Attached files

file filename
EX-12 - EX-12 - TELEPHONE & DATA SYSTEMS INC /DE/exhibit12.htm
EX-31.1 - EX-31.1 - TELEPHONE & DATA SYSTEMS INC /DE/exhibit311.htm
EX-31.2 - EX-31.2 - TELEPHONE & DATA SYSTEMS INC /DE/exhibit312.htm
EX-32.2 - EX-32.2 - TELEPHONE & DATA SYSTEMS INC /DE/exhibit322.htm
EX-32.1 - EX-32.1 - TELEPHONE & DATA SYSTEMS INC /DE/exhibit321.htm

Table of Contents

 

 

 

 

 

 

 

 

 

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                                                                            

For the quarterly period ended September 30, 2009

OR

¨        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)

 

 

 

Delaware

(State or other jurisdiction of

incorporation or organization)


36-2669023

(I.R.S. Employer Identification No.)

 

 

 

30 North LaSalle Street, Chicago, Illinois  60602

(Address of principal executive offices)  (Zip Code)

 

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 ¨

 

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 ¨  No ¨

 

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.

 

Large accelerated filer  x

 

Accelerated filer  ¨

 

 

 

Non-accelerated filer  ¨

(Do not check if a smaller reporting company)

 

Smaller reporting company  ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No  x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

 

Outstanding at September 30, 2009

Common Shares, $.01 par value

 

50,173,631 Shares

Special Common Shares, $.01 par value

 

49,831,064 Shares

Series A Common Shares, $.01 par value

 

6,484,748 Shares




   

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

Telephone and Data Systems, Inc.

 

Quarterly Report on Form 10-Q

For the Period Ended September 30, 2009

 

 

 

 

 

 

 

 

 

Index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page No.

Part I.

Financial Information

3

 

 

 

 

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 3

 

 

Consolidated Statement of Operations

      Three and Nine Months Ended September 30, 2009 and 2008

 3

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows

      Nine Months Ended September 30, 2009 and 2008

 4

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheet

      September 30, 2009 and December 31, 2008

 5

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Changes in Equity

      Nine Months Ended September 30, 2009 and 2008

 7

 

 

 

 

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements

 9

 

 

 

 

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

 

 

 

 

 

 

 

 

Overview

 28

 

 

Nine Months Ended September 30, 2009 and 2008

 

 

 

 

Results of Operations - Consolidated

 33

 

 

 

Results of Operations - Wireless

 35

 

 

 

Results of Operations - Wireline

 40

 

 

Three Months Ended September 30, 2009 and 2008

 

 

 

 

Results of Operations - Consolidated

 44

 

 

 

Results of Operations - Wireless

 46

 

 

 

Results of Operations - Wireline

 48

 

 

Recent Accounting Pronouncements

 52

 

 

Financial Resources

 52

 

 

Liquidity and Capital Resources

 54

 

 

Application of Critical Accounting Policies and Estimates

 58

 

 

Certain Relationships and Related Transactions

 58

 

 

Safe Harbor Cautionary Statement

 59

 

 

 

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 63

 

 

 

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

 64

 

 

 

 

 

 

 

 

 

Part II.

Other Information

65

 

 

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 65

 

 

 

 

 

 

 

 

 

 

Item 1A.

Risk Factors

 65

 

 

 

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 66

 

 

 

 

 

 

 

 

 

 

Item 5.

Other Information

 67

 

 

 

 

 

 

 

 

 

 

Item 6.

Exhibits

 68

 

 

 

 

 

 

 

 

 

Signatures

 

 

 

 

 

 

69


 

 

Part I.  Financial Information

Item 1.  Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telephone and Data Systems, Inc.

 

Consolidated Statement of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

$

 1,258,742

 

$

 1,304,598

 

$

 3,757,865

 

$

 3,828,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and products (excluding Depreciation, amortization and accretion expense reported below)

 

 477,116

 

 

 466,710

 

 

 1,375,642

 

 

 1,369,897

 

Selling, general and administrative expense

 

 507,159

 

 

 490,674

 

 

 1,445,920

 

 

 1,423,313

 

Depreciation, amortization and accretion expense

 

 192,247

 

 

 187,975

 

 

 558,362

 

 

 562,159

 

Loss on asset disposals, net

 

 4,557

 

 

 

 7,100

 

 

 

 9,469

 

 

 

 17,190

 

 

 

Total operating expenses

 

 1,181,079

 

 

 

 1,152,459

 

 

 

 3,389,393

 

