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

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8-K - TELEPHONE & DATA SYSTEMS INC /DE/	tds8kcover.htm
EX-99.2 - EXHIBIT 99.2 - TELEPHONE & DATA SYSTEMS INC /DE/	tds8kex992.htm

Exhibit 99.l NEWS RELEASE

As previously announced, TDS will hold a teleconference Aug. 1, 2014 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.teldta.com.

FOR IMMEDIATE RELEASE

TDS reports second quarter 2014 results

U.S. Cellular provides 2014 financial guidance; TDS Telecom raises AIBIT guidance

CHICAGO, (Aug. 1, 2014) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,236.4 million for the second quarter of 2014, versus $1,228.2 million for the comparable period one year ago. Net income (loss) attributable to TDS shareholders and related diluted earnings (loss) per share were $(22.0) million and $(0.20) respectively, for the second quarter of 2014, compared to $156.1 million and $1.42, respectively, in the comparable period one year ago. Year-over-year comparisons are affected by U.S. Cellular’s divestiture transaction and acquisitions at TDS Telecom, in 2013.

“Our businesses were productive in the second quarter. We’re seeing positive results from strategic growth initiatives we’ve implemented over the last few years,” said LeRoy T. Carlson, Jr., TDS president and CEO.

“U.S. Cellular generated strong gross customer additions and significantly reduced postpaid churn in the quarter, leading to net postpaid customer growth in June. Our high-quality 4G LTE network, competitive service plans, devices, pricing and our new equipment installment plans helped drive smartphone penetration to 55 percent, which increased data usage and helped us achieve higher average revenue per postpaid customer.

“TDS Telecom posted another solid quarter of earnings and revenue growth, fueled by residential TDS TV customer additions, broadband speed upgrades, and commercial managedIP connections, and by realizing significant cost reductions. We continue to be excited about the growth potential in our cable business. At Baja Broadband, we are working to improve our video offerings and increase broadband penetration. We also are focused on ensuring a smooth completion to our BendBroadband acquisition in the third quarter. In our hosted and managed services business, OneNeck IT Solutions, we increased revenues through growth in recurring services and through the effect of acquisitions.”

2014 Estimated Results

Estimates of full-year 2014 results for U.S. Cellular, TDS Telecom and TDS are shown below. Such estimates represent management’s view as of August 1, 2014. 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.

	2014 Estimated Results
	U.S. Cellular		TDS Telecom (1)		TDS (1)(3)
	Current	Previous	Current	Previous	Current	Previous
(Dollars in millions)
Total operating revenues	$3,900-$4,000	N/A	$1,050-$1,100	Unchanged	$4,970-$5,120	N/A
Adjusted income before income taxes (2)	$350-$450	N/A	$260-$290	$250-$280	$605-$735	N/A
Capital expenditures	$640	Unchanged	$200	Unchanged	$850	N/A

(1) These estimates do not reflect the effects of the acquisition of BendBroadband.

(2) Adjusted income before income taxes is 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. From time to time, TDS may 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 items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future. Adjusted income before income taxes is not a measure of financial performance under Generally Accepted Accounting Principles in the United States (“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 before income taxes to adjusted income before income taxes for 2014 estimated results, six months ended June 30, 2014 actual results, and year ended December 31, 2013 actual results:

	2014 Estimated Results
	U.S. Cellular	TDS Telecom (1)	TDS (1)(3)
(Dollars in millions)
Income (loss) before income taxes	($189)-($89)	$35-$65	($249)-($119)
Depreciation, amortization and accretion	$630	$225	$865
(Gain) loss on sale of business and other exit costs, net	($50)	―	($25)
(Gain) loss on license sales and exchanges	($91)	―	($91)
Interest expense	$50	―	$105
Adjusted income before income taxes	$350-$450	$260-$290	$605-$735

	Actual Results
	Six months ended June 30, 2014			Year ended December 31, 2013
	U.S. Cellular	TDS Telecom	TDS (3)	U.S. Cellular	TDS Telecom	TDS (3)
(Dollars in millions)
Income (loss) before income taxes	$1	$39	($7)	$258	$49	$293
Depreciation, amortization and accretion expense	$316	$107	$429	$804	$203	$1,018
(Gain) loss on sale of business and other exit costs, net	($17)	—	($4)	($247)	—	($301)
(Gain) loss on license sales and exchanges	($91)	—	($91)	($255)	—	($255)
(Gain) loss on investments	—	—	—	($19)	($1)	($15)
Interest expense	$29	($1)	$56	$44	($2)	$99
Adjusted income before income taxes	$238	$145	$383	$585	$249	$839

(3) 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.

