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TDS Reports Fourth Quarter Results

02/24/2011
Provides financial guidance for 2011

CHICAGO, Feb. 24, 2011 /PRNewswire via COMTEX/ --

Note: Comparisons are year over year unless otherwise noted.

Fourth Quarter Highlights

Enterprise/TDS Corporate

  • Operating revenues were $1.3 billion.
  • Repurchased 610,277 special common shares for $17.5 million; $179 million remaining on current authorization.

Wireless/U.S. Cellular

  • Service revenues were $992 million.
  • Retail service ARPU (average revenue per unit) increased to $47.41 from $47.07.
  • Net retail customer losses were 10,000 postpaid and 11,000 prepaid.
  • Retail postpaid churn improved to 1.5 percent from 1.6 percent; postpaid customers comprised 95 percent of retail customers.
  • 5 percent increase in cell sites to 7,645.
  • Nearly 1.2 million customers signed-up for Belief Plans.

Wireline/TDS Telecom

  • 9 percent increase in ILEC high-speed data customers.
  • 23 percent increase in ILEC data revenues, representing 21 percent of ILEC revenues.
  • ILEC equivalent access lines remained stable at 767,200, primarily due to a loss of physical access lines partially offset by growth in high-speed data customers.
  • managedIP stations (ILEC and CLEC) grew to 27,400 from 13,900.

As previously announced, TDS will hold a teleconference Feb. 24, 2011 at 9:30 a.m. CST. Listen to the live call online via the Conference Calls page of www.teldta.com.

Telephone and Data Systems, Inc. (NYSE: TDS, TDS.S) reported operating revenues of $1,265.8 million for the fourth quarter of 2010, versus $ 1,261.9 million in the comparable period one year ago. Net income attributable to TDS was $14.5 million, or $0.14 earnings per diluted share. In the fourth quarter of 2009, net income attributable to TDS was $11.7 million, or $0.11 diluted earnings per share.

For the twelve months ended Dec. 31, 2010, TDS reported operating revenues of $4,986.8 million, versus $5,019.9 million in 2009. Net income attributable to TDS for 2010 was $143.8 million, or $1.36 per diluted share.In 2009, net income attributable to TDS was $188.9 million, or $1.72 diluted earnings per share. Fourth quarter and full year 2009 results were impacted by a $14.0 million (pre-tax), or $0.07 diluted loss per share, charge for impairment of licenses.

"Both U.S. Cellular and TDS Telecom faced a cautious economy and intense competition in 2010," said LeRoy T. Carlson, Jr., TDS president and CEO. "We made progress on our underlying strategies and improved certain key metrics, and we're focused on growing and improving our competitive position.

"TDS Telecom had a good year in 2010, increasing revenue and improving operating margins, despite physical access line losses. Data revenue growth was strong, as we added DSL customers, and more customers migrated to higher data speeds. On the commercial side, the company significantly expanded availability of its managedIP service and nearly doubled the number of stations. TDS Telecom is also now offering hosted and managed service solutions, as part of its strategy to offer a diverse range of commercial services that complement its core offerings.

"U.S. Cellular's launch of The Belief Project in October was an important step in the company's customer satisfaction strategy. Nearly 1.2 million new and existing customers had chosen our Belief Plans by year end. Two important measures--average revenue per customer and customer loyalty--improved in 2010. Customer additions, however, did not meet expectations, and the impact of promotions and smartphone subsidies, as well as spending related to enablement initiatives, reduced 2010 profitability.

"Our businesses are making significant strides to compete effectively, and TDS stands behind them with a strong financial foundation that provides support and flexibility for future growth."

TDS common and special common repurchase summary










Number of


Cost


Repurchase Period

Shares


(in millions)


2010 (fourth quarter)

610,277


$

17.5


2010 (third quarter)

705,000


$

19.5


2010 (second quarter)

568,297


$

16.3


2010 (first quarter)

510,902


$

14.8


2010 (full year)

2,394,476


$

68.1








2009 (full year)

6,374,741


$

176.6








2008 (full year)

5,861,822


$

199.6








Total

14,631,039


$

444.3


Fourth Quarter Treasury Activities

TDS issued $225 million in 49-year debt at 6.875 percent and in turn redeemed $217.5 million of 7.6 percent debt. Additionally, TDS and U.S. Cellular entered into new revolving credit facilities, for $400 million and $300 million respectively, that are due to expire in Dec. 2015.

