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TDS Reports Third Quarter 2011 Results

11/04/2011
Revenues increase 5 percent; profitability improves

CHICAGO, Nov. 4, 2011 /PRNewswire via COMTEX/ --

Note: Comparisons are year over year unless otherwise noted.

3Q 2011 Highlights

TDS Consolidated

  • Operating revenues increased 5 percent to $1.3 billion.
  • Operating income increased 50 percent to $126.9 million.
  • Diluted earnings per share attributable to TDS shareholders increased to $0.68 from $0.39.

U.S. Cellular

  • Smartphones sold, as a percent of total devices sold, increased to 39.9 percent from 23.6 percent; smartphone customers increased to 26.2 percent of postpaid customers from 12.1 percent.
  • Postpaid ARPU (average revenue per unit) increased to $52.41 from $50.82.
  • Service revenues increased 5 percent to $1,036.6 million.
  • Operating income increased 66 percent to $101.6 million.
  • Net loss of 23,000 retail customers, reflecting loss of 34,000 postpaid customers and gain of 11,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
  • Cell sites in service increased 4 percent to 7,828.

TDS Telecom

  • Operating revenues increased 4 percent to $210.8 million.
  • Operating income increased 2 percent to $25.2 million.
  • ILEC triple play penetration increased to 28.5 percent from 24.6 percent.
  • managedIP stations (ILEC and CLEC) grew to 39,400 from 23,400.

As previously announced, TDS will hold a teleconference Nov. 4, 2011 at 9:00 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 $1,325.4 million for the third quarter of 2011, an increase of 5 percent from $1,266.4 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $71.3 million and $0.68, respectively, for the third quarter of 2011, compared to $41.4 million and $0.39, respectively, in the comparable period one year ago.

"U.S. Cellular and TDS Telecom are focused on competing more effectively for new customers," said LeRoy T. Carlson, Jr., TDS president and CEO, "while continuing to satisfy and retain their current customers. Both companies are also working to improve operational excellence and efficiency."

"U.S. Cellular increased its margins and profitability, through growth in inbound roaming revenue, and through expense control. Average revenue per customer also grew, as more customers chose smartphones and data plans.

"TDS Telecom had a solid quarter, increasing operating revenues and operating income. ILEC data revenues continued to increase, due mainly to growth in hosted and managed services revenues and high-speed data customers. TDS Telecom also continued to add managedIP stations in its commercial business.

"The TDS Board of Directors is currently considering potential changes to our share consolidation proposal and anticipates completing this review process in the near future. Management and the TDS Board of Directors continue to believe that the share consolidation is in the best interests of all TDS shareowners and will simplify TDS' capital structure, improve market liquidity and provide greater financial flexibility."

Guidance for year ending Dec. 31, 2011

Guidance for the year ending Dec. 31, 2011, as of Nov. 4, 2011, is provided below, compared to the previous guidance provided on Aug. 8, 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)

$230-$305 million


$210-$285 million


Depreciation, amortization and accretion expenses,





and losses on asset disposals and exchanges

Approx. $590 million


Unchanged


and impairment of assets (3)





Adjusted OIBDA (2) (4)

$820-$895 million


$800-$875 million


Capital expenditures (4)

$750-$800 million


Unchanged






TDS Telecom





Operating revenues

$800-$830 million


Unchanged


Operating income (3)

$85-$115 million


Unchanged


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


Unchanged


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 June 30, 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 and exchanges (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 operations, 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 2015.

Stock repurchase summary

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



Repurchase Period


# Shares


Cost (in millions)


2011 (YTD)


748,246


$

21.5


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 Nov. 4, 2011 at 9:00 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.

IMPORTANT INFORMATION: The foregoing information is not a solicitation of a proxy from any TDS shareholder. This is being done only pursuant to a definitive proxy statement. Additional information relating to the foregoing is included in TDS' proxy materials filed with the Securities and Exchange Commission ("SEC") and distributed to shareholders. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ SUCH MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Shareholders and other investors may access such materials without charge at the SEC's web site (www.sec.gov) and on the TDS web site (www.teldta.com) in the Investor Relations section on the SEC filings page. In addition, shareholders may obtain free copies of the proxy materials by contacting TDS' proxy solicitor, MacKenzie Partners at (800) 322-2885. TDS and its executive officers and directors may be deemed to be participants in the solicitation of proxies from TDS shareholders on behalf of the TDS board of directors in connection with the foregoing. Information concerning such participants and their respective direct or indirect interests in TDS by security holdings or otherwise is included in TDS' definitive proxy statement.

