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 Oct. 31, 2014 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.tdsinc.com.

FOR IMMEDIATE RELEASE

TDS reports third quarter 2014 results

U.S. Cellular reports positive net additions; TDS Telecom raises 2014 guidance

CHICAGO, (Oct. 31, 2014) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,280.0 million for the third quarter of 2014, versus $1,181.0 million for the comparable period one year ago. Net loss attributable to TDS shareholders and related diluted loss per share were $116.0 million and $1.07 respectively, for the third quarter of 2014, compared to $9.5 million and $0.09, respectively, in the comparable period one year ago.

In the third quarter of 2014, TDS recorded two significant, discrete, non-cash charges, an $84 million non-cash goodwill impairment charge related to the HMS segment and $30 million of net deferred tax expense related to adjusting valuation allowances on deferred tax assets.

“Our wireless business had a very promising quarter, with strong customer growth and improved loyalty at U.S. Cellular,” said LeRoy T. Carlson, Jr., TDS president and CEO. “In the wireline business, we had another solid quarter of improved profitability, a result of continued cost reduction activities. We also successfully completed our BendBroadband cable acquisition on September 1, 2014.

“U.S. Cellular's attractive value proposition, combining a high-quality network and competitive devices, plans, and pricing, led to strong growth in both gross and net postpaid customer additions. We also increased total revenues, though higher smartphone subsidies continued to impact margins. We have plans to build upon this momentum with competitive offerings throughout the important holiday months.

“TDS Telecom grew revenues from residential TDS TV and broadband services and from commercial managedIP connections, which helped offset declines in voice and wholesale revenues. We are integrating BendBroadband and are focused on increasing video and broadband penetration in our cable businesses. We continue to focus on increasing the strategic recurring revenues from hosted and managed services at OneNeck IT Solutions.”

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 October 31, 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		TDS(2)
	Current	Previous	Current	Previous	Current	Previous
(Dollars in millions)
Total operating revenues	$3,900-$4,000	Unchanged	$1,075-$1,125	$1,050-$1,100	$4,995-$5,145	$4,970-$5,120
Adjusted income before income taxes (1)	$375-$450	$350-$450	$275-$300	$260-$290	$645-$745	$605-$735
Capital expenditures	$600	$640	$210	$200	$820	$850

(1) 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, nine months ended September 30, 2014 actual results, and year ended December 31, 2013 actual results:

	2014 Estimated Results
	U.S. Cellular	TDS Telecom		TDS(2)
(Dollars in millions)
Income (loss) before income taxes	($164)-($89)	($32)-($7)		($291)-($191)
Depreciation, amortization and accretion	$620	$225		$855
Loss on impairment of assets	―		$84	$84
(Gain) loss on sale of business and other exit costs, net	($50)	($2)		($27)
(Gain) loss on license sales and exchanges	($91)	―		($91)
Interest expense	$60	―		$115
Adjusted income before income taxes	$375-$450	$275-$300		$645-$745

	Actual Results
	Nine months ended September 30, 2014			Year ended December 31, 2013
	U.S. Cellular	TDS Telecom	TDS (2)	U.S. Cellular	TDS Telecom	TDS (2)
(Dollars in millions)
Income (loss) before income taxes	($24)	($24)	($119)	$258	$49	$293
Depreciation, amortization and accretion expense	$465	$161	$635	$804	$203	$1,018
Loss on impairment of assets	—	$84	$84	—	—	—
(Gain) loss on sale of business and other exit costs, net	($28)	($2)	($9)	($247)	—	($301)
(Gain) loss on license sales and exchanges	($91)	—	($91)	($255)	—	($255)
(Gain) loss on investments	—	—	—	($19)	($1)	($15)
Interest expense	$43	($1)	$84	$44	($2)	$99
Adjusted income before income taxes	$365	$219	$583	$585	$249	$839

(2) 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 (third quarter)	421,322	$	10.7
2014 (second quarter)	650,628	$	17.3
2014 (first quarter)	157,891	$	3.8
2013 (full year)	338,851	$	9.7
Total	1,568,692	$	41.5

Conference Call Information

TDS will hold a conference call on Oct. 31, 2014 at 9:30 a.m. CDT.

· Access the live call on the Events & Presentations page of investors.tdsinc.com or at http://www.videonewswire.com/event.asp?id=100845.

