TDS reports first quarter 2014 results

TDS reports first quarter 2014 results

As previously announced, TDS will hold a teleconference May 2, 2014 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.teldta.com.

CHICAGO, May 2, 2014 /PRNewswire/ -- Telephone and Data Systems, Inc. (NYSE: TDS) reported operating revenues of $1,196.0 million for the first quarter of 2014, versus $1,308.6 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $18.3 million and $0.16 respectively, for the first quarter of 2014, compared to $1.4 million and $0.01, respectively, in the comparable period one year ago.

Year-over-year comparisons are affected by U.S. Cellular's divestiture transaction, the deconsolidation of certain U.S. Cellular partnerships, and acquisitions at TDS Telecom, in 2013.

"Our businesses made significant progress in the quarter to execute on their customer strategies and improve operating efficiency," said LeRoy T. Carlson, Jr., TDS president and CEO. "While we have considerable work to do to improve our financial and operating performance, I believe we're focused on the right areas.

"U.S. Cellular continues to attract new customers and drive smartphone adoption and data use, leading to higher average revenue per customer. Substantial progress has been made to restore high standards of service following the billing system conversion, and U.S. Cellular has already leveraged the system to deliver new services like our Shared Connect Plans and no contract Simple Connect Plans.

"TDS Telecom increased average revenue per customer for both residential and commercial wireline customers, with higher-tier TDS TV packages and faster broadband speeds, and new managedIP plans. We also continued to improve the overall efficiency of the wireline business. Revenues increased 77 percent at OneNeck IT Solutions, our hosted and managed services business, driven by revenues from acquisitions and increased revenues for recurring services.

"As we continued to execute our integration and customer strategies for Baja Broadband, we also agreed to acquire Bend Broadband, a premier cable and broadband provider to residential and business customers in Central Oregon. BendBroadband's high-capacity, all-digital network, technology leadership, and customer-centered approach will be tremendous assets as we develop a premier cable broadband business."

2014 Estimated Results
U.S. Cellular capital expenditures for 2014 are expected to be approximately $640 million, down from $738 million in 2013.

TDS Telecom estimates for full-year 2014 results are shown below. Such estimates represent management's view as of May 2, 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.



TDS Telecom 2014
Estimated Results (1)
----------------------

Current Previous
------- --------

(Dollars in millions)

Operating revenues $1,050-$1,100 Unchanged

Adjusted income before income
taxes (2) $250-$280 Unchanged

Capital expenditures $200 Unchanged



(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. In addition, 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 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 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 table provides
a reconciliation of income before
income taxes to adjusted income before
income taxes for 2014 estimated
results, three months ended March 31,
2014, and 2013 actual results:


TDS Telecom
-----------

Actual Results
--------------

2014 Estimated Results Three Months Ended Year Ended

March 31, 2014 December 31, 2013
-------------- -----------------

(Dollars
in
millions)

Income
before
income
taxes $25-$55 $19 $49

Depreciation,
amortization
and
accretion
expense $225 $54 $203

(Gain)
loss
on
investments ? ? ($1)

Interest
expense ? ? ($2)
--- --- ---

Adjusted
income
before
income
taxes $250-$280 $73 $249
========= === ====


Stock repurchase summary

TDS began repurchasing 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 (first quarter) 157,891 $3.8

2013 (full year) 338,851 $9.7
------- ----

Total 496,742 $13.5
======= =====


Conference Call Information
TDS will hold a conference call on May 2, 2014 at 9:30 a.m. CDT.


-- Access the live call on the Events & Presentations page of
investors.teldta.com or at
http://www.videonewswire.com/event.asp?id=99006.
-- 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 500® 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 10,600 people as of March 31, 2014.

