UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
OR
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-14157
TELEPHONE AND DATA SYSTEMS, INC.
(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 |
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(I.R.S. Employer Identification No.) |
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incorporation or organization) |
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30 North LaSalle Street, Chicago, Illinois 60602 |
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(Address of principal executive offices) (Zip Code) |
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Registrant’s telephone number, including area code: (312) 630-1900
Indicate by check mark 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. Yes x No o
Indicate by check mark 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). Yes o No o
Indicate by check mark 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 x |
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Accelerated filer o |
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Non-accelerated filer o (Do not check if a smaller reporting company) |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
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, 2009 |
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Common Shares, $.01 par value |
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51,651,691 Shares |
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Special Common Shares, $.01 par value |
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50,959,100 Shares |
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Series A Common Shares, $.01 par value |
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6,477,322 Shares |
Telephone and Data Systems, Inc.
Quarterly Report on Form 10-Q
For the Period Ended June 30, 2009
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Page No. |
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3 |
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3 |
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Consolidated Statement of
Operations |
3 |
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Consolidated Statement of
Cash Flows |
4 |
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Consolidated Balance Sheet |
5 |
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Consolidated
Statement of Changes in Equity |
7 |
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9 |
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Management’s
Discussion and Analysis of Financial |
28 |
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28 |
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33 |
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33 |
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35 |
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41 |
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46 |
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46 |
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48 |
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50 |
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54 |
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54 |
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56 |
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60 |
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61 |
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62 |
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66 |
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67 |
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68 |
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68 |
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68 |
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69 |
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71 |
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72 |
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72 |
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74 |
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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, |
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2009 |
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2008 |
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2009 |
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2008 |
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(Dollars and shares in thousands, except per share amounts) |
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Operating revenues |
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$ |
1,242,477 |
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$ |
1,274,351 |
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$ |
2,499,123 |
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$ |
2,523,452 |
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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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431,119 |
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456,796 |
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898,526 |
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903,187 |
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Selling, general and administrative expense |
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470,913 |
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473,348 |
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938,761 |
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932,639 |
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Depreciation, amortization and accretion expense |
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183,349 |
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188,026 |
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366,115 |
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374,184 |
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Loss on asset disposals, net |
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2,496 |
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6,438 |
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4,912 |
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10,090 |
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Total operating expenses |
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1,087,877 |
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1,124,608 |
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2,208,314 |
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2,220,100 |
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Operating income |
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154,600 |
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149,743 |
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290,809 |
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303,352 |
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Investment and other income (expense) |
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Equity in earnings of unconsolidated entities |
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18,363 |
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22,909 |
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43,700 |
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44,379 |
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Interest and dividend income |
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2,902 |
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17,455 |
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4,974 |
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27,201 |
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Interest expense |
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(32,245 |
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(35,570 |
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(62,350 |
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(76,950 |
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Gain (loss) on investments and financial instruments |
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— |
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3,088 |
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— |
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(402 |
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Other, net |
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(25 |
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1,902 |
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474 |
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1,703 |
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Total investment and other income (expense) |
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(11,005 |
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9,784 |
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(13,202 |
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(4,069 |
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Income before income taxes |
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143,595 |
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159,527 |
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277,607 |
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299,283 |
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Income tax expense |
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53,036 |
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53,261 |
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93,674 |
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102,512 |
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Net income |
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90,559 |
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106,266 |
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183,933 |
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196,771 |
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Less: Net income attributable to noncontrolling interests, net of tax |
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(20,828 |
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(18,509 |
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(42,194 |
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(35,527 |
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Net income attributable to TDS |
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69,731 |
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87,757 |
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141,739 |
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161,244 |
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Preferred dividend requirement |
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(13 |
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(13 |
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(26 |
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(26 |
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Net income available to common |
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$ |
69,718 |
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$ |
87,744 |
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$ |
141,713 |
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$ |
161,218 |
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Basic weighted average shares outstanding |
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110,741 |
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116,267 |
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111,486 |
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116,919 |
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Basic earnings per share attributable to TDS shareholders |
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$ |
0.63 |
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$ |
0.75 |
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$ |
1.27 |
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$ |
1.38 |
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Diluted weighted average shares outstanding |
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110,971 |
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116,814 |
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111,698 |
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117,500 |
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Diluted earnings per share attributable to TDS shareholders |
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$ |
0.63 |
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$ |
0.75 |
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$ |
1.27 |
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$ |
1.37 |
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Dividends per share |
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$ |
0.1075 |
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$ |
0.1025 |
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$ |
0.2150 |
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$ |
0.2050 |
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The accompanying notes are an integral part of these consolidated financial statements.