Stock Repurchase Summary

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

Repurchase Period	# Shares	Cost (in millions)
2014 (second quarter)	650,628	$	17.3
2014 (first quarter)	157,891	$	3.8
2013 (full year)	338,851	$	9.7
Total	1,147,370	$	30.8

Conference Call Information

TDS will hold a conference call on Aug. 1, 2014 at 9:30 a.m. CDT.

· Access the live call on the Events & Presentations page of investors.teldta.com or at www.videonewswire.com/event.asp?id=100144 .

· 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 investors.teldta.com. The call will be archived on the Events & Presentations page of investors.teldta.com.

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 1000® company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 5.8 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions and Baja Broadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,100 people as of June 30, 2014.

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

Contacts

Jane McCahon, Vice President, Corporate Relations and Corporate Secretary

312- 592-5379

jane.mccahon@teldta.com

Julie Mathews, Investor Relations Manager

312- 592-5341

julie.mathews@teldta.com

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: impacts of any pending acquisition and divestiture transactions, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; 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 wireless 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

OneNeck IT Solutions: www.oneneck.com

United States Cellular Corporation
*Total Markets Summary Operating Data (Unaudited)**

As of or for the Quarter Ended			6/30/2014		3/31/2014		12/31/2013		9/30/2013		6/30/2013
Retail Customers
	Postpaid
		Total at end of period		4,148,000		4,174,000		4,267,000		4,343,000		4,412,000
		Gross additions		190,000		197,000		176,000		165,000		165,000
		Net additions (losses)		(26,000)		(93,000)		(71,000)		(60,000)		(120,000)
		ARPU (1)	$	56.82	$	57.59	$	53.53	$	54.64	$	54.18
		Churn rate (2)		1.7%		2.3%		1.9%		1.7%		2.0%
		Smartphone penetration (3)		55.3%		53.1%		50.8%		47.1%		45.5%
	Prepaid
		Total at end of period		352,000		356,000		343,000		370,000		381,000
		Gross additions		65,000		85,000		63,000		65,000		77,000
		Net additions (losses)		(4,000)		13,000		(26,000)		(11,000)		(7,000)
		ARPU (1)	$	34.02	$	32.22	$	31.66	$	28.72	$	31.69
		Churn rate (2)		6.5%		6.9%		8.3%		6.8%		6.8%
Total customers at end of period				4,653,000		4,684,000		4,774,000		4,875,000		4,968,000
Billed ARPU (1)			$	53.36	$	53.93	$	50.25	$	50.92	$	50.60
Service revenue ARPU (1)			$	60.32	$	60.19	$	57.05	$	58.36	$	57.45
Smartphones sold as a percent of total devices sold				72.6%		73.0%		79.6%		65.2%		66.0%
Total population
		Consolidated markets (4)		54,817,000		54,817,000		58,013,000		84,025,000		84,025,000
		Consolidated operating markets (4)		31,729,000		31,729,000		31,759,000		31,822,000		31,822,000
Market penetration at end of period
		Consolidated markets (5)		8.5%		8.5%		8.2%		5.8%		5.9%
		Consolidated operating markets (5)		14.7%		14.8%		15.0%		15.3%		15.6%
Capital expenditures (000s)			$	143,927	$	89,581	$	208,135	$	242,459	$	168,497
Total cell sites in service				6,183		6,165		6,975		7,687		7,748
Owned towers				4,457		4,448		4,448		4,422		4,411

* Represents U.S. Cellular’s consolidated markets. These results include markets which U. S. Cellular currently consolidates, or previously consolidated in the periods presented, and are not adjusted in prior periods for subsequent divestitures or deconsolidations.

