
33,626 |
|
|
|
|
Stock-based compensation expense |
|
12,902 |
|
|
20,955 |
|
|
|
|
Deferred income taxes, net |
|
(21,246) |
|
|
29,929 |
|
|
|
|
Equity in earnings of unconsolidated entities |
|
(62,694) |
|
|
(48,781) |
|
|
|
|
Distributions from unconsolidated entities |
|
47,635 |
|
|
6,973 |
|
|
|
|
Loss on impairment of assets |
|
- |
|
|
515 |
|
|
|
|
Loss on asset disposals, net |
|
13,935 |
|
|
5,074 |
|
|
|
|
(Gain) loss on sale of business and other exit costs, net |
|
(296,103) |
|
|
(4,174) |
|
|
|
|
(Gain) loss on investments |
|
(14,518) |
|
|
3,728 |
|
|
|
|
Noncash interest expense |
|
997 |
|
|
1,728 |
|
|
|
|
Other operating activities |
|
505 |
|
|
1,010 |
|
|
Changes in assets and liabilities from operations |
|
|
|
|
|
|||
|
|
|
Accounts receivable |
|
(5,781) |
|
|
(10,197) |
|
|
|
|
Inventory |
|
(8,105) |
|
|
(58,467) |
|
|
|
|
Accounts payable |
|
58,204 |
|
|
(23,336) |
|
|
|
|
Customer deposits and deferred revenues |
|
7,897 |
|
|
22,786 |
|
|
|
|
Accrued taxes |
|
150,425 |
|
|
89,433 |
|
|
|
|
Accrued interest |
|
2,172 |
|
|
(1,823) |
|
|
|
|
Other assets and liabilities |
|
(81,586) |
|
|
(81,517) |
|
|
|
|
|
|
|
521,492 |
|
|
506,910 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
||||
|
Cash used for additions to property, plant and equipment |
|
(384,281) |
|
|
(501,211) |
|||
|
Cash paid for acquisitions and licenses |
|
(14,150) |
|
|
(52,213) |
|||
|
Cash received from divestitures |
|
480,000 |
|
|
50,036 |
|||
|
Cash paid for investments |
|
- |
|
|
(45,000) |
|||
|
Cash received for investments |
|
15,000 |
|
|
128,444 |
|||
|
Other investing activities |
|
14,127 |
|
|
(8,916) |
|||
|
|
|
|
|
|
110,696 |
|
|
(428,860) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
||||
|
Repayment of long-term debt |
|
(605) |
|
|
(952) |
|||
|
Issuance of long-term debt |
|
- |
|
|
358 |
|||
|
TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments |
|
776 |
|
|
(39) |
|||
|
U.S. Cellular Common Shares reissued for benefit plans, net of tax payments |
|
(2,206) |
|
|
(2,465) |
|||
|
Repurchase of U.S. Cellular Common Shares |
|
(18,425) |
|
|
- |
|||
|
Dividends paid to TDS shareholders |
|
(27,598) |
|
|
(26,610) |
|||
|
U.S. Cellular dividends paid to noncontrolling public shareholders |
|
(75,235) |
|
|
- |
|||
|
Payment of debt issuance costs |
|
(23) |
|
|
- |
|||
|
Distributions to noncontrolling interests |
|
(3,292) |
|
|
(643) |
|||
|
Other financing activities |
|
354 |
|
|
2,790 |
|||
|
|
|
|
|
|
(126,254) |
|
|
(27,561) |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
505,934 |
|
|
50,489 |
||||
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
||||
|
Beginning of period |
|
740,481 |
|
|
563,275 |
|||
|
End of period |
$ |
1,246,415 |
|
$ |
613,764 |
|||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
3
Telephone and Data Systems, Inc. Consolidated Balance Sheet — Assets (Unaudited) |
||||||||
(Dollars in thousands) |
June 30, 2013 |
|
December 31, 2012 |
|||||
Current assets |
|
|
|
|
|
|||
|
Cash and cash equivalents |
$ |
1,246,415 |
|
$ |
740,481 |
||
|
Short-term investments |
|
110,352 |
|
|
115,700 |
||
|
Accounts receivable |
|
|
|
|
|
||
|
|
Due from customers and agents, less allowances of $28,368 and $28,152, respectively |
|
353,580 |
|
|
409,720 |
|
|
|
Other, less allowances of $3,030 and $5,263, respectively |
|
132,016 |
|
|
164,608 |
|
|
Inventory |
|
168,700 |
|
|
160,692 |
||
|
Net deferred income tax asset |
|
56,822 |
|
|
43,411 |
||
|
Prepaid expenses |
|
93,383 |
|
|
86,385 |
||
|
Income taxes receivable |
|
9 |
|
|
9,625 |
||
|
Other current assets |
|
32,375 |
|
|
32,815 |
||
|
|
|
|
|
2,193,652 |
|
|
1,763,437 |
|
|
|
|
|
|
|
|
|
Assets held for sale |
|
78,389 |
|
|
163,242 |
|||
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|||