 

 

 3,372,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 77,663

 

 

 152,139

 

 

 368,472

 

 

 455,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

 23,334

 

 

 22,566

 

 

 67,034

 

 

 66,945

 

Interest and dividend income

 

 3,461

 

 

 8,617

 

 

 8,435

 

 

 35,818

 

Interest expense

 

 (30,430

)

 

 

 (31,684

)

 

 

 (92,780

)

 

 

 (108,634

)

 

Gain on investments and financial instruments

 

 —

 

 

 31,997

 

 

 —

 

 

 31,595

 

Other, net

 

 1,030

 

 

 

 383

 

 

 

 1,504

 

 

 

 2,086

 

 

 

Total investment and other income (expense)

 

 (2,605

)

 

 

 31,879

 

 

 

 (15,807

)

 

 

 27,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 75,058

 

 

 184,018

 

 

 352,665

 

 

 483,301

 

Income tax expense

 

 27,793

 

 

 

 61,024

 

 

 

 121,467

 

 

 

 163,536

 

Net income

 

 47,265

 

 

 122,994

 

 

 231,198

 

 

 319,765

Less: Net income attributable to noncontrolling interests, net of tax

 

 (11,620

)

 

 

 (21,771

)

 

 

 (53,814

)

 

 

 (57,298

)

Net income attributable to TDS

 

 35,645

 

 

 101,223

 

 

 177,384

 

 

 262,467

Preferred dividend requirement

 

 (13

)

 

 

 (13

)

 

 

 (38

)

 

 

 (39

)

Net income available to common

$

 35,632

 

 

$

 101,210

 

 

$

 177,346

 

 

$

 262,428

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 108,289

 

 

 115,700

 

 

 110,408

 

 

 116,510

Basic earnings per share attributable to TDS shareholders

$

0.33

 

 

$

0.87

 

 

$

1.61

 

 

$

2.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

 108,565

 

 

 116,193

 

 

 110,633

 

 

 117,065

Diluted earnings per share attributable to TDS shareholders

$

0.33

 

 

$

0.87

 

 

$

1.60

 

 

$

2.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per share

$

0.1075

 

 

$

0.1025

 

 

$

0.3225

 

 

$

0.3075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

Telephone and Data Systems, Inc.

 

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

 

 

 

 

2009

 

2008

 

 

 

 

(Dollars in thousands)

Cash flows from operating activities

 

 

 

 

 

 

Net income

$

 231,198

 

$

 319,765

 

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 558,362

 

 

 562,159

 

 

 

Bad debts expense

 

 78,941

 

 

 59,452

 

 

 

Stock-based compensation expense

 

 24,523

 

 

 15,961

 

 

 

Deferred income taxes, net

 

 25,935

 

 

 (298,200

)

 

 

 

Gain on investments and financial instruments, net

 

 —

 

 

 (31,595

)

 

 

 

Equity in earnings of unconsolidated entities

 

 (67,034

)

 

 

 (66,945

)

 

 

 

Distributions from unconsolidated entities

 

 51,668

 

 

 51,224

 

 

 

Loss on asset disposals, net

 

 9,469

 

 

 17,190

 

 

 

Noncash interest expense

 

 2,160

 

 

 8,573

 

 

 

Excess tax benefit from stock awards

 

 (5

)

 

 

 (1,832

)

 

 

 

Other operating activities

 

 (41

)

 

 

 (1,955

)

 

 

Changes in assets and liabilities from operations

 

 

 

 

 

 

 

 

Accounts receivable

 

 (102,137

)

 

 

 (82,857

)

 

 

 

Inventory

 

 (3,595

)

 

 

 (12,929

)

 

 

 

Accounts payable

 

 (29,401

)

 

 

 7,140

 

 

 

Customer deposits and deferred revenues

 

 (3,609

)

 

 

 9,827

 

 

 

Accrued taxes

 

 82,267

 

 

 109,269

 

 

 

Accrued interest

 

 9,893

 

 

 5,528

 

 

 

Other assets and liabilities

 

 (68,643

)

 

 

 (37,951

)

 

 

 

 

 

 799,951

 

 

 

 631,824

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Additions to property, plant and equipment

 

 (450,594

)

 

 

 (485,028

)

 

Cash paid for acquisitions and licenses

 

 (15,242

)

 

 

 (336,259

)

 

Cash received from divestitures

 

 50

 

 

 6,838

 

Proceeds from disposition of investments

 

 —

 

 

 259,017

 

