TELEPHONE & DATA SYSTEMS INC /DE/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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EX-99.2 - EXHIBIT 99.2 - TELEPHONE & DATA SYSTEMS INC /DE/	Ex992.htm

Exhibit 99.l NEWS RELEASE

As previously announced, TDS will hold a teleconference November 1, 2013 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com.

Contact: Jane W. McCahon, Vice President, Corporate Relations and Corporate Secretary

(312) 592-5379; jane.mccahon@teldta.com

Julie D. Mathews, Manager, Investor Relations

(312) 592-5341; julie.mathews@teldta.com

FOR RELEASE: IMMEDIATE

TDS REPORTS THIRD QUARTER 2013 RESULTS

CHICAGO – November 1, 2013 – Telephone and Data Systems, Inc. [NYSE:TDS] reported operating revenues of $1,181.0 million for the third quarter of 2013, versus $1,370.1 million for the comparable period one year ago. Net income (loss) attributable to TDS shareholders and related diluted earnings (loss) per share were $(9.5) million and $(0.09) respectively, for the third quarter of 2013, compared to $29.1 million and $0.26, respectively, in the comparable period one year ago.

“All of our businesses continued to make progress on their strategic priorities throughout the quarter,” said LeRoy T. Carlson, Jr., TDS president and CEO. “At U.S. Cellular, we introduced shared data plans, prepared for the upcoming launch of Apple devices, and implemented an important new billing system. TDS Telecom completed the acquisition of Baja Broadband in August, and acquired IT solutions provider MSN Communications in early October.

“U.S. Cellular is close to its goal of bringing 4G LTE access to nearly 90 percent of its customers in 2013, to support growth in smartphone penetration and increased data use. We expect that the addition of the Apple iPhone 5s and 5c to our device portfolio in early November, together with shared data plans we launched in October, will help build our customer base and reduce churn. We are disappointed about, and regret, the significant impact of the billing system implementation on our customer service levels for a period of time. We have resolved most of these issues, and we expect the billing system to provide outstanding benefits going forward. U.S. Cellular has been successful in its sales of non-strategic spectrum, with deals signed or closed generating pre-tax cash proceeds of over $400 million.

“In addition to completing the recent cable and HMS acquisitions, TDS Telecom had continued growth in residential IPTV and commercial managedIP connections. A combination of revenue growth and cost reductions helped to improve TDS Telecom’s profitability in the quarter.”

2013 ESTIMATES

Estimates of full-year 2013 results for U.S. Cellular, TDS Telecom and TDS are shown below. Such estimates represent management’s view as of the date of filing TDS’ Form 10-Q for the quarter ended September 30, 2013. Such forward-looking statements should not be assumed to be current as of any future date. 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 such estimated results.

	2013 Estimated Results (1)
	U.S. Cellular (2)		TDS Telecom		TDS (2)(6)
	Previous	Current	Previous	Current	Previous	Current
(Dollars in millions)
Adjusted operating revenues (3)	$3,615-$3,715	$3,590-$3,640	$890-$930	$920-$960	$4,550-$4,690	$4,555-$4,645
Adjusted income before income taxes (4)	$600-$700	Unchanged	$230-$260	Unchanged	$830-$960	Unchanged
Capital expenditures	$735	Unchanged	$165	Unchanged	$910	Unchanged

(1) These estimates are based on TDS’ current plans, which include an expansion of the multi-year deployment of 4G LTE technology; such expansion includes deployment on 700 MHz in additional markets as well as deployment on the 850 MHz band to provide additional capacity for future growth in data usage, enable potential future 4G LTE roaming, and support the sale of Apple products. The financial impacts of selling Apple products in 2013 consist of the following:

· Increased Adjusted operating revenues resulting from net incremental customers added and retained as a result of offering Apple products;

· Decreased Adjusted income before income taxes as a result of net increases in costs, primarily loss on equipment sales as a result of offering Apple products; and

· Increased Capital expenditures related to the deployment on the 850 MHz band to provide additional capacity for future growth in data usage, which includes capacity required to accommodate Apple products.

These estimates also reflect the impacts of the deconsolidation of certain partnerships as of April 2013 at U.S. Cellular. These estimates do not include (i) the reported gain on sale of business and other exit costs, net (ii) the reported gain on investments, or (iii) the actual or expected gains from spectrum license divestitures. In addition, the estimates reflect the impacts of the acquisition of Baja Broadband, LLC as of August 1, 2013 and MSN Communications, Inc. as of October 4, 2013, and of a multi-year deployment of IPTV at TDS Telecom. New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services, costs to deploy, agreements for content or franchises, or possible acquisitions, dispositions or exchanges) could affect TDS’ plans and, therefore, its 2013 estimated results.