Refer to U.S. Cellular’s Form 8-K filed on August 2, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and six months ended June 30, 2013, as if the transactions had occurred at the beginning of the period.

United States Cellular Corporation
*Core Markets Summary Operating Data (Unaudited)**

As of or for the Quarter Ended			6/30/2014		3/31/2014		12/31/2013		9/30/2013		6/30/2013
Retail Customers
	Postpaid
		Total at end of period		4,148,000		4,174,000		4,267,000		4,343,000		4,412,000
		Gross additions		190,000		197,000		176,000		165,000		165,000
		Net additions (losses)		(26,000)		(93,000)		(71,000)		(60,000)		(53,000)
		ARPU (1)	$	56.82	$	57.59	$	53.53	$	54.64	$	54.44
		Churn rate (2)		1.7%		2.3%		1.9%		1.7%		1.6%
		Smartphone penetration (3)		55.3%		53.1%		50.8%		47.1%		45.5%
	Prepaid
		Total at end of period		352,000		356,000		343,000		370,000		381,000
		Gross additions		65,000		85,000		63,000		65,000		76,000
		Net additions (losses)		(4,000)		13,000		(26,000)		(11,000)		8,000
		ARPU (1)	$	34.02	$	32.22	$	31.66	$	28.72	$	31.65
		Churn rate (2)		6.5%		6.9%		8.3%		6.8%		6.0%
Total customers at end of period				4,653,000		4,684,000		4,774,000		4,875,000		4,968,000
Billed ARPU (1)			$	53.36	$	53.93	$	50.25	$	50.92	$	50.98
Service revenue ARPU (1)			$	60.32	$	60.19	$	57.05	$	58.36	$	57.88
Smartphones sold as a percent of total devices sold				72.6%		73.0%		79.6%		65.2%		66.1%
Total population
		Consolidated markets (4)		54,817,000		54,817,000		58,013,000		84,025,000		84,025,000
		Consolidated operating markets (4)		31,729,000		31,729,000		31,759,000		31,822,000		31,822,000
Market penetration at end of period
		Consolidated markets (5)		8.5%		8.5%		8.2%		5.8%		5.9%
		Consolidated operating markets (5)		14.7%		14.8%		15.0%		15.3%		15.6%
Capital expenditures (000s)			$	143,927	$	89,581	$	211,247	$	239,332	$	171,166
Total cell sites in service				6,183		6,165		6,161		6,127		6,113
Owned towers				3,892		3,883		3,883		3,857		3,846

* U.S. Cellular’s Core Markets excludes the results of the Divestiture Markets and NY1 and NY2 Partnerships for the periods presented.

(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 retail service or “billed” revenues (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, Apple, BlackBerry or Windows Mobile operating system, excluding tablets. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(4) The decrease in the population of Consolidated markets is due primarily to the divestiture of the Mississippi Valley non-operating license in October 2013 and the majority of the St. Louis area non-operating market license in March 2014. Total Population is used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (5) below.

(5) 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. The increase in penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (4) above.

TDS Telecom
Summary Operating Data (Unaudited)

Quarter Ended			6/30/2014		3/31/2014		12/31/2013		9/30/2013		6/30/2013
TDS Telecom
Wireline
	Residential connections
		Voice (1)		346,100		348,700		352,100		358,100		364,100
		Broadband (2)		232,700		229,000		227,000		229,500		231,700
		IPTV (3)		18,200		15,900		13,800		12,200		10,500
		Wireline residential connections		597,000		593,600		592,900		599,800		606,300

	Total residential revenue per connection (4)		$	41.05	$	40.79	$	40.93	$	41.12	$	40.10

	Commercial connections
		Voice (1)		206,200		212,200		218,400		223,800		229,100
		Broadband (2)		26,000		26,600		27,100		27,600		28,200
		managedIP (5)		133,300		131,000		127,600		121,000		112,000
		Wireline commercial connections		365,500		369,800		373,100		372,400		369,300

	Total Wireline connections			962,500		963,400		966,000		972,200		975,600

Cable
	Cable Connections
		Video (6)		69,700		68,700		69,100		70,300
		Broadband (7)		63,200		63,000		61,000		59,800
		Voice (7)		17,800		17,700		17,200		16,800
		Cable connections		150,700		149,400		147,300		146,900

	Total residential revenue per connection (4)		$	56.80	$	57.37	$	55.27	$	55.67

(1) The individual circuit connecting customers to TDS Telecom’s central office facilities.