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

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 1000^TM company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 5.9 million customers nationwide through its business units, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, Baja Broadband and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,400 people as of Sept. 30, 2014.

Visit www.tdsinc.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@tdsinc.com

Julie Mathews, Investor Relations Manager

312- 592-5341

julie.mathews@tdsinc.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.tdsinc.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			9/30/2014		6/30/2014		3/31/2014		12/31/2013		9/30/2013
Retail Customers
	Postpaid
		Total at end of period		4,200,000		4,148,000		4,174,000		4,267,000		4,343,000
		Gross additions		251,000		190,000		197,000		176,000		165,000
		Net additions (losses)		52,000		(26,000)		(93,000)		(71,000)		(60,000)
		ARPU (1)	$	56.37	$	56.82	$	57.59	$	53.53	$	54.64
		Churn rate (2)		1.6%		1.7%		2.3%		1.9%		1.7%
		Smartphone penetration (3)		57.9%		55.3%		53.1%		50.8%		47.1%
	Prepaid
		Total at end of period		350,000		352,000		356,000		343,000		370,000
		Gross additions		64,000		65,000		85,000		63,000		65,000
		Net additions (losses)		(2,000)		(4,000)		13,000		(26,000)		(11,000)
		ARPU (1)	$	34.40	$	34.02	$	32.22	$	31.66	$	28.72
		Churn rate (2)		6.3%		6.5%		6.9%		8.3%		6.8%
Total customers at end of period				4,674,000		4,653,000		4,684,000		4,774,000		4,875,000
Billed ARPU (1)			$	53.24	$	53.36	$	53.93	$	50.25	$	50.92
Service revenue ARPU (1)			$	60.92	$	60.32	$	60.19	$	57.05	$	58.36
Smartphones sold as a percent of total devices sold				73.3%		72.6%		73.0%		79.6%		65.2%
Total population
		Consolidated markets (4)		54,817,000		54,817,000		54,817,000		58,013,000		84,025,000
		Consolidated operating markets (4)		31,729,000		31,729,000		31,729,000		31,759,000		31,822,000
Market penetration at end of period
		Consolidated markets (5)		8.5%		8.5%		8.5%		8.2%		5.8%
		Consolidated operating markets (5)		14.7%		14.7%		14.8%		15.0%		15.3%
Capital expenditures (000s)			$	142,452	$	143,927	$	89,581	$	208,135	$	242,459
Total cell sites in service				6,209		6,183		6,165		6,975		7,687
Owned towers				4,487		4,457		4,448		4,448		4,422

* 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 November 1, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 and NY2 Deconsolidation for the three and nine months ended September 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			9/30/2014		6/30/2014		3/31/2014		12/31/2013		9/30/2013
Retail Customers
	Postpaid
		Total at end of period		4,200,000		4,148,000		4,174,000		4,267,000		4,343,000
		Gross additions		251,000		190,000		197,000		176,000		165,000
		Net additions (losses)		52,000		(26,000)		(93,000)		(71,000)		(60,000)
		ARPU (1)	$	56.37	$	56.82	$	57.59	$	53.53	$	54.64
		Churn rate (2)		1.6%		1.7%		2.3%		1.9%		1.7%
		Smartphone penetration (3)		57.9%		55.3%		53.1%		50.8%		47.1%
	Prepaid
		Total at end of period		350,000		352,000		356,000		343,000		370,000
		Gross additions		64,000		65,000		85,000		63,000		65,000
		Net additions (losses)		(2,000)		(4,000)		13,000		(26,000)		(11,000)
		ARPU (1)	$	34.40	$	34.02	$	32.22	$	31.66	$	28.72
		Churn rate (2)		6.3%		6.5%		6.9%		8.3%		6.8%
Total customers at end of period				4,674,000		4,653,000		4,684,000		4,774,000		4,875,000
Billed ARPU (1)			$	53.24	$	53.36	$	53.93	$	50.25	$	50.92
Service revenue ARPU (1)			$	60.92	$	60.32	$	60.19	$	57.05	$	58.36
Smartphones sold as a percent of total devices sold				73.3%		72.6%		73.0%		79.6%		65.2%
Total population
		Consolidated markets (4)		54,817,000		54,817,000		54,817,000		58,013,000		84,025,000
		Consolidated operating markets (4)		31,729,000		31,729,000		31,729,000		31,759,000		31,822,000
Market penetration at end of period
		Consolidated markets (5)		8.5%		8.5%		8.5%		8.2%		5.8%
		Consolidated operating markets (5)		14.7%		14.7%		14.8%		15.0%		15.3%
Capital expenditures (000s)			$	142,452	$	143,927	$	89,581	$	211,247	$	239,332
Total cell sites in service				6,209		6,183		6,165		6,161		6,127
Owned towers				3,922		3,892		3,883		3,883		3,857