(2) These estimates reflect U.S. Cellular’s consolidated results for 2013. Estimated results reflecting U.S. Cellular’s Divestiture Markets and Core Markets are shown in the table below:

	2013 Estimated Results
	U.S. Cellular Core Markets (5)		U.S. Cellular Divestiture Markets (5)		U.S. Cellular Consolidated (5)
	Previous	Current	Previous	Current	Previous	Current
(Dollars in millions)
Adjusted operating revenues (3)	$3,475-$3,575	$3,450-$3,500	$140	Unchanged	$3,615-$3,715	$3,590-$3,640
Adjusted income before income taxes (4)	$560-$660	Unchanged	$40	Unchanged	$600-$700	Unchanged
Capital expenditures	$730	Unchanged	$5	Unchanged	$735	Unchanged

These estimates reflect the Divestiture Transaction which closed on May 16, 2013.

(3) Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular Equipment sales revenues less U.S. Cellular Cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results. For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular Equipment sales revenues. TDS believes this measure provides useful information to investors regarding TDS’ results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to Operating revenues as an indicator of the Company’s operating performance.

(4) Adjusted income before income taxes is a non-GAAP financial measure defined as Income before income taxes, adjusted for the items set forth in the reconciliation below. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. In addition, TDS may also exclude other items from adjusted income before income taxes if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future. Adjusted

income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company’s operating performance or as an alternative to Cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. TDS believes Adjusted income before income taxes is a useful measure of TDS’ operating results before significant recurring non-cash charges, discrete gains and losses and financing charges (Interest expense). The following tables provide a reconciliation of Income (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results, nine months ended September 30, 2013 actual results, and 2012 actual results:

	2013 Current Estimated Results
	U.S. Cellular Core Markets (5)	U.S. Cellular Divestiture Markets (2)(5)	U.S. Cellular Consolidated (5)	TDS Telecom	TDS (6)
(Dollars in millions)
Income (loss) before income taxes	$315-$415	$35	$350-$450	$25-$55	$360-$490
Depreciation, amortization and accretion expense (7)	$540	$250	$790	$205	$1,005
(Gain) loss on sale of business and other exit costs, net	—	($245)	($245)	—	($300)
(Gain) loss from spectrum license divestitures	($325)	—	($325)	—	($325)
(Gain) loss on investments	($20)	—	($20)	—	($15)
Interest expense	$50	—	$50	—	$105
Adjusted income before income taxes	$560-$660	$40	$600-$700	$230-$260	$830-$960

		Actual Results
		Nine Months Ended September 30, 2013						Year Ended December 31, 2012
			U.S. Cellular Consolidated (5)		TDS Telecom		TDS (6)		U.S. Cellular Consolidated (5)		TDS Telecom		TDS (6)
(Dollars in millions)
Income before income taxes		$	266	$	36	$	304	$	205	$	45	$	196
Depreciation, amortization and accretion expense (7)			593		150		752		609		193		814
(Gain) loss on sale of business and other exit costs, net			(244)		—		(298)		21		—		21
(Gain) loss from spectrum license divestitures			—		—		—		—		—		—
(Gain) loss on investments			(18)		(1)		(15)		4		—		4
Interest expense			33		(2)		74		42		(1)		87
Adjusted income before income taxes		$	630	$	183	$	817	$	881	$	237	$	1,122

(5)	The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets. The amounts for Core Markets and Divestiture Markets represent non-GAAP financial measures. TDS believes that the amounts for the Core Markets and Divestiture Markets may be useful to investors and other users of its financial information in evaluating the separate results for the Core Markets. Divestiture Markets are comprised of U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets. Core Markets are comprised of all other markets in which U.S. Cellular conducts business including Peoria, Rockford and certain other areas in Illinois, and in Columbia, Joplin, Jefferson City and certain other areas in Missouri. Core Markets as defined also includes any other income or expenses due to U.S. Cellular’s direct or indirect ownership interests in other spectrum in the Divestiture Markets which was not included in the sale and other retained assets from the Divestiture Markets.

(6)	The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.