(2) The number of customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.

(3) The number of customers provided video services using IP networking technology.

(4) Total residential revenue divided by the average number of total residential connections.

(5) The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.

(6) Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.

(7) Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively.



TDS Telecom
Capital Expenditures (000s)

Quarter Ended		6/30/2014		3/31/2014		12/31/2013		9/30/2013		6/30/2013
Wireline	$	27,400	$	22,900	$	46,000	$	32,800	$	33,300
Cable		7,200		6,200		7,000		1,400		—
HMS		10,600		2,800		9,200		2,400		2,300
	$	45,200	$	31,900	$	62,200	$	36,600	$	35,600

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)
								Change
				2014		2013		Amount		Percent
Operating revenues
	U.S. Cellular			$	957,773	$	995,130	$	(37,357)		(4%)
	TDS Telecom				270,850		223,460		47,390		21%
	All Other (1)				7,769		9,576		(1,807)		(19%)
					1,236,392		1,228,166		8,226		1%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			863,361		813,464		49,897		6%
		Depreciation, amortization and accretion			148,337		202,580		(54,243)		(27%)
		(Gain) loss on asset disposals, net			6,893		9,018		(2,125)		(24%)
		(Gain) loss on sale of business and other exit costs, net			(10,511)		(249,024)		238,513		96%
					1,008,080		776,038		232,042		30%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			197,427		162,954		34,473		21%
		Depreciation, amortization and accretion			53,175		48,756		4,419		9%
		(Gain) loss on asset disposals, net			983		(682)		1,665		>(100%)
					251,585		211,028		40,557		19%
	All Other (1)(2)
		Expenses excluding depreciation and amortization			9,613		10,033		(420)		(4%)
		Depreciation and amortization			3,055		2,867		188		7%
		(Gain) loss on asset disposals, net			27		(17)		44		>(100%)
		(Gain) loss on sale of business and other exit costs, net			13,122		(54,010)		67,132		>(100%)
					25,817		(41,127)		66,944		>(100%)

			Total operating expenses		1,285,482		945,939		339,543		36%
Operating income (loss)
	U.S. Cellular				(50,307)		219,092		(269,399)		>(100%)
	TDS Telecom				19,265		12,432		6,833		55%
	All Other (1)(2)				(18,048)		50,703		(68,751)		>(100%)
					(49,090)		282,227		(331,317)		>(100%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				34,790		35,605		(815)		(2%)
	Interest and dividend income				2,751		2,600		151		6%
	Gain (loss) on investments				—		14,518		(14,518)		N/M
	Interest expense				(27,898)		(23,749)		(4,149)		(17%)
	Other, net				50		(197)		247		>(100%)
		Total investment and other income			9,693		28,777		(19,084)		(66%)
Income (loss) before income taxes					(39,397)		311,004		(350,401)		>(100%)
	Income tax expense (benefit)				(13,671)		132,607		(146,278)		>(100%)
Net income (loss)					(25,726)		178,397		(204,123)		>(100%)
	Less: Net income (loss) attributable to noncontrolling interests, net of tax				(3,688)		22,320		(26,008)		>(100%)
Net income (loss) attributable to TDS shareholders					(22,038)		156,077		(178,115)		>(100%)
	TDS Preferred dividend requirement				(12)		(12)		—		—
Net income (loss) available to common shareholders				$	(22,050)	$	156,065	$	(178,115)		>(100%)

Basic weighted average shares outstanding					108,719		108,385		334		—
Basic earnings (loss) per share attributable to TDS shareholders				$	(0.20)	$	1.44	$	(1.64)		>(100%)

Diluted weighted average shares outstanding					108,719		108,913		(194)		—
Diluted earnings (loss) per share attributable to TDS shareholders				$	(0.20)	$	1.42	$	(1.62)		>(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.

