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TDS Reports Second Quarter 2011 Results

08/08/2011
Company proposes plan to simplify capital structure

CHICAGO, Aug. 8, 2011 /PRNewswire via COMTEX/ --

Note: Comparisons are year over year unless otherwise noted.

2Q 2011 Highlights

TDS Corporate

  • Operating revenues increased 4 percent to $1.3 billion.
  • Diluted earnings per share attributable to TDS shareholders increased to $0.87 from $0.38.

U.S. Cellular

  • Smartphones sold, as a percent of total devices sold, increased to 39.6 percent from 15.8 percent.
  • Service revenues were $1,002.0 million, up 3 percent.
  • Postpaid ARPU (average revenue per unit) increased to $51.84 from $50.55.
  • Postpaid churn improved to 1.38 percent from 1.43 percent.
  • Operating income increased 61 percent to $102.4 million.
  • Net loss of 58,000 retail customers, reflecting loss of 41,000 postpaid customers and 17,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
  • Cell sites in service increased 5 percent to 7,770, of which 4,400 are owned towers.

TDS Telecom

  • Operating revenues remained stable at $198.9 million.
  • Operating income increased 5 percent to $25.9 million.
  • ILEC triple play bundle penetration of residential customers grew to 27 percent.
  • managedIP stations (ILEC and CLEC) grew to 35,300 from 19,700.

As previously announced, TDS will hold a teleconference Aug. 8, 2011 at 7:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com.

Telephone and Data Systems, Inc. (NYSE: TDS, TDS.S) reported operating revenues of $1,279.6 million for the second quarter of 2011, an increase of 4 percent from $1,232.2 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $91.1 million and $0.87, respectively, for the second quarter of 2011, compared to $40.3 million and $0.38, respectively, in the comparable period one year ago.

"Attracting more new customers is a high priority for U.S. Cellular and TDS Telecom and we are devoting substantial effort to this challenge," said LeRoy T. Carlson, Jr., TDS president and CEO. "Both companies are focused on improving and successfully executing marketing and sales strategies to compete more effectively.

"U.S. Cellular continued to raise average revenue per customer by increasing smartphone penetration and adoption of data plans. Profitability improved in the quarter, due to a strong increase in inbound roaming revenue and expense control, with fewer gross additions contributing to lower sales and marketing expenses.

"TDS Telecom had a solid quarter, with stable operating revenues and higher operating income. The company continued to grow ILEC data revenues through increases in hosted and managed services revenues and high-speed data customers. We broke ground on the first of 44 broadband expansion stimulus projects to bring high-speed Internet access to more customers in rural areas. TDS Telecom's aggressive commercial sales strategy helped the company achieve a strong year-over-year increase in managedIP stations. And in early July, we expanded our hosted and managed services business significantly with the acquisition of OneNeck IT Services Corporation.

"As announced separately today, to simplify our capital structure, improve market liquidity and provide greater financial flexibility, TDS is proposing to reclassify its outstanding Special Common Shares into Common Shares on a one-for-one basis, while retaining the controlling shareholder vote. We will hold a special shareholder meeting later this year to vote on the proposed amendments."

Second quarter transactions

U.S. Cellular paid $24.6 million in cash to purchase the remaining interest in a wireless business in which it previously held a non-controlling interest. As a result, the company recorded a $13.4 million pre-tax gain on investments.

Additionally, U.S. Cellular sold $342 million of 6.95 percent senior notes and redeemed $330 million of its 7.5 percent senior notes. The redemption required U.S. Cellular to write off $8.2 million of previously capitalized debt issuance costs related to the 7.5 percent senior notes. The $8.2 million was recorded in interest expense.

Also in the quarter, TDS redeemed $282.5 million of 7.6 percent Series A notes. This redemption required TDS to write off $7.2 million of previously capitalized debt issuance costs, which was recorded in interest expense.

Guidance for year ending Dec. 31, 2011

Guidance for the year ending Dec. 31, 2011, as of Aug. 8, 2011, is provided below, compared to the previous guidance provided on May 6, 2011. TDS undertakes no duty to update such information, whether as a result of new information, future events, or otherwise. There can be no assurance that final results will not differ materially from this guidance.


