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U.S. Cellular's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: USM

Ken Meyers

Thank you, Jane. Good morning everyone. As you are all from the team with mix quarter with some good progress on several fronts including the level of post paid and pre-paid gross adds and an another HMS acquisition. And there are some tough head winds we are faced -- we are working our way through. I will let team provide the details. I do want to point out three unusual items this quarter that affect comparisons.

The first is related to interest expense which was down $22 million year-over-year as a result of a $15.4 million write off of unamortized debt issuance cost in the second quarter of last year. The second item on the gain/loss on investment line, where last year we had a $13.4 million gain on the sales of property and this year we had a $3.7 million loss producing a swing of $17.1 million.

There is also a big change in taxes. TDS' overall affected tax rate was 39% this quarter compared to 9.5% of last year with income tax expense was reduced to $29 million primarily due to tax benefits from state tax law changes and street items. These three items which are all below the line significantly impact EPS comparisons.

Staying with taxes for a moment, as you know, the bonus depreciation rate for federal income tax purposes is currently 50% and it is expected to expire at the end of this year. We expect federal income tax payment to substantially increase beginning in 2013 and remain at a higher level for several years as the amount of TDS' federal income tax depreciation deduction substantially decreases. By the way, for the full year, we are estimating an effective tax rated at TDS about 35%.

Our balance sheet remained strong. We ended the second quarter with $820 million in cash, cash equivalents and short-term investments, as well as all of the $700 million on the revolving credit facilities. And I think it is always good to point out once in a while that we have no unfunded pension liabilities.

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