(2) Due to the Airadigm Transaction, TDS recognized expenses of $13.1 million related to exit and disposal activities in 2014. In 2013, TDS recognized an incremental gain of $53.5 million compared to U.S. Cellular upon closing of the Divestiture Transaction as a result of lower asset basis in the assets disposed.

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)
								Change
				2014		2013		Amount		Percent
Operating revenues
	U.S. Cellular			$	1,883,584	$	2,076,876	$	(193,292)		(9%)
	TDS Telecom				533,266		440,521		92,745		21%
	All Other (1)				15,504		19,342		(3,838)		(20%)
					2,432,354		2,536,739		(104,385)		(4%)
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			1,710,006		1,691,534		18,472		1%
		Depreciation, amortization and accretion			316,090		392,425		(76,335)		(19%)
		(Gain) loss on asset disposals, net			8,827		14,452		(5,625)		(39%)
		(Gain) loss on sale of business and other exit costs, net			(17,411)		(242,093)		224,682		93%
		(Gain) loss on license sales and exchanges			(91,446)		—		(91,446)		N/M
					1,926,066		1,856,318		69,748		4%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			387,730		322,440		65,290		20%
		Depreciation, amortization and accretion			106,950		98,247		8,703		9%
		(Gain) loss on asset disposals, net			1,327		(489)		1,816		>(100%)
					496,007		420,198		75,809		18%
	All Other (1)(2)
		Expenses excluding depreciation and amortization			18,939		19,272		(333)		(2%)
		Depreciation and amortization			6,446		5,608		838		15%
		(Gain) loss on asset disposals, net			179		(28)		207		>(100%)
		(Gain) loss on sale of business and other exit costs, net			13,122		(54,010)		67,132		>(100%)
					38,686		(29,158)		67,844		>(100%)

			Total operating expenses		2,460,759		2,247,358		213,401		9%
Operating income (loss)
	U.S. Cellular				(42,482)		220,558		(263,040)		>(100%)
	TDS Telecom				37,259		20,323		16,936		83%
	All Other (1)(2)				(23,182)		48,500		(71,682)		>(100%)
					(28,405)		289,381		(317,786)		>(100%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				72,117		62,694		9,423		15%
	Interest and dividend income				5,237		4,178		1,059		25%
	Gain (loss) on investments				―		14,518		(14,518)		N/M
	Interest expense				(56,605)		(48,247)		(8,358)		(17%)
	Other, net				210		(351)		561		>(100%)
		Total investment and other income			20,959		32,792		(11,833)		(36%)
Income (loss) before income taxes					(7,446)		322,173		(329,619)		>(100%)
	Income tax expense (benefit)				(2,014)		136,787		(138,801)		>(100%)
Net income (loss)					(5,432)		185,386		(190,818)		>(100%)
	Less: Net income (loss) attributable to noncontrolling interests, net of tax				(1,648)		27,890		(29,538)		>(100%)
Net income (loss) attributable to TDS shareholders					(3,784)		157,496		(161,280)		>(100%)
	TDS Preferred dividend requirement				(25)		(25)		—		—
Net income (loss) available to common shareholders				$	(3,809)	$	157,471	$	(161,280)		>(100%)

Basic weighted average shares outstanding					108,853		108,320		533		—
Basic earnings (loss) per share attributable to TDS shareholders				$	(0.04)	$	1.45	$	(1.49)		>(100%)

Diluted weighted average shares outstanding					108,853		108,827		26		—
Diluted earnings (loss) per share attributable to TDS shareholders				$	(0.04)	$	1.44	$	(1.48)		>(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 Balance Sheet Highlights
(Unaudited, dollars in thousands)