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 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 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
OneNeck IT Solutions: www.oneneck.com







United States Cellular Corporation

Total Markets* Summary Operating Data (Unaudited)


As of or for the Quarter Ended 3/31/2014 12/31/2013 9/30/2013 6/30/2013 3/31/2013
------------------------------ --------- ---------- --------- --------- ---------

Retail Customers

Postpaid

Total at end of period 4,174,000 4,267,000 4,343,000 4,412,000 5,060,000

Gross additions 197,000 176,000 165,000 165,000 191,000

Net additions (losses) (93,000) (71,000) (60,000) (120,000) (74,000)

ARPU (1) $57.59 $53.53 $54.64 $54.18 $54.85

Churn rate (2) 2.3% 1.9% 1.7% 2.0% 1.7%

Smartphone penetration (3) (4) 53.1% 50.8% 47.1% 45.5% 43.5%

Prepaid

Total at end of period 356,000 343,000 370,000 381,000 446,000

Gross additions 85,000 63,000 65,000 77,000 104,000

Net additions (losses) 13,000 (26,000) (11,000) (7,000) 23,000

ARPU (1) $32.22 $31.66 $28.72 $31.69 $33.31

Churn rate (2) 6.9% 8.3% 6.8% 6.8% 6.2%

Total customers at end of period 4,684,000 4,774,000 4,875,000 4,968,000 5,736,000

Billed ARPU (1) $53.93 $50.25 $50.92 $50.60 $51.13

Service revenue ARPU (1) $60.19 $57.05 $58.36 $57.45 $57.63

Smartphones sold as a percent of total 73.0% 79.6% 65.2% 66.0% 61.7%

devices sold

Total population

Consolidated markets (5) 54,817,000 58,013,000 84,025,000 84,025,000 93,943,000

Consolidated operating markets
(5) 31,729,000 31,759,000 31,822,000 31,822,000 47,440,000

Market penetration at end of period

Consolidated markets (6) 8.5% 8.2% 5.8% 5.9% 6.1%

Consolidated operating markets
(6) 14.8% 15.0% 15.3% 15.6% 12.1%

Capital expenditures (000s) $89,581 $208,135 $242,459 $168,497 $118,410

Total cell sites in service 6,165 6,975 7,687 7,748 8,027

Owned towers 4,448 4,448 4,422 4,411 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 is not adjusted in prior
periods for subsequent divestitures or
deconsolidations.

Refer to U.S. Cellular's Form 8-K filed on May
3, 2013 for pro forma financial information
related to the Divestiture Transaction and the
NY1 and NY2 Deconsolidation for the three
months ended March 31, 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 3/31/2014 12/31/2013 9/30/2013 6/30/2013 3/31/2013
------------------------------ --------- ---------- --------- --------- ---------

Retail Customers

Postpaid

Total at end of period 4,174,000 4,267,000 4,343,000 4,412,000 4,463,000

Gross additions 197,000 176,000 165,000 165,000 176,000

Net additions (losses) (93,000) (71,000) (60,000) (53,000) (33,000)

ARPU (1) $57.59 $53.53 $54.64 $54.44 $54.21

Churn rate (2) 2.3% 1.9% 1.7% 1.6% 1.6%

Smartphone penetration (3) (4) 53.1% 50.8% 47.1% 45.5% 43.0%

Prepaid

Total at end of period 356,000 343,000 370,000 381,000 373,000

Gross additions 85,000 63,000 65,000 76,000 91,000

Net additions (losses) 13,000 (26,000) (11,000) 8,000 31,000

ARPU (1) $32.22 $31.66 $28.72 $31.65 $32.92

Churn rate (2) 6.9% 8.3% 6.8% 6.0% 5.6%

Total customers at end of period 4,684,000 4,774,000 4,875,000 4,968,000 5,005,000

Billed ARPU (1) $53.93 $50.25 $50.92 $50.98 $50.93

Service revenue ARPU (1) $60.19 $57.05 $58.36 $57.88 $57.14

Smartphones sold as a percent of total 73.0% 79.6% 65.2% 66.1% 62.1%

devices sold

Total population

Consolidated markets (5) 54,817,000 58,013,000 84,025,000 84,025,000 84,025,000

Consolidated operating markets
(5) 31,729,000 31,759,000 31,822,000 31,822,000 31,822,000