Guidance for year ending Dec. 31, 2011

This guidance represents the views of management as of Feb. 24, 2011 and should not be assumed to be accurate as of any other date. There can be no assurance that final results will not differ materially from this guidance. TDS undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.





2011


2010

U.S. Cellular

EstimatedResults


ActualResults


Service revenues

$4,000 - $4,100 million


$3,913.0 million


Adjusted OIBDA (1) (3)

$775 - $875 million


$783.1 million


Operating income (3)

$185 - $285 million


$195.4 million


Depreciation, amortization and accretion expenses, and





losses on asset disposals and impairment of assets (2)

Approx. $590 million


$587.8 million


Capital expenditures (3)

Approx. $650 million


$583.1 million







TDS Telecom ILEC and CLEC operations:





Operating revenues

$780 - $810 million


$795.8 million


Adjusted OIBDA (1)

$260 - $290 million


$275.0 million


Operating income

$75 - $105 million


$99.8 million


Depreciation, amortization and accretion expenses, and





losses on asset disposals and impairment of assets (2)

Approx. $185 million


$175.2 million


Capital expenditures (4)

$175 - $200 million


$157.3 million


(1)

Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows.



(2)

2010 Actual Results include losses on asset disposals and no losses on impairment of assets. The 2011 Estimated Results include only the estimate for Depreciation, amortization and accretion expenses and losses on disposals of assets, and do not include any estimate for losses on impairment of assets (since these cannot be predicted).



(3)

This guidance is based on U.S. Cellular's current plans. New developments or changing competitive conditions in the wireless industry, such as the rate of deployment of 4G Long-term Evolution ("LTE") technology by other carriers, could affect U.S. Cellular's LTE deployment plans and, as a result, its capital expenditures and operating expenses.



(4)

TDS Telecom will fund its share for projects approved under the American Recovery and Reinvestment Act of 2009 to increase broadband access in unserved areas. Under the Recovery Act, TDS Telecom will receive $105.1 million in federal grants and will provide $30.9 million of its own funds to complete 44 projects over the next 24 to 36 months.

Conference call information

TDS will hold a conference call on Feb. 24, 2011 at 9:30 a.m. CST.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of www.teldta.com. The call will be archived on the Conference Calls page of www.teldta.com.

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 500(R) company, provides wireless, local and long-distance telephone, and broadband services to 7.2 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS had 12,400 employees as of Dec. 31, 2010. For more information about TDS, visit www.teldta.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates and expectations. These statements are based on current estimates, projections and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of U.S. Cellular to successfully grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to possible future restatements; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by TDS to furnish this press release to the SEC, which are incorporated by reference herein.

For more information about TDS and its subsidiaries, visit our websites at:



TDS: www.teldta.com

TDS Telecom: www.tdstelecom.com

U.S. Cellular: www.uscellular.com



UNITED STATES CELLULAR CORPORATION

SUMMARY OPERATING DATA (UNAUDITED)

















Quarter Ended


12/31/2010



9/30/2010



6/30/2010



3/31/2010



12/31/2009

Total population
















Consolidated markets(1)


90,468,000



90,468,000



90,468,000



90,468,000



89,712,000


Consolidated operating markets(1)


46,546,000



46,546,000



46,546,000



46,546,000



46,306,000

Market penetration at end of period
















Consolidated markets(2)


6.7%



6.7%



6.8%



6.8%



6.8%


Consolidated operating markets(2)


13.0%



13.1%



13.2%



13.2%



13.3%

All customers
















Total at end of period


6,072,000



6,103,000



6,144,000



6,147,000



6,141,000


Gross additions


327,000



338,000



349,000



358,000



399,000


Net additions (losses)


(31,000)



(41,000)



(3,000)



6,000



10,000


Smartphones sold as a percent of
















total devices sold(3)


39.6%



23.6%



15.8%



16.6%



14.7%

Retail customers
















Total at end of period


5,729,000



5,750,000



5,775,000



5,768,000



5,744,000


Smartphone penetration (3) (4)