(7)	The 2013 estimated amount for Depreciation, amortization and accretion expense in the U.S. Cellular Divestiture Markets includes approximately $171 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction. Actual results for the nine months ended September 30, 2013 and the year ended December 31, 2012 include $134 million and $20 million, respectively, of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.

Stock repurchase summary

TDS began repurchasing under its $250 million repurchase authorization on Aug. 5, 2013. The following represents the third quarter repurchases of TDS Common Shares.

Repurchase Period		# Shares		Cost (in millions)
2013 (third quarter)		204,548		$5.8

Conference Call Information

TDS will hold a conference call on November 1, 2013 at 9:30 a.m. CDT.

· Access the live call on the Investor Relations page of www.teldta.com or at http://www.videonewswire.com/event.asp?id=96657.

· Access the call by phone at 877-407-8029 (US/Canada), no pass code required.

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; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, TDS Hosted & Managed Services and Baja Broadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,600 people as of September 30, 2013.

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: impacts of any pending acquisition and divestiture transactions, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transaction and the financial impacts of such transaction; the ability of the company to successfully manage and 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 on acceptable terms; 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; changes in customer growth rates, average monthly revenue per user, 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 Current Report used by TDS to furnish this press release to the Securities and Exchange Commission (“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
Total Markets Summary Operating Data (Unaudited)

Quarter Ended			9/30/2013		6/30/2013		3/31/2013		12/31/2012		9/30/2012
Retail Customers
	Postpaid
		Total at end of period		4,343,000		4,412,000		5,060,000		5,134,000		5,175,000
		Gross additions		165,000		165,000		191,000		241,000		230,000
		Net additions (losses)		(60,000)		(120,000)		(74,000)		(41,000)		(38,000)
		ARPU (1)	$	54.64	$	54.18	$	54.85	$	54.56	$	54.34
		Churn rate (2)		1.7%		2.0%		1.7%		1.8%		1.7%
		Smartphone penetration (3) (4)		47.1%		45.5%		43.5%		41.8%		38.6%
	Prepaid
		Total at end of period		370,000		381,000		446,000		423,000		386,000
		Gross additions		65,000		77,000		104,000		107,000		120,000
		Net additions (losses)		(11,000)		(7,000)		23,000		37,000		57,000
		ARPU (1)	$	28.72	$	31.69	$	33.31	$	33.56	$	32.97
		Churn rate (2)		6.8%		6.8%		6.2%		5.8%		5.9%
Total customers at end of period				4,875,000		4,968,000		5,736,000		5,798,000		5,808,000
Billed ARPU (1)			$	50.92	$	50.60	$	51.13	$	50.94	$	50.83
Service revenue ARPU (1)			$	58.36	$	57.45	$	57.63	$	58.00	$	59.57
Smartphones sold as a percent of total devices sold				65.2%		66.0%		61.7%		62.9%		53.0%
Total population
		Consolidated markets (5)		84,025,000		84,025,000		93,943,000		93,244,000		92,996,000
		Consolidated operating markets (5)		31,822,000		31,822,000		47,440,000		46,966,000		46,966,000
Market penetration at end of period
		Consolidated markets (6)		5.8%		5.9%		6.1%		6.2%		6.2%
		Consolidated operating markets (6)		15.3%		15.6%		12.1%		12.3%		12.4%
Capital expenditures (000s)			$	242,500	$	168,500	$	118,400	$	253,100	$	199,100
Total cell sites in service				7,687		7,748		8,027		8,028		7,984
Owned towers in service				4,422		4,411		4,411		4,408		4,377

United States Cellular Corporation
Core Markets Summary Operating Data (Unaudited)
Excludes NY1 & NY2

