8-K

 

FORM 8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 4, 2012

TELEPHONE AND DATA SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)	001-14157 (Commission File Number)	36-2669023 (I.R.S. Employer Identification No.)
30 North LaSalle Street, Suite 4000, Chicago, Illinois (Address of principal executive offices)		60602 (Zip Code)

Registrant’s telephone number, including area code:  (312) 630-1900

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02.  Results of Operations and Financial Condition

On May 4, 2012, Telephone and Data Systems, Inc. (“TDS”) issued a news release announcing its results of operations for the period ended March 31, 2012.  A copy of the news release is attached hereto as Exhibit 99.1 and incorporated by reference herein. 

The information in this Item 2.02 of Form 8-K is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.

Item 9.01  Financial Statements and Exhibits

(d)       Exhibits:

In accordance with the provisions of Item 601 of Regulation S-K, any Exhibits filed or furnished herewith are set forth on the Exhibit Index attached hereto.

Attached as Exhibit 99.2 is a safe harbor cautionary statement under the Private Securities Litigation Reform Act of 1995.

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

Telephone and Data Systems, Inc. (Registrant)
Date:	May 4, 2012
By:	/s/ Douglas D. Shuma
	Douglas D. Shuma Senior Vice President and Corporate Controller

EXHIBIT INDEX

The following exhibits are filed or furnished herewith as noted below.

Exhibit No.	Description
99.1	Earnings Press Release dated May 4, 2012
99.2	Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement

EX-99.1

 

NEWS RELEASE  

As previously announced, TDS will hold a teleconference May 4, 2012 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com. 

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

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

                 Julie D. Mathews, Manager, Investor Relations

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

FOR RELEASE: IMMEDIATE

TDS Reports First quarter 2012 results

Reaffirms 2012 Guidance

Note: Comparisons are year over year unless otherwise noted.

1Q 2012 Highlights

TDS Consolidated

§Operating revenues increased 4 percent to $1,305.8 million.

§        Operating income increased 5 percent to $93.6 million.

U.S. Cellular

§Smartphones as a percent of total devices sold increased to 54.1 percent from 42.5 percent; smartphone customers increased to 34.4 percent of postpaid customers from 20.3 percent.

§Postpaid ARPU (average revenue per customer) increased 5 percent to $54.00 from $51.21.

§Service revenues increased 4 percent to $1,023.8 million.

§Operating income increased 45 percent to $85.2 million.

§        Retail gross additions increased 7 percent to 273,000 from 256,000.

§        Postpaid churn increased to 1.6 percent from 1.4 percent.

§Net loss of 34,000 retail customers, reflecting loss of 38,000 postpaid customers and gain of 4,000 prepaid customers; postpaid customers comprised 94 percent of retail customers.

§Cell sites in service increased 3 percent to 7,875.

TDS Telecom

§Operating revenues increased 3 percent to $204.1 million.

§ILEC triple play penetration increased to 30 percent from 26 percent.

§managedIP connections (ILEC and CLEC) grew 88 percent to 64,500 from 34,400.

CHICAGO – May 4, 2012 – Telephone and Data Systems, Inc. [NYSE:TDS] reported operating revenues of $1,305.8 million for the first quarter of 2012, an increase of 4 percent from $1,258.7 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $52.3 million and $0.48, respectively, for the first quarter of 2012, compared to $43.5 million and $0.39, respectively, in the comparable period one year ago.

“Improved profitability at U.S. Cellular helped TDS’ performance in the quarter,” said LeRoy T. Carlson, Jr., TDS president and CEO. “U.S. Cellular increased retail gross customer additions and revenues, while effectively managing costs. TDS Telecom continued to increase residential broadband speeds and grow the customer base for its managedIP commercial services.”

“U.S. Cellular continues to increase average revenue per customer through growth in smartphone penetration and data use, as well as inbound roaming revenues. To effectively manage equipment and network costs, the company has maintained a balanced mix of devices, and recently introduced a set of tiered data plans. U.S. Cellular plans to reach 50 percent of customers with 4G LTE access by year end.