16.6%



12.0%



10.1%



8.9%



7.5%


Gross additions


292,000



301,000



307,000



305,000



354,000


Net retail additions (losses)(5)


(21,000)



(25,000)



7,000



24,000



39,000


Net postpaid additions (losses)


(10,000)



(25,000)



(22,000)



(9,000)



26,000


Net prepaid additions (losses)


(11,000)



---



29,000



33,000



13,000

Service revenue components (000s)
















Retail service

$

864,905


$

865,766


$

863,836


$

865,039


$

866,866


Inbound roaming


67,545



72,901



60,902



51,942



61,728


Other


59,464



44,836



47,838



48,027



56,814

Total service revenues (000s)

$

991,914


$

983,503


$

972,576


$

965,008


$

985,408


Divided by average customers (000s)


6,081



6,124



6,151



6,137



6,139


Divided by three months in each quarter


3



3



3



3



3


Total average monthly revenue per unit(6)

$

54.37


$

53.53


$

52.71


$

52.41


$

53.51

Components of average monthly revenue per customer by revenue type











Retail service(6)

$

47.41


$

47.12


$

46.81


$

46.98


$

47.07


Inbound roaming(6)

$

3.70


$

3.97


$

3.30


$

2.82


$

3.35


Other(6)

$

3.26


$

2.44


$

2.60


$

2.61


$

3.09

















Retail postpaid churn rate(7)


1.5%



1.6%



1.4%



1.4%



1.6%

Capital expenditures (000s)

$

203,400


$

124,700


$

133,500


$

121,500


$

189,000

Cell sites in service


7,645



7,524



7,416



7,310



7,279


(1)

Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).

(2)

Calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.

(3)

Smartphones represent wireless devices which run on a Blackberry, Windows Mobile, or Android operating system.

(4)

Smartphone penetration is calculated by dividing postpaid customers on smartphone service plans by total postpaid customers.

(5)

Calculated by adding net postpaid additions (losses) and net prepaid additions (losses).

(6)

Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.

(7)

Represents the percentage of the retail postpaid customer base that disconnects service each month. This amount represents the average retail postpaid churn rate for each respective quarterly period.


TELEPHONE AND DATA SYSTEMS, INC.

SUMMARY OPERATING DATA (UNAUDITED)

















Quarter Ended


12/31/2010



9/30/2010



6/30/2010



3/31/2010



12/31/2009

TDS Telecom
















ILEC:
















Equivalent access lines (1)


767,200



773,800



779,200



778,700



775,900


Physical access lines (2)


507,700



517,000



525,000



530,400



536,300


High-speed data customers (3)


227,700



225,400



223,200



217,400



208,300


Long-distance customers


370,100



370,800



369,100



365,600



362,800


managedIP stations (4)


3,600



3,100



2,700



2,300



1,900


Capital expenditures (000s)

$

55,700


$

33,000


$

28,200


$

20,200


$

26,900


CLEC:
















Equivalent access lines (1)


335,400



338,700



343,100



349,300



355,900


High-speed data customers (3)


33,100



33,900



35,000



36,000



36,900


managedIP stations (4)


23,800



20,300



17,000



14,300



12,000


Capital expenditures (000s)

$

6,200


$

5,500


$

5,400


$

3,200


$

6,800


(1)

Sum of physical access lines and high-capacity data lines, adjusted to estimate the equivalent number of physical access lines in terms of capacity, plus the number of managedIP stations.

(2)

Individual circuits connecting customers to a telephone company's central office facilities.

(3)

The number of customers provided high-capacity data circuits via various technologies, including DSL, managedIP and dedicated Internet circuit technologies.

(4)

The number of telephone handsets providing communications using packet networking technology.


TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS

Three Months Ended December 31,

(Unaudited, dollars and shares in thousands, except per share amounts)



























Increase/ (Decrease)





2010



2009


Amount


Percent

Operating revenues













U.S. Cellular

$

1,063,150



$

1,060,098


$

3,052


--


TDS Telecom


199,101




198,048



1,053


1%


All Other(1)


3,508




3,764



(256)


(7%)






1,265,759




1,261,910



3,849


--

Operating expenses













U.S. Cellular














Expenses excluding depreciation, amortization and accretion


921,778




887,572



34,206


4%



Depreciation, amortization and accretion


144,649




146,807



(2,158)


(1%)



Loss on asset disposals, net


2,310




7,528



(5,218)


(69%)



Loss on impairment of intangible assets


--




14,000



(14,000)


N/M






1,068,737




1,055,907



12,830


1%


TDS Telecom














Expenses excluding depreciation, amortization and accretion


129,981




129,568



413


--



Depreciation, amortization and accretion


43,837




42,044



1,793


4%



Loss on asset disposals, net


464




649



(185)


(29%)






174,282




172,261



2,021


1%


All Other(1)














Expenses excluding depreciation and amortization


1,677




367



1,310


>100%



Depreciation and amortization


2,643




2,757



(114)


(4%)



(Gain) Loss on asset disposals, net


(34)




119



(153)


>100%






4,286




3,243



1,043


32%



















Total operating expenses


1,247,305




1,231,411



15,894


1%

Operating income (loss)













U.S. Cellular


(5,587)




4,191



(9,778)


>100%


TDS Telecom


24,819




25,787



(968)


(4%)


All Other (1)


(778)




521



(1,299)


>100%






18,454




30,499



(12,045)


(39%)

Investment and other income (expense)













Equity in earnings of unconsolidated entities


23,027




23,698



(671)


(3%)


Interest and dividend income


2,608




2,686



(78)


(3%)


Interest expense


(28,700)




(32,311)



3,611


11%


Other, net


468




496



(28)


(6%)



Total investment and other income (expense)


(2,597)




(5,431)



2,834


52%

Income before income taxes


15,857




25,068



(9,211)


(37%)


Income tax expense (benefit)


(5,884)




8,388



(14,272)


>100%

Net income


21,741




16,680



5,061


30%


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


(7,211)




(4,951)



(2,260)


(46%)

Net income attributable to TDS shareholders


14,530




11,729



2,801


24%


Preferred dividend requirement


(12)




(13)



1


8%

Net income available to common

$

14,518



$

11,716


$

2,802


24%
















Basic weighted average shares outstanding


104,070




106,166



(2,096)


(2%)

Basic earnings per share attributable to TDS shareholders

$

0.14



$

0.11


$

0.03


27%

Diluted weighted average shares outstanding


104,604




106,489



(1,885)


(2%)

Diluted earnings per share attributable to TDS shareholders

$

0.14



$

0.11


$

0.03


27%


(1)

Consists of Suttle Straus printing and distribution operations, corporate operations and intercompany eliminations.



N/M - Percentage change not meaningful


TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS

Year Ended December 31,

(Unaudited, dollars and shares in thousands, except per share amounts)











Increase/(Decrease)





2010


2009


Amount


Percent

Operating revenues












U.S. Cellular

$

4,177,681


$

4,213,880


$

(36,199)


(1%)


TDS Telecom


795,842



789,852



5,990


1%


All Other(1)


13,306



16,211



(2,905)


(18%)






4,986,829



5,019,943



(33,114)


(1%)

Operating expenses












U.S. Cellular













Expenses excluding depreciation, amortization and accretion


3,394,536



3,293,251



101,285


3%



Depreciation, amortization and accretion


577,054



569,514



7,540


1%



Loss on asset disposals, net


10,717



16,169



(5,452)


(34%)



Loss on impairment of intangible assets


--



14,000



(14,000)


N/M






3,982,307



3,892,934



89,373


2%


TDS Telecom













Expenses excluding depreciation, amortization and accretion


520,823



526,650



(5,827)


(1%)



Depreciation, amortization and accretion


174,054



167,316



6,738


4%



Loss on asset disposals, net


1,131



2,401



(1,270)


(53%)






696,008



696,367



(359)


--


All Other (1)













Expenses excluding depreciation and amortization


7,967



15,193



(7,226)


(48%)



Depreciation and amortization


10,640



11,996



(1,356)


(11%)



Loss on asset disposals, net


(85)



188



(273)


>100%






18,522



27,377



(8,855)


(32%)


