U.S. Cellular

Current Estimates


Previous Estimates (1)


Service revenues

$4,000-$4,100 million


Unchanged


Operating income (3) (4)

$210-$285 million


$185-$285 million


Depreciation, amortization and accretion expenses, and





losses on asset disposals and impairment of assets (3)

Approx. $590 million


Unchanged


Adjusted OIBDA (2) (4)

$800-$875 million


$775-$875 million


Capital expenditures (4)

$750-$800 million


Unchanged








TDS Telecom





Operating revenues

$800-$830 million


$780-$810 million


Operating income (3)

$85-$115 million


$75-$105 million


Depreciation, amortization and accretion expenses, and





losses on asset disposals and impairment of assets (3)

Approx. $185 million


Unchanged


Adjusted OIBDA (2)

$270-$300 million


$260-$290 million


Capital expenditures (5)

$175-$200 million


Unchanged


(1)

The 2011 Estimated Results as disclosed in the TDS Quarterly Report on Form 10-Q for the period ended March 31, 2011.

(2)

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.

(3)

The 2011 Estimated Results do not include any estimate for losses on impairment of assets since these cannot be predicted.

(4)

This guidance is based on U.S. Cellular's current plans, which include a multi-year deployment of Long-term Evolution ("LTE") technology commencing in 2011. As customer demand for data services increases, and competitive conditions in the wireless industry evolve, such as the rate of deployment of LTE technology by other carriers, the timing of U.S. Cellular's deployment of LTE and the timing of other capital expenditures could change. These factors could affect U.S. Cellular's estimated capital expenditures and operating expenses in 2011.

(5)

The capital expenditure guidance does not include federal grants of $105.1 million awarded to TDS Telecom through the Broadband Stimulus program under the American Recovery and Reinvestment Act for 44 projects to be completed between 2011 and 2013.

Stock repurchase summary

The following represents repurchases of TDS Common Shares and TDS Special Common Shares.



Repurchase Period


# Shares


Cost (in millions)


2011 (second quarter)


340,965


$

9.9


2011 (first quarter)


407,281


$

11.6


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


15,379,285


$

465.8









Conference call information

TDS will hold a conference call on Aug. 8, 2011 at 7:30 a.m. CDT.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Investor Relations 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® company, provides wireless, local and long-distance telephone, and broadband services to approximately 7.1 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 employed 12,300 people as of June 30, 2011.

Visit www.teldta.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

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 the company to successfully grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers; 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; 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:

TDS: www.teldta.com

U.S. Cellular: www.uscellular.com

TDS Telecom: www.tdstelecom.com


United States Cellular Corporation

Summary Operating Data (Unaudited)

















Quarter Ended


6/30/2011



3/31/2011



12/31/2010



9/30/2010



6/30/2010

Total population
















Consolidated markets (1)


91,204,000



91,090,000



90,468,000



90,468,000



90,468,000


Consolidated operating markets (1)


46,888,000



46,774,000



46,546,000



46,546,000



46,546,000

Market penetration at end of period
















Consolidated markets (2)


6.5%



6.6%



6.7%



6.7%



6.8%


Consolidated operating markets (2)


12.7%



12.9%



13.0%



13.1%



13.2%

All customers
















Total at end of period


5,968,000



6,033,000



6,072,000



6,103,000



6,144,000


Gross additions


257,000



293,000



327,000



338,000



349,000


Net additions (losses)


(70,000)



(39,000)



(31,000)



(41,000)



(3,000)


Smartphones sold as a percent of
















total devices sold (3)


39.6%



42.5%



39.6%



23.6%



15.8%

Retail customers
















Total at end of period


5,644,000



5,698,000



5,729,000



5,750,000



5,775,000


Smartphone penetration (3) (4)


23.0%



20.2%



16.6%



12.0%



10.1%


Gross additions


226,000



256,000



292,000



301,000



307,000


Net retail additions (losses) (5)


(58,000)



(31,000)



(21,000)



(25,000)



7,000


Net postpaid additions (losses)


(41,000)



(22,000)



(10,000)



(25,000)



(22,000)


Net prepaid additions (losses)


(17,000)



(9,000)



(11,000)



---



29,000

Service revenue components (000s)
