|
Licenses |
|
1,418,832 |
|
|
1,480,039 |
||
|
Goodwill |
|
759,885 |
|
|
797,194 |
||
|
Other intangible assets, net of accumulated amortization of $102,890 and $143,613, respectively |
|
52,592 |
|
|
58,522 |
||
|
Investments in unconsolidated entities |
|
312,046 |
|
|
179,921 |
||
|
Long-term investments |
|
40,120 |
|
|
50,305 |
||
|
Other investments |
|
738 |
|
|
824 |
||
|
|
|
|
|
2,584,213 |
|
|
2,566,805 |
Property, plant and equipment |
|
|
|
|
|
|||
|
In service and under construction |
|
10,758,765 |
|
|
10,808,499 |
||
|
Less: Accumulated depreciation |
|
6,989,832 |
|
|
6,811,233 |
||
|
|
|
|
|
3,768,933 |
|
|
3,997,266 |
|
|
|
|
|
|
|
|
|
Other assets and deferred charges |
|
129,578 |
|
|
133,150 |
|||
|
|
|
|
|
|
|
|
|
Total assets |
$ |
8,754,765 |
|
$ |
8,623,900 |
|||
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
||||||||
|
|
|
|
|
|
|
|
|
4
Telephone and Data Systems, Inc. Consolidated Balance Sheet — Liabilities and Equity (Unaudited) |
|||||||||
(Dollars and shares in thousands) |
June 30, 2013 |
|
December 31, 2012 |
||||||
Current liabilities |
|
|
|
|
|
||||
|
Current portion of long-term debt |
$ |
1,899 |
|
$ |
1,233 |
|||
|
Accounts payable |
|
393,906 |
|
|
377,291 |
|||
|
Customer deposits and deferred revenues |
|
228,259 |
|
|
222,345 |
|||
|
Accrued interest |
|
8,599 |
|
|
6,565 |
|||
|
Accrued taxes |
|
190,836 |
|
|
48,237 |
|||
|
Accrued compensation |
|
95,677 |
|
|
134,932 |
|||
|
Other current liabilities |
|
114,910 |
|
|
134,005 |
|||
|
|
|
|
|
|
1,034,086 |
|
|
924,608 |
|
|
|
|
|
|
|
|
|
|
Liabilities held for sale |
|
559 |
|
|
19,594 |
||||
|
|
|
|
|
|
|
|
|
|
Deferred liabilities and credits |
|
|
|
|
|
||||
|
Net deferred income tax liability |
|
855,623 |
|
|
862,580 |
|||
|
Other deferred liabilities and credits |
|
460,991 |
|
|
438,727 |
|||
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
1,720,642 |
|
|
1,721,571 |
||||
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
- |
|
|
- |
||||
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests with redemption features |
|
512 |
|
|
493 |
||||
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
||||
|
TDS shareholders’ equity |
|
|
|
|
|
|||
|
|
Series A Common and Common Shares |
|
|
|
|
|
||
|
|
|
Authorized 290,000 shares (25,000 Series A Common and 265,000 Common Shares) |
|
|
|
|
|
|
|
|
|
Issued 132,694 shares (7,149 Series A Common and 125,545 Common Shares) and 132,672 shares (7,160 Series A Common and 125,512 Common Shares), respectively |
|
|
|
|
|
|
|
|
|
Outstanding 108,289 shares (7,149 Series A Common and 101,140 Common Shares) and 108,031 shares (7,160 Series A Common and 100,871 Common Shares), respectively |
|
|
|
|
|
|
|
|
|
Par Value ($.01 per share) of $1,327 ($72 Series A Common and $1,255 Common Shares) and $1,327 ($72 Series A Common and $1,255 Common Shares), respectively |
|
1,327 |
|
|
1,327 |
|
|
|
Capital in excess of par value |
|
2,299,091 |
|
|
2,304,122 |
||
|
|
Treasury shares at cost: |
|
|
|
|
|
||
|
|
|
24,405 and 24,641 Common Shares, respectively |
|
(738,397) |
|
|
(750,099) |
|
|
|
Accumulated other comprehensive loss |
|
(8,438) |
|
|
(8,132) |
||
|
|
Retained earnings |
|
2,586,567 |
|
|
2,464,318 |
||
|
|
|
Total TDS shareholders' equity |
|
4,140,150 |
|
|
4,011,536 |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares |
|
825 |
|
|
825 |
|||
|
Noncontrolling interests |
|
541,377 |
|
|
643,966 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
4,682,352 |
|
|
4,656,327 |
||
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
$ |
8,754,765 |
|
$ |
8,623,900 |
||||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
5
Telephone and Data Systems, Inc. Consolidated Statement of Changes in Equity (Unaudited) |