Quarter Ended			9/30/2013		6/30/2013		3/31/2013		12/31/2012		9/30/2012
Retail Customers
	Postpaid
		Total at end of period		4,343,000		4,412,000		4,463,000		4,496,000		4,515,000
		Gross additions		165,000		165,000		176,000		208,000		196,000
		Net additions (losses)		(60,000)		(53,000)		(33,000)		(19,000)		(23,000)
		ARPU (1)	$	54.64	$	54.44	$	54.21	$	53.91	$	53.67
		Churn rate (2)		1.7%		1.6%		1.6%		1.7%		1.6%
		Smartphone penetration (3) (4)		47.1%		45.5%		43.0%		41.1%		37.8%
	Prepaid
		Total at end of period		370,000		381,000		373,000		342,000		305,000
		Gross additions		65,000		76,000		91,000		87,000		99,000
		Net additions (losses)		(11,000)		8,000		31,000		37,000		59,000
		ARPU (1)	$	28.72	$	31.65	$	32.92	$	33.21	$	32.97
		Churn rate (2)		6.8%		6.0%		5.6%		5.1%		4.8%
Total customers at end of period				4,875,000		4,968,000		5,005,000		5,022,000		5,012,000
Billed ARPU (1)			$	50.92	$	50.98	$	50.93	$	50.71	$	50.59
Service revenue ARPU (1)			$	58.36	$	57.88	$	57.14	$	57.67	$	59.34
Smartphones sold as a percent of total devices sold				65.2%		66.1%		62.1%		62.9%		53.0%
Total population
		Consolidated markets (5)		84,025,000		84,025,000		84,025,000		83,384,000		82,595,000
		Consolidated operating markets (5)		31,822,000		31,822,000		31,822,000		31,445,000		31,110,000
Market penetration at end of period
		Consolidated markets (6)		5.8%		5.9%		6.0%		6.0%		6.1%
		Consolidated operating markets (6)		15.3%		15.6%		15.7%		16.0%		16.1%
Capital expenditures (000s)			$	239,300	$	171,200	$	113,300	$	241,400	$	184,100
Total cell sites in service				6,127		6,113		6,113		6,130		6,089
Owned towers in service				3,859		3,844		3,846		3,847		3,818

(1) ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period. These revenue bases and customer populations are shown below:

a. Postpaid ARPU consists of total postpaid service revenues and postpaid customers.

b. Prepaid ARPU consists of total prepaid service revenues and prepaid customers.

c. Billed ARPU consists of total postpaid, prepaid, and reseller service revenues and postpaid, prepaid and reseller customers.

d. Service revenue ARPU consists of total retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2) Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

(3) Smartphones represent wireless devices which run on an Android^TM, BlackBerry® or Windows Mobile® operating system, excluding tablets.

(4) Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5) Used only to calculate market penetration of consolidated and core markets and consolidated and core operating markets, respectively. See footnote (6) below.

(6) Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated and core markets and consolidated and core operating markets, respectively, as estimated by Claritas®.

TDS Telecom
Summary Operating Data (Unaudited)

Quarter Ended			9/30/2013	6/30/2013	3/31/2013	12/31/2012	9/30/2012
TDS Telecom
Wireline Connections:
	Residential
		Voice	358,200	364,000	368,600	374,700	382,000
		Broadband	229,500	231,700	229,500	229,900	232,000
		IPTV	12,200	10,500	9,000	7,900	6,700
		Wireline residential connections	599,900	606,200	607,100	612,500	620,700

	Commercial
		Voice	223,800	229,100	235,600	243,100	250,100
		Broadband	27,600	28,300	28,800	29,600	30,500
		managedIP	121,000	112,000	103,400	94,600	84,500
		Wireline commercial connections	372,400	369,400	367,800	367,300	365,100

	Total Wireline connections		972,300	975,600	974,900	979,800	985,800

Cable Connections:
		Video	70,300	—	—	—	—
		Broadband	59,800	—	—	—	—
		Voice	16,800	—	—	—	—
		Cable connections	146,900	—	—	—	—

Total Wireline and Cable Customer Connections			1,119,200	975,600	974,900	979,800	985,800

TDS Telecom
Capital Expenditures (000s)

Quarter Ended		9/30/2013		6/30/2013		3/31/2013		12/31/2012		9/30/2012
Wireline	$	32,800	$	33,300	$	27,900	$	49,500	$	39,100
Cable		1,400		—		—		—		—
HMS		2,400		2,300		2,600		2,300		4,400
	$	36,600	$	35,600	$	30,500	$	51,800	$	43,500

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)
				2013		2012		Amount		Percent
Operating revenues
	U.S. Cellular			$	939,236	$	1,140,357	$	(201,121)		(18%)
	TDS Telecom				234,543		220,417		14,126		6%
	All Other (1)				7,201		9,334		(2,133)		(23%)
					1,180,980		1,370,108		(189,128)		(14%)
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			781,291		935,800		(154,509)		(17%)
		Depreciation, amortization and accretion			200,985		145,151		55,834		38%
		Loss on asset disposals, net			1,701		11,262		(9,561)		(85%)
		(Gain) loss on sale of business and other exit costs, net			(1,534)		65		(1,599)		>(100%)
					982,443		1,092,278		(109,835)		(10%)
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			170,650		161,515		9,135		6%
		Depreciation, amortization and accretion			51,305		48,251		3,054		6%
		Loss on asset disposals, net			436		351		85		24%
					222,391		210,117		12,274		6%
	All Other (1)
		Expenses excluding depreciation and amortization			6,208		9,361		(3,153)		(34%)
		Depreciation and amortization			3,005		2,817		188		7%
		Loss on asset disposals, net			18		29		(11)		(38%)
					9,231		12,207		(2,976)		(24%)