Total operating expenses


4,696,837



4,616,678



80,159


2%

Operating income (loss)












U.S. Cellular


195,374



320,946



(125,572)


(39%)


TDS Telecom


99,834



93,485



6,349


7%


All Other (1)


(5,216)



(11,166)



5,950


53%






289,992



403,265



(113,273)


(28%)

Investment and other income (expense)












Equity in earnings of unconsolidated entities


98,074



90,732



7,342


8%


Interest and dividend income


10,508



11,121



(613)


(6%)


Interest expense


(115,220)



(126,209)



10,989


9%


Other, net


(2,089)



2,000



(4,089)


>100%



Total investment and other income (expense)


(8,727)



(22,356)



13,629


61%

Income before income taxes


281,265



380,909



(99,644)


(26%)


Income tax expense


92,283



133,800



(41,517)


(31%)

Net income


188,982



247,109



(58,127)


(24%)


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


(45,126)



(58,144)



13,018


22%

Net income attributable to TDS shareholders


143,856



188,965



(45,109)


(24%)


Preferred dividend requirement


(50)



(51)



1


2%

Net income available to common

$

143,806


$

188,914


$

(45,108)


(24%)















Basic weighted average shares outstanding


105,111



109,339



(4,228)


(4%)

Basic earnings per share attributable to TDS shareholders

$

1.37


$

1.73


$

(0.36)


(21%)

Diluted weighted average shares outstanding


105,506



109,577



(4,071)


(4%)

Diluted earnings per share attributable to TDS shareholders

$

1.36


$

1.72


$

(0.36)


(21%)


(1)

Consists of Suttle-Straus printing and distribution operations, corporate operations and intercompany eliminations.



N/M - Percentage change not meaningful


TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Unaudited, dollars in thousands)









ASSETS




















December 31,


December 31,




2010


2009

Current assets







Cash and cash equivalents

$

368,134


$

670,992


Short-term investments


402,882



113,275


Accounts receivable from customers and other


512,946



515,443


Inventory


116,330



156,987


Net deferred income tax asset


37,079



29,874


Prepaid expenses


76,935



94,336


Prepaid taxes


64,386



3,718


Other current assets


17,384



63,046





1,596,076



1,647,671









Investments







Licenses


1,460,126



1,443,025


Goodwill


728,455



707,840


Other intangible assets


30,810



26,589


Investments in unconsolidated entities


197,922



203,799


Long-term investments


102,185



--


Other investments


8,988



9,785





2,528,486



2,391,038









Property, plant and equipment, net







U.S. Cellular


2,615,072



2,601,338


TDS Telecom


909,951



880,378


Other


33,311



26,129





3,558,334



3,507,845









Other assets and deferred charges


79,623



65,759









Total assets

$

7,762,519


$

7,612,313



TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Unaudited, dollars in thousands)










LIABILITIES AND EQUITY























December 31,


December 31,





2010


2009

Current liabilities








Current portion of long-term debt

$

1,711


$

2,509



Accounts payable


344,355



347,348



Customer deposits and deferred revenues


171,781



164,451



Accrued interest


2,718



12,227



Accrued taxes


46,110



62,568



Accrued compensation


99,020



93,524



Other current liabilities


144,938



117,081






810,633



799,708










Deferred liabilities and credits








Net deferred income tax liability


585,468



517,762



Other deferred liabilities and credits


404,892



373,862






990,360



891,624










Long-term debt


1,499,862



1,492,908










Noncontrolling interests with redemption features


855



727










Equity







TDS shareholders' equity








Series A Common, Special Common and Common Shares, par value $.01


1,270



1,270



Capital in excess of par value


2,107,929



2,088,807



Special Common and Common Treasury shares, at cost


(738,695)



(681,649)



Accumulated other comprehensive loss


(3,208)



(2,710)



Retained earnings


2,446,626



2,358,580




Total TDS shareholders' equity


3,813,922



3,764,298










Preferred shares


830



832

Noncontrolling interests


646,057



662,216












Total equity


4,460,809



4,427,346










Total liabilities and equity

$

7,762,519


$

7,612,313



BALANCE SHEET HIGHLIGHTS

December 31, 2010

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

294,426


$

7,285


$

66,423


$

--


$

368,134

Affiliated cash investments


--



341,797



--



(341,797)