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDS Shareholders |
|
|
|
|
|
|
|
|
|
||||||||||||||||
(Dollars in thousands) |
Series A Common and Common Shares |
|
Capital in Excess of Par Value |
|
Treasury Common Shares |
|
Accumulated Other Comprehensive Income (Loss) |
|
Retained Earnings |
|
Total TDS Shareholders' Equity |
|
Preferred Shares |
|
Non controlling Interests |
|
Total Equity |
||||||||||||
December 31, 2012 |
$ |
1,327 |
|
$ |
2,304,122 |
|
$ |
(750,099) |
|
$ |
(8,132) |
|
$ |
2,464,318 |
|
$ |
4,011,536 |
|
$ |
825 |
|
$ |
643,966 |
|
$ |
4,656,327 |
|||
Add (Deduct) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net income attributable to TDS shareholders |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
157,496 |
|
|
157,496 |
|
|
- |
|
|
- |
|
|
157,496 |
|||
Net income attributable to noncontrolling interests classified as equity |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
27,871 |
|
|
27,871 |
|||
Net unrealized gain (loss) on equity investments |
|
- |
|
|
- |
|
|
- |
|
|
51 |
|
|
- |
|
|
51 |
|
|
- |
|
|
- |
|
|
51 |
|||
Change in foreign currency translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
15 |
|
|
- |
|
|
15 |
|
|
- |
|
|
- |
|
|
15 |
|||
Change related to retirement plan |
|
- |
|
|
- |
|
|
- |
|
|
(372) |
|
|
- |
|
|
(372) |
|
|
- |
|
|
- |
|
|
(372) |
|||
TDS Common and Series A Common Share dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(27,573) |
|
|
(27,573) |
|
|
- |
|
|
- |
|
|
(27,573) |
|||
TDS Preferred dividend requirement |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(25) |
|
|
(25) |
|
|
- |
|
|
- |
|
|
(25) |
|||
U.S. Cellular dividends paid to noncontrolling public shareholders |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(75,235) |
|
|
(75,235) |
|||
Dividend reinvestment plan |
|
- |
|
|
448 |
|
|
7,914 |
|
|
- |
|
|
(4,540) |
|
|
3,822 |
|
|
- |
|
|
- |
|
|
3,822 |
|||
Incentive and compensation plans |
|
- |
|
|
533 |
|
|
3,788 |
|
|
- |
|
|
(3,109) |
|
|
1,212 |
|
|
- |
|
|
- |
|
|
1,212 |
|||
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans |
|
- |
|
|
(1,166) |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,166) |
|
|
- |
|
|
(13,457) |
|
|
(14,623) |
|||
Stock-based compensation awards |
|
- |
|
|
6,124 |
|
|
- |
|
|
- |
|
|
- |
|
|
6,124 |
|
|
- |
|
|
- |
|
|
6,124 |
|||
Tax windfall (shortfall) from stock awards |
|
- |
|
|
(648) |
|
|
- |
|
|
- |
|
|
- |
|
|
(648) |
|
|
- |
|
|
- |
|
|
(648) |
|||
Distributions to noncontrolling interests |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,292) |
|
|
(3,292) |
|||
Adjust investment in subsidiaries for noncontrolling interest purchases |
|
|
|
|
(10,322) |
|
|
- |
|
|
- |
|
|
- |
|
|
(10,322) |
|
|
- |
|
|
5,294 |
|
|
(5,028) |
|||
Deconsolidation of partnerships |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(43,770) |
|
|
(43,770) |
|||
June 30, 2013 |
$ |
1,327 |
|
$ |
2,299,091 |
|
$ |
(738,397) |
|
$ |
(8,438) |
|
$ |
2,586,567 |
|
$ |
4,140,150 |
|
$ |
825 |
|
$ |
541,377 |
|
$ |
4,682,352 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
6
Telephone and Data Systems, Inc. Consolidated Statement of Changes in Equity (Unaudited) |
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDS Shareholders |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
(Dollars in thousands) |
Series A Common and Common Shares |
|
Capital in Excess of Par Value |
|
Treasury Common Shares |
|
Accumulated Other Comprehensive Income (Loss) |
|
Retained Earnings |
|
Total TDS Shareholders' Equity |
|
Preferred Shares |
|
Non controlling Interests |
|
Total Equity |
||||||||||||
December 31, 2011 |
$ |
1,326 |
|
$ |
2,268,711 |
|
$ |
(750,921) |
|
$ |
(8,854) |
|
$ |
2,451,899 |
|
$ |
3,962,161 |
|
$ |
830 |
|
$ |
639,688 |
|
$ |
4,602,679 |
|||