Market penetration at end of period

Consolidated markets (6) 8.5% 8.2% 5.8% 5.9% 6.0%

Consolidated operating markets
(6) 14.8% 15.0% 15.3% 15.6% 15.7%

Capital expenditures (000s) $89,581 $211,247 $239,332 $171,166 $107,907

Total cell sites in service 6,165 6,161 6,127 6,113 6,113

Owned towers 3,883 3,883 3,857 3,846 3,846




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


Refer to U.S. Cellular's Form 8-K
filed on May 3, 2013 for pro forma
financial information related to the
Divestiture Transaction and the NY1
and NY2 Deconsolidation for the three
months ended March 31, 2013, as if
the transactions had occurred at the
beginning of the period.


(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, Apple,
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 markets
and consolidated 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
markets and consolidated operating
markets, respectively, as estimated
by Claritas.








TDS Telecom

Summary Operating Data (Unaudited)


Quarter Ended 3/31/2014 12/31/2013 9/30/2013 6/30/2013 3/31/2013
--------- ---------- --------- --------- ---------

TDS Telecom

Wireline
--------

Residential
connections

Voice (1) 348,700 352,100 358,100 364,100 368,600

Broadband (2) 229,000 227,000 229,500 231,700 229,500

IPTV (3) 15,900 13,800 12,200 10,500 9,000
------ ------ ------ ------ -----

Wireline residential
connections 593,600 592,900 599,800 606,300 607,100
======= ======= ======= ======= =======


Commercial
connections

Voice (1) 212,200 218,400 223,800 229,100 235,700

Broadband (2) 26,600 27,100 27,600 28,200 28,800

managedIP (4) 131,000 127,600 121,000 112,000 103,400
------- ------- ------- ------- -------

Wireline commercial connections 369,800 373,100 372,400 369,300 367,900
======= ======= ======= ======= =======


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


Total
residential
revenue per
connection (5) $40.79 $40.93 $41.12 $40.10 $39.99


Cable
-----

Cable
Connections

Video (6) 68,700 69,100 70,300

Broadband (7) 63,000 61,000 59,800

Voice (7) 17,700 17,200 16,800
------ ------ ------

Cable connections 149,400 147,300 146,900
======= ======= =======


Total
residential
revenue per
connection (5) $57.37 $55.27 $55.67



(1) The individual circuit connecting a
customer 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) The number of telephone handsets, data
lines and IP trunks providing
communications using IP networking
technology.

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

(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 3/31/2014 12/31/2013 9/30/2013 6/30/2013 3/31/2013
--------- ---------- --------- --------- ---------

Wireline $22,900 $46,000 $32,800 $33,300 $27,900

Cable 6,200 7,000 1,400 - -

HMS 2,800 9,200 2,400 2,300 2,600
----- ----- ----- ----- -----

$31,900 $62,200 $36,600 $35,600 $30,500
======= ======= ======= ======= =======







Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended March 31,

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

Change
------

2014 2013 Amount Percent
---- ---- ------ -------

Operating revenues

U.S. Cellular $925,811 $1,081,746 $(155,935) (14%)

TDS Telecom 262,416 217,061 45,355 21%

All Other (1) 7,735 9,766 (2,031) (21%)


1,195,962 1,308,573 (112,611) (9%)
--------- --------- --------

Operating expenses

U.S. Cellular

Expenses
excluding
depreciation,
amortization
and accretion 846,645 878,070 (31,425) (4%)

Depreciation,
amortization
and accretion 167,753 189,845 (22,092) (12%)

(Gain) loss on
asset
disposals, net 1,934 5,434 (3,500) (64%)

(Gain) loss on
sale of
business and
other exit
costs, net (6,900) 6,931 (13,831) >(100%)

(Gain) loss on
license sales
and exchanges (91,446) - (91,446) N/M
------- --- -------