Cash paid to settle derivative liabilities

 

 —

 

 

 (17,404

)

 

Cash paid for short-term investments

 

 (109,055

)

 

 

 —

 

Other investing activities

 

 3,285

 

 

 

 (832

)

 

 

 

 

 

 (571,556

)

 

 

 (573,668

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Issuance of notes payable

 

 —

 

 

 100,000

 

Repayment of notes payable

 

 — 

 

 

 (100,000

)

 

Repayment of variable prepaid forward contracts

 

 —

 

 

 (47,357

)

 

Repayment of long-term debt

 

 (2,507

)

 

 

 (8,296

)

 

TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments

 

 1,296 

 

 

 1,916

 

U.S. Cellular Common Shares reissued for benefit plans, net of tax payments

 

 (119

)

 

 

 (1,286

)

 

Excess tax benefit from stock awards

 

 5 

 

 

 1,832

 

Repurchase of TDS Common and Special Common Shares

 

 (152,918

)

 

 

 (111,769

)

 

Repurchase of U.S. Cellular Common Shares

 

 (24,283

)

 

 

 (23,146

)

 

Dividends paid

 

 (35,389

)

 

 

 (35,783

)

 

Payment of debt issuance costs

 

 (10,074

)

 

 

 —

 

Distributions to noncontrolling interests

 

 (4,962

)

 

 

 (6,539

)

 

Other financing activities

 

 1,406

 

 

 

 3,909

 

 

 

 

 

 

 (227,545

)

 

 

 (226,519

)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 850

 

 

 (168,363

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

Beginning of period

 

 777,309

 

 

 

 1,174,446

 

 

End of period

$

 778,159

 

 

$

 1,006,083

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


 

Table of Contents

 

Telephone and Data Systems, Inc.

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheet — Assets

 

 

 

 

 

 

 

 

 

 

September 30,

2009 

 

December 31,

2008 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

(Dollars in thousands)

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

778,159 

 

$

777,309 

 

Short-term investments

 

136,400 

 

 

27,705 

 

Accounts receivable

 

 

 

 

 

 

 

Due from customers, less allowances of $19,704 and $12,822, respectively

 

384,213 

 

 

377,054 

 

 

Other, principally connecting companies, less allowances of $6,931 and  $6,380, respectively

 

156,998 

 

 

139,795 

 

Inventory

 

126,007 

 

 

122,377 

 

Net deferred income tax asset

 

27,758 

 

 

 27,758 

 

Prepaid expenses

 

95,677 

 

 

93,382 

 

Other current assets

 

72,812 

 

 

63,556 

 

 

 

 

 

1,778,024 

 

 

1,628,936 

Investments

 

 

 

 

 

 

Licenses

 

1,453,526 

 

 

1,441,440 

 

Goodwill

 

707,840 

 

 

707,079 

 

Customer lists, net of accumulated amortization of $106,347 and $97,891, respectively

 

25,577 

 

 

34,032 

 

Investments in unconsolidated entities

 

219,760 

 

 

205,768 

 

Other investments

 

9,996 

 

 

10,623 

 

 

 

 

 

2,416,699 

 

 

2,398,942 

Property, plant and equipment

 

 

 

 

 

 

In service and under construction

 

8,581,669 

 

 

8,680,388 

 

Less: accumulated depreciation

 

5,108,800 

 

 

5,111,464 

 

 

 

 

 

3,472,869 

 

 

3,568,924 

 

 

 

 

 

 

 

 

 

Other assets and deferred charges

 

65,583 

 

 

55,614 

 

 

 

 

 

 

 

 

 

Total assets

$

7,733,175 

 

$

7,652,416 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


 

Table of Contents

 

 

Telephone and Data Systems, Inc.

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheet — Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

September 30,

2009

 

December 31,

2008

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

(Dollars in thousands)

Current liabilities

 

 

 

 

 

 

 

 

Current portion of long-term debt

$

 15,126

 

 

$

 15,337

 

 

Accounts payable

 

 297,249

 

 

 

 319,575

 

 

Customer deposits and deferred revenues

 

 170,493

 

 

 

 174,101

 

 

Accrued interest

 

 24,129

 

 

 

 14,236

 

 

Accrued taxes

 

 66,661

 

 

 

 25,192

 

 

Accrued compensation

 

 84,125

 

 

 

 90,512

 

 

Other current liabilities

 

 116,041

 

 

 

 134,334

 

 

 

 

 

 

 

 773,824

 

 

 

 773,287

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred liabilities and credits

 