--

Short-term investments


146,586



97,020



159,276



--



402,882



$

441,012


$

446,102


$

225,699


$

(341,797)


$

771,016


















Licenses, goodwill and other intangible assets

$

1,947,597


$

464,854


$

(193,059)


$

--


$

2,219,392

Investment in unconsolidated entities


160,847



3,806



41,028



(7,759)



197,922

Long-term and other investments


50,103



1,541



59,528



--



111,172




$

2,158,547


$

470,201


$

(92,503)


$

(7,759)


$

2,528,486



































Property, plant and equipment, net

$

2,615,072


$

909,951


$

33,311


$

--


$

3,558,334


















Long-term debt:
















Current portion

$

101


$

330


$

1,280


$

--


$

1,711


Non-current portion


867,941



1,953



629,968



--



1,499,862



Total

$

868,042


$

2,283


$

631,248


$

--


$

1,501,573


















Preferred shares

$

--


$

--


$

830


$

--


$

830


Telephone and Data Systems, Inc.

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)

In an effort to improve investment returns, during 2010, TDS elected to use a portion of its cash balance to directly purchase U.S. treasury securities and securities insured by the Federal Deposit Insurance Corporation ("FDIC"). The maturity dates of such direct investments were staggered in order to maintain cash balances and liquidity at targeted levels. TDS also continues to invest in certificates of deposit that are insured by the FDIC. The following table presents TDS' cash and cash equivalents; and investments in government-backed securities and certificates of deposit at December 31, 2010 and December 31, 2009.







December 31,


December 31,




2010


2009












Cash and cash equivalents


$

368,134


$

670,992


Amounts included in short-term investments (1) (2)









Government-backed securities (3)




305,612



--



Certificates of deposit (4)




97,270



113,275






$

402,882


$

113,275












Amounts included in long-term investments (1) (5)









Government-backed securities (3)



$

102,185


$

--


(1)

Designated as held-to-maturity investments and are recorded at amortized cost on the Consolidated Balance Sheet.

(2)

Maturities are less than twelve months from the respective balance sheet dates.

(3)

Includes U.S. treasuries and corporate notes that are guaranteed under the FDIC's Temporary Liquidity Guarantee Program.

(4)

TDS' investments in certificates of deposits are insured by the FDIC.

(5)

Maturities range between 14 and 24 months from the balance sheet date.


TDS TELECOM HIGHLIGHTS

Three Months Ended December 31,

(Unaudited, dollars in thousands)























Increase/(Decrease)




2010


2009


Amount


Percent

Local Telephone Operations












Operating revenues













Voice

$

43,880


$

45,304


$

(1,424)


(3%)



Data


33,265



26,965



6,300


23%



Network access


68,039



69,364



(1,325)


(2%)



Miscellaneous


10,410



9,840



570


6%





155,594



151,473



4,121


3%


Operating expenses













Cost of services and products


48,684



47,588



1,096


2%



Selling, general and administrative expenses


43,921



42,996



925


2%



Depreciation, amortization and accretion


37,942



35,873



2,069


6%



Loss on asset disposals


425



456



(31)


(7%)





130,972



126,913



4,059


3%















Operating income

$

24,622


$

24,560


$

62


0%














Competitive Local Exchange Carrier Operations













Revenues

$

45,878


$

48,940


$

(3,062)


(6%)
















Expenses excluding depreciation, amortization and accretion


39,747



41,349



(1,602)


(4%)



Depreciation, amortization and accretion


5,895



6,171



(276)


(4%)



Loss on asset disposals


39



193



(154)


(80%)





45,681



47,713



(2,032)


(4%)















Operating income

$

197


$

1,227


$

(1,030)


(84%)














Intercompany revenues

$

(2,371)


$

(2,365)


$

(6)


(0%)

Intercompany expenses


(2,371)



(2,365)



(6)


(0%)





--



--



--


0%














Total TDS Telecom operating income

$

24,819


$

25,787


$

(968)


(4%)





TDS TELECOM HIGHLIGHTS



Twelve Months Ended December 31,



(Unaudited, dollars in thousands)