Retail service

$

868,630


$

864,602


$

864,905


$

865,766


$

863,836


Inbound roaming


82,760



64,386



67,545



72,901



60,902


Other


50,640



56,125



59,464



44,836



47,838

Total service revenues (000s)

$

1,002,030


$

985,113


$

991,914


$

983,503


$

972,576

Total ARPU (6)

$

55.69


$

54.29


$

54.37


$

53.53


$

52.71

Billed ARPU (7)

$

48.27


$

47.65


$

47.41


$

47.12


$

46.81

Postpaid ARPU (8)

$

51.84


$

51.21


$

50.99


$

50.82


$

50.55

Postpaid churn rate (9)


1.4%



1.4%



1.5%



1.6%



1.4%

Capital expenditures (000s)

$

162,100


$

95,900


$

203,400


$

124,700


$

133,500

Cell sites in service


7,770



7,663



7,645



7,524



7,416


(1)

Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.

(2)

Market Penetration is 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)

Includes net postpaid additions (losses) and net prepaid additions (losses).

(6)

Total ARPU - Average monthly service revenue per customer includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.

(7)

Billed ARPU - Average monthly billed revenue per customer is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.

(8)

Postpaid ARPU - Average monthly revenue per postpaid customer is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.

(9)

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


TDS Telecom

Summary Operating Data (Unaudited)

















Quarter Ended


6/30/2011



3/31/2011



12/31/2010



9/30/2010



6/30/2010

TDS Telecom
















ILEC:
















Equivalent access lines (1)


764,600



765,300



767,200



773,800



779,200


Physical access lines (2)


496,300



501,200



507,700



517,000



525,000


High-speed data customers (3)


235,600



231,800



227,700



225,400



223,200


Long-distance customers


373,200



370,600



370,100



370,800



369,100


managedIP stations (4)


5,100



4,300



3,600



3,100



2,700


Capital expenditures (000s)

$

39,100


$

22,100


$

55,700


$

33,000


$

28,200


CLEC:
















Equivalent access lines (1)


328,700



331,000



335,400



338,700



343,100


High-speed data customers (3)


31,500



32,300



33,100



33,900



35,000


managedIP stations (4)


30,200



27,200



23,800



20,300



17,000


Capital expenditures (000s)

$

6,200


$

4,200


$

6,200


$

5,500


$

5,400


(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 June 30,


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

































Increase/ (Decrease)






2011



2010



Amount



Percent


Operating revenues

















U.S. Cellular

$

1,076,182



$

1,029,893



$

46,289




4%



TDS Telecom


198,896




199,206




(310)




--



All Other (1)


4,562




3,120




1,442




46%







1,279,640




1,232,219




47,421




4%


Operating expenses

















U.S. Cellular


















Expenses excluding depreciation, amortization and accretion


822,587




820,684




1,903




--




Depreciation, amortization and accretion


148,283




144,455




3,828




3%




Loss on asset disposals, net


2,922




1,250




1,672




>100%







973,792




966,389




7,403




1%



TDS Telecom


















Expenses excluding depreciation, amortization and accretion


128,846




131,565




(2,719)




(2%)




Depreciation, amortization and accretion


43,843




43,149




694




2%




(Gain) Loss on asset disposals, net


317




(68)




385




>(100)%







173,006




174,646




(1,640)




(1%)



All Other (1)


















Expenses excluding depreciation and amortization


4,569




2,117




2,452




>100%




Depreciation and amortization


2,625




2,654




(29)




(1%)




(Gain) Loss on asset disposals, net


(1)




32




(33)




>(100)%







7,193




4,803




2,390




50%
























Total operating expenses


1,153,991




1,145,838




8,153




1%


Operating income (loss)

















U.S. Cellular


102,390




63,504




38,886




61%



TDS Telecom


25,890




24,560




1,330




5%



All Other (1)


(2,631)




(1,683)




(948)




(56%)







125,649




86,381




39,268




45%


Investment and other income (expense)

















Equity in earnings of unconsolidated entities


22,590




25,997




(3,407)




(13%)



Interest and dividend income


2,093




2,674




(581)




(22%)



Gain on investment


13,373




--




13,373




N/M



Interest expense


(45,417)




(29,265)




(16,152)




(55%)



Other, net


1,306




(1,929)




3,235




>(100)%




Total investment and other income (expense)