 

 

 

 

 

 

 

Net deferred income tax liability

 

 499,002

 

 

 

 471,623

 

 

Other deferred liabilities and credits

 

 384,032

 

 

 

 368,045

 

 

 

 

 

 

 

 883,034

 

 

 

 839,668

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 1,620,979

 

 

 

 1,621,422

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests with mandatory redemption features

 

 708

 

 

 

 589

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

TDS stockholders’ equity

 

 

 

 

 

 

 

 

 

Common Shares, par value $.01 per share; authorized 100,000,000 shares; issued 57,082,000 shares

 

 571

 

 

 

 571

 

 

 

Special Common Shares, par value $.01 per share; authorized 165,000,000 shares; issued 63,442,000 shares

 

 634

 

 

 

 634

 

 

 

Series A Common Shares, par value $.01 per share; authorized 25,000,000 shares; issued and outstanding 6,485,000 and 6,461,000 shares, respectively

 

 65

 

 

 

 65

 

 

 

Capital in excess of par value

 

 2,084,481

 

 

 

 2,066,597

 

 

 

Treasury shares at cost:

 

 

 

 

 

 

 

 

 

 

Common Shares, 6,908,000 and 5,435,000 shares, respectively

 

 (206,244

)

 

 

 (163,017

)

 

 

 

Special Common Shares, 13,611,000 and 9,352,000 shares, respectively

 

 (462,788

)

 

 

 (350,091

)

 

 

Accumulated other comprehensive loss

 

 (12,951

)

 

 

 (16,812

)

 

 

Retained earnings

 

 2,370,595

 

 

 

 2,229,540

 

 

 

 

Total TDS stockholders' equity

 

 3,774,363

 

 

 

 3,767,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

 

 845

 

 

 

 852

 

 

Noncontrolling interests

 

 679,422

 

 

 

 649,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

 4,454,630

 

 

 

 4,417,450

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$

 7,733,175

 

 

$

 7,652,416

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

6


 

Table of Contents

Telephone and Data Systems, Inc.

Consolidated Statement of Changes in Equity

(Unaudited)

  

 

TDS Shareholders

 

 

 

 

 

 

(Dollars in thousands)

Common

Shares

Special

Common

Shares

Series A

Common

Shares

Capital in

Excess of

Par Value

Treasury Common

Shares

Treasury Special

Common

Shares

Accumulated

Other

Comprehensive

 Loss

Retained

Earnings

Total

Shareholders’

Equity

 

Preferred Shares

Non

controlling Interests

Total

 Equity

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

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 177,384

 

 177,384

 

 —

 

 53,695

 

231,079

Net unrealized losses on equity investments

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 (302

)

 

 —

 

 (302

)

 

 —

 

 —

 

(302

)

Changes in plan assets and projected benefit obligation related to retirement plans

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 4,163

 

 —

 

 4,163

 

 —

 

 —

 

4,163

Dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common, Special Common and Series A Common Shares

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 (35,351

)

 

 (35,351

)

 

 —

 

 —

 

(35,351

)

 

Preferred shares

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 (38

)

 

 (38

)

 

 —

 

 —

 

(38

)

Repurchase of shares 

 

 —

 

 —

 

 —

 

 —

 

 (43,826

)

 

 (116,167

)

 

 —

 

 —

 

 (159,993

)

 

 (7

)

 

 —

 

(160,000

)

Dividend reinvestment plan

 

 —

 

 —

 

 —

 

 (13

)

 

 280

 

 451

 

 —

 

 444

 

 1,162

 

 —

 

 —

 

1,162

Incentive and compensation plans

 

 —

 

 —

 

 —

 

 (45

)

 

 319

 

 3,019

 

 —

 

 (1,384

)

 

 1,909

 

 —

 

 —

 

1,909

Adjust investment in subsidiaries for repurchases, issuances and other compensation plans

 

 —

 

 —

 

 —

 

 6,564

 

 —

 

 —

 

 —

 

 —

 

 6,564

 

 —

 

 (18,422

)

 

(11,858

)

Stock-based compensation awards

 

 —

 

 —

 

 —

 

 11,523

 

 —

 

 —

 

 —

 

 —

 

 11,523

 

 —

 

 —

 

11,523

Tax windfall (shortfall) from stock awards

 

 —

 

 —

 

 —

 

 (145

)

 

 —

 

 —

 

 —

 

 —

 

 (145

)

 

 —

 

 —

 

(145

)

Distributions to noncontrolling interests

 

 —

 

 —

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

   

 

 —

 

 

 —

 

 

 —

 

 

 (4,962

)

 

(4,962

)

September 30, 2009

$

 571

$

 634

$

 65

$

 2,084,481

 

$

 (206,244

) 

$

 (462,788

)

$

 (12,951

)

$

 2,370,595

 

$

 3,774,363

 

$

 845

 

$

 679,422

 

$

 4,454,630

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 The accompanying notes are an integral part of these consolidated financial statements.