Increase/(Decrease)




2010


2009


Amount


Percent

Local Telephone Operations












Operating revenues













Voice

$

179,539


$

187,223


$

(7,684)


(4%)



Data


126,029



103,682



22,347


22%



Network access


271,964



271,276



688


0%



Miscellaneous


39,862



37,346



2,516


7%





617,394



599,527



17,867


3%


Operating expenses













Cost of services and products


196,298



194,030



2,268


1%



Selling, general and administrative expenses


173,020



170,505



2,515


1%



Depreciation, amortization and accretion


149,375



142,913



6,462


5%



Loss on asset disposals


769



1,949



(1,180)


(61%)





519,462



509,397



10,065


2%















Operating income

$

97,932


$

90,130


$

7,802


9%














Competitive Local Exchange Carrier Operations













Revenues

$

187,984


$

199,375


$

(11,391)


(6%)
















Expenses excluding depreciation, amortization and accretion


161,041



171,165



(10,124)


(6%)



Depreciation, amortization and accretion


24,679



24,403



276


1%



Loss on asset disposals


362



452



(90)


(20%)





186,082



196,020



(9,938)


(5%)















Operating income

$

1,902


$

3,355


$

(1,453)


(43%)














Intercompany revenues

$

(9,536)


$

(9,050)


$

(486)


(5%)

Intercompany expenses


(9,536)



(9,050)



(486)


(5%)





--



--



--


0%














Total TDS Telecom operating income

$

99,834


$

93,485


$

6,349


7%



TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)






2010


2009

Cash flows from operating activities







Net income

$

188,982


$

247,109



Add (deduct) adjustments to reconcile net income to net









cash flows from operating activities










Depreciation, amortization and accretion


761,748



748,826





Bad debts expense


83,098



115,989





Stock-based compensation expense


35,128



32,486





Deferred income taxes, net


74,074



34,275





Equity in earnings of unconsolidated entities


(98,074)



(90,732)





Distributions from unconsolidated entities


100,845



91,587





Loss on impairment of intangible assets


--



14,000





Loss on asset disposals, net


11,763



18,758





Noncash interest expense


9,733



4,412





Excess tax benefit from stock awards


(117)



(25)





Other operating activities


500



(46)



Changes in assets and liabilities










Accounts receivable


(79,182)



(115,087)





Inventory


40,657



(34,566)





Accounts payable


(4,016)



29,646





Customer deposits and deferred revenues


6,478



(8,763)





Accrued taxes


(95,872)



61,630





Accrued interest


(9,270)



(2,009)





Other assets and liabilities


95,470



(44,896)







1,121,945



1,102,594











Cash flows from investing activities







Additions to property, plant and equipment


(755,032)



(671,165)


Cash paid for acquisitions and licenses


(81,691)



(29,276)


Cash received from divestitures


--



50


Cash paid for investments


(493,750)



(109,230)


Cash received from investments


106,255



23,660


Other investing activities


370



4,515







(1,223,848)



(781,446)











Cash flows from financing activities







Issuance of long-tem debt


225,648



--


Repayment of long-term debt


(220,249)



(143,078)


TDS Common Shares and Special Common Shares








reissued for benefit plans, net of tax payments


309



819


U.S. Cellular Common Shares reissued for benefit








plans, net of tax payments


509



(82)


Excess tax benefit from stock awards


117



25


Repurchase of TDS Common and Special Common Shares


(68,053)



(178,536)


Repurchase of U.S. Cellular Common Shares


(52,827)



(33,585)


Dividends paid


(47,202)



(46,798)


Payment of debt issuance costs


(12,533)



(10,079)


Distributions to noncontrolling interests


(19,630)



(17,533)


Payments to acquire additional interest in subsidiaries


(9,248)



(285)


Other financing activities


2,204



1,667







(200,955)



(427,465)











Net decrease in cash and cash equivalents


(302,858)



(106,317)

Cash and cash equivalents







Beginning of period


670,992



777,309


End of period

$

368,134


$

670,992



Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)




Three Months Ended December 31, 2010


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated

Total



Operating revenues


$

1,063,150


$

199,101


$

3,508


$

1,265,759



Deduct:
