			Total operating expenses		1,214,065		1,314,602		(100,537)		(8%)
Operating income (loss)
	U.S. Cellular				(43,207)		48,079		(91,286)		>(100%)
	TDS Telecom				12,152		10,300		1,852		18%
	All Other (1)				(2,030)		(2,873)		843		29%
					(33,085)		55,506		(88,591)		>(100%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				37,609		25,015		12,594		50%
	Interest and dividend income				2,507		2,359		148		6%
	Interest expense				(24,961)		(20,497)		(4,464)		(22%)
	Other, net				145		217		(72)		(33%)
		Total investment and other income			15,300		7,094		8,206		>100%
Income (loss) before income taxes					(17,785)		62,600		(80,385)		>(100%)
	Income tax expense (benefit)				(6,731)		22,442		(29,173)		>(100%)
Net income (loss)					(11,054)		40,158		(51,212)		>(100%)
	Less: Net income (loss) attributable to noncontrolling interests, net of tax				(1,542)		11,041		(12,583)		>(100%)
Net income (loss) attributable to TDS shareholders					(9,512)		29,117		(38,629)		>(100%)
	Preferred dividend requirement				(12)		(12)		—		—
Net income (loss) available to common shareholders				$	(9,524)	$	29,105	$	(38,629)		>(100%)

Basic weighted average shares outstanding					108,571		108,819		(248)		—
Basic earnings (loss) per share attributable to TDS shareholders				$	(0.09)	$	0.27	$	(0.36)		>(100%)

Diluted weighted average shares outstanding					108,571		109,246		(675)		—
Diluted earnings (loss) per share attributable to TDS shareholders				$	(0.09)	$	0.26	$	(0.35)		>(100%)

(1) Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations.

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)
				2013		2012		Amount		Percent
Operating revenues
	U.S. Cellular			$	3,016,112	$	3,336,878	$	(320,766)		(10%)
	TDS Telecom				675,064		633,011		42,053		7%
	All Other (1)				26,543		29,179		(2,636)		(9%)
					3,717,719		3,999,068		(281,349)		(7%)
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			2,472,825		2,668,224		(195,399)		(7%)
		Depreciation, amortization and accretion			593,410		439,391		154,019		35%
		Loss on asset disposals, net			16,153		15,967		186		1%
		(Gain) loss on sale of business and other exit costs, net			(243,627)		(4,148)		(239,479)		>100%
					2,838,761		3,119,434		(280,673)		(9%)
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			493,090		453,918		39,172		9%
		Depreciation, amortization and accretion			149,552		143,639		5,913		4%
		(Gain) loss on asset disposals, net			(53)		738		(791)		>(100%)
		(Gain) loss on sale of business and other exit costs, net			—		39		(39)		N/M
					642,589		598,334		44,255		7%
	All Other (1)
		Expenses excluding depreciation and amortization			25,480		31,418		(5,938)		(19%)
		Depreciation and amortization			8,613		9,132		(519)		(6%)
		Loss on impairment of assets			—		515		(515)		N/M
		(Gain) loss on asset disposals, net			(10)		11		(21)		>(100%)
		(Gain) loss on sale of business and other exit costs, net			(54,010)		—		(54,010)		N/M
					(19,927)		41,076		(61,003)		>(100%)

			Total operating expenses		3,461,423		3,758,844		(297,421)		(8%)
Operating income (loss)
	U.S. Cellular				177,351		217,444		(40,093)		(18%)
	TDS Telecom				32,475		34,677		(2,202)		(6%)
	All Other (1)				46,470		(11,897)		58,367		>(100%)
					256,296		240,224		16,072		7%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				100,303		73,796		26,507		36%
	Interest and dividend income				6,685		6,894		(209)		(3%)
	Gain (loss) on investments				14,518		(3,728)		18,246		>(100%)
	Interest expense				(73,208)		(68,100)		(5,108)		(8%)
	Other, net				(206)		196		(402)		>(100%)
		Total investment and other income			48,092		9,058		39,034		>100%
Income before income taxes					304,388		249,282		55,106		22%
	Income tax expense				130,056		85,619		44,437		52%
Net income					174,332		163,663		10,669		7%
	Less: Net income attributable to noncontrolling interests, net of tax				26,348		39,955		(13,607)		(34%)
Net income attributable to TDS shareholders					147,984		123,708		24,276		20%
	Preferred dividend requirement				(37)		(37)		—		—
Net income available to common shareholders				$	147,947	$	123,671	$	24,276		20%