3
Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
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Six Months Ended |
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June 30, |
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2009 |
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2008 |
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(Dollars in thousands) |
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Cash flows from operating activities |
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Net income |
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$ |
183,933 |
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$ |
196,771 |
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Add (deduct) adjustments to reconcile net income to net cash flows from operating activities |
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Depreciation, amortization and accretion |
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366,115 |
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374,184 |
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Bad debts expense |
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42,761 |
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36,806 |
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Stock-based compensation expense |
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14,394 |
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9,022 |
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Deferred income taxes, net |
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16,237 |
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(316,269 |
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Loss on investments and financial instruments, net |
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— |
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402 |
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Equity in earnings of unconsolidated entities |
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(43,700 |
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(44,379 |
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Distributions from unconsolidated entities |
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13,239 |
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45,810 |
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Loss on asset disposals, net |
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4,912 |
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10,090 |
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Noncash interest expense |
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2,170 |
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7,930 |
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Excess tax benefit from stock awards |
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(4 |
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(1,706 |
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Other operating activities |
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(41 |
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(2,103 |
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Changes in assets and liabilities from operations |
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Accounts receivable |
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(62,870 |
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(59,440 |
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Inventory |
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(9,928 |
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(20,830 |
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Accounts payable |
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(63,963 |
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(4,171 |
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Customer deposits and deferred revenues |
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(4,824 |
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10,303 |
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Accrued taxes |
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56,741 |
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304,231 |
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Accrued interest |
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513 |
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(3,780 |
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Other assets and liabilities |
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(71,724 |
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(47,432 |
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443,961 |
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495,439 |
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Cash flows from investing activities |
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Additions to property, plant and equipment |
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(290,821 |
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(299,061 |
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Cash paid for acquisitions and licenses |
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(15,042 |
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(334,350 |
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Cash received from divestitures |
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50 |
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6,838 |
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Proceeds from disposition of investments |
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— |
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226,644 |
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Cash paid to settle derivative liabilities |
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— |
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(17,404 |
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Cash paid for short-term investments |
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(109,055 |
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— |
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Other investing activities |
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1,990 |
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(934 |
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(412,878 |
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(418,267 |
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Cash flows from financing activities |
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Issuance of notes payable |
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— |
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100,000 |
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Repayment of notes payable |
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— |
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(50,000 |
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Repayment of variable prepaid forward contracts |
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— |
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(47,357 |
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Repayment of long-term debt |
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(1,655 |
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(6,442 |
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TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments |
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743 |
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1,494 |
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U.S. Cellular Common Shares reissued for benefit plans, net of tax payments |
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(405 |
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(1,878 |
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Excess tax benefit from stock awards |
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4 |
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1,706 |
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Repurchase of TDS Special Common Shares |
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(86,565 |
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(83,013 |
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Repurchase of U.S. Cellular Common Shares |
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(19,332 |
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(14,516 |
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Dividends paid |
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(23,814 |
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(23,922 |
) |
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Payment of debt issuance costs |
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(9,959 |
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— |
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Distributions to noncontrolling interests |
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(3,417 |
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(4,594 |
) |
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Other financing activities |
|
765 |
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2,067 |
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(143,635 |
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(126,455 |
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Net decrease in cash and cash equivalents |
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(112,552 |
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(49,283 |
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Cash and cash equivalents - |
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|
|
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Beginning of period |
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777,309 |
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1,174,446 |
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End of period |
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$ |
664,757 |
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$ |
1,125,163 |
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The accompanying notes are an integral part of these consolidated financial statements.
4
Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Assets
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June 30, |
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2009 |
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December 31, |
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(Unaudited) |
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2008 |
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(Dollars in thousands) |
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Current assets |
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Cash and cash equivalents |
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$ |
664,757 |
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$ |
777,309 |
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Short-term investments |
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136,495 |
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27,705 |
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Accounts receivable |
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Due from customers, less allowances of $12,250 and $12,822, respectively |
|
390,211 |
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377,054 |
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Other, principally connecting companies, less allowances of $5,935 and $6,380, respectively |
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151,017 |
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139,795 |
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Inventory |
|
130,963 |
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122,377 |
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Net deferred income tax asset |
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27,758 |
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27,758 |
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Prepaid expenses |
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83,457 |
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93,382 |
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Other current assets |
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71,144 |
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63,556 |
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1,655,802 |
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1,628,936 |
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Investments |
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Licenses |
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1,453,526 |
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1,441,440 |
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Goodwill |
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707,840 |
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707,079 |
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Customer lists, net of accumulated amortization of $103,734 and $97,891, respectively |
|
28,189 |
|
34,032 |
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Investments in unconsolidated entities |
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234,409 |
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205,768 |
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Other investments |
|
10,177 |
|
10,623 |
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2,434,141 |
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2,398,942 |
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Property, plant and equipment |
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|
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In service and under construction |
|
8,447,510 |
|
8,680,388 |
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Less: accumulated depreciation |
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4,944,900 |
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5,111,464 |
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|
3,502,610 |
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3,568,924 |
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Other assets and deferred charges |
|
65,179 |
|
55,614 |
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Total assets |
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$ |
7,657,732 |
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$ |
7,652,416 |
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The accompanying notes are an integral part of these consolidated financial statements.