* 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			9/30/2014		6/30/2014		3/31/2014		12/31/2013		9/30/2013
TDS Telecom
Wireline
	Residential connections
		Voice (1)		340,300		346,100		348,700		352,100		358,100
		Broadband (2)		231,600		232,700		229,000		227,000		229,500
		IPTV (3)		20,700		18,200		15,900		13,800		12,200
		Wireline residential connections		592,600		597,000		593,600		592,900		599,800

	Total residential revenue per connection (4)		$	41.47	$	41.05	$	40.79	$	40.93	$	41.12

	Commercial connections
		Voice (1)		199,300		206,200		212,200		218,400		223,800
		Broadband (2)		25,300		26,000		26,600		27,100		27,600
		managedIP (5)		137,700		133,300		131,000		127,600		121,000
		Wireline commercial connections		362,300		365,500		369,800		373,100		372,400

	Total Wireline connections			954,900		962,500		963,400		966,000		972,200

Cable
	Cable Connections
		Video (6)		109,100		69,700		68,700		69,100		70,200
		Broadband (7)		106,400		63,200		63,000		61,000		59,800
		Voice (7)		41,800		17,800		17,700		17,200		16,800
		Cable connections		257,300		150,700		149,400		147,300		146,800

	Total residential revenue per connection (4)		$	56.14	$	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		9/30/2014		6/30/2014		3/31/2014		12/31/2013		9/30/2013
Wireline	$	34,200	$	27,400	$	22,900	$	46,000	$	32,800
Cable		7,600		7,200		6,200		7,000		1,400
HMS		9,800		10,600		2,800		9,200		2,400
	$	51,600	$	45,200	$	31,900	$	62,200	$	36,600

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)
								Change
				2014		2013		Amount		Percent
Operating revenues
	U.S. Cellular			$	1,000,419	$	939,236	$	61,183		7%
	TDS Telecom				273,157		234,543		38,614		16%
	All Other (1)				6,447		7,201		(754)		(10%)
					1,280,023		1,180,980		99,043		8%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			905,157		781,291		123,866		16%
		Depreciation, amortization and accretion			148,952		200,985		(52,033)		(26%)
		(Gain) loss on asset disposals, net			7,947		1,701		6,246		>100%
		(Gain) loss on sale of business and other exit costs, net			(10,283)		(1,534)		(8,749)		>100%
					1,051,773		982,443		69,330		7%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			199,132		170,650		28,482		17%
		Depreciation, amortization and accretion			54,255		51,305		2,950		6%
		Loss on impairment of assets			84,000		—		84,000		N/M
		(Gain) loss on asset disposals, net			1,367		436		931		>100%
		(Gain) loss on sale of business and other exit costs, net			(2,201)		—		(2,201)		N/M
					336,553		222,391		114,162		51%
	All Other (1)(2)
		Expenses excluding depreciation and amortization			7,117		6,208		909		15%
		Depreciation and amortization			2,322		3,005		(683)		(23%)
		(Gain) loss on asset disposals, net			(21)		18		(39)		>(100%)
		(Gain) loss on sale of business and other exit costs, net			7,694		—		7,694		N/M
					17,112		9,231		7,881		85%

			Total operating expenses		1,405,438		1,214,065		191,373		16%
Operating income (loss)
	U.S. Cellular				(51,354)		(43,207)		(8,147)		(19%)
	TDS Telecom				(63,396)		12,152		(75,548)		>(100%)
	All Other (1)(2)				(10,665)		(2,030)		(8,635)		>(100%)
					(125,415)		(33,085)		(92,330)		>100%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				36,081		37,609		(1,528)		(4%)
	Interest and dividend income				4,526		2,507		2,019		81%
	Interest expense				(27,170)		(24,961)		(2,209)		(9%)
	Other, net				69		145		(76)		(52%)
		Total investment and other income			13,506		15,300		(1,794)		(12%)
Income (loss) before income taxes					(111,909)		(17,785)		(94,124)		>100%
	Income tax expense (benefit)				9,290		(6,731)		16,021		>(100%)
Net income (loss)					(121,199)		(11,054)		(110,145)		>100%
	Less: Net income (loss) attributable to noncontrolling interests, net of tax				(5,169)		(1,542)		(3,627)		>100%
Net income (loss) attributable to TDS shareholders					(116,030)		(9,512)		(106,518)		>100%
	TDS Preferred dividend requirement				(12)		(12)		—		—
Net income (loss) available to common shareholders				$	(116,042)	$	(9,524)	$	(106,518)		>100%

Basic weighted average shares outstanding					108,252		108,571		(319)		—
Basic earnings (loss) per share attributable to TDS shareholders				$	(1.07)	$	(0.09)	$	(0.98)		>100%

Diluted weighted average shares outstanding					108,252		108,571		(319)		—
Diluted earnings (loss) per share attributable to TDS shareholders				$	(1.07)	$	(0.09)	$	(0.98)		>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 $7.7 million related to exit and disposal activities in 2014.

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)
								Change
				2014		2013		Amount		Percent
Operating revenues
	U.S. Cellular			$	2,884,003	$	3,016,112	$	(132,109)		(4%)
	TDS Telecom				806,423		675,064		131,359		19%
	All Other (1)				21,951		26,543		(4,592)		(17%)
					3,712,377		3,717,719		(5,342)		—
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			2,615,163		2,472,825		142,338		6%
		Depreciation, amortization and accretion			465,042		593,410		(128,368)		(22%)
		(Gain) loss on asset disposals, net			16,774		16,153		621		4%
		(Gain) loss on sale of business and other exit costs, net			(27,694)		(243,627)		215,933		89%
		(Gain) loss on license sales and exchanges			(91,446)		—		(91,446)		N/M
					2,977,839		2,838,761		139,078		5%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			586,862		493,090		93,772		19%
		Depreciation, amortization and accretion			161,205		149,552		11,653		8%
		Loss on impairment of assets			84,000		—		84,000		N/M
		(Gain) loss on asset disposals, net			2,694		(53)		2,747		>(100%)
		(Gain) loss on sale of business and other exit costs, net			(2,201)		—		(2,201)		N/M
					832,560		642,589		189,971		30%
	All Other (1)(2)
		Expenses excluding depreciation and amortization			26,056		25,480		576		2%
		Depreciation and amortization			8,768		8,613		155		2%
		(Gain) loss on asset disposals, net			158		(10)		168		>(100%)
		(Gain) loss on sale of business and other exit costs, net			20,816		(54,010)		74,826		>(100%)
					55,798		(19,927)		75,725		>(100%)

			Total operating expenses		3,866,197		3,461,423		404,774		12%
Operating income (loss)
	U.S. Cellular				(93,836)		177,351		(271,187)		>(100%)
	TDS Telecom				(26,137)		32,475		(58,612)		>(100%)
	All Other (1)(2)				(33,847)		46,470		(80,317)		>(100%)
					(153,820)		256,296		(410,116)		>(100%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				108,198		100,303		7,895		8%
	Interest and dividend income				9,763		6,685		3,078		46%
	Gain (loss) on investments				―		14,518		(14,518)		N/M
	Interest expense				(83,775)		(73,208)		(10,567)		(14%)
	Other, net				279		(206)		485		>(100%)
		Total investment and other income			34,465		48,092		(13,627)		(28%)
Income (loss) before income taxes					(119,355)		304,388		(423,743)		>(100%)
	Income tax expense (benefit)				7,276		130,056		(122,780)		(94%)
Net income (loss)					(126,631)		174,332		(300,963)		>(100%)
	Less: Net income (loss) attributable to noncontrolling interests, net of tax				(6,817)		26,348		(33,165)		>(100%)
Net income (loss) attributable to TDS shareholders					(119,814)		147,984		(267,798)		>(100%)
	TDS Preferred dividend requirement				(37)		(37)		—		—
Net income (loss) available to common shareholders				$	(119,851)	$	147,947	$	(267,798)		>(100%)

Basic weighted average shares outstanding					108,650		108,405		245		—
Basic earnings (loss) per share attributable to TDS shareholders				$	(1.10)	$	1.36	$	(2.46)		>(100%)

Diluted weighted average shares outstanding					108,650		108,993		(343)		—
Diluted earnings (loss) per share attributable to TDS shareholders				$	(1.10)	$	1.35	$	(2.45)		>(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 $20.8 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 Balance Sheet Highlights
(Unaudited, dollars in thousands)

ASSETS


		September 30,		December 31,
		2014		2013
Current assets
	Cash and cash equivalents	$	573,067	$	830,014
	Short-term investments		40,014		50,104
	Accounts receivable from customers and others		652,487		731,114
	Inventory, net		193,694		244,560
	Net deferred income tax asset		100,951		106,077
	Prepaid expenses		89,243		87,920
	Income taxes receivable		10,522		2,397
	Other current assets		31,884		35,151
			1,691,862		2,087,337

Assets held for sale			68,288		16,027

Investments
	Licenses		1,400,808		1,423,779
	Goodwill		783,280		836,843
	Franchise rights		238,950		123,668
	Other intangible assets, net		70,075		71,454
	Investments in unconsolidated entities		335,448		301,772
	Other investments		543		641
			2,829,104		2,758,157

Property, plant and equipment, net
	U.S. Cellular		2,746,449		2,856,520
	TDS Telecom		1,064,677		984,634
	Other		25,342		36,990
			3,836,468		3,878,144

Other assets and deferred charges			214,826		164,482

Total assets		$	8,640,548	$	8,904,147

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

LIABILITIES AND EQUITY


				September 30,		December 31,
				2014		2013
Current liabilities
		Current portion of long-term debt		$	862	$	1,646
		Accounts payable			469,193		496,069
		Customer deposits and deferred revenues			330,789		289,445
		Accrued interest			15,750		6,673
		Accrued taxes			87,474		70,518
		Accrued compensation			100,297		115,031
		Other current liabilities			153,142		212,374
					1,157,507		1,191,756

Deferred liabilities and credits
		Net deferred income tax liability			823,172		862,975
		Other deferred liabilities and credits			455,360		458,709

Long-term debt					1,718,701		1,720,074

Noncontrolling interests with redemption features					1,007		536

Equity
	TDS shareholders' equity
		Series A Common and Common Shares, par value $.01			1,327		1,327
		Capital in excess of par value			2,329,674		2,308,807
		Treasury shares, at cost			(746,660)		(721,354)
		Accumulated other comprehensive loss			(1,307)		(569)
		Retained earnings			2,366,237		2,529,626
			Total TDS shareholders' equity		3,949,271		4,117,837

	Preferred shares				824		824
	Noncontrolling interests				534,706		551,436

		Total equity			4,484,801		4,670,097

Total liabilities and equity				$	8,640,548	$	8,904,147

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


		U.S.		TDS		TDS Corporate		Intercompany		TDS
		Cellular		Telecom		& Other		Eliminations		Consolidated
Cash and cash equivalents		$	273,798	$	75,226	$	224,043	$	―	$	573,067
Affiliated cash investments			―		518,587		―		(518,587)		―
Short-term investments			40,014		―		―		―		40,014
		$	313,812	$	593,813	$	224,043	$	(518,587)	$	613,081

Licenses, goodwill and other intangible assets		$	1,778,196	$	861,352	$	(146,435)	$	―	$	2,493,113
Investment in unconsolidated entities			296,900		3,803		41,936		(7,191)		335,448
Long-term and other investments			―		543		―		―		543
		$	2,075,096	$	865,698	$	(104,499)	$	(7,191)	$	2,829,104


Property, plant and equipment, net		$	2,746,449	$	1,064,677	$	25,597	$	(255)	$	3,836,468

Long-term debt:
	Current portion	$	46	$	57	$	759	$	―	$	862
	Non-current portion		876,756		1,433		840,512		―		1,718,701
		$	876,802	$	1,490	$	841,271	$	―	$	1,719,563

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, 2014 and December 31, 2013.