7


 

Table of Contents

 

Telephone and Data Systems, Inc.

Consolidated Statement of Changes in Equity

(Unaudited)

 

TDS Shareholders

(Dollars in thousands)

Common

Shares

Special

Common

Shares

Series A

Common

Shares

Capital in Excess of Par Value

Treasury Common

Shares

Treasury Special

Common

Shares

Accumulated

Other

Comprehensive

 Income/(Loss)

Retained

Earnings

Total

Shareholders’

Equity

 

Preferred Shares

Non

controlling

Interests

Total

 Equity

December 31, 2007

$

571

$

633

$

64

$

2,048,110

$

(120,549

)

$

(204,918

)

$

511,776

$

1,690,651

$

3,926,338

 

$

860

$

654,972

$

4,582,170

Net income excluding portion attributable to noncontrolling interests with mandatory redemption features

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 262,467

 

 262,467

 

 

 —

 

 58,893

 

321,360

Net change in marketable equity securities and equity method investments

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 (17,509

)

 

 —

 

 (17,509

)

 

 —

 

 (1,945

)

 

(19,454

)

Cumulative-effect adjustment related to fair value accounting (Note 15)

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 (502,677

)

 

 502,677

 

 —

 

 

 —

 

 —

 

 —

Changes in plan assets and projected benefit obligation related to retirement plans

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 72

 

 —

 

 72

 

 

 —

 

 —

 

72

Dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common, Special Common and Series A Common Shares

 

 —

 

 —

 

 —

 

 

 

 —

 

 —

 

 (35,732

)

 

 (35,732

)

 

 —

 

 —

 

(35,732

)

Preferred shares

 

 

(39

)

(39

)

(39

)

Repurchase of shares

 

 —

 

 —

 

 —

 

 —

 

 —

 

 (114,988

)

 

 —

 

 —

 

 (114,988

)

 

 (6

)

 

 —

 

(114,994

)

Dividend reinvestment plan

 

 —

 

 1

 

 1

 

 1,418

 

 —

 

 —

 

 —

 

 —

 

 1,420

 

 

 —

 

 —

 

1,420

Incentive and compensation plans

 

 —

 

 —

 

 —

 

 62

 

 2,154

 

 6,430

 

 —

 

 (6,220

)

 

 2,426

 

 

 —

 

 —

 

2,426

Adjust investment in subsidiaries for repurchases, issuances and other compensation plans

 

 —

 

 —

 

 —

 

 6,941

 

 —

 

 —

 

 —

 

 —

 

 6,941

 

 

 —

 

 (8,543

)

 

(1,602

)

Stock-based compensation awards

 

 —

 

 —

 

 —

 

 4,668

 

 —

 

 —

 

 —

 

 —

 

 4,668

 

 

 —

 

 —

 

4,668

Tax windfall (shortfall) from stock awards

 

 —

 

 —

 

 —

 

 1,019

 

 —

 

 —

 

 —

 

 —

 

 1,019

 

 

 —

 

 —

 

1,019

Distributions to noncontrolling interests

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 

 —

 

 (6,539

)

 

(6,539

)

Other

 

 —

 

 —

 

 —

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

  

 

 183

 

 

183

 

September 30, 2008

$

 571

$

 634

$

 65

$

 2,062,218

$

 (118,395

)

$

 (313,476

$

 (8,338

)

$

 2,413,804

 

$

 4,037,083

 

$

 854

 

$

 697,021

 

$

 4,734,958

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

8


   

 

Table of Contents

 

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.  The consolidated financial statements include the accounts of TDS and its majority-owned subsidiaries, including TDS’ 82%-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.  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 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 September 30, 2009 and December 31, 2008, the results of operations for the three and nine months ended September 30, 2009 and 2008, and cash flows and changes in equity for the nine months ended September 30, 2009 and 2008. The results of operations for the three and nine months, and cash flows and changes in equity for the nine months ended September 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

September 30,

 

Nine Months Ended

September 30,

 

 

 

 

2009

 

2008

 

2009

 

2008