917,986 1,080,280 (162,294) (15%)
------- --------- --------

TDS Telecom

Expenses
excluding
depreciation,
amortization
and accretion 190,303 159,486 30,817 19%

Depreciation,
amortization
and accretion 53,775 49,491 4,284 9%

(Gain) loss on
asset
disposals, net 344 193 151 78%
--- --- ---

244,422 209,170 35,252 17%
------- ------- ------

All Other (1)

Expenses
excluding
depreciation
and
amortization 9,326 9,239 87 1%

Depreciation
and
amortization 3,391 2,741 650 24%

(Gain) loss on
asset
disposals, net 152 (11) 163 >(100%)
--- --- ---

12,869 11,969 900 8%
------ ------ ---


Total operating expenses 1,175,277 1,301,419 (126,142) (10%)
--------- --------- --------

Operating income (loss)

U.S. Cellular 7,825 1,466 6,359 >100%

TDS Telecom 17,994 7,891 10,103 >100%

All Other (1) (5,134) (2,203) (2,931) >(100%)


20,685 7,154 13,531 >100%
------ ----- ------

Investment and other income (expense)

Equity in earnings
of unconsolidated
entities 37,327 27,089 10,238 38%

Interest and
dividend income 2,486 1,578 908 58%

Interest expense (28,707) (24,498) (4,209) (17%)

Other, net 160 (154) 314 >(100%)


Total
investment and
other income 11,266 4,015 7,251 >100%
------ ----- -----

Income before income taxes 31,951 11,169 20,782 >100%

Income tax expense 11,657 4,180 7,477 >100%


Net income 20,294 6,989 13,305 >100%

Less: Net income
attributable to
noncontrolling
interests, net of
tax 2,040 5,570 (3,530) (63%)


Net income attributable to TDS shareholders 18,254 1,419 16,835 >100%

TDS Preferred
dividend
requirement (12) (12) - -


Net income available to common shareholders $18,242 $1,407 $16,835 >100%
======= ====== =======


Basic weighted average shares outstanding 108,988 108,255 733 1%

Basic earnings per share attributable to TDS
shareholders $0.17 $0.01 $0.16 >100%


Diluted weighted average shares outstanding 109,672 108,693 979 1%

Diluted earnings per share attributable to
TDS shareholders $0.16 $0.01 $0.15 >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



March 31, December 31,

2014 2013
---- ----

Current assets

Cash and cash equivalents $872,910 $830,014

Short-term investments 40,056 50,104

Accounts receivable from customers
and others 615,009 731,114

Inventory, net 224,904 244,560

Net deferred income tax asset 106,077 106,077

Prepaid expenses 89,344 87,920

Income taxes receivable 5,679 2,397

Other current assets 35,154 35,151


1,989,133 2,087,337


Assets held for sale - 16,027


Investments

Licenses 1,448,598 1,423,779

Goodwill 836,843 836,843

Franchise rights 123,668 123,668

Other intangible assets, net 66,439 71,454

Investments in unconsolidated
entities 326,279 301,772

Other investments 611 641


2,802,438 2,758,157


Property, plant and equipment, net

U.S. Cellular 2,776,220 2,856,520

TDS Telecom 967,847 984,634

Other 35,066 36,990


3,779,133 3,878,144


Other assets and deferred charges 178,599 164,482
------- -------


Total assets $8,749,303 $8,904,147
========== ==========







Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)


LIABILITIES AND EQUITY



March 31, December 31,

2014 2013
---- ----

Current liabilities

Current portion
of long-term
debt $1,415 $1,646

Accounts payable 414,015 496,069

Customer deposits
and deferred
revenues 287,999 289,445

Accrued interest 15,757 6,673

Accrued taxes 72,761 70,518

Accrued
compensation 65,486 115,031

Other current
liabilities 167,746 212,374
------- -------

1,025,179 1,191,756


Deferred liabilities and credits

Net deferred
income tax
liability 847,850 862,975

Other deferred
liabilities and
credits 477,305 458,709


Long-term debt 1,720,031 1,720,074


Noncontrolling interests with redemption features 543 536


Equity

TDS shareholders'
equity

Series A Common
and Common
Shares, par
value $.01 1,327 1,327

Capital in excess
of par value 2,313,682 2,308,807

Treasury shares,
at cost (722,658) (721,354)

Accumulated other
comprehensive
loss (938) (569)

Retained earnings 2,533,298 2,529,626
--------- ---------

Total TDS shareholders' equity 4,124,711 4,117,837


Preferred shares 824 824

Noncontrolling
interests 552,860 551,436



Total equity 4,678,395 4,670,097


Total liabilities and equity $8,749,303 $8,904,147
========== ==========







Balance Sheet Highlights

March 31, 2014

(Unaudited, dollars in thousands)



U.S. TDS TDS Corporate Intercompany TDS

Cellular Telecom & Other Eliminations Consolidated
-------- ------- ------- ------------ ------------

Cash and cash
equivalents $398,541 $84,120 $390,249 $ ? $872,910

Affiliated cash investments ? 444,181 ? (444,181) ?

Short-term investments 40,056 ? ? ? 40,056
------ --- --- --- ------

$438,597 $528,301 $390,249 $(444,181) $912,966
======== ======== ======== ========= ========


Licenses, goodwill and
other intangible
assets $1,813,469 $792,606 $(130,527) $ ? $2,475,548

Investment in unconsolidated
entities 289,842 3,807 39,771 (7,141) 326,279

Long-term and other investments ? 611 ? ? 611
--- --- --- --- ---

$2,103,311 $797,024 $(90,756) $(7,141) $2,802,438
========== ======== ======== ======= ==========



Property, plant and
equipment, net $2,776,220 $967,847 $35,066 $ ? $3,779,133
========== ======== ======= === === ==========


Long-term debt:

Current portion $166 $73 $1,176 $ ? $1,415

Non-current portion 878,127 1,420 840,484 ? 1,720,031
------- ----- ------- --- ---------

$878,293 $1,493 $841,660 $ ? $1,721,446
======== ====== ======== === === ==========








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 March 31,
2014 and December 31, 2013.


March 31, December 31,

2014 2013
---- ----


Cash and cash
equivalents $872,910 $830,014


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

U.S. Treasury Notes 40,056 50,104


Total cash and cash
equivalents and
investments $912,966 $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

Three Months Ended March 31,

(Unaudited, dollars in thousands)

2014 2013
---- ----

Cash flows from operating activities

Net income $20,294 $6,989

Add (deduct)
adjustments to
reconcile net income
to net cash flows

from operating
activities

Depreciation, amortization and
accretion 224,919 242,077

Bad debts expense 21,559 17,874

Stock-based compensation expense 6,759 7,585

Deferred income taxes, net (14,510) 3,009

Equity in earnings of unconsolidated
entities (37,327) (27,089)

Distributions from unconsolidated
entities 12,820 8,089

(Gain) loss on asset disposals, net 2,430 5,616

(Gain) loss on sale of business and
other exit costs, net (6,900) 6,931

(Gain) loss on license sales and
exchanges (91,446) -

Noncash interest expense 506 497

Other operating activities 47 256

Changes in assets and
liabilities from
operations

Accounts receivable 92,949 34,038

Inventory 19,656 16,860

Accounts payable (53,403) (3,203)

Customer deposits and deferred
revenues (1,447) 7,904

Accrued taxes (1,634) 5,309

Accrued interest 9,136 9,279

Other assets and liabilities (99,471) (95,669)
------- -------

104,937 246,352
------- -------


Cash flows from investing activities

Cash used for additions
to property, plant and
equipment (150,890) (176,318)

Cash paid for
acquisitions and
licenses (8,254) (14,150)

Cash received from
divestitures 103,042 -

Cash received for
investments 10,000 -

Other investing
activities 1,623 6,364


(44,479) (184,104)
------- --------


Cash flows from financing activities

Repayment of long-term
debt (392) (328)