U.S. Cellular equipment sales revenue



71,236














Service revenues



991,914












Operating income (loss)



(5,587)



24,819



(778)



18,454



Add (Deduct):
















Depreciation, amortization and accretion



144,649



43,837



2,643



191,129




Loss on impairment of intangible assets



--



--



--



--




(Gain) Loss on asset disposals



2,310



464



(34)



2,740





Adjusted OIBDA (3)


$

141,372


$

69,120


$

1,831


$

212,323






















Adjusted OIBDA margin (4)



14.3%



34.7%

























Three Months Ended December 31, 2009


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated Total



Operating revenues


$

1,060,098


$

198,048


$

3,764


$

1,261,910



Deduct:
















U.S. Cellular equipment sales revenue



74,690














Service revenues



985,408





























Operating income



4,191



25,787



521



30,499



Add:
















Depreciation, amortization and accretion



146,807



42,044



2,757



191,608




Loss on impairment of intangible assets



14,000



--



--



14,000




Loss on asset disposals



7,528



649



119



8,296





Adjusted OIBDA (3)


$

172,526


$

68,480


$

3,397


$

244,403





Adjusted OIBDA margin (4)



17.5%



34.6%













TDS Consolidated








Three Months Ended December 31,


2010


2009









Cash flows from operating activities


$

357,165


$

302,643









Deduct:
















Capital expenditures



268,894



220,571











Free cash flow (5)


$

88,271


$

82,072

























See footnotes defined on next page.
















Telephone and Data Systems, Inc.

Financial Measures and Reconciliation

(Unaudited, dollars in thousands)




Twelve Months Ended December 31, 2010


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated

Total




















Operating revenues


$

4,177,681


$

795,842


$

13,306


$

4,986,829



Deduct:
















U.S. Cellular equipment sales revenue



264,680














Service revenues



3,913,001





























Operating income (loss)



195,374



99,834



(5,216)



289,992



Add (Deduct):
















Depreciation, amortization and accretion



577,054



174,054



10,640



761,748




Loss on impairment of intangible assets



--



--



--



--




(Gain) Loss on asset disposals



10,717



1,131



(85)



11,763





Adjusted OIBDA (3)


$

783,145


$

275,019


$

5,339


$

1,063,503






















Adjusted OIBDA margin (4)



20.0%



34.6%

























Twelve Months Ended December 31, 2009


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated

Total





















Operating revenues


$

4,213,880


$

789,852


$

16,211


$

5,019,943



Deduct:
















U.S. Cellular equipment sales revenue



286,752














Service revenues



3,927,128





























Operating income (loss)



320,946



93,485



(11,166)



403,265



Add:
















Depreciation, amortization and accretion



569,514



167,316



11,996



748,826




Loss on impairment of intangible assets



14,000



--



--



14,000




Loss on asset disposals



16,169



2,401



188



18,758





Adjusted OIBDA (3)


$

920,629


$

263,202


$

1,018


$

1,184,849






















Adjusted OIBDA margin (4)



23.4%



33.3%















































TDS Consolidated








Twelve Months Ended December 31,


2010


2009


























Cash flows from operating activities


$

1,121,945


$

1,102,594









Deduct:
















Capital expenditures



755,032



671,165











Free cash flow (5)


$

366,913


$

431,429









(1)

Includes ILEC and CLEC intercompany eliminations.

(2)

Consists of a non-reportable segment (Suttle-Straus), corporate operations and, intercompany eliminations between U.S. Cellular, TDS Telecom and corporate investments. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.

(3)

Adjusted OIBDA is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.

(4)

Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues (U.S. Cellular) and operating revenues (TDS Telecom). Equipment revenues are excluded from the denominator of the U.S. Cellular calculation since equipment is generally sold at a net negative margin, and the net equipment subsidy is effectively a cost for purposes of assessing business results and is already reflected in adjusted OIBDA.TDS believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular's business results. Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.

(5)

Free cash flow is defined as cash flows from operating activities minus capital expenditures. Free cash flow is a non-GAAP financial measure. TDS believes that free cash flow as reported by TDS is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

SOURCE Telephone and Data Systems, Inc.

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