ASSETS


		June 30,		December 31,
		2014		2013
Current assets
	Cash and cash equivalents	$	874,860	$	830,014
	Short-term investments		40,035		50,104
	Accounts receivable from customers and others		624,261		731,114
	Inventory, net		205,886		244,560
	Net deferred income tax asset		106,077		106,077
	Prepaid expenses		88,860		87,920
	Income taxes receivable		9,197		2,397
	Other current assets		32,274		35,151
			1,981,450		2,087,337

Assets held for sale			5,980		16,027

Investments
	Licenses		1,460,484		1,423,779
	Goodwill		834,352		836,843
	Franchise rights		124,487		123,668
	Other intangible assets, net		61,536		71,454
	Investments in unconsolidated entities		308,661		301,772
	Other investments		589		641
			2,790,109		2,758,157

Property, plant and equipment, net
	U.S. Cellular		2,761,404		2,856,520
	TDS Telecom		962,377		984,634
	Other		26,166		36,990
			3,749,947		3,878,144

Other assets and deferred charges			180,183		164,482

Total assets		$	8,707,669	$	8,904,147

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

LIABILITIES AND EQUITY


				June 30,		December 31,
				2014		2013
Current liabilities
		Current portion of long-term debt		$	890	$	1,646
		Accounts payable			425,051		496,069
		Customer deposits and deferred revenues			302,496		289,445
		Accrued interest			6,671		6,673
		Accrued taxes			73,227		70,518
		Accrued compensation			98,099		115,031
		Other current liabilities			166,270		212,374
					1,072,704		1,191,756

Liabilities held for sale					722		―

Deferred liabilities and credits
		Net deferred income tax liability			828,458		862,975
		Other deferred liabilities and credits			460,862		458,709

Long-term debt					1,718,832		1,720,074

Noncontrolling interests with redemption features					911		536

Equity
	TDS shareholders' equity
		Series A Common and Common Shares, par value $.01			1,327		1,327
		Capital in excess of par value			2,312,515		2,308,807
		Treasury shares, at cost			(737,835)		(721,354)
		Accumulated other comprehensive loss			(980)		(569)
		Retained earnings			2,496,735		2,529,626
			Total TDS shareholders' equity		4,071,762		4,117,837

	Preferred shares				824		824
	Noncontrolling interests				552,594		551,436

		Total equity			4,625,180		4,670,097

Total liabilities and equity				$	8,707,669	$	8,904,147

Balance Sheet Highlights
June 30, 2014
(Unaudited, dollars in thousands)


		U.S.		TDS		TDS Corporate		Intercompany		TDS
		Cellular		Telecom		& Other		Eliminations		Consolidated
Cash and cash equivalents		$	404,058	$	87,170	$	383,632	$	―	$	874,860
Affiliated cash investments			―		466,295		―		(466,295)		―
Short-term investments			40,035		―		―		―		40,035
		$	444,093	$	553,465	$	383,632	$	(466,295)	$	914,895

Licenses, goodwill and other intangible assets		$	1,825,355	$	786,487	$	(130,983)	$	―	$	2,480,859
Investment in unconsolidated entities			270,215		3,810		41,789		(7,153)		308,661
Long-term and other investments			―		588		1		―		589
		$	2,095,570	$	790,885	$	(89,193)	$	(7,153)	$	2,790,109


Property, plant and equipment, net		$	2,761,404	$	962,377	$	26,166	$	―	$	3,749,947

Long-term debt:
	Current portion	$	46	$	57	$	787	$	―	$	890
	Non-current portion		876,715		1,424		840,693		―		1,718,832
		$	876,761	$	1,481	$	841,480	$	―	$	1,719,722

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, 2014 and December 31, 2013.

		June 30,		December 31,
		2014		2013

Cash and cash equivalents		$	874,860	$	830,014

Amounts included in short-term investments (1) (2)
	U.S. Treasury Notes		40,035		50,104

Total cash and cash equivalents and investments		$	914,895	$	880,118

(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.