“TDS Telecom is focused on attracting and retaining customers by offering competitive broadband speeds and complementary services. The company launched TDS TV, its proprietary IPTV service, in one more market in the quarter. TDS Telecom also increased the number of managedIP connections by 88 percent, as more business customers understood the productivity benefits of IP-based communication. To help the hosted and managed services business grow strategically over the next several years, the company is investing to build its management team and develop its portfolio of products and services. Operating income at TDS Telecom decreased due primarily to $5.2 million of discrete gains in the first quarter of 2011, as well as a decline in high margin wholesale revenues.”

Guidance for year ending Dec. 31, 2012

Guidance for the year ending Dec. 31, 2012, as of May 4, 2012, is unchanged from the previous guidance provided on Feb. 24, 2012.  TDS undertakes no duty to update such information, whether as a result of new information, future events, or otherwise.  There can be no assurance that final results will not differ materially from this guidance. 

U.S. Cellular		2012 Estimated Results (1)
	Service revenues	$4,050-$4,150 million
	Operating income	$200-$300 million
	Depreciation, amortization and accretion expenses, and net gain or loss on asset disposals
	and exchanges and loss on impairment of assets (2)	Approx. $600 million
	Adjusted OIBDA (2) (4)	$800-$900 million
	Capital expenditures	Approx. $850 million
TDS Telecom operations		2012 Estimated Results (3)
	Operating revenues	$810-$840 million
	Operating income	$55-$85 million
	Depreciation, amortization and accretion expenses, and net gain or loss on asset disposals
	and exchanges and loss on impairment of assets (2)	Approx. $190 million
	Adjusted OIBDA (4)	$245-$275 million
	Capital expenditures	$150-$180 million

(1)These estimates are based on U.S. Cellular’s current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011. New developments or changing conditions (such as customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges), could affect U.S. Cellular's plans and, therefore, its 2012 estimated results. 

(2)The 2012 Estimated Results do not include any estimate for unrecognized gains or losses related to disposals and exchanges of assets or losses on impairment of assets (since such transactions and their effects are uncertain).

(3)These estimates are based on TDS Telecom’s current plans which include a multi-year deployment of IPTV that commenced in 2011.  New developments or changing conditions (such as costs to deploy, agreements for content or franchises) could affect TDS Telecom’s plans and, therefore, its 2012 estimated results.

(4)Adjusted OIBDA is defined as operating income excluding the effects of depreciation, amortization and accretion (OIBDA): the net gain or loss on asset disposals and exchanges (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and exchanges (if any) and loss on impairment of assets (if any) in order to show operating results on a more comparable basis from period to period.  TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual and, accordingly, they may be incurred in the future.  TDS believes this measure provides useful information to investors regarding TDS’ financial condition and results of operations because it highlights certain key cash and non-cash items and their impacts on cash flows from operating activities.

2

 

Stock repurchase

TDS did not repurchase any shares during the quarter.  TDS determines whether to repurchase shares from time to time based on many considerations, including cash needed for other known or possible requirements, the stock price, market conditions, debt rating considerations, business forecasts, business plans, macroeconomic conditions, share issuances under compensation plans, provisions in governing and legal documents and other legal requirements, and other facts and circumstances.  Subject to these considerations, TDS intends to continue to repurchase its shares from time to time when circumstances warrant.  To the extent TDS does not complete its existing share authorization by the expiration date in November 2012, it is expected that the TDS board of directors will approve an additional authorization at that time.

Conference call information

TDS will hold a conference call on May 4, 2012at 9:30 a.m. CDT.

§Access the live call on the Investor Relations page of  www.teldta.com or at http://www.videonewswire.com/event.asp?id=86868. 

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

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Investor Relations page of www.teldta.com. The call will be archived on the Conference Calls page of www.teldta.com. 

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless, local and long-distance telephone, and broadband services to approximately 7 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of March 31, 2012.

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

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

3

 