Add (Deduct) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net income attributable to TDS shareholders |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
94,591 |
|
|
94,591 |
|
|
- |
|
|
- |
|
|
94,591 |
|||
Net income attributable to noncontrolling interests classified as equity |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
28,869 |
|
|
28,869 |
|||
Net unrealized gain (loss) on equity investments |
|
- |
|
|
- |
|
|
- |
|
|
49 |
|
|
- |
|
|
49 |
|
|
- |
|
|
- |
|
|
49 |
|||
Change related to retirement plan |
|
- |
|
|
- |
|
|
- |
|
|
311 |
|
|
- |
|
|
311 |
|
|
- |
|
|
- |
|
|
311 |
|||
TDS Common and Series A Common Share dividends |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(26,585) |
|
|
(26,585) |
|
|
- |
|
|
- |
|
|
(26,585) |
|||
TDS Preferred dividend requirement |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(25) |
|
|
(25) |
|
|
- |
|
|
- |
|
|
(25) |
|||
Dividend reinvestment plan |
|
- |
|
|
581 |
|
|
6,764 |
|
|
- |
|
|
(4,196) |
|
|
3,149 |
|
|
- |
|
|
- |
|
|
3,149 |
|||
Incentive and compensation plans |
|
- |
|
|
444 |
|
|
1,251 |
|
|
- |
|
|
(1,357) |
|
|
338 |
|
|
- |
|
|
- |
|
|
338 |
|||
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans |
|
- |
|
|
1,438 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,438 |
|
|
- |
|
|
7,763 |
|
|
9,201 |
|||
Stock-based compensation awards |
|
- |
|
|
9,711 |
|
|
- |
|
|
- |
|
|
- |
|
|
9,711 |
|
|
- |
|
|
- |
|
|
9,711 |
|||
Tax windfall (shortfall) from stock awards |
|
- |
|
|
(83) |
|
|
- |
|
|
- |
|
|
- |
|
|
(83) |
|
|
- |
|
|
- |
|
|
(83) |
|||
Distributions to noncontrolling interests |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(643) |
|
|
(643) |
|||
Other |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
84 |
|
|
84 |
|||
June 30, 2012 |
$ |
1,326 |
|
$ |
2,280,802 |
|
$ |
(742,906) |
|
$ |
(8,494) |
|
$ |
2,514,327 |
|
$ |
4,045,055 |
|
$ |
830 |
|
$ |
675,761 |
|
$ |
4,721,646 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
7
Telephone and Data Systems, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accounting policies of Telephone and Data Systems, Inc. (“TDS”) conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The consolidated financial statements include the accounts of TDS and its majority-owned subsidiaries, including TDS’ 84%-owned wireless telephone subsidiary, United States Cellular Corporation (“U.S. Cellular”) and TDS’ wholly-owned wireline telephone subsidiary, TDS Telecommunications Corporation (“TDS Telecom”). In addition, the consolidated financial statements include certain entities in which TDS has a variable interest that require consolidation under GAAP. All material intercompany accounts and transactions have been eliminated.
The consolidated financial statements included herein have been prepared by TDS, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, TDS believes that the disclosures included herein are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in TDS’ Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2012.
TDS’ business segments reflected in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, are U.S. Cellular, TDS Telecom’s incumbent local exchange carriers, (“ILEC”), its competitive local exchange carrier (“CLEC”), its Hosted and Managed Services (“HMS”) operations, and the Non-Reportable Segment which includes TDS’ majority-owned printing and distribution company, Suttle-Straus, Inc. (“Suttle-Straus”) and TDS’ wholly-owned wireless telephone subsidiary, Airadigm Communications, Inc. (“Airadigm”). All of TDS’ segments operate only in the United States, except for HMS, which includes an insignificant foreign operation.
In April 2013, TDS deconsolidated its investments in the St. Lawrence Seaway RSA Cellular Partnership (“NY1”) and New York RSA 2 Cellular Partnership (“N