Basic weighted average shares outstanding					108,405		108,735		(330)		—
Basic earnings per share attributable to TDS shareholders				$	1.36	$	1.14	$	0.22		19%

Diluted weighted average shares outstanding					108,993		109,018		(25)		—
Diluted earnings per share attributable to TDS shareholders				$	1.35	$	1.13	$	0.22		19%

(1) Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations. TDS recognized an incremental $53.5 million upon closing of the Divesture Transaction as a result of lower asset basis in assets disposed.

N/M – Percentage change not meaningful

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)

ASSETS


		September 30,		December 31,
		2013		2012
Current assets
	Cash and cash equivalents	$	711,089	$	740,481
	Short-term investments		45,162		115,700
	Accounts receivable from customers and others		686,811		574,328
	Inventory		149,489		160,692
	Net deferred income tax asset		62,479		43,411
	Prepaid expenses		94,989		86,385
	Income taxes receivable		1,909		9,625
	Other current assets		36,011		32,815
			1,787,939		1,763,437

Assets held for sale			78,413		163,242

Investments
	Licenses		1,420,541		1,480,039
	Goodwill		821,155		797,194
	Franchise rights		123,668		—
	Other intangible assets, net		59,841		58,522
	Investments in unconsolidated entities		345,411		179,921
	Long-term investments		40,099		50,305
	Other investments		689		824
			2,811,404		2,566,805

Property, plant and equipment, net
	U.S. Cellular		2,874,593		3,022,588
	TDS Telecom		969,318		934,188
	Other		37,924		40,490
			3,881,835		3,997,266

Other assets and deferred charges			140,109		133,150

Total assets		$	8,699,700	$	8,623,900

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY


				September 30,		December 31,
				2013		2012
Current liabilities
		Current portion of long-term debt		$	1,806	$	1,233
		Accounts payable			398,867		377,291
		Customer deposits and deferred revenues			244,526		222,345
		Accrued interest			15,799		6,565
		Accrued taxes			107,183		48,237
		Accrued compensation			97,266		134,932
		Other current liabilities			142,851		134,005
					1,008,298		924,608

Liabilities held for sale					471		19,594

Deferred liabilities and credits
		Net deferred income tax liability			851,396		862,580
		Other deferred liabilities and credits			445,596		438,727

Long-term debt					1,721,085		1,721,571

Noncontrolling interests with redemption features					540		493

Equity
	TDS shareholders' equity
		Series A Common and Common Shares, par value $.01			1,327		1,327
		Capital in excess of par value			2,301,983		2,304,122
		Treasury shares, at cost			(727,577)		(750,099)
		Accumulated other comprehensive loss			(8,656)		(8,132)
		Retained earnings			2,555,765		2,464,318
			Total TDS shareholders' equity		4,122,842		4,011,536

	Preferred shares				825		825
	Noncontrolling interests				548,647		643,966

		Total equity			4,672,314		4,656,327

Total liabilities and equity				$	8,699,700	$	8,623,900

Balance Sheet Highlights
September 30, 2013
(Unaudited, dollars in thousands)


		U.S.		TDS		TDS Corporate		Intercompany		TDS
		Cellular		Telecom		& Other		Eliminations		Consolidated
Cash and cash equivalents		$	183,101	$	91,200	$	436,788	$	―	$	711,089
Affiliated cash investments			―		428,258		―		(428,258)		―
Short-term investments			45,162		―		―		―		45,162
		$	228,263	$	519,458	$	436,788	$	(428,258)	$	756,251

Licenses, goodwill and other intangible assets		$	1,785,248	$	769,748	$	(129,791)	$	―	$	2,425,205
Investment in unconsolidated entities			309,481		3,809		39,491		(7,370)		345,411
Long-term and other investments			40,099		689		―		―		40,788
		$	2,134,828	$	774,246	$	(90,300)	$	(7,370)	$	2,811,404


Property, plant and equipment, net		$	2,874,593	$	969,318	$	37,924	$	―	$	3,881,835

Long-term debt:
	Current portion	$	102	$	98	$	1,606	$	―	$	1,806
	Non-current portion		878,939		1,470		840,676		―		1,721,085
		$	879,041	$	1,568	$	842,282	$	―	$	1,722,891

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, 2013 and December 31, 2012.