United States Cellular Corporation Summary Operating Data (Unaudited)
Quarter Ended		3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Total population
	Consolidated markets (1)		92,684,000			91,965,000			91,965,000			91,204,000			91,090,000
	Consolidated operating markets (1)		46,966,000			46,888,000			46,888,000			46,888,000			46,774,000
Market penetration at end of period
	Consolidated markets (2)		6.3	%		6.4	%		6.5	%		6.5	%		6.6	%
	Consolidated operating markets (2)		12.4	%		12.6	%		12.7	%		12.7	%		12.9	%
All customers
	Total at end of period		5,837,000			5,891,000			5,932,000			5,968,000			6,033,000
	Gross additions		285,000			306,000			299,000			257,000			293,000
	Net additions (losses)		(49,000	)		(41,000	)		(36,000	)		(70,000	)		(39,000	)
	Smartphones sold as a percent of
	total devices sold (3)		54.1	%		52.5	%		39.9	%		39.6	%		42.5	%
Retail customers
	Total at end of period		5,570,000			5,608,000			5,621,000			5,644,000			5,698,000
	Smartphone penetration (3) (4)		34.4	%		30.5	%		26.2	%		23.1	%		20.3	%
	Gross additions		273,000			298,000			284,000			226,000			256,000
	Net retail additions (losses) (5)		(34,000	)		(13,000	)		(23,000	)		(58,000	)		(31,000	)
	Net postpaid additions (losses)		(38,000	)		(20,000	)		(34,000	)		(41,000	)		(22,000	)
	Net prepaid additions (losses)		4,000			7,000			11,000			(17,000	)		(9,000	)
Service revenue components (000s)
	Retail service	$	888,527		$	882,091		$	871,199		$	868,630		$	864,602
	Inbound roaming		80,132			93,353			107,810			82,760			64,386
	Other		55,161			54,601			57,600			50,640			56,125
Total service revenues (000s)		$	1,023,820		$	1,030,045		$	1,036,609		$	1,002,030		$	985,113
Total ARPU (6)		$	58.21		$	58.13		$	58.09		$	55.69		$	54.29
Billed ARPU (7)		$	50.52		$	49.78		$	48.82		$	48.27		$	47.65
Postpaid ARPU (8)		$	54.00		$	53.35		$	52.41		$	51.84		$	51.21
Postpaid churn rate (9)			1.6	%		1.6	%		1.5	%		1.4	%		1.4	%
Capital expenditures (000s)		$	201,300		$	276,400		$	248,000		$	162,100		$	95,900
Cell sites in service			7,875			7,882			7,828			7,770			7,663

(1)   Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.

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

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

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

(5)    Includes net postpaid additions (losses) and net prepaid additions (losses).

(6)    Total ARPU - Average monthly service revenue per customer includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.

(7)    Billed ARPU - Average monthly billed revenue per customer is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.

(8)    Postpaid ARPU - Average monthly revenue per postpaid customer is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.

(9)    Represents the percentage of the postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.

4

 

TDS Telecom Summary Operating Data (Unaudited)
Quarter Ended				3/31/2012		12/31/2011		9/30/2011		6/30/2011		3/31/2011
TDS Telecom
ILEC:
	Residential Connections
		Physical access lines (1)			363,500		367,600		373,700		378,500		382,400
		Broadband connections (2)			219,500		219,600		220,500		217,600		214,100
		IPTV customers			4,900		4,600		4,500		4,300		4,000
			ILEC Residential Connections		587,900		591,800		598,700		600,400		600,500
	Commercial Connections
		Physical access lines (1)			112,600		114,400		116,500		117,800		118,800
		Broadband connections (2)			18,200		18,200		17,900		17,600		17,300
		managedIP connections (3)			10,800		8,600		6,800		5,800		4,700
			ILEC Commercial Connections		141,600		141,200		141,200		141,200		140,800
CLEC:
	Residential Connections
		Physical access lines (1)			29,600		31,800		33,900		36,700		39,300
		Broadband connections (2)			10,100		11,000		11,700		12,800		13,700
			CLEC Residential Connections		39,700		42,800		45,600		49,500		53,000
	Commercial Connections
		Physical access lines (1)			151,100		157,300		163,600		168,100		171,000
		Broadband connections (2)			13,700		14,600		15,400		15,900		16,200
		managedIP connections			53,700		44,900		38,000		33,200		29,700
			CLEC Commercial Connections		218,500		216,800		217,000		217,200		216,900
Total ILEC and CLEC customer connections					987,700		992,600		1,002,500		1,008,300		1,011,200

(1)Individual circuits connecting customers to a telephone company'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 telephone handsets, data lines and IP trunks providing communications using IP networking technology.