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
Six Months Ended June 30,
(Unaudited, dollars in thousands)
				2014		2013
Cash flows from operating activities
	Net income (loss)			$	(5,432)	$	185,386
		Add (deduct) adjustments to reconcile net income to cash flows from operating activities
			Depreciation, amortization and accretion		429,486		496,280
			Bad debts expense		52,098		35,187
			Stock-based compensation expense		15,488		12,902
			Deferred income taxes, net		(33,346)		(21,246)
			Equity in earnings of unconsolidated entities		(72,117)		(62,694)
			Distributions from unconsolidated entities		65,569		47,635
			(Gain) loss on asset disposals, net		10,333		13,935
			(Gain) loss on sale of business and other exit costs, net		(4,289)		(296,103)
			(Gain) loss on investments		—		(14,518)
			(Gain) loss on license sales and exchanges		(91,446)		—
			Noncash interest expense		1,014		997
			Other operating activities		3		505
		Changes in assets and liabilities from operations
			Accounts receivable		40,459		(5,781)
			Inventory		38,674		(8,105)
			Accounts payable		(43,132)		58,204
			Customer deposits and deferred revenues		13,139		7,897
			Accrued taxes		1,049		150,425
			Accrued interest		22		2,172
			Other assets and liabilities		(101,930)		(81,586)
					315,642		521,492

Cash flows from investing activities
	Cash used for additions to property, plant and equipment				(339,907)		(384,281)
	Cash paid for acquisitions and licenses				(18,681)		(14,150)
	Cash received from divestitures				125,905		480,000
	Cash received for investments				10,000		15,000
	Other investing activities				3,720		14,127
					(218,963)		110,696

Cash flows from financing activities
	Repayment of long-term debt				(589)		(605)
	TDS Common Shares reissued for benefit plans, net of tax payments				401		776
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments				830		(2,206)
	Repurchase of TDS Common Shares				(20,090)		—
	Repurchase of U.S. Cellular Common Shares				(8,298)		(18,425)
	Dividends paid to TDS shareholders				(29,107)		(27,598)
	U.S. Cellular dividends paid to noncontrolling public shareholders				—		(75,235)
	Distributions to noncontrolling interests				(482)		(3,292)
	Other financing activities				5,502		331
					(51,833)		(126,254)

Net increase in cash and cash equivalents					44,846		505,934
Cash and cash equivalents
	Beginning of period				830,014		740,481
	End of period			$	874,860	$	1,246,415

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

							Change
			2014		2013		Amount		Percent
Wireline
Operating revenues
	Residential		$	73,360	$	72,911	$	449	1%
	Commercial			57,472		57,128		344	1%
	Wholesale			49,465		51,389		(1,924)	(4%)
		Total service revenues		180,297		181,428		(1,131)	(1%)
	Equipment sales			431		765		(334)	(44%)
				180,728		182,193		(1,465)	(1%)
Operating expenses
	Cost of services			64,305		65,729		(1,424)	(2%)
	Cost of equipment sold			481		1,094		(613)	(56%)
	Selling, general and administrative expenses			47,708		56,692		(8,984)	(16%)
	Depreciation, amortization and accretion			41,827		43,193		(1,366)	(3%)
	(Gain) loss on asset disposals, net			514		(765)		1,279	>100%
				154,835		165,943		(11,108)	(7%)

	Operating income		$	25,893	$	16,250	$	9,643	59%

Cable
Operating revenues
	Residential		$	18,222	$	—	$	18,222	N/M
	Commercial			4,262		—		4,262	N/M
				22,484		—		22,484	N/M
Operating expenses
	Cost of services			11,394		—		11,394	N/M
	Selling, general and administrative expenses			6,285		—		6,285	N/M
	Depreciation, amortization and accretion			4,557		—		4,557	N/M
	Loss on asset disposals, net			425		—		425	N/M
				22,661		—		22,661	N/M

	Operating loss		$	(177)	$	—	$	(177)	N/M

HMS
Operating revenues
	Service revenues		$	27,575	$	23,205	$	4,370	19%
	Equipment sales			40,361		18,169		22,192	>100%
				67,936		41,374		26,562	64%
Operating expenses
	Cost of services			21,301		15,071		6,230	41%
	Cost of equipment sold			33,875		15,114		18,761	>100%
	Selling, general and administrative expenses			12,376		9,361		3,015	32%
	Depreciation, amortization and accretion			6,791		5,563		1,228	22%
	Loss on asset disposals, net			44		83		(39)	(47%)
				74,387		45,192		29,195	65%