		September 30,		December 31,
		2013		2012

Cash and cash equivalents		$	711,089	$	740,481

Amounts included in short-term investments (1) (2)
	U.S. Treasury Notes		45,162		115,700

Amounts included in long-term investments (1) (3)
	U.S. Treasury Notes		40,099		50,305

Total cash and cash equivalents and investments		$	796,350	$	906,486

(1) Designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet.

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

(3) At September 30, 2013, maturities range between 14 and 15 months.

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
Nine Months Ended September 30,
(Unaudited, dollars in thousands)
				2013		2012
Cash flows from operating activities
	Net income			$	174,332	$	163,663
		Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
			Depreciation, amortization and accretion		751,575		592,162
			Bad debts expense		56,693		56,597
			Stock-based compensation expense		21,867		31,724
			Deferred income taxes, net		(30,748)		52,169
			Equity in earnings of unconsolidated entities		(100,303)		(73,796)
			Distributions from unconsolidated entities		51,879		45,558
			Loss on impairment of assets		—		515
			Loss on asset disposals, net		16,090		16,716
			(Gain) loss on sale of business and other exit costs, net		(297,637)		(4,109)
			(Gain) loss on investments		(14,518)		3,728
			Noncash interest expense		1,498		2,555
			Other operating activities		575		1,650
		Changes in assets and liabilities from operations
			Accounts receivable		(216,700)		(69,478)
			Inventory		11,114		(70,918)
			Accounts payable		33,312		(37,728)
			Customer deposits and deferred revenues		21,883		28,323
			Accrued taxes		41,838		107,502
			Accrued interest		9,451		9,488
			Other assets and liabilities		(94,301)		(95,785)
					437,900		760,536

Cash flows from investing activities
	Cash used for additions to property, plant and equipment				(631,370)		(730,897)
	Cash paid for acquisitions and licenses				(280,383)		(97,523)
	Cash received from divestitures				484,300		50,182
	Cash paid for investments				—		(45,000)
	Cash received for investments				80,000		143,444
	Other investing activities				13,860		(13,121)
					(333,593)		(692,915)

Cash flows from financing activities
	Repayment of long-term debt				(1,196)		(2,435)
	Issuance of long-term debt				—		358
	TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments				7,537		(23)
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments				2,840		(2,299)
	Repurchase of TDS Common Shares				(5,813)		—
	Repurchase of U.S. Cellular Common Shares				(18,544)		—
	Dividends paid to TDS shareholders				(41,430)		(39,930)
	U.S. Cellular dividends paid to noncontrolling public shareholders				(75,235)		—
	Payment of debt issuance costs				(23)		—
	Distributions to noncontrolling interests				(3,447)		(1,491)
	Other financing activities				1,612		4,208
					(133,699)		(41,612)

Net increase (decrease) in cash and cash equivalents					(29,392)		26,009
Cash and cash equivalents
	Beginning of period				740,481		563,275
	End of period			$	711,089	$	589,284

TDS Telecom Highlights
Three Months Ended September 30,
(Unaudited, dollars in thousands)

							Increase (Decrease)
			2013		2012		Amount		Percent
Wireline
	Operating revenues
		Residential	$	74,257	$	74,434	$	(177)	—
		Commercial		57,787		57,493		294	1%
		Wholesale		49,756		52,139		(2,383)	(5%)
				181,800		184,066		(2,266)	(1%)
	Operating expenses
		Cost of services and products		68,249		67,740		509	—
		Selling, general and administrative expenses		53,254		57,619		(4,365)	(8%)
		Depreciation, amortization and accretion		42,136		42,800		(664)	(2%)
		Loss on asset disposals and exchanges, net		426		345		81	23%
				164,065		168,504		(4,439)	(3%)

	Operating income		$	17,735	$	15,562	$	2,173	14%

Cable
	Operating revenues
		Residential	$	11,642	$	—	$	11,642	N/M
		Commercial		2,720		—		2,720	N/M
				14,362		—		14,362	N/M
	Operating expenses
		Cost of services and products		6,727		—		6,727	N/M
		Selling, general and administrative expenses		5,184		—		5,184	N/M
		Depreciation, amortization and accretion		2,914		—		2,914	N/M
				14,825		—		14,825	N/M