(6,055)




(2,523)




(3,532)




>100%


Income before income taxes


119,594




83,858




35,736




43%



Income tax expense


10,916




31,469




(20,553)




(65%)


Net income


108,678




52,389




56,289




>100%



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


(17,615)




(12,102)




(5,513)




(46%)


Net income attributable to TDS shareholders


91,063




40,287




50,776




>100%



Preferred dividend requirement


(12)




(12)




--




--


Net income available to common shareholders

$

91,051



$

40,275



$

50,776




>100%





















Basic weighted average shares outstanding


103,509




105,520




(2,011)




(2%)


Basic earnings per share attributable to TDS shareholders

$

0.88



$

0.38



$

0.50




>100%





















Diluted weighted average shares outstanding


104,062




105,907




(1,845)




(2%)


Diluted earnings per share attributable to TDS shareholders

$

0.87



$

0.38



$

0.49




>100%



(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


Six Months Ended June 30,


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

































Increase/ (Decrease)






2011



2010



Amount



Percent


Operating revenues

















U.S. Cellular

$

2,133,274



$

2,053,750



$

79,524




4%



TDS Telecom


397,812




394,711




3,101




1%



All Other (1)


7,235




6,193




1,042




17%







2,538,321




2,454,654




83,667




3%


Operating expenses

















U.S. Cellular


















Expenses excluding depreciation, amortization and accretion


1,676,554




1,618,508




58,046




4%




Depreciation, amortization and accretion


293,328




287,688




5,640




2%




Loss on asset disposals, net


3,959




6,426




(2,467)




(38%)







1,973,841




1,912,622




61,219




3%



TDS Telecom


















Expenses excluding depreciation, amortization and accretion


250,615




257,430




(6,815)




(3%)




Depreciation, amortization and accretion


88,680




86,572




2,108




2%




Loss on asset disposals, net


421




277




144




52%







339,716




344,279




(4,563)




(1%)



All Other (1)


















Expenses excluding depreciation and amortization


6,685




4,047




2,638




65%




Depreciation and amortization


5,261




5,387




(126)




(2%)




(Gain) Loss on asset disposals, net


1




(58)




59




>(100)%







11,947




9,376




2,571




27%
























Total operating expenses


2,325,504




2,266,277




59,227




3%


Operating income (loss)

















U.S. Cellular


159,433




141,128




18,305




13%



TDS Telecom


58,096




50,432




7,664




15%



All Other (1)


(4,712)




(3,183)




(1,529)




(48%)







212,817




188,377




24,440




13%


Investment and other income (expense)

















Equity in earnings of unconsolidated entities


41,978




50,900




(8,922)




(18%)



Interest and dividend income


4,717




5,115




(398)




(8%)



Gain on investment


13,373




--




13,373




N/M



Interest expense


(73,516)




(58,223)




(15,293)




(26%)



Other, net


1,386




(2,119)




3,505




>(100)%




Total investment and other income (expense)


(12,062)




(4,327)




(7,735)




>100%


Income before income taxes


200,755




184,050




16,705




9%



Income tax expense


39,833




69,392




(29,559)




(43%)


Net income


160,922




114,658




46,264




40%



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


(28,237)




(25,957)




(2,280)




(9%)


Net income attributable to TDS shareholders


132,685




88,701




43,984




50%



Preferred dividend requirement


(25)




(25)




--




--


Net income available to common shareholders

$

132,660



$

88,676



$

43,984




50%





















Basic weighted average shares outstanding


103,765




105,728




(1,963)




(2%)


Basic earnings per share attributable to TDS shareholders

$

1.28



$

0.84



$

0.44




52%





















Diluted weighted average shares outstanding


104,301




106,071




(1,770)




(2%)