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 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 September 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


9/30/2011



6/30/2011



3/31/2011



12/31/2010



9/30/2010

Total population
















Consolidated markets (1)


91,965,000



91,204,000



91,090,000



90,468,000



90,468,000


Consolidated operating markets (1)


46,888,000



46,888,000



46,774,000



46,546,000



46,546,000

Market penetration at end of period
















Consolidated markets (2)


6.5%



6.5%



6.6%



6.7%



6.7%


Consolidated operating markets (2)


12.7%



12.7%



12.9%



13.0%



13.1%

All customers
















Total at end of period


5,932,000



5,968,000



6,033,000



6,072,000



6,103,000


Gross additions


299,000



257,000



293,000



327,000



338,000


Net additions (losses)


(36,000)



(70,000)



(39,000)



(31,000)



(41,000)


Smartphones sold as a percent of
















total devices sold (3)


39.9%



39.6%



42.5%



39.6%



23.6%

Retail customers
















Total at end of period


5,621,000



5,644,000



5,698,000



5,729,000



5,750,000


Smartphone penetration (3) (4)


26.2%



23.0%



20.2%



16.6%



12.1%


Gross additions


284,000



226,000



256,000



292,000



301,000


Net retail additions (losses) (5)


(23,000)



(58,000)



(31,000)



(21,000)



(25,000)


Net postpaid additions (losses)


(34,000)



(41,000)



(22,000)



(10,000)



(25,000)


Net prepaid additions (losses)


11,000



(17,000)



(9,000)



(11,000)



--

Service revenue components (000s)
















Retail service

$

871,199


$

868,630


$

864,602


$

864,905


$

865,766


Inbound roaming


107,810



82,760



64,386



67,545



72,901


Other


57,600



50,640



56,125



59,464



44,836

Total service revenues (000s)

$

1,036,609


$

1,002,030


$

985,113


$

991,914


$

983,503

Total ARPU (6)

$

58.09


$

55.69


$

54.29


$

54.37


$

53.53

Billed ARPU (7)

$

48.82


$

48.27


$

47.65


$

47.41


$

47.12

Postpaid ARPU (8)

$

52.41


$

51.84


$

51.21


$

50.99


$

50.82

Postpaid churn rate (9)


1.5%



1.4%



1.4%



1.5%



1.6%

Capital expenditures (000s)

$

248,000


$

162,100


$

95,900


$

203,400


$

124,700

Cell sites in service


7,828



7,770



7,663



7,645



7,524


(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


9/30/2011



6/30/2011



3/31/2011



12/31/2010



9/30/2010

TDS Telecom
















ILEC:
















Equivalent access lines (1)


762,500



764,600



765,300



767,200



773,800


Physical access lines (2)


490,200



496,300



501,200



507,700



517,000


High-speed data customers (3)


239,000



235,600



231,800



227,700



225,400


Long-distance customers


373,300



373,200



370,600



370,100



370,800


managedIP stations (4)


5,800



5,100



4,300



3,600



3,100


Capital expenditures (000s)

$

51,500


$

39,100


$

22,100


$

55,700


$

33,000


CLEC:
















Equivalent access lines (1)


322,600



328,700



331,000



335,400



338,700


High-speed data customers (3)


30,200



31,500



32,300



33,100



33,900


managedIP stations (4)


33,600



30,200



27,200



23,800



20,300


Capital expenditures (000s)

$

4,700


$

6,200


$

4,200


$

6,200


$

5,500


(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 September 30,


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

































Increase/ (Decrease)






2011



2010 (1)



Amount



Percent


Operating revenues

















U.S. Cellular

$

1,110,439



$

1,060,781



$

49,658




5%



TDS Telecom


210,806




202,030




8,776




4%



All Other (2)


4,178




3,605




573




16%







1,325,423




1,266,416




59,007




5%


Operating expenses

















U.S. Cellular


















Expenses excluding depreciation, amortization and accretion


876,855




854,250




22,605




3%




Depreciation, amortization and accretion


141,664




143,191




(1,527)




(1%)




(Gain) loss on asset disposals and exchanges, net


(9,700)




1,981




(11,681)




> (100%)







1,008,819




999,422




9,397




1%



TDS Telecom


















Expenses excluding depreciation, amortization and accretion


139,601




133,412




6,189




5%




Depreciation, amortization and accretion


45,682




43,645




2,037




5%




(Gain) loss on asset disposals, net


337




390




(53)




(14%)







185,620




177,447




8,173




5%



All Other (2)


















Expenses excluding depreciation and amortization


1,355




2,243




(888)




(40%)




Depreciation and amortization


2,693




2,610




83




3%




(Gain) loss on asset disposals, net


12




7




5




71%







4,060




4,860




(800)




(16%)
























Total operating expenses


1,198,499




1,181,729




16,770




1%


Operating income (loss)

















U.S. Cellular


101,620




61,359




40,261




66%



TDS Telecom


25,186




24,583




603




2%



All Other (2)


118




(1,255)




1,373




> (100%)







126,924




84,687




42,237




50%


Investment and other income (expense)

















Equity in earnings of unconsolidated entities


22,053




24,147




(2,094)




(9%)



Interest and dividend income


2,199




2,785




(586)




(21%)



Gain on investment


12,730




--




12,730




N/M



Interest expense


(22,258)




(28,297)




6,039




21%



Other, net


115




(438)




553




> (100%)




Total investment and other income (expense)


14,839




(1,803)




16,642




> (100%)


Income before income taxes


141,763




82,884




58,879




71%



Income tax expense


53,545




29,354




24,191




82%


Net income


88,218




53,530




34,688




65%



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


(16,924)




(12,111)




(4,813)




(40%)


Net income attributable to TDS shareholders


71,294




41,419




29,875




72%



Preferred dividend requirement


(12)




(12)




--




--


Net income available to common shareholders

$

71,282



$

41,407



$

29,875




72%





















Basic weighted average shares outstanding


103,487




104,881




(1,394)




(1%)


Basic earnings per share attributable to TDS shareholders

$

0.69



$

0.39



$

0.30




77%





















Diluted weighted average shares outstanding


103,806




105,298




(1,492)




(1%)


Diluted earnings per share attributable to TDS shareholders

$

0.68



$

0.39



$

0.29




74%



(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

(2)

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


Nine Months Ended September 30,


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

































Increase/ (Decrease)






2011



2010 (1)



Amount



Percent


Operating revenues

















U.S. Cellular

$

3,243,713



$

3,114,531



$

129,182




4%



TDS Telecom


608,618




596,741




11,877




2%



All Other (2)


11,413




9,798




1,615




16%







3,863,744




3,721,070




142,674




4%


Operating expenses

















U.S. Cellular


















Expenses excluding depreciation, amortization and accretion


2,553,409




2,472,758




80,651




3%




Depreciation, amortization and accretion


431,581




427,831




3,750




1%




(Gain) loss on asset disposals and exchanges, net


(5,741)




8,407




(14,148)




> (100%)







2,979,249




2,908,996




70,253




2%



TDS Telecom


















Expenses excluding depreciation, amortization and accretion


390,216




390,842




(626)




--




Depreciation, amortization and accretion


134,362




130,217




4,145




3%




(Gain) loss on asset disposals, net


758




667




91




14%







525,336




521,726




3,610




1%



All Other (2)


















Expenses excluding depreciation and amortization


8,040




6,290




1,750




28%




Depreciation and amortization


7,954




7,997




(43)




(1%)




(Gain) loss on asset disposals, net


13




(51)




64




> (100%)







16,007




14,236




1,771




12%
























Total operating expenses


3,520,592




3,444,958




75,634




2%


Operating income (loss)

















U.S. Cellular


264,464




205,535




58,929




29%



TDS Telecom


83,282




75,015




8,267




11%



All Other (2)


(4,594)




(4,438)




(156)




(4%)







343,152




276,112




67,040




24%


Investment and other income (expense)

















Equity in earnings of unconsolidated entities


64,031




75,047




(11,016)




(15%)



Interest and dividend income


6,916




7,900




(984)




(12%)



Gain on investment


26,103




--




26,103




N/M



Interest expense


(94,184)




(86,520)




(7,664)




(9%)



Other, net


1,501




(2,557)




4,058




> (100%)




Total investment and other income (expense)


4,367




(6,130)




10,497




> (100%)


Income before income taxes


347,519




269,982




77,537




29%



Income tax expense


95,264




99,904




(4,640)




(5%)


Net income


252,255




170,078




82,177




48%



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


(45,503)




(38,373)




(7,130)




(19%)


Net income attributable to TDS shareholders


206,752




131,705




75,047




57%



Preferred dividend requirement


(37)




(37)




--




--


Net income available to common shareholders

$

206,715



$

131,668



$

75,047




57%





















Basic weighted average shares outstanding


103,672




105,443




(1,771)




(2%)


Basic earnings per share attributable to TDS shareholders

$

1.99



$

1.25



$

0.74




59%





















Diluted weighted average shares outstanding


104,094




105,800




(1,706)




(2%)


Diluted earnings per share attributable to TDS shareholders

$

1.98



$

1.24



$

0.74




60%



(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

(2)

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




















September 30,


December 31,




2011


2010 (1)

Current assets







Cash and cash equivalents

$

599,545


$

368,134


Short-term investments


249,816



402,882


Accounts receivable from customers and others


536,129



512,946


Inventory


153,077



116,330


Net deferred income tax asset


37,132



37,079


Prepaid expenses


80,742



76,935


Income taxes receivable


60,960



64,985


Other current assets


17,922



17,384





1,735,323



1,596,675









Assets held for sale


60,829



--









Investments







Licenses


1,493,796



1,460,126


Goodwill


797,084



728,455


Other intangible assets, net


54,291



30,810


Investments in unconsolidated entities


195,872



197,922


Long-term investments


85,676



102,185


Other investments


5,189



8,988





2,631,908



2,528,486









Property, plant and equipment, net







U.S. Cellular


2,654,494



2,574,522


TDS Telecom


916,458



909,951


Other


56,311



33,311





3,627,263



3,517,784









Other assets and deferred charges


107,237



79,623









Total assets

$

8,162,560


$

7,722,568


(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.


Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights


(Unaudited, dollars in thousands)













LIABILITIES AND EQUITY




























September 30,



December 31,






2011



2010 (1)













Current liabilities









Current portion of long-term debt

$

3,554



$

1,711



Accounts payable


416,288




344,355



Customer deposits and deferred revenues


203,367




171,781



Accrued interest


14,678




4,308



Accrued taxes


45,682




46,110



Accrued compensation


76,481




99,020



Other current liabilities


108,634




144,938







868,684




812,223













Liabilities held for sale


858




--













Deferred liabilities and credits









Net deferred income tax liability


771,049




589,092



Other deferred liabilities and credits


363,291




354,798













Long-term debt


1,528,350




1,499,862













Noncontrolling interests with redemption features


923




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


2,116,063




2,107,929




Special Common and Common Treasury shares, at cost


(754,302)




(738,695)




Accumulated other comprehensive loss


(2,923)




(3,208)




Retained earnings


2,619,055




2,450,599





Total TDS shareholders' equity


3,979,163




3,817,895














Preferred shares


830




830



Noncontrolling interests


649,412




647,013















Total equity


4,629,405




4,465,738













Total liabilities and equity

$

8,162,560



$

7,722,568



(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.


Balance Sheet Highlights

September 30, 2011

(Unaudited, dollars in thousands)






































U.S.