	Operating loss		$	(463)	$	—	$	(463)	N/M

HMS
	Operating revenues		$	38,727	$	36,428	$	2,299	6%
	Operating expenses
		Cost of services and products		27,518		25,332		2,186	9%
		Selling, general and administrative expenses		10,064		10,901		(837)	(8%)
		Depreciation, amortization and accretion		6,255		5,451		804	15%
		Loss on asset disposals and exchanges, net		10		6		4	67%
				43,847		41,690		2,157	5%

	Operating loss		$	(5,120)	$	(5,262)	$	142	3%

Intercompany revenues			$	(346)	$	(77)	$	(269)	>(100)%
Intercompany expenses				(346)		(77)		(269)	>(100)%

Total TDS Telecom operating income			$	12,152	$	10,300	$	1,852	18%

Previously, TDS Telecom had reported Results of Operations for its incumbent local exchange carrier (“ILEC”), its competitive local exchange carrier (“CLEC”) and Hosted and Managed Services (“HMS”) segments. As a result of recent acquisitions and changes in TDS’ strategy, operations and internal reporting, TDS has reevaluated and changed its operating segments during the quarter ended September 30, 2013, which resulted in the following reportable segments: Wireline, Cable and HMS. The Wireline segment consists of the former ILEC and CLEC segments. The Cable segment consists of Baja Broadband, LLC, which was acquired in August 2013. Periods presented for comparative purposes have been re-presented to conform to the revised presentation.

TDS Telecom Highlights
Nine Months Ended September 30,
(Unaudited, dollars in thousands)

							Increase (Decrease)
			2013		2012		Amount		Percent
Wireline
	Operating revenues
		Residential	$	220,172	$	223,041	$	(2,869)	—
		Commercial		173,702		172,299		1,403	—
		Wholesale		151,694		160,977		(9,283)	(6%)
				545,568		556,317		(10,749)	(2%)
	Operating expenses
		Cost of services and products		202,521		205,088		(2,567)	(1%)
		Selling, general and administrative expenses		167,326		174,534		(7,208)	(4%)
		Depreciation, amortization and accretion		129,352		129,367		(15)	—
		(Gain) loss on asset disposals and exchanges, net		(176)		672		(848)	>(100)%
				499,023		509,661		(10,638)	(2%)

	Operating income		$	46,545	$	46,656	$	(111)	—

Cable
	Operating revenues
		Residential	$	11,642	$	—	$	11,642	N/M
		Commercial		2,720		—		2,720	N/M
				14,362		—		14,362	N/M
	Operating expenses
		Cost of services and products		6,727		—		6,727	N/M
		Selling, general and administrative expenses		5,184		—		5,184	N/M
		Depreciation, amortization and accretion		2,914		—		2,914	N/M
				14,825		—		14,825	N/M

	Operating loss		$	(463)	$	—	$	(463)	N/M

HMS
	Operating revenues		$	115,665	$	76,862	$	38,803	50%
	Operating expenses
		Cost of services and products		82,517		50,196		32,321	64%
		Selling, general and administrative expenses		29,346		24,268		5,078	21%
		Depreciation, amortization and accretion		17,286		14,272		3,014	21%
		Loss on asset disposals and exchanges, net		123		105		18	17%
				129,272		88,841		40,431	46%

	Operating loss		$	(13,607)	$	(11,979)	$	(1,628)	(14%)

Intercompany revenues			$	(531)	$	(168)	$	(363)	>(100)%
Intercompany expenses				(531)		(168)		(363)	>(100)%

Total TDS Telecom operating income			$	32,475	$	34,677	$	(2,202)	(6%)

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)

			TDS Consolidated

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2013		2012		2013		2012

	Cash flows from operating activities		$	(83,592)	$	253,626	$	437,900	$	760,536
	Deduct:
	Cash used for additions to property, plant and equipment			247,089		229,686		631,370		730,897
		Free cash flow (1)	$	(330,681)	$	23,940	$	(193,470)	$	29,639

(1) Free cash flow is defined as Cash flows from operating activities less Cash used for additions to property, plant and equipment. 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.

TELEPHONE & DATA SYSTEMS INC /DE/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - November 1, 2013

Attached files

TELEPHONE & DATA SYSTEMS INC /DE/ Reports