TDS Common Shares
reissued for benefit
plans, net of tax
payments (50) 140

U.S. Cellular Common
Shares reissued for
benefit plans, net of
tax payments 316 123

Repurchase of TDS Common
Shares (3,342) -

Repurchase of U.S.
Cellular Common Shares (2,000) (18,425)

Dividends paid to TDS
shareholders (14,582) (13,792)

Distributions to
noncontrolling interests (346) (2,396)

Other financing
activities 2,834 (1,351)


(17,562) (36,029)
------- -------


Net increase in cash and cash equivalents 42,896 26,219

Cash and cash equivalents

Beginning of period 830,014 740,481


End of period $872,910 $766,700







TDS Telecom Highlights

Three Months Ended March 31,

(Unaudited, dollars in thousands)


Change
------

2014 2013 Amount Percent
---- ---- ------ -------

Wireline

Operating revenues

Residential $72,505 $73,004 $(499) (1%)

Commercial 57,980 57,125 855 1%

Wholesale 46,448 50,549 (4,101) (8%)


Total service revenues 176,933 180,678 (3,745) (2%)

Equipment
sales 553 897 (344) (38%)


177,486 181,575 (4,089) (2%)
------- ------- ------

Operating expenses

Cost of
services 64,400 66,439 (2,039) (3%)

Cost of
equipment
sold 483 1,010 (527) (52%)

Selling,
general and
administrative
expenses 46,520 57,380 (10,860) (19%)

Depreciation,
amortization
and accretion 42,736 44,023 (1,287) (3%)

Loss on asset
disposals,
net 245 163 82 50%


154,384 169,015 (14,631) (9%)
------- ------- -------


Operating
income $23,102 $12,560 $10,542 84%
----------


Cable

Operating revenues

Residential $18,253 $ - $18,253 N/M

Commercial 4,250 - 4,250 N/M


22,503 - 22,503 N/M

Operating expenses

Cost of
services 10,955 - 10,955 N/M

Selling,
general and
administrative
expenses 6,378 - 6,378 N/M

Depreciation,
amortization
and accretion 4,361 - 4,361 N/M

Loss on asset
disposals,
net 65 - 65 N/M


21,759 - 21,759 N/M
------ --- ------


Operating
income $744 $ - $744 N/M
---------- ---


HMS

Operating revenues

Service
revenues $27,376 $22,000 $5,376 24%

Equipment
sales 35,732 13,564 22,168 >100%


63,108 35,564 27,544 77%
------ ------ ------

Operating expenses

Cost of
services 16,946 13,602 3,344 25%

Cost of
equipment
sold 30,467 11,212 19,255 >100%

Selling,
general and
administrative
expenses 14,835 9,921 4,914 50%

Depreciation,
amortization
and accretion 6,678 5,468 1,210 22%

Loss on asset
disposals,
net 34 30 4 13%


68,960 40,233 28,727 71%
------ ------ ------


Operating loss $(5,852) $(4,669) $(1,183) (25%)
------------


Intercompany revenues $(681) $(78) $(603) >(100)%

Intercompany expenses (681) (78) (603) >(100)%
---- --- ----


Total TDS Telecom operating
income $17,994 $7,891 $10,103 >100%
======= ====== =======





Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)


TDS Consolidated
----------------

Three Months Ended
March 31, 2014 2013
------------------ ---- ----


Cash flows
from
operating
activities $104,937 $246,352

Deduct:

Cash used
for
additions
to
property,
plant, and
equipment 150,890 176,318


Free cash flow (1) $(45,953) $70,034
======== =======



(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 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, after Cash used
for additions to property,
plant and equipment.




SOURCE Telephone and Data Systems, Inc.

Telephone and Data Systems, Inc.

CONTACT: Jane McCahon, Vice President, Corporate Relations and Corporate Secretary, 312- 592-5379, jane.mccahon@teldta.com; or Julie Mathews, Investor Relations Manager, 312- 592-5341, julie.mathews@teldta.com

Web Site: http://www.teldta.com


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