		September 30,		December 31,
		2014		2013

Cash and cash equivalents		$	573,067	$	830,014

Amounts included in short-term investments (1) (2)
	U.S. Treasury Notes		40,014		50,104

Total cash and cash equivalents and investments		$	613,081	$	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
Nine Months Ended September 30,
(Unaudited, dollars in thousands)
				2014		2013
Cash flows from operating activities
	Net income (loss)			$	(126,631)	$	174,332
		Add (deduct) adjustments to reconcile net income to cash flows from operating activities
			Depreciation, amortization and accretion		635,015		751,575
			Bad debts expense		79,218		56,693
			Stock-based compensation expense		25,715		21,867
			Deferred income taxes, net		(33,242)		(30,748)
			Equity in earnings of unconsolidated entities		(108,198)		(100,303)
			Distributions from unconsolidated entities		74,864		51,879
			Loss on impairment of assets		84,000		—
			(Gain) loss on asset disposals, net		19,626		16,090
			(Gain) loss on sale of business and other exit costs, net		(9,079)		(297,637)
			(Gain) loss on investments		—		(14,518)
			(Gain) loss on license sales and exchanges		(91,446)		—
			Noncash interest expense		1,584		1,498
			Other operating activities		13		575
		Changes in assets and liabilities from operations
			Accounts receivable		(7,879)		(216,700)
			Inventory		52,078		11,114
			Accounts payable		11,034		33,312
			Customer deposits and deferred revenues		37,834		21,883
			Accrued taxes		14,307		41,838
			Accrued interest		9,105		9,451
			Other assets and liabilities		(171,707)		(94,301)
					496,211		437,900

Cash flows from investing activities
	Cash used for additions to property, plant and equipment				(553,718)		(631,370)
	Cash paid for acquisitions and licenses				(284,089)		(280,383)
	Cash received from divestitures				151,369		484,300
	Cash received for investments				10,000		80,000
	Other investing activities				5,598		13,860
					(670,840)		(333,593)

Cash flows from financing activities
	Repayment of long-term debt				(819)		(1,196)
	TDS Common Shares reissued for benefit plans, net of tax payments				486		7,537
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments				1,150		2,840
	Repurchase of TDS Common Shares				(31,293)		(5,813)
	Repurchase of U.S. Cellular Common Shares				(14,698)		(18,544)
	Dividends paid to TDS shareholders				(43,575)		(41,430)
	U.S. Cellular dividends paid to noncontrolling public shareholders				—		(75,235)
	Distributions to noncontrolling interests				(439)		(3,447)
	Other financing activities				6,870		1,589
					(82,318)		(133,699)

Net decrease in cash and cash equivalents					(256,947)		(29,392)
Cash and cash equivalents
	Beginning of period				830,014		740,481
	End of period			$	573,067	$	711,089

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

							Change
			2014		2013		Amount		Percent
Wireline
Operating revenues
	Residential		$	73,901	$	74,257	$	(356)	—
	Commercial			57,179		57,075		104	—
	Wholesale			46,570		49,755		(3,185)	(6%)
		Total service revenues		177,650		181,087		(3,437)	(2%)
	Equipment sales			425		713		(288)	(40%)
				178,075		181,800		(3,725)	(2%)
Operating expenses
	Cost of services			64,072		67,308		(3,236)	(5%)
	Cost of equipment sold			829		941		(112)	(12%)
	Selling, general and administrative expenses			46,627		53,254		(6,627)	(12%)
	Depreciation, amortization and accretion			41,358		42,136		(778)	(2%)
	(Gain) loss on asset disposals, net			743		426		317	74%
	(Gain) loss on sale of business and other exit costs, net			(2,201)		—		(2,201)	N/M
				151,428		164,065		(12,637)	(8%)

	Operating income		$	26,647	$	17,735	$	8,912	50%

Cable
Operating revenues
	Residential		$	22,921	$	11,642	$	11,279	97%
	Commercial			5,598		2,720		2,878	>100%
				28,519		14,362		14,157	99%
Operating expenses
	Cost of services			12,651		6,727		5,924	88%
	Selling, general and administrative expenses			9,948		5,184		4,764	92%
	Depreciation, amortization and accretion			6,171		2,914		3,257	>100%
	(Gain) loss on asset disposals, net			626		—		626	N/M
				29,396		14,825		14,571	98%

	Operating income (loss)		$	(877)	$	(463)	$	(414)	(89%)

HMS
Operating revenues
	Service revenues		$	27,806	$	23,200	$	4,606	20%
	Equipment sales			39,737		15,527		24,210	>100%
				67,543		38,727		28,816	74%
Operating expenses
	Cost of services			19,442		14,369		5,073	35%
	Cost of equipment sold			33,819		13,149		20,670	>100%
	Selling, general and administrative expenses			12,724		10,064		2,660	26%
	Depreciation, amortization and accretion			6,726		6,255		471	8%
	Loss on impairment of assets			84,000		—		84,000	N/M
	(Gain) loss on asset disposals, net			(2)		10		(12)	>(100)%
				156,709		43,847		112,862	>100%

	Operating income (loss)		$	(89,166)	$	(5,120)	$	(84,046)	>(100)%

Intercompany revenues			$	(980)	$	(346)	$	(634)	>(100)%
Intercompany expenses				(980)		(346)		(634)	>(100)%

Total TDS Telecom operating income (loss)			$	(63,396)	$	12,152	$	(75,548)	>(100)%

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

							Change
			2014		2013		Amount		Percent
Wireline
Operating revenues
	Residential		$	219,766	$	220,172	$	(406)	—
	Commercial			172,631		171,328		1,303	1%
	Wholesale			142,483		151,693		(9,210)	(6%)
		Total service revenues		534,880		543,193		(8,313)	(2%)
	Equipment sales			1,409		2,375		(966)	(41%)
				536,289		545,568		(9,279)	(2%)
Operating expenses
	Cost of services			192,777		199,476		(6,699)	(3%)
	Cost of equipment sold			1,793		3,045		(1,252)	(41%)
	Selling, general and administrative expenses			140,855		167,326		(26,471)	(16%)
	Depreciation, amortization and accretion			125,921		129,352		(3,431)	(3%)
	(Gain) loss on asset disposals, net			1,502		(176)		1,678	>100%
	(Gain) loss on sale of business and other exit costs, net			(2,201)		—		(2,201)	N/M
				460,647		499,023		(38,376)	(8%)

	Operating income		$	75,642	$	46,545	$	29,097	63%

Cable
Operating revenues
	Residential		$	59,396	$	11,642	$	47,754	>100%
	Commercial			14,110		2,720		11,390	>100%
				73,506		14,362		59,144	>100%
Operating expenses
	Cost of services			35,000		6,727		28,273	>100%
	Selling, general and administrative expenses			22,611		5,184		17,427	>100%
	Depreciation, amortization and accretion			15,089		2,914		12,175	>100%
	(Gain) loss on asset disposals, net			1,116		—		1,116	N/M
				73,816		14,825		58,991	>100%

	Operating income (loss)		$	(310)	$	(463)	$	153	33%

HMS
Operating revenues
	Service revenues		$	82,757	$	68,405	$	14,352	21%
	Equipment sales			115,830		47,260		68,570	>100%
				198,587		115,665		82,922	72%
Operating expenses
	Cost of services			57,689		43,042		14,647	34%
	Cost of equipment sold			98,161		39,475		58,686	>100%
	Selling, general and administrative expenses			39,935		29,346		10,589	36%
	Depreciation, amortization and accretion			20,195		17,286		2,909	17%
	Loss on impairment of assets			84,000		—		84,000	N/M
	(Gain) loss on asset disposals, net			76		123		(47)	(38%)
				300,056		129,272		170,784	>100%

	Operating income (loss)		$	(101,469)	$	(13,607)	$	(87,862)	>(100)%

Intercompany revenues			$	(1,959)	$	(531)	$	(1,428)	>(100)%
Intercompany expenses				(1,959)		(531)		(1,428)	>(100)%

Total TDS Telecom operating income (loss)			$	(26,137)	$	32,475	$	(58,612)	>(100)%

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,
			2014		2013		2014		2013

	Cash flows from operating activities		$	180,569	$	(83,592)	$	496,211	$	437,900
	Add: Sprint Cost Reimbursement			17,896		1,131		52,012		1,131
	Less: Cash used for additions to property, plant and equipment			213,811		247,089		553,718		631,370
		Adjusted free cash flow (1)	$	(15,346)	$	(329,550)	$	(5,495)	$	(192,339)

(1) Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), 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.

TELEPHONE & DATA SYSTEMS INC /DE/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 31, 2014

Attached files

TELEPHONE & DATA SYSTEMS INC /DE/ Reports