	Operating loss		$	(6,451)	$	(3,818)	$	(2,633)	(69%)

Intercompany revenues			$	(298)	$	(107)	$	(191)	>(100)%
Intercompany expenses				(298)		(107)		(191)	>(100)%

Total TDS Telecom operating income			$	19,265	$	12,432	$	6,833	55%

TDS Telecom Highlights
Six Months Ended June 30,
(Unaudited, dollars in thousands)

							Change
			2014		2013		Amount		Percent
Wireline
Operating revenues
	Residential		$	145,865	$	145,915	$	(50)	—
	Commercial			115,452		114,253		1,199	1%
	Wholesale			95,913		101,938		(6,025)	(6%)
		Total service revenues		357,230		362,106		(4,876)	(1%)
	Equipment sales			984		1,662		(678)	(41%)
				358,214		363,768		(5,554)	(2%)
Operating expenses
	Cost of services			128,705		132,168		(3,463)	(3%)
	Cost of equipment sold			964		2,104		(1,140)	(54%)
	Selling, general and administrative expenses			94,228		114,072		(19,844)	(17%)
	Depreciation, amortization and accretion			84,563		87,216		(2,653)	(3%)
	(Gain) loss on asset disposals, net			759		(602)		1,361	>100%
				309,219		334,958		(25,739)	(8%)

	Operating income		$	48,995	$	28,810	$	20,185	70%

Cable
Operating revenues
	Residential		$	36,475	$	—	$	36,475	N/M
	Commercial			8,512		—		8,512	N/M
				44,987		—		44,987	N/M
Operating expenses
	Cost of services			22,349		—		22,349	N/M
	Selling, general and administrative expenses			12,663		—		12,663	N/M
	Depreciation, amortization and accretion			8,918		—		8,918	N/M
	Loss on asset disposals, net			490		—		490	N/M
				44,420		—		44,420	N/M

	Operating income		$	567	$	—	$	567	N/M

HMS
Operating revenues
	Service revenues		$	54,951	$	45,205	$	9,746	22%
	Equipment sales			76,093		31,733		44,360	>100%
				131,044		76,938		54,106	70%
Operating expenses
	Cost of services			38,247		28,673		9,574	33%
	Cost of equipment sold			64,342		26,326		38,016	>100%
	Selling, general and administrative expenses			27,211		19,282		7,929	41%
	Depreciation, amortization and accretion			13,469		11,031		2,438	22%
	Loss on asset disposals, net			78		113		(35)	(31%)
				143,347		85,425		57,922	68%

	Operating loss		$	(12,303)	$	(8,487)	$	(3,816)	(45%)

Intercompany revenues			$	(979)	$	(185)	$	(794)	>(100)%
Intercompany expenses				(979)		(185)		(794)	>(100)%

Total TDS Telecom operating income			$	37,259	$	20,323	$	16,936	83%

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

			TDS Consolidated

			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2014		2013		2014		2013

	Cash flows from operating activities		$	210,705	$	275,140	$	315,642	$	521,492
	Add: Sprint Cost Reimbursement			22,862		—		34,116		—
	Less: Cash used for additions to property, plant and equipment			189,017		207,963		339,907		384,281
		Adjusted free cash flow (1)	$	44,550	$	67,177	$	9,851	$	137,211

(1) Adjusted free cash flow is defined as Cash flows from operating activities, as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash used for additions to property, plant and equipment. Adjusted free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment. The prior manner of calculating free cash flow has been adjusted to include the Sprint Cost Reimbursement. The reason for this is that the Sprint decommissioning cash outflows are included in “Cash flows from operating activities,” but the reimbursements from Sprint related to these outflows are not included in this caption.

TELEPHONE & DATA SYSTEMS INC /DE/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 1, 2014

Attached files

TELEPHONE & DATA SYSTEMS INC /DE/ Reports