TDS Telecom Capital Expenditures (000s)
Quarter Ended	3/31/2012		12/31/2011		9/30/2011		6/30/2011		3/31/2011
ILEC	$	27,500	$	50,300	$	36,500	$	34,500	$	20,500
CLEC		5,100		7,200		4,700		6,200		4,200
HMS		3,100		5,900		15,000		4,600		1,600
	$	35,700	$	63,400	$	56,200	$	45,300	$	26,300

5

 

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)
										Increase/ (Decrease)
				2012			2011			Amount			Percent
Operating revenues
	U.S. Cellular			$	1,092,121		$	1,057,092		$	35,029			3	%
	TDS Telecom				204,075			198,916			5,159			3	%
	All Other (1)				9,595			2,673			6,922			>100	%
					1,305,791			1,258,681			47,110			4	%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			862,444			853,967			8,477			1	%
		Depreciation, amortization and accretion			146,685			143,340			3,345			2	%
		(Gain) loss on asset disposals and exchanges, net			(2,210	)		1,037			(3,247	)		>(100	%)
					1,006,919			998,344			8,575			1	%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			143,420			121,769			21,651			18	%
		Depreciation, amortization and accretion			47,443			44,837			2,606			6	%
		(Gain) loss on asset disposals, net			120			104			16			15	%
					190,983			166,710			24,273			15	%
	All Other (1)
		Expenses excluding depreciation and amortization			10,946			2,116			8,830			>100	%
		Depreciation and amortization			3,306			2,636			670			25	%
		(Gain) loss on asset disposals, net			(5	)		2			(7	)		>(100	%)
					14,247			4,754			9,493			>100	%
			Total operating expenses		1,212,149			1,169,808			42,341			4	%
Operating income (loss)
	U.S. Cellular				85,202			58,748			26,454			45	%
	TDS Telecom				13,092			32,206			(19,114	)		(59	%)
	All Other (1)				(4,652	)		(2,081	)		(2,571	)		>(100	%)
					93,642			88,873			4,769			5	%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				23,389			19,388			4,001			21	%
	Interest and dividend income				2,183			2,624			(441	)		(17	%)
	Interest expense				(24,464	)		(26,509	)		2,045			8	%
	Other, net				228			80			148			>100	%
		Total investment and other income (expense)			1,336			(4,417	)		5,753			>100	%
Income before income taxes					94,978			84,456			10,522			12	%
	Income tax expense				27,412			30,159			(2,747	)		(9	%)
Net income					67,566			54,297			13,269			24	%
	Less: Net income attributable to noncontrolling interests, net of tax				(15,312	)		(10,793	)		(4,519	)		(42	%)
Net income attributable to TDS shareholders					52,254			43,504			8,750			20	%
	Preferred dividend requirement				(12	)		(12	)		—			—
Net income available to common shareholders				$	52,242		$	43,492		$	8,750			20	%
Basic weighted average shares outstanding (2)					108,653			108,936			(283	)		—
Basic earnings per share attributable to TDS shareholders (2)				$	0.48		$	0.40		$	0.08			20	%
Diluted weighted average shares outstanding (2)					109,098			109,715			(617	)		(1	%)
Diluted earnings per share attributable to TDS shareholders (2)				$	0.48		$	0.39		$	0.09			23	%

(1)   Consists of Suttle Straus printing and distribution operations, Airadigm, corporate operations and intercompany eliminations.

(2)On January 13, 2012 TDS shareholders approved a Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS. Average basic and diluted shares outstanding used to calculate earnings per share for the comparative period presented have been retroactively restated to reflect the impact of the increased shares outstanding as a result of the Share Consolidation Amendment. 

N/M – Percentage change not meaningful

6

 

Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands)
ASSETS
		March 31,		December 31,
		2012		2011
Current assets
	Cash and cash equivalents	$	639,130	$	563,275
	Short-term investments		229,975		246,273
	Accounts receivable from customers and others		495,409		542,577
	Inventory		134,929		130,044
	Net deferred income tax asset		40,898		40,898
	Prepaid expenses		84,201		80,628
	Income taxes receivable		9,314		85,636
	Other current assets		18,117		16,349
			1,651,973		1,705,680
Assets held for sale			—		49,647
Investments
	Licenses		1,505,110		1,494,014
	Goodwill		796,819		797,077
	Other intangible assets, net		47,851		50,734
	Investments in unconsolidated entities		191,644		173,710
	Long-term investments		50,333		45,138
	Other investments		1,096		3,072
			2,592,853		2,563,745
Property, plant and equipment, net
	U.S. Cellular		2,847,426		2,790,302
	TDS Telecom		930,085		936,757
	Other		46,222		57,476
			3,823,733		3,784,535
Other assets and deferred charges			104,109		97,398
Total assets		$	8,172,668	$	8,201,005

7

 

Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
				March 31,			December 31,
				2012			2011
Current liabilities
	Current portion of long-term debt			$	1,420		$	1,509
	Accounts payable				327,376			364,746
	Customer deposits and deferred revenues				218,316			207,633
	Accrued interest				16,518			7,456
	Accrued taxes				46,671			41,069
	Accrued compensation				54,990			107,719
	Other current liabilities				94,536			144,001
					759,827			874,133
Liabilities held for sale					—			1,051
Deferred liabilities and credits
	Net deferred income tax liability				821,115			808,713
	Other deferred liabilities and credits				391,397			383,567
Long-term debt					1,529,988			1,529,857
Noncontrolling interests with redemption features					1,064			1,005
Equity
	TDS shareholders’ equity
		Series A Common and Common Shares, par value $.01 (1)			1,326			1,326
		Capital in excess of par value (1)			2,278,384			2,268,711
		Treasury shares at cost (1)			(746,988	)		(750,921	)
		Accumulated other comprehensive loss			(8,695	)		(8,854	)
		Retained earnings (1)			2,487,936			2,451,899
			Total TDS shareholders’ equity		4,011,963			3,962,161
	Preferred shares				830			830
	Noncontrolling interests				656,484			639,688
		Total equity			4,669,277			4,602,679
Total liabilities and equity				$	8,172,668		$	8,201,005

(1)The December 31, 2011 amounts reflect the impact of the Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS, as approved by the TDS shareholders on January 13, 2012.

8

 

Balance Sheet Highlights March 31, 2012
(Unaudited, dollars in thousands)
			U.S. Cellular		TDS Telecom		TDS Corporate & Other			Intercompany Eliminations			TDS Consolidated
Cash and cash equivalents			$	511,078	$	66,080	$	61,972		$	―		$	639,130
Affiliated cash investments				―		345,458		―			(345,458	)		―
Short-term investments				116,368		27,195		86,412			―			229,975
			$	627,446	$	438,733	$	148,384		$	(345,458	)	$	869,105
Licenses, goodwill and other intangible assets			$	1,976,825	$	550,970	$	(178,015	)	$	―		$	2,349,780
Investment in unconsolidated entities				154,431		3,813		39,049			(5,649	)		191,644
Long-term and other investments				40,357		1,014		10,058			―			51,429
			$	2,171,613	$	555,797	$	(128,908	)	$	(5,649	)	$	2,592,853
Property, plant and equipment, net			$	2,847,426	$	930,085	$	46,222		$	―		$	3,823,733
Long-term debt:
	Current portion		$	127	$	190	$	1,103		$	―		$	1,420
	Non-current portion			880,486		1,733		647,769			―			1,529,988
		Total	$	880,613	$	1,923	$	648,872		$	―		$	1,531,408
Preferred shares			$	―	$	―	$	830		$	―		$	830

9

 

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, 2012 and December 31, 2011.

		March 31,		December 31,
		2012		2011
Cash and cash equivalents		$	639,130	$	563,275
Amounts included in short-term investments (1) (2)
	Government-backed securities (3)		202,780		218,829
	Certificates of deposit		27,195		27,444
		$	229,975	$	246,273
Amounts included in long-term investments (1) (4)
	Government-backed securities (3)	$	50,333	$	45,138

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

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

(4)Includes U.S. treasuries and corporate notes guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.

(5)     At March 31, 2012, maturities range between 14 and 24 months.

10

 