5
Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Liabilities and Stockholders’ Equity
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June 30, |
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2009 |
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December 31, |
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(Unaudited) |
|
2008 |
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(Dollars in thousands) |
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||||
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Current liabilities |
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Current portion of long-term debt |
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$ |
17,427 |
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$ |
15,337 |
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Accounts payable |
|
258,484 |
|
319,575 |
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Customer deposits and deferred revenues |
|
169,277 |
|
174,101 |
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Accrued interest |
|
14,749 |
|
14,236 |
|
||
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Accrued taxes |
|
39,618 |
|
25,192 |
|
||
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Accrued compensation |
|
66,492 |
|
90,512 |
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Other current liabilities |
|
114,915 |
|
134,334 |
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|
|
680,962 |
|
773,287 |
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Deferred liabilities and credits |
|
|
|
|
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Net deferred income tax liability |
|
485,290 |
|
471,623 |
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Other deferred liabilities and credits |
|
383,507 |
|
368,045 |
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|
|
868,797 |
|
839,668 |
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Long-term debt |
|
1,619,341 |
|
1,621,422 |
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Commitments and contingencies |
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Noncontrolling interests with mandatory redemption features |
|
640 |
|
589 |
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Equity |
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TDS stockholders’ equity |
|
|
|
|
|
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|
Common Shares, par value $.01 per share; authorized 100,000,000 shares; issued 57,082,000 shares |
|
571 |
|
571 |
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Special Common Shares, par value $.01 per share; authorized 165,000,000 shares; issued 63,442,000 shares |
|
634 |
|
634 |
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||
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Series A Common Shares, par value $.01 per share; authorized 25,000,000 shares; issued and outstanding 6,477,000 and 6,461,000 shares, respectively |
|
65 |
|
65 |
|
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|
Capital in excess of par value |
|
2,075,420 |
|
2,066,597 |
|
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|
Treasury shares at cost: |
|
|
|
|
|
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|
Common Shares, 5,430,000 and 5,435,000 shares, respectively |
|
(162,713 |
) |
(163,017 |
) |
||
|
Special Common Shares, 12,483,000 and 9,352,000 shares, respectively |
|
(433,440 |
) |
(350,091 |
) |
||
|
Accumulated other comprehensive loss |
|
(13,309 |
) |
(16,812 |
) |
||
|
Retained earnings |
|
2,346,702 |
|
2,229,540 |
|
||
|
Total TDS stockholders’ equity |
|
3,813,930 |
|
3,767,487 |
|
||
|
|
|
|
|
|
|
||
|
Nonredeemable preferred shares |
|
852 |
|
852 |
|
||
|
Noncontrolling interests |
|
673,210 |
|
649,111 |
|
||
|
|
|
|
|
|
|
||
|
Total equity |
|
4,487,992 |
|
4,417,450 |
|
||
|
|
|
|
|
|
|
||
|
Total liabilities and equity |
|
$ |
7,657,732 |
|
$ |
7,652,416 |
|
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) |
|
Common |
|
Special |
|
Series A |
|
Capital in |
|
Treasury |
|
Treasury |
|
Accumulated |
|
Retained |
|
Total |
|
Non |
|
Non |
|
Total |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
December 31, 2008 |
|
$ |
571 |
|
$ |
634 |
|
$ |
65 |
|
$ |
2,066,597 |
|
$ |
(163,017 |
) |
$ |
(350,091 |
) |
$ |
(16,812 |
) |
$ |
2,229,540 |
|
$ |
3,767,487 |
|
$ |
852 |
|
$ |
649,111 |
|
$ |
4,417,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net income excluding portion attributable to noncontrolling interests with mandatory redemption features |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
141,739 |
|
141,739 |
|
— |
|
42,143 |
|
183,882 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net unrealized losses on equity investments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(501 |
) |
— |
|
(501 |
) |
— |
|
— |
|
(501 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Changes in plan assets and projected benefit obligation related to retirement plans |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4,004 |
|
— |
|
4,004 |
|
— |
|
— |
|
4,004 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Common, Special Common and Series A Common Shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(23,788 |
) |
(23,788 |
) |
— |
|
— |
|
(23,788 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Preferred shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(26 |
) |
(26 |
) |
— |
|
— |
|
(26 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Repurchase of shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(86,018 |
) |
— |
|
— |
|
(86,018 |
) |
— |
|
— |
|
(86,018 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Dividend reinvestment plan |
|
— |
|
— |
|
— |
|
(13 |
) |
278 |
|
450 |
|
— |
|
79 |
|
794 |
|
— |
|
— |
|
794 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Incentive and compensation plans |
|
— |
|
— |
|
— |
|
(53 |
) |
26 |
|
2,219 |
|
— |
|
(842 |
) |
1,350 |
|
— |
|
— |
|
1,350 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans |
|
— |
|
— |
|
— |
|
2,545 |
|
— |
|
— |
|
— |
|
— |
|
2,545 |
|
— |
|
(14,627 |
) |
(12,082 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Stock-based compensation awards |
|
— |
|
— |
|
— |
|
6,420 |
|
— |
|
— |
|
— |
|
— |
|
6,420 |
|
— |
|
— |
|
6,420 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Tax windfall (shortfall) from stock awards |
|
— |
|
— |
|
— |
|
(76 |
) |
— |
|
— |
|
— |
|
— |
|
(76 |
) |
— |
|
— |
|
(76 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Distributions to noncontrolling interests |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(3,417 |
) |
(3,417 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
June 30, 2009 |
|
$ |
571 |
|
$ |
634 |
|
$ |
65 |
|
$ |
2,075,420 |
|
$ |
(162,713 |
) |
$ |
(433,440 |
) |
$ |
(13,309 |
) |
$ |
2,346,702 |
|
$ |
3,813,930 |
|
$ |
852 |
|
$ |
673,210 |
|
$ |
4,487,992 |
|
The accompanying notes are an integral part of these consolidated financial statements.
7
Telephone and Data Systems, Inc.