Diluted earnings per share attributable to TDS shareholders

$

1.27



$

0.83



$

0.44




53%



(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




















June 30,


December 31,




2011


2010

Current assets







Cash and cash equivalents

$

584,436


$

368,134


Short-term investments


270,896



402,882


Accounts receivable from customers and others


519,102



512,946


Inventory


165,156



116,330


Net deferred income tax asset


47,970



37,079


Prepaid expenses


89,997



76,935


Income taxes receivable


63,978



64,386


Other current assets


17,390



17,384





1,758,925



1,596,076









Assets held for sale


53,910



--









Investments







Licenses


1,462,926



1,460,126


Goodwill


728,455



728,455


Other intangible assets


26,316



30,810


Investments in unconsolidated entities


177,963



197,922


Long-term investments


90,900



102,185


Other investments


8,701



8,988





2,495,261



2,528,486









Property, plant and equipment, net







U.S. Cellular


2,582,045



2,615,072


TDS Telecom


897,117



909,951


Other


38,776



33,311





3,517,938



3,558,334









Other assets and deferred charges


94,874



79,623









Total assets

$

7,920,908


$

7,762,519



Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)













LIABILITIES AND EQUITY




























June 30,



December 31,






2011



2010













Current liabilities









Current portion of long-term debt

$

1,919



$

1,711



Accounts payable


344,026




344,355



Customer deposits and deferred revenues


194,381




171,781



Accrued interest


5,546




2,718



Accrued taxes


44,830




46,110



Accrued compensation


75,912




99,020



Other current liabilities


97,122




144,938







763,736




810,633













Liabilities held for sale


871




--













Deferred liabilities and credits









Net deferred income tax liability


688,311




585,468



Other deferred liabilities and credits


402,143




404,892













Long-term debt


1,530,369




1,499,862













Noncontrolling interests with redemption features


863




855













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


2,108,280




2,107,929




Special Common and Common Treasury shares, at cost


(756,284)




(738,695)




Accumulated other comprehensive loss


(2,972)




(3,208)




Retained earnings


2,553,863




2,446,626





Total TDS shareholders' equity


3,904,157




3,813,922














Preferred shares


830




830



Noncontrolling interests


629,628




646,057















Total equity


4,534,615




4,460,809













Total liabilities and equity

$

7,920,908



$

7,762,519




Balance Sheet Highlights

June 30, 2011

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

428,625


$

5,028


$

150,783


$

-


$

584,436

Affiliated cash investments


-



423,931



-



(423,931)



-

Short-term investments


96,085



73,990



100,821



-



270,896



$

524,710


$

502,949


$

251,604


$

(423,931)


$

855,332


















Licenses, goodwill and other intangible assets

$

1,950,174


$

462,228


$

(194,705)


$

-


$

2,217,697

Investment in unconsolidated entities


142,377



3,806



41,102



(9,322)



177,963

Long-term and other investments


44,323



1,327



53,951



-



99,601




$

2,136,874


$

467,361


$

(99,652)


$

(9,322)


$

2,495,261



































Property, plant and equipment, net

$

2,582,045


$

897,117


$

38,776


$

-


$

3,517,938


















Long-term debt:
















Current portion

$

101


$

237


$

1,581


$

-


$

1,919


Non-current portion


880,300



1,887



648,182



-



1,530,369



Total

$

880,401


$

2,124


$

649,763


$

-


$

1,532,288


















Preferred shares

$

-


$

-


$

830


$

-


$

830


Telephone and Data Systems, Inc.

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)


The following table presents TDS' cash and cash equivalents and investments at June 30, 2011 and December 31, 2010.







June 30,


December 31,




2011


2010












Cash and cash equivalents


$

584,436


$

368,134


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









Government-backed securities (3)




196,656



305,612



Certificates of deposit




74,240



97,270






$

270,896


$

402,882












Amounts included in long-term investments (1) (4)









Government-backed securities (3)



$

90,900


$

102,185


(1)

Designated as held-to-maturity investments and recorded at amortized cost in 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)

At June 30, 2011, maturities range between 12 and 24 months from the balance sheet date.


Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Six Months Ended June 30,

(Unaudited, dollars in thousands)






2011


2010

Cash flows from operating activities







Net income

$

160,922


$

114,658



Add (deduct) adjustments to reconcile net income to net









cash flows from operating activities










Depreciation, amortization and accretion


387,269



379,647





Bad debts expense


29,906



39,633





Stock-based compensation expense


18,913



16,743





Deferred income taxes, net


79,637



(28,881)





Equity in earnings of unconsolidated entities


(41,978)



(50,900)





Distributions from unconsolidated entities


47,375



48,740





Loss on asset disposals, net


4,381



6,645





Gain on investment


(13,373)



--





Noncash interest expense


17,147



2,715





Other operating activities


1,070



666



Changes in assets and liabilities from operations










Accounts receivable


(37,819)



(20,985)





Inventory


(48,826)



32,177





Accounts payable


(448)



(35,572)





Customer deposits and deferred revenues


22,600



4,217





Accrued taxes


(2,345)



24,209





Accrued interest


2,945



102





Other assets and liabilities


(89,713)



(31,468)







537,663



502,346











Cash flows from investing activities







Additions to property, plant and equipment


(338,711)



(317,950)


Cash paid for acquisitions and licenses


(22,167)



(28,264)


Cash paid for investments


(71,000)



(385,000)


Cash received for investments


213,030



15,661


Other investing activities


(816)



1,479







(219,664)



(714,074)











Cash flows from financing activities







Repayment of long-term debt


(613,387)



(1,280)


Issuance of long-term debt


643,700



--


TDS Common Shares and Special Common Shares








reissued for benefit plans, net of tax payments


1,055



845


U.S. Cellular Common Shares reissued for benefit








plans, net of tax payments


1,264



144


Repurchase of TDS Common and Special Common Shares


(21,500)



(31,092)


Repurchase of U.S. Cellular Common Shares


(62,308)



(21,423)


Dividends paid


(24,343)



(23,732)


Payment of debt issuance costs


(21,191)



--


Distributions to noncontrolling interests


(1,377)



(4,314)


Other financing activities


2,077



65







(96,010)



(80,787)











Cash classified as held for sale


(5,687)



--











Net increase (decrease) in cash and cash equivalents


216,302



(292,515)

Cash and cash equivalents







Beginning of period


368,134



670,992


End of period

$

584,436


$

378,477



TDS Telecom Highlights


Three Months Ended June 30,


(Unaudited, dollars in thousands)
































Increase (Decrease)






2011



2010



Amount


Percent


Local Telephone Operations
















Operating revenues

















Voice

$

42,916



$

45,738



$

(2,822)



(6%)




Data


36,998




31,993




5,005



16%




Network access


66,320




66,951




(631)



(1%)




Miscellaneous


9,772




9,576




196



2%







156,006




154,258




1,748



1%



Operating expenses

















Cost of services and products


49,839




49,302




537



1%




Selling, general and administrative expenses


42,597




44,167




(1,570)



(4%)




Depreciation, amortization and accretion


38,404




36,847




1,557



4%




Loss on asset disposals, net


270




(228)




498



>100%







131,110




130,088




1,022



1%





















Operating income

$

24,896



$

24,170



$

726



3%




















Competitive Local Exchange Carrier Operations

















Revenues

$

45,596



$

47,325



$

(1,729)



(4%)




Expenses (excluding Depreciation, amortization

















and accretion)


39,116




40,473




(1,357)



(3%)




Depreciation, amortization and accretion


5,439




6,302




(863)



(14%)




Loss on asset disposals, net


47




160




(113)



(71%)







44,602




46,935




(2,333)



(5%)





















Operating income

$

994



$

390



$

604



>100%




















Intercompany revenues

$

(2,706)



$

(2,377)



$

(329)



(14%)


Intercompany expenses


(2,706)




(2,377)




(329)



(14%)




















Total TDS Telecom operating income

$

25,890



$

24,560



$

1,330



5%




TDS Telecom Highlights


Six Months Ended June 30,


(Unaudited, dollars in thousands)
































Increase (Decrease)






2011



2010



Amount


Percent


Local Telephone Operations
















Operating revenues

















Voice

$

86,086



$

90,296



$

(4,210)



(5%)




Data


73,150




60,291




12,859



21%




Network access


132,492




134,893




(2,401)



(2%)




Miscellaneous


20,094




18,934




1,160



6%







311,822




304,414




7,408



2%



Operating expenses

















Cost of services and products


97,523




95,794




1,729



2%




Selling, general and administrative expenses


80,790




85,904




(5,114)



(6%)




Depreciation, amortization and accretion


77,751




73,905




3,846



5%




Loss on asset disposals, net


343




32




311



>100%







256,407




255,635




772



--





















Operating income

$

55,415



$

48,779



$

6,636



14%




















Competitive Local Exchange Carrier Operations

















Revenues

$

90,924



$

95,068



$

(4,144)