TDS


TDS Corporate


Intercompany


TDS




Cellular


Telecom


& Other


Eliminations


Consolidated

Cash and cash equivalents

$

504,952


$

2,925


$

91,668


$

-


$

599,545

Affiliated cash investments


-



458,441



-



(458,441)



-

Short-term investments


110,761



53,584



85,471



-



249,816



$

615,713


$

514,950


$

177,139


$

(458,441)


$

849,361


















Licenses, goodwill and other intangible assets

$

1,965,712


$

556,051


$

(176,592)


$

-


$

2,345,171

Investment in unconsolidated entities


160,374



3,807



41,577



(9,886)



195,872

Long-term and other investments


49,256



1,229



40,380



-



90,865




$

2,175,342


$

561,087


$

(94,635)


$

(9,886)


$

2,631,908



































Property, plant and equipment, net

$

2,654,494


$

916,458


$

56,311


$

-


$

3,627,263


















Long-term debt:
















Current portion

$

101


$

209


$

3,244


$

-


$

3,554


Non-current portion


880,411



1,828



646,111



-



1,528,350



Total

$

880,512


$

2,037


$

649,355


$

-


$

1,531,904


















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 September 30, 2011 and December 31, 2010.







September 30,


December 31,




2011


2010












Cash and cash equivalents


$

599,545


$

368,134


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









Government-backed securities (3)




196,232



305,612



Certificates of deposit




53,584



97,270






$

249,816


$

402,882












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









Government-backed securities (3)



$

85,676


$

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 September 30, 2011, maturities range between 13 and 23 months from the balance sheet date.


Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Nine Months Ended September 30,

(Unaudited, dollars in thousands)






2011


2010 (1)

Cash flows from operating activities







Net income

$

252,255


$

170,078



Add (deduct) adjustments to reconcile net income to net









cash flows from operating activities










Depreciation, amortization and accretion


573,897



566,045





Bad debts expense


49,101



61,087





Stock-based compensation expense


27,792



26,055





Deferred income taxes, net


160,436



56,839





Equity in earnings of unconsolidated entities


(64,031)



(75,047)





Distributions from unconsolidated entities


52,385



59,519





(Gain) loss on asset disposals and exchanges, net


(4,970)



9,023





Gain on investment


(26,103)



-





Noncash interest expense


17,973



4,143





Other operating activities


1,630



502



Changes in assets and liabilities from operations










Accounts receivable


(69,690)



(48,891)





Inventory


(36,387)



32,571





Accounts payable


69,929



(49,034)





Customer deposits and deferred revenues


31,191



2,363





Accrued taxes


2,011



(42,843)





Accrued interest


10,519



9,343





Other assets and liabilities


(74,673)



(16,973)







973,265



764,780











Cash flows from investing activities







Additions to property, plant and equipment


(643,396)



(486,138)


Cash paid for acquisitions and licenses


(105,184)



(28,264)


Cash paid for investments


(101,000)



(433,750)


Cash received for investments


268,686



40,765


Other investing activities


(3,703)



1,681







(584,597)



(905,706)











Cash flows from financing activities







Repayment of long-term debt


(613,933)



(2,182)


Issuance of long-term debt


643,700



-


TDS Common Shares and Special Common Shares








reissued for benefit plans, net of tax payments


1,402



1,183


U.S. Cellular Common Shares reissued for benefit








plans, net of tax payments


1,755



738


Repurchase of TDS Common and Special Common Shares


(21,500)



(50,543)


Repurchase of U.S. Cellular Common Shares


(62,294)



(40,520)


Dividends paid


(36,496)



(35,502)


Payment of debt issuance costs


(21,650)



--


Distributions to noncontrolling interests


(1,676)



(5,828)


Other financing activities


(35,328)



(7,404)







(146,020)



(140,058)











Cash classified as held for sale


(11,237)



-











Net increase (decrease) in cash and cash equivalents


231,411



(280,984)

Cash and cash equivalents







Beginning of period


368,134



670,992


End of period

$

599,545


$

390,008


(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.


TDS Telecom Highlights


Three Months Ended September 30,


(Unaudited, dollars in thousands)
































Increase (Decrease)






2011



2010



Amount


Percent


Local Telephone Operations
















Operating revenues

















Voice

$

42,725



$

45,363



$

(2,638)



(6%)




Data


47,905




32,473




15,432



48%




Network access


67,927




69,032




(1,105)



(2%)




Miscellaneous


9,730