Consolidated Statement of Changes in Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDS Shareholders |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
(Dollars in thousands) |
|
Common |
|
Special |
|
Series A |
|
Capital in |
|
Treasury |
|
Treasury |
|
Accumulated |
|
Retained |
|
Total |
|
Non |
|
Non |
|
Total |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
December 31, 2007 |
|
$ |
571 |
|
$ |
634 |
|
$ |
64 |
|
$ |
2,048,110 |
|
$ |
(120,549 |
) |
$ |
(204,919 |
) |
$ |
511,776 |
|
$ |
1,690,651 |
|
$ |
3,926,338 |
|
$ |
860 |
|
$ |
654,971 |
|
$ |
4,582,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net income excluding portion attributable to noncontrolling interests with mandatory redemption features |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
161,244 |
|
161,244 |
|
— |
|
36,613 |
|
197,857 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net unrealized gains on securities |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
399 |
|
— |
|
399 |
|
— |
|
8 |
|
407 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Adoption of FAS 159 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(502,677 |
) |
502,677 |
|
— |
|
— |
|
— |
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Changes in plan assets and projected benefit obligation related to retirement plans |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
48 |
|
— |
|
48 |
|
— |
|
— |
|
48 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Common, Special Common and Series A Common Shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(23,896 |
) |
(23,896 |
) |
— |
|
— |
|
(23,896 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Preferred shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(26 |
) |
(26 |
) |
— |
|
— |
|
(26 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Repurchase of shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(84,679 |
) |
— |
|
— |
|
(84,679 |
) |
— |
|
— |
|
(84,679 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Dividend reinvestment plan |
|
— |
|
— |
|
1 |
|
1,078 |
|
— |
|
— |
|
— |
|
— |
|
1,079 |
|
— |
|
— |
|
1,079 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Incentive and compensation plans |
|
— |
|
— |
|
— |
|
(145 |
) |
2,038 |
|
5,912 |
|
— |
|
(5,836 |
) |
1,969 |
|
— |
|
— |
|
1,969 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans |
|
— |
|
— |
|
— |
|
3,068 |
|
— |
|
— |
|
— |
|
— |
|
3,068 |
|
— |
|
(4,164 |
) |
(1,096 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Stock-based compensation awards |
|
— |
|
— |
|
— |
|
2,541 |
|
— |
|
— |
|
— |
|
— |
|
2,541 |
|
— |
|
— |
|
2,541 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Tax windfall (shortfall) from stock awards |
|
— |
|
— |
|
— |
|
1,025 |
|
— |
|
— |
|
— |
|
— |
|
1,025 |
|
— |
|
— |
|
1,025 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Distributions to noncontrolling interests |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(4,594 |
) |
(4,594 |
) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
June 30, 2008 |
|
$ |
571 |
|
$ |
634 |
|
$ |
65 |
|
$ |
2,055,677 |
|
$ |
(118,511 |
) |
$ |
(283,686 |
) |
$ |
9,546 |
|
$ |
2,324,814 |
|
$ |
3,989,110 |
|
$ |
860 |
|
$ |
682,834 |
|
$ |
4,672,804 |
|
The accompanying notes are an integral part of these consolidated financial statements.
8
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”). The consolidated financial statements include the accounts of TDS and its majority-owned subsidiaries, including TDS’ 81%-owned wireless telephone subsidiary, United States Cellular Corporation (“U.S. Cellular®”), TDS’ 100%-owned wireline telephone subsidiary, TDS Telecommunications Corporation (“TDS Telecom®”) and TDS’ 80%-owned printing and distribution company, Suttle-Straus, Inc. In addition, the consolidated financial statements include all entities in which TDS has a variable interest that requires TDS to recognize a majority of the entity’s expected gains or losses. All material intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the 2009 presentation.
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 U.S. 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. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in TDS’ Annual Report on Form 10-K for the year ended December 31, 2008.
The accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring items unless otherwise disclosed) necessary to present fairly the financial position as of June 30, 2009 and December 31, 2008, the results of operations for the three and six months ended June 30, 2009 and 2008, and cash flows and changes in equity for the six months ended June 30, 2009 and 2008. The results of operations for the three and six months, and cash flows and changes in equity for the six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year.
2. Summary of Significant Accounting Policies
Postretirement Benefits
TDS sponsors two contributory defined benefit postretirement plans that cover most employees of TDS Corporate, TDS Telecom and the subsidiaries of TDS Telecom. One plan provides medical benefits and the other plan provides life insurance benefits.
Net periodic benefit costs for the defined benefit postretirement plans include the following components:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
|
|
(Dollars in thousands) |
|
||||||||||
|
Service cost |
|
$ |
535 |
|
$ |
499 |
|
$ |
1,070 |
|
$ |
998 |
|
|
Interest on accumulated benefit obligation |
|
890 |
|
863 |
|
1,779 |
|
1,726 |
|
||||
|
Expected return on plan assets |
|
(643 |
) |
(948 |
) |
(1,328 |
) |
(1,896 |
) |
||||
|
Amortization of: |
|
|
|
|
|
|
|
|
|
||||
|
Prior service cost |
|
(200 |
) |
(207 |
) |
(400 |
) |
(414 |
) |
||||
|
Net loss |
|
451 |
|
242 |
|
903 |
|
484 |
|
||||
|
Net postretirement cost |
|
$ |
1,033 |
|
$ |
449 |
|
$ |
2,024 |
|
$ |
898 |
|
9
TDS contributed $2.9 million to the postretirement plans during the six months ended June 30, 2009.