(4%)




Expenses (excluding Depreciation, amortization

















and accretion


77,236




80,503




(3,267)



(4%)




Depreciation, amortization and accretion


10,929




12,667




(1,738)



(14%)




Loss on asset disposals, net


78




245




(167)



(68%)







88,243




93,415




(5,172)



(6%)





















Operating income

$

2,681



$

1,653



$

1,028



62%




















Intercompany revenues

$

(4,934)



$

(4,771)



$

(163)



(3%)


Intercompany expenses


(4,934)




(4,771)




(163)



(3%)




















Total TDS Telecom operating income

$

58,096



$

50,432



$

7,664



15%




Telephone and Data Systems, Inc.


Financial Measures and Reconciliations

(Unaudited, dollars in thousands)


Three Months Ended June 30, 2011


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated

Total




















Operating revenues


$

1,076,182


$

198,896


$

4,562


$

1,279,640



Deduct:
















U.S. Cellular equipment sales revenue



74,152














Service revenues



1,002,030





























Operating income (loss)



102,390



25,890



(2,631)



125,649



Add (Deduct):
















Depreciation, amortization and accretion



148,283



43,843



2,625



194,751




Loss on impairment of intangible assets



--



--



--



--




(Gain) Loss on asset disposals



2,922



317



(1)



3,238





Adjusted OIBDA (3)


$

253,595


$

70,050


$

(7)


$

323,638






















Adjusted OIBDA margin (4)



25.3%



35.2%

























Three Months Ended June 30, 2010


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated Total




















Operating revenues


$

1,029,893


$

199,206


$

3,120


$

1,232,219



Deduct:
















U.S. Cellular equipment sales revenue



57,317














Service revenues



972,576





























Operating income (loss)



63,504



24,560



(1,683)



86,381



Add (Deduct):
















Depreciation, amortization and accretion



144,455



43,149



2,654



190,258




Loss on impairment of intangible assets



--



--



--



--




(Gain) Loss on asset disposals



1,250



(68)



32



1,214





Adjusted OIBDA (3)


$

209,209


$

67,641


$

1,003


$

277,853






















Adjusted OIBDA margin (4)



21.5%



34.0%















































TDS Consolidated








Three Months Ended June 30,


2011


2010


























Cash flows from operating activities


$

275,873


$

291,686









Deduct:
















Capital expenditures



211,248



171,328











Free cash flow (5)


$

64,625


$

120,358










Telephone and Data Systems, Inc.


Financial Measures and Reconciliations

(Unaudited, dollars in thousands)


Six Months Ended June 30, 2011


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated

Total




















Operating revenues


$

2,133,274


$

397,812


$

7,235


$

2,538,321



Deduct:
















U.S. Cellular equipment sales revenue



146,131














Service revenues



1,987,143





























Operating income (loss)



159,433



58,096



(4,712)



212,817



Add (Deduct):
















Depreciation, amortization and accretion



293,328



88,680



5,261



387,269




Loss on impairment of intangible assets



--



--



--



--




Loss on asset disposals



3,959



421



1



4,381





Adjusted OIBDA (3)


$

456,720


$

147,197


$

550


$

604,467






















Adjusted OIBDA margin (4)



23.0%



37.0%

























Six Months Ended June 30, 2010


U.S. Cellular


TDS Telecom (1)


All Other (2)


Consolidated

Total





















Operating revenues


$

2,053,750


$

394,711


$

6,193


$

2,454,654



Deduct:
















U.S. Cellular equipment sales revenue



116,166














Service revenues



1,937,584





























Operating income (loss)



141,128



50,432



(3,183)



188,377



Add (Deduct):
















Depreciation, amortization and accretion



287,688



86,572



5,387



379,647




Loss on impairment of intangible assets



--



--



--



--




(Gain) Loss on asset disposals



6,426



277



(58)



6,645





Adjusted OIBDA (3)


$

435,242


$

137,281


$

2,146


$

574,669






















Adjusted OIBDA margin (4)



22.5%



34.8%















































TDS Consolidated








Six Months Ended June 30,


2011


2010


























Cash flows from operating activities


$

537,663


$

502,346









Deduct: