May 4, 2012 10:30 AM ET Call Start: 10:30 Call End: 11:18 Telephone & Data Systems, Inc. (TDS) Q1 2012 Earnings Call Executives Jane McCahon – VP, Corporate Relations Ken Meyers – EVP and CFO Mary Dillon – President and CEO, U.S. Cellular Steve Campbell – EVP and CFO, U.S. Cellular Vicki Villacrez – VP, Finance and CFO, TDS Telecom Alan Ferber – Chief Brand and Strategy Officer Analysts Simon Flannery – Morgan Stanley Ric Prentiss – Raymond James James Moorman – S&P Capital Sergey Dluzhevskiy – Gabelli & Company Stephen Mead – Anchor Capital Advisors Michael Rollins – Citi Presentation Operator
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This call is being simultaneously webcast on the Investor Relations’ sections of both the TDS and U.S. Cellular websites. Please see the website for slides referred to on this call including our non-GAAP reconciliations.The information set forth in the presentation today and discussed during this call contained statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the Safe Harbor paragraphs in our release and the more extended versions that will be included in our SEC filings. Shortly after we released our earnings results this morning and before this call, TDS and U.S. Cellular filed SEC Form 8-K Current Reports, including the press releases we issued this morning. Both companies plan to file their SEC Form 10-Q later this afternoon. As a reminder will be hosting an Analyst Day at CTIA next Wednesday, so please contact us if you be interested in being part of the meeting and also you reminded that our annual shareholder meetings are coming U.S. Cellulars on May 15 and TDS on May 17. Please note that the TDS meeting is being held in a different location this year, Ohio here to avoid the expected disruptions downtown around later meeting. Please keep in mind that TDS has an open door policy, to appear in the Chicago area and we’d like to meet members of management from TDS, U.S. Cellular or TDS Telecom the IR team will be – will try to accommodate you Calendars Committee. Now I’d like to turn the call over to Ken Meyers. Ken Meyers Thank you, Jane. Good morning. I’ll start on slide four, TDS ended the quarter with revenues up 4%, operating income of 5% and earnings per share of 23%. TDS’s overall tax rate for the quarter was up 28.9%. The rate was reduced by 9.3% or $7.2 million, primarily due to an unrecognized tax benefit to the expiration of a statutes of limitations for certain tax years, and the correction of deferred tax balances on publish of investments.
TDS incurred a net operating loss in 2011 for Federal income tax purposes, largely as a result of the 100% bonus depreciation rules in effect of that time. We carried this Federal net operating loss back to prior years and we received an almost $60 million refund in the first quarter. The bonus depreciation rate for Federal income tax purposes for 2012 is 50%, and is currently expected to expire at the end of the year. We expect Federal income tax payments to substantially increase in 2013 and remain at a higher-level for several years, as the amount of TDS’s Federal tax depreciation induction substantially decreases.For the full-year, we are estimating an effective tax rated TDS of about 35%. So same factors also affected U.S. Cellular in the quarter, and we expect both year tax rate at U.S. Cellular of about 33% for the year. As you may have seen in the press release, TDS and U.S. Cellular did not repurchase any shares during the quarter. We just haven’t whether to repurchase shares from time to time based on many considerations, ranging from market conditions to cash needed for known or possible requirements with many in a fund raised or other reasons in between including other facts and circumstances. Our press release has a more fulsome listings of many of the reasons we might consider purchasing or not purchasing shares. We continue to desire to repurchase shares under the existing authorizations as circumstances want or allow, to the extent that we do not complete the existing TDS authorization before it expires in November, we’d expect the board to approve additional authorization at that time. I’d also like to thank all of the investors that provide us with some thoughtful ideas around changes we can make, in terms of increasing the shareholder value. We’ve received many suggestions and we are working through that. Read the rest of this transcript for free on seekingalpha.com