Amounts Collected from Customers and Remitted to Governmental Authorities
If the tax is assessed upon the customer and TDS merely acts as an agent in collecting the tax on behalf of the governmental authority imposing such tax, the amounts collected from customers and remitted to governmental authorities are recorded net in Accrued taxes in the Consolidated Balance Sheet. If the tax is assessed upon TDS, the amounts collected from customers as recovery of the tax are recorded in Operating revenues and the amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The amounts recorded in Operating revenues that are billed to customers and remitted to governmental authorities totaled $31.0 million and $60.2 million for the three and six months ended June 30, 2009, respectively, and $40.4 million and $77.2 million for the three and six months ended June 30, 2008, respectively.
Implementation of SFAS No. 141(R)
Effective January 1, 2009, TDS adopted the provisions of FASB Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations—a replacement of FASB Statement No. 141 (“SFAS 141(R)”), which replaces SFAS No. 141, Business Combinations (“SFAS 141”). Although SFAS 141(R) retains the underlying concept of SFAS 141 in that all business combinations are still required to be accounted for at fair value in accordance with the acquisition method, SFAS 141(R) requires TDS to revise its application of the acquisition method in a number of significant aspects, such as requiring the expensing of transaction costs and requiring the acquirer to recognize 100% of the acquiree’s assets and liabilities, rather than a proportional share, for acquisitions of less than 100% of a business. In addition, SFAS 141(R) eliminates the step acquisition model and provides that all business combinations, whether full, partial or step acquisitions, will result in all assets and liabilities of an acquired business being recorded at their fair values at the acquisition date.
In April 2009, the FASB issued FASB Staff Position FAS 141(R)-1, Accounting for Assets and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP FAS 141(R)-1”), which amends the initial and subsequent measurement guidance and disclosure requirements in SFAS 141(R) for assets and liabilities arising from contingencies in a business combination. FSP FAS 141(R)-1 is effective on a prospective basis for all business combinations for which the acquisition date is on or after January 1, 2009. TDS did not have any business combinations accounted for under SFAS 141(R) during the six months ended June 30, 2009.
Implementation of SFAS No. 160
See Note 3 — Noncontrolling Interests for information related to TDS’ adoption of SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS 160”).
Recent Accounting Pronouncements
In December 2008, the FASB issued FASB Staff Position FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (“FSP FAS 132(R)-1”). FSP FAS 132(R)-1 provides guidance on disclosing information about assets held in a defined benefit pension or other postretirement plan. The guidance addresses disclosures relating to (a) categories of plan assets, (b) concentrations of risk arising within or across categories of plan assets, and (c) fair value measurements of plan assets. FSP FAS 132(R)-1 is effective for TDS on December 31, 2009 and will impact TDS’ financial statement year-end disclosures related to its defined benefit postretirement plans.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 changes how TDS will determine when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. TDS has several variable interest entities within the scope of SFAS 167 (see Note 6 — Variable Interest Entities). SFAS 167 is effective for TDS on January 1, 2010. TDS is currently reviewing the requirements of SFAS 167 and has not yet determined the impact of adoption, if any, on its financial position or results of operations.
10
3. Noncontrolling Interests
Implementation of SFAS No. 160
Effective January 1, 2009, TDS adopted the provisions of SFAS 160.
Pursuant to SFAS 160, the following provisions were applied retrospectively to all periods presented in the financial statements:
· TDS reclassified noncontrolling interests, formerly known as “minority interests,” from a separate caption between liabilities and stockholders’ equity (“mezzanine section”) to a component of equity, with the exception of noncontrolling interests with redemption features, which require mezzanine section presentation in accordance with Emerging Issues Task Force Topic No. D-98, Classification and Measurement of Redeemable Securities. Previously, minority interests generally were reported in the balance sheet in the mezzanine section.
· Consolidated net income and comprehensive income include amounts attributable to both TDS and the noncontrolling interests. Previously, net income attributable to the noncontrolling interests was reported as a deduction in arriving at consolidated net income. This presentation change does not impact the calculation of basic or diluted earnings per share, which continue to be calculated based on Net income attributable to TDS.
· Shares of TDS held by its subsidiary are reflected as treasury shares in the consolidated financial statements. Previously, these shares were not reflected as issued shares and treasury shares in the consolidated financial statements. As a result, 484,012 Common Shares and 484,012 Special Common Shares were added to both Common and Special Common Shares issued and Treasury Shares in the Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008.
Pursuant to SFAS 160, the following provisions were applied prospectively effective January 1, 2009:
· SFAS 160 provides that all earnings and losses of a subsidiary should be attributed to the parent and the noncontrolling interest, even if the losses attributable to the noncontrolling interest result in a deficit noncontrolling interest balance. Previously, any losses exceeding the noncontrolling interest’s investment in the subsidiary were attributed to the parent. This change did not have a significant impact on TDS’ financial statements for the six months ended June 30, 2009.
11
· SFAS 160 establishes that once control of a subsidiary is obtained, changes in ownership interests in that subsidiary that do not result in a loss of control shall be accounted for as equity transactions. Previously, decreases in ownership interest in a subsidiary were accounted for as equity transactions, while increases in ownership interests in a subsidiary were accounted for as step acquisitions under the provisions of SFAS 141. Therefore, U.S. Cellular’s repurchases of U.S. Cellular Common Shares during the six months ended June 30, 2009 were accounted for as equity transactions in TDS’ financial statements, whereby the difference between the fair value of the consideration paid and the related carrying value of the noncontrolling interests was recorded as Capital in excess of par value in TDS’ Consolidated Balance Sheet. Previously, these transactions had been recorded as step acquisitions in TDS’ financial statements. The following schedule discloses the effects of net income and changes in TDS’ ownership interest in U.S. Cellular on TDS’ equity for the six months ended June 30, 2009 and 2008:
|
|
|
Six Months Ended |
|
||||
|
|
|
June 30, |
|
||||
|
|
|
2009 |
|
2008 (1) |
|
||
|
|
|
(Dollars in thousands) |
|
||||
|
Net income attributable to TDS |
|
$ |
141,739 |
|
$ |
161,244 |
|
|
Transfer (to) from the noncontrolling interests |
|
|
|
|
|
||
|
Change in TDS’ Capital in excess of par value from U.S. Cellular’s issuance of U.S. Cellular shares |
|
(3,277 |
) |
(7,800 |
) |
||
|
Change in TDS’ Capital in excess of par value from U.S. Cellular’s repurchase of U.S. Cellular shares |
|
(405 |
) |
— |
|
||
|
Net transfers (to) from noncontrolling interests |
|
(3,682 |
) |
(7,800 |
) |
||
|
Change from net income attributable to TDS and transfers (to) from noncontrolling interests |
|
$ |
138,057 |
|
$ |
153,444 |
|
(1) During the six months ended June 30, 2008, U.S. Cellular repurchased U.S. Cellular Common Shares and also purchased noncontrolling interests in a consolidated subsidiary. TDS accounted for these transactions as step acquisitions under the provisions of SFAS 141. The amounts recorded in these transactions are reflected in the changes in the balances of Licenses, Goodwill and Customer lists.
Mandatorily Redeemable Noncontrolling Interests in Subsidiaries
Under SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, certain noncontrolling interests in consolidated entities with finite lives may meet the definition of a mandatorily redeemable financial instrument. TDS’ consolidated financial statements include certain noncontrolling interests that meet the definition of mandatorily redeemable financial instruments. These mandatorily redeemable noncontrolling interests represent interests held by third parties in consolidated partnerships and limited liability companies (“LLCs”), where the terms of the underlying partnership or LLC agreement provide for a defined termination date at which time the assets of the subsidiary are to be sold, the liabilities are to be extinguished and the remaining net proceeds are to be distributed to the noncontrolling interest holders and TDS in accordance with the respective partnership and LLC agreements. The termination dates of TDS’ mandatorily redeemable noncontrolling interests range from 2085 to 2094.
The settlement value of TDS’ mandatorily redeemable noncontrolling interests is estimated to be $133.8 million at June 30, 2009. This amount represents the estimate of cash that would be due and payable to settle these noncontrolling interests assuming an orderly liquidation of the finite-lived consolidated partnerships and LLCs on June 30, 2009, net of estimated liquidation costs. This amount is being disclosed pursuant to the requirements of FSP No. FAS 150-3, Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under SFAS 150. TDS has no current plans or intentions to liquidate any of the related partnerships or LLCs prior to their scheduled termination dates. The corresponding carrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships and LLCs at June 30, 2009 is $47.9 million, and is included in Noncontrolling interests in the Consolidated Balance Sheet. The excess of the aggregate settlement value over the aggregate carrying value of the mandatorily redeemable noncontrolling interests of $85.9 million is due primarily to the unrecognized appreciation of the noncontrolling interest holders’ share of the underlying net assets in the consolidated partnerships and LLCs. Neither the noncontrolling interest holders’ share, nor TDS’ share, of the appreciation of the underlying net assets of these subsidiaries is reflected in the consolidated financial statements. The estimate of settlement value was based on certain factors and assumptions which are subjective in nature. Changes in those factors and assumptions could result in a materially larger or smaller settlement amount.
12
4. Fair Value Measurements
SFAS No. 157, Fair Value Measurements, (“SFAS 157”) defines “fair value”, establishes a framework for measuring fair value in the application of GAAP, and expands disclosures about fair value measurements. SFAS 157 does not expand the use of fair value measurements in financial statements, but standardizes its definition and application in GAAP. SFAS 157 provides that fair value is a market-based measurement. This pronouncement establishes a fair value hierarchy that distinguishes between assumptions developed based on market data obtained from independent external sources and the reporting entity’s own assumptions. Further, SFAS 157 specifies that fair value measurements should consider adjustments for risk, such as the risk inherent in a valuation technique or its input. For assets and liabilities measured at fair value on a recurring basis, SFAS 157 expands the required disclosures concerning the inputs used to measure fair value.
As of June 30, 2009 and December 31, 2008, TDS did not have any financial assets or liabilities that were required to be recorded at fair value on a recurring basis in its Consolidated Balance Sheet. However, TDS has applied the provisions of SFAS 157 for purposes of computing the fair value of financial instruments for disclosure purposes. The fair value of financial instruments was as follows:
|
|
|
June 30, |
|
December 31, |
|
||||||||
|
|
|
2009 |
|
2008 |
|
||||||||
|
|
|
Book Value |
|
Fair Value |
|
Book Value |
|
Fair Value |
|
||||
|
|
|
(Dollars in thousands) |
|
||||||||||
|
Cash and cash equivalents |
|
$ |
664,757 |
|
$ |
664,757 |
|
$ |
777,309 |
|
$ |
777,309 |
|
|
Short-term investments |
|
136,495 |
|
136,495 |
|
27,705 |
|
27,705 |
|
||||
|
Current portion of long-term debt(1) |
|
17,053 |
|
16,824 |
|
14,618 |
|
14,715 |
|
||||
|
Long-term debt(1) |
|
1,614,194 |
|
1,358,467 |
|
1,617,534 |
|
1,035,554 |
|
||||
(1) Excludes capital lease obligations
The fair value of Cash and cash equivalents and Short-term investments approximate their book value due to the short-term nature of these financial instruments. The fair value of TDS’ Current portion of long-term debt, excluding capital lease obligations, was estimated using a discounted cash flow analysis. The fair value of Long-term debt, excluding capital lease obligations, was estimated using market prices for TDS’ 7.6% Series A notes and 6.625% senior notes, U.S. Cellular’s 7.5% and 8.75% senior notes, and discounted cash flow analysis for remaining debt.
As of June 30, 2009, TDS did not have any nonfinancial assets or liabilities that required the application of SFAS 157 for purposes of reporting such amounts in its Consolidated Balance Sheet.
5. Income Taxes
TDS’ overall effective tax rate on Income before income taxes for the three and six months ended June 30, 2009 was 36.9% and 33.7%, respectively, and for the three and six months ended June 30, 2008 was 33.4% and 34.3%.
· The effective tax rate for the six months ended June 30, 2009 was lower than the rate for the three months ended June 30, 2009, primarily due to a state tax benefit resulting from a state tax law change. A tax benefit associated with the state tax law change was recognized as a discrete item in the three months ended March 31, 2009. This benefit, along with other minor discrete benefits in the period, decreased income tax expense for the three months ended March 31, 2009 and the six months ended June 30, 2009 by $9.9 million and $10.8 million, respectively; absent these benefits, the effective tax rate for the three and six month periods ended June 30, 2009 would have been 37.6% for both periods. The state tax law change is not expected to provide any incremental benefit in future periods.
· The effective tax rate for the three and six months ended June 30, 2008 was impacted by the disposition of Deutsche Telekom marketable equity securities and settlement of the related variable prepaid forward contracts during these periods. See Note 10 — Marketable Equity Securities and Variable Prepaid Forward Contracts for additional details on these transactions. The tax benefit associated with the Deutsche Telekom transactions and other discrete benefits in the three and six months ended June 30, 2008 was $4.6 million and $11.6 million respectively; absent these benefits, the effective tax rate for the three and six months ended June 30, 2008 would have been 37.0% and 38.1%, respectively.
13
In 2008, upon completion of the audit of the TDS consolidated group’s federal income tax returns for the years 2002 through 2005, the Internal Revenue Service (“IRS”) issued an assessment of income tax. TDS protested the assessment and it is under appeal. Pursuant to a provision of the Internal Revenue Code, TDS made a $38 million deposit with the IRS in order to eliminate any potential interest expense subsequent to the deposit. This deposit is included in Other current assets in TDS’ Consolidated Balance Sheet at June 30, 2009.
6. Variable Interest Entities
From time to time, the Federal Communications Commission (“FCC”) conducts auctions through which additional spectrum is made available for the provision of wireless services. U.S. Cellular, TDS’ subsidiary, participated in spectrum auctions indirectly through its limited partnership interests in Aquinas Wireless L.P. (“Aquinas Wireless”), King Street Wireless L.P. (“King Street Wireless”), Barat Wireless L.P. (“Barat Wireless”) and Carroll Wireless L.P. (“Carroll Wireless”), collectively, the “limited partnerships.” Each entity qualified as a “designated entity” and thereby was eligible for bid credits with respect to licenses purchased in accordance with the rules defined by the FCC for each auction. In most cases, the bidding credits resulted in a 25% discount from the gross winning bid. Some licenses were “closed licenses,” for which no credit was received, but bidding was restricted to bidders qualifying as “entrepreneurs,” which are small businesses that have a limited amount of assets and revenues.
A summary of the auctions in which each entity participated and the auction results for each of these entities are shown in the table below.
|
|
|
FCC |
|
Auction End Date |
|
Date Applications |
|
Number of |
|
|
Aquinas Wireless |
|
78 |
|
August 20, 2008 |
|
(1) |
|
5 |
(2) |
|
King Street Wireless |
|
73 |
|
March 20, 2008 |
|
(1) |
|
152 |
(2) |
|
Barat Wireless |
|
66 |
|
September 18, 2006 |
|
April 30, 2007 |
|
17 |
|
|
Carroll Wireless |
|
58 |
|
February 15, 2005 |
|
January 6, 2006 |
|
16 |
|
(1) As of June 30, 2009, the FCC had not granted licenses to Aquinas Wireless and King Street Wireless for Auctions 78 and 73, respectively.
(2) Provisionally won.
Consolidated Variable Interest Entities
As of June 30, 2009, TDS consolidates the following variable interest entities (“VIEs”):
· Aquinas Wireless;
· King Street Wireless and King Street Wireless, Inc., the general partner of King Street Wireless;
· Barat Wireless and Barat Wireless, Inc., the general partner of Barat Wireless; and
· Carroll Wireless and Carroll PCS, Inc., the general partner of Carroll Wireless.
FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (“FIN 46(R)”), establishes certain criteria for consolidation when voting control is not present. Specifically, for a variable interest entity, as such term is defined by FIN 46(R), an entity, referred to as the primary beneficiary, that absorbs a majority of the variable interest entity’s expected gains or losses is required to consolidate such a variable interest entity. TDS holds a variable interest in the entities listed above due to capital contributions and/or advances it has provided to these entities. Given the significance of these contributions and/or advances in relation to the equity investment at risk, TDS was deemed to be the primary beneficiary of these VIEs. Accordingly, these VIEs are consolidated pursuant to FIN 46(R) because TDS anticipates benefiting from or absorbing a majority of these VIEs’ expected gains or losses.
14
Following is a summary of the capital contributions and advances made to each entity by TDS as of June 30, 2009 (dollars in thousands). The amounts in the table below exclude funds provided to these entities solely from the shareholder of the general partner.
|
Aquinas Wireless |
|
$ |
2,132 |
|
|
King Street Wireless & King Street Wireless, Inc. |
|
300,604 |
|
|
|
Barat Wireless & Barat Wireless, Inc. |
|
127,485 |
|
|
|
Carroll Wireless & Carroll PCS, Inc. |
|
130,094 |
|
|
|
|
|
$ |
560,315 |
|
The following table presents the classification of the consolidated VIEs’ assets and liabilities in TDS’ Consolidated Balance Sheet.
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2009 |
|
2008 |
|
||
|
|
|
(Dollars in thousands) |
|
||||
|
Assets |
|
|
|
|
|
||
|
Cash |
|
$ |
361 |
|
$ |
684 |
|
|
Other current assets |
|
367 |
|
63 |
|
||
|
Licenses |
|
487,962 |
|
487,962 |
|
||
|
Total assets |
|
$ |
488,690 |
|
$ |
488,709 |
|
|
|
|
|
|
|
|
||
|
Liabilities |
|
|
|
|
|
||
|
Customer deposits and deferred revenues |
|
110 |
|
63 |
|
||
|
Total liabilities |
|
$ |
110 |
|
$ |
63 |
|
Other Related Matters
TDS may agree to make additional capital contributions and/or advances to the VIEs discussed above and/or to their general partners to provide additional funding for the development of licenses granted in the various auctions. TDS may finance such amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or long-term debt. There is no assurance that TDS will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.
The general partner of each of these VIEs has the right to manage and operate the limited partnerships; however, the general partner needs consent of the limited partner, a subsidiary of U.S. Cellular, in certain limited circumstances, such as to make certain large expenditures, admit other partners, or liquidate the limited partnerships.
See Note 13 — Commitments and Contingencies for additional information related to the participation of Carroll Wireless, Barat Wireless and King Street Wireless in Auction 58, Auction 66 and Auction 73, respectively.
These VIEs are in the process of developing long-term business and financing plans. These entities were formed to participate in FCC auctions of wireless spectrum and to fund, establish and provide wireless service with respect to any FCC licenses won in the auctions. As such, these entities have risks similar to those described in the “Risk Factors” in TDS’ Form 10-K for the year ended December 31, 2008.
15
7. Earnings per Share
Basic earnings per share attributable to TDS shareholders is computed by dividing Net income available to common shareholders of TDS by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to TDS shareholders is computed by dividing Net income available to common shareholders of TDS by the weighted average number of common shares adjusted to include the effect of potentially dilutive securities. Potentially dilutive securities include incremental shares issuable upon exercise of outstanding stock options and the vesting of restricted stock units.
The amounts used in computing earnings per share and the effects of potentially dilutive securities on income and the weighted average number of Common, Special Common and Series A Common Shares are as follows:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
|
|
(Dollars and shares in
thousands, |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basic earnings per share attributable to TDS shareholders |
|
|
|
|
|
|
|
|
|
||||
|
Net Income attributable to TDS |
|
$ |
69,731 |
|
$ |
87,757 |
|
$ |
141,739 |
|
$ |
161,244 |
|
|
Preferred dividend requirement |
|
(13 |
) |
(13 |
) |
(26 |
) |
(26 |
) |
||||
|
Net income attributable to common shareholders of TDS used in basic earnings per share |
|
$ |
69,718 |
|
$ |
87,744 |
|
$ |
141,713 |
|
$ |
161,218 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Diluted earnings per share attributable to TDS shareholders |
|
|
|
|
|
|
|
|
|
||||
|
Net income attributable to common shareholders of TDS used in basic earnings per share |
|
$ |
69,718 |
|
$ |
87,744 |
|
$ |
141,713 |
|
$ |
161,218 |
|
|
Noncontrolling income adjustment (1) |
|
(147 |
) |
(200 |
) |
(343 |
) |
(516 |
) |
||||
|
Preferred dividend adjustment (2) |
|
12 |
|
12 |
|
25 |
|
25 |
|
||||
|
Net income attributable to common shareholders of TDS used in diluted earnings per share |
|
$ |
69,583 |
|
$ |
87,556 |
|
$ |
141,395 |
|
$ |
160,727 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average number of shares |
|
|
|
|
|
|
|
||||||