Telephone and Data Systems, Inc. Consolidated Statement of Cash Flows Three Months Ended March 31,
(Unaudited, dollars in thousands)
				2012			2011
Cash flows from operating activities
	Net income			$	67,566		$	54,297
		Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
			Depreciation, amortization and accretion		197,434			190,813
			Bad debts expense		15,105			14,285
			Stock-based compensation expense		10,330			9,459
			Deferred income taxes, net		6,187			47,841
			Equity in earnings of unconsolidated entities		(23,389	)		(19,388	)
			Distributions from unconsolidated entities		2,938			8,439
			(Gain) loss on asset disposals, net		(2,095	)		1,143
			Noncash interest expense		862			875
			Other operating activities		852			1,159
		Changes in assets and liabilities from operations
			Accounts receivable		38,941			8,438
			Inventory		(4,842	)		2,978
			Accounts payable		(25,372	)		56,189
			Customer deposits and deferred revenues		10,745			10,342
			Accrued taxes		82,014			18,832
			Accrued interest		9,117			15,072
			Other assets and liabilities		(104,148	)		(87,732	)
					282,245			333,042
Cash flows from investing activities
	Cash used for additions to property, plant and equipment				(242,611	)		(157,897	)
	Cash paid for acquisitions and licenses				(11,096	)		—
	Cash received from divestitures				50,036			—
	Cash paid for investments				(10,000	)		—
	Cash received for investments				20,249			122,785
	Transfer of cash to Restricted cash				—			(282,500	)
	Other investing activities				(436	)		(1,503	)
					(193,858	)		(319,115	)
Cash flows from financing activities
	Repayment of long-term debt				(493	)		(402	)
	Issuance of long-term debt				358			300,000
	TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments				(33	)		587
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments				357			1,305
	Repurchase of TDS Common and Special Common Shares				—			(11,603	)
	Repurchase of U.S. Cellular Common Shares				—			(17,357	)
	Dividends paid				(13,301	)		(12,197	)
	Payment of debt issuance costs				—			(9,848	)
	Distributions to noncontrolling interests				(218	)		(686	)
	Other financing activities				798			968
					(12,532	)		250,767
Net increase in cash and cash equivalents					75,855			264,694
Cash and cash equivalents
	Beginning of period				563,275			341,683
	End of period			$	639,130		$	606,377

11

 

TDS Telecom Highlights Three Months Ended March 31,
(Unaudited, dollars in thousands)
									Increase (Decrease)
			2012			2011			Amount			Percent
Local Telephone Operations
	Operating revenues
		Residential	$	69,399		$	69,713		$	(314	)		—
		Commercial		24,130			25,371			(1,241	)		(5	%)
		Wholesale		51,536			54,490			(2,954	)		(5	%)
				145,065			149,574			(4,509	)		(3	%)
	Operating expenses
		Cost of services and products		49,168			45,402			3,766			8	%
		Selling, general and administrative expenses		41,514			35,482			6,032			17	%
		Depreciation, amortization and accretion		37,778			37,200			578			2	%
		Loss on asset disposals, net		66			41			25			61	%
				128,526			118,125			10,401			9	%
	Operating income		$	16,539		$	31,449		$	(14,910	)		(47	%)
Competitive Local Exchange Carrier Operations
	Operating revenues
		Residential	$	4,788		$	6,497		$	(1,709	)		(26	%)
		Commercial		34,341			34,017			324			1	%
		Wholesale		4,915			4,814			101			2	%
				44,044			45,328			(1,284	)		(3	%)
	Operating expenses
		Cost of services and products		22,564			22,472			92			—
		Selling, general and administrative expenses		16,260			15,648			612			4	%
		Depreciation, amortization and accretion		5,489			5,490			(1	)		—
		Loss on asset disposals, net		53			31			22			71	%
				44,366			43,641			725			2	%
	Operating income (loss)		$	(322	)	$	1,687		$	(2,009	)		>(100	%)
Hosted and Managed Services Operations
		Revenues	$	17,558		$	6,242		$	11,316			>100	%
	Operating expenses
		Cost of services and products		9,774			2,282			7,492			>100	%
		Selling, general and administrative expenses		6,732			2,711			4,021			>100	%
		Depreciation, amortization and accretion		4,176			2,147			2,029			95	%
		Loss on asset disposals, net		1			32			(31	)		(97	%)
				20,683			7,172			13,511			>100	%
	Operating loss		$	(3,125	)	$	(930	)	$	(2,195	)		>(100	%)
Intercompany revenues			$	(2,592	)	$	(2,228	)	$	(364	)		(16	%)
Intercompany expenses				(2,592	)		(2,228	)		(364	)		(16	%)
Total TDS Telecom operating income			$	13,092		$	32,206		$	(19,114	)		(59	%)

12

Telephone and Data Systems, Inc. Financial Measures and Reconciliation (Unaudited, dollars in thousands)
Three Months Ended March 31, 2012			U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
Operating revenues			$	1,092,121		$	204,075		$	9,595		$	1,305,791
Deduct:
	U.S. Cellular equipment sales revenue			68,301
		Service revenues		1,023,820
Operating income (loss)				85,202			13,092			(4,652	)		93,642
Add (Deduct):
	Depreciation, amortization and accretion			146,685			47,443			3,306			197,434
	Loss on impairment of intangible assets			—			—			—			—
	(Gain) loss on asset disposals and exchanges			(2,210	)		120			(5	)		(2,095	)
		Adjusted OIBDA (3)	$	229,677		$	60,655		$	(1,351	)	$	288,981
		Adjusted OIBDA margin (4)		22.4	%		29.7	%
Three Months Ended March 31, 2011			U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
Operating revenues			$	1,057,092		$	198,916		$	2,673		$	1,258,681
Deduct:
	U.S. Cellular equipment sales revenue			71,979
		Service revenues		985,113
Operating income (loss)				58,748			32,206			(2,081	)		88,873
Add (Deduct):
	Depreciation, amortization and accretion			143,340			44,837			2,636			190,813
	Loss on impairment of intangible assets			—			—			—			—
	(Gain) loss on asset disposals and exchanges			1,037			104			2			1,143
		Adjusted OIBDA (3)	$	203,125		$	77,147		$	557		$	280,829
		Adjusted OIBDA margin (4)		20.6	%		38.8	%
			TDS Consolidated
Three Months Ended March 31,			2012			2011
Cash flows from operating activities			$	282,245		$	333,042
Deduct:
Cash used for additions to property, plant, and equipment				242,611			157,897
		Free cash flow (5)	$	39,634		$	175,145

(1)Includes ILEC, CLEC and HMS intercompany eliminations.

(2)Consists of Suttle-Straus and Airadigm (as of September 23, 2011), which represents TDS’ Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom and corporate investments. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.

(3)Adjusted OIBDA is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance.  Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow.  This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.

(4)Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues (U.S. Cellular) and operating revenues (TDS Telecom).  Equipment revenues are excluded from the denominator of the U.S. Cellular calculation since equipment is generally sold at a net negative margin, and the net equipment subsidy is effectively a cost for purposes of assessing business results and is already reflected in adjusted OIBDA. TDS believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular’s business results.  Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.

(5)Free cash flow is defined as cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure.  TDS believes that free cash flow as reported by TDS is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

13

EX-99.2

 

Exhibit 99.2

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Form 8-K and/or press release attached to this Form 8-K contain statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, that address activities, events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements.  The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors include those set forth below, as more fully discussed under “Risk Factors” in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K.  However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document.  Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements.  TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.  You should carefully consider the Risk Factors in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K, the following factors and other information contained in, or incorporated by reference into, this Form 8-K and/or press release attached to this Form 8-K to understand the material risks relating to TDS’ business.

·Intense competition in the markets in which TDS operates could adversely affect TDS’ revenues or increase its costs to compete.

·A failure by TDS to successfully execute its business strategy or allocate resources or capital could have an adverse effect on TDS’ business, financial condition or results of operations.

·A failure by TDS’ service offerings to meet customer expectations could limit TDS’ ability to attract and retain customers and could have an adverse effect on TDS’ operations.

·TDS’ system infrastructure may not be capable of supporting changes in technologies and services expected by customers, which could result in lost customers and revenues.

·An inability to obtain or maintain roaming arrangements with other carriers on terms that are acceptable to TDS could have an adverse effect on TDS’ business, financial condition or results of operations.

·TDS currently receives a significant amount of roaming revenues from its wireless business.  Further consolidation within the wireless industry and/or continued network build-outs by other wireless carriers could cause roaming revenues to decline from current levels, which would have an adverse effect on TDS' business, financial condition and results of operations.

·A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business and operations.

·To the extent conducted by the Federal Communications Commission (“FCC”), TDS is likely to participate in FCC auctions of additional spectrum in the future as an applicant or as a noncontrolling partner in another auction applicant and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on TDS.

·Changes in the regulatory environment or a failure by TDS to timely or fully comply with any applicable regulatory requirements could adversely affect TDS’ financial condition, results of operations or ability to do business.

·Changes in Universal Service Fund (“USF”) funding and/or intercarrier compensation could have a material adverse impact on TDS' financial condition or results of operations.

·An inability to attract and/or retain highly competent management, technical, sales and other personnel could have an adverse effect on TDS’ business, financial condition or results of operations.

·TDS’ assets are concentrated in the U.S. telecommunications industry. As a result, its results of operations may fluctuate based on factors related entirely to conditions in this industry.

 

·The completion of acquisitions by other companies has led to increased consolidation in the wireless telecommunications industry.  TDS’ lower scale relative to larger wireless carriers has in the past and could in the future prevent or delay its access to new products including wireless devices, new technology and/or new content and applications which could adversely affect TDS' ability to attract and retain customers and, as a result, could adversely affect its business, financial condition or results of operations.

·TDS' inability to manage its supply chain or inventory successfully could have an adverse effect on its business, financial condition or results of operations.

·Changes in general economic and business conditions, both nationally and in the markets in which TDS operates, could have an adverse effect on TDS’ business, financial condition or results of operations.

·Changes in various business factors could have an adverse effect on TDS’ business, financial condition or results of operations.

·Advances or changes in telecommunications technology, such as Voice over Internet Protocol (“VoIP”), High-Speed Packet Access (“HSPA”), WiMAX or Long-Term Evolution (“LTE”), could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business.

·Complexities associated with deploying new technologies, such as TDS' ongoing upgrade to 4G LTE technology, present substantial risk.

·TDS is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of these fees are subject to great uncertainty.

·Changes in TDS’ enterprise value, changes in the market supply or demand for wireless licenses or wireline markets, adverse developments in the business or the industry in which TDS is involved and/or other factors could require TDS to recognize impairments in the carrying value of its license costs, goodwill and/or physical assets.

·Costs, integration problems or other factors associated with developing and enhancing business support systems, acquisitions/divestitures of properties or licenses and/or expansion of TDS’ business could have an adverse effect on TDS’ business, financial condition or results of operations.

·A significant portion of TDS’ wireless revenues is derived from customers who buy services through independent agents who market TDS’ services on a commission basis. If TDS’ relationships with these agents are seriously harmed, its business, financial condition or results of operations could be adversely affected.

·TDS’ investments in technologies which are unproven may not produce the benefits that TDS expects.

·A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network and support systems could have an adverse effect on its operations.

·Financial difficulties (including bankruptcy proceedings) or other operational difficulties of any of TDS’ key suppliers or vendors, termination or impairment of TDS’ relationships with such suppliers or vendors, or a failure by TDS to manage its supply chain effectively could result in delays or termination of TDS' receipt of required equipment or services, or could result in excess quantities of required equipment or services, any of which could adversely affect TDS' business, financial condition or results of operations.

·TDS has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on TDS’ financial condition or results of operations.

·A failure by TDS to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, including breaches of network or information technology security, could have an adverse effect on TDS’ business, financial condition or results of operations.

·Wars, conflicts, hostilities and/or terrorist attacks or equipment failures, power outages, natural disasters or other events could have an adverse effect on TDS’ business, financial condition or results of operations.

·The market price of TDS’ Common Shares is subject to fluctuations due to a variety of factors.

 

·Identification of errors in financial information or disclosures could require amendments to or restatements of financial information or disclosures included in this or prior filings with the Securities and Exchange Commission (“SEC”).  Such amendments or restatements and related matters, including resulting delays in filing periodic reports with the SEC, could have an adverse effect on TDS' business, financial condition or results of operations.

·The existence of material weaknesses in the effectiveness of internal control over financial reporting could result in inaccurate financial statements or other disclosures or failure to prevent fraud, which could have an adverse effect on TDS’ business, financial condition or results of operations.

·Changes in facts or circumstances, including new or additional information that affects the calculation of potential liabilities for contingent obligations under guarantees, indemnities, claims, litigation or otherwise, could require TDS to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on TDS' financial condition or results of operations.

·Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS' access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS' financial condition or results of operations.

·Uncertainty of access to capital for telecommunications companies, deterioration in the capital markets, other changes in market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs.

·Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ financial condition, results of operations or ability to do business.

·The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on TDS' wireless business, financial condition or results of operations.

·Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS' business, financial condition or results of operations.

·Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS.

·Any of the foregoing events or other events could cause customer net additions, revenues, operating income, capital expenditures and/or any other financial or statistical information to vary from TDS’ forward-looking estimates by a material amount.

TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. Readers should evaluate any statements in light of these important factors.