TDS Reports Fourth Quarter Results

Provides financial guidance for 2012

Feb 24, 2012, 08:28 ET from Telephone and Data Systems, Inc.

CHICAGO, Feb. 24, 2012 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

Fourth Quarter Highlights

U.S. Cellular

  • Smartphones increased to 52.5 percent of total devices sold from 39.6 percent; smartphone customers increased to 30.5 percent of postpaid customers from 16.7 percent.
  • Postpaid ARPU (average revenue per unit) increased 5 percent to $53.35 from $50.99.
  • Service revenues increased 4 percent to $1,030.0 million.
  • Operating income increased $20.4 million to $16.3 million.
  • Net loss of 13,000 retail customers, reflecting loss of 20,000 postpaid customers and a gain of 7,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
  • Cell sites in service increased 3 percent to 7,882.

TDS Telecom

  • Operating revenues increased 4 percent to $206.8 million.
  • ILEC triple play penetration increased to 29 percent from 26 percent.
  • TDS managedIP stations (ILEC and CLEC) grew to 43,100 from 27,400.

As previously announced, TDS will hold a teleconference Feb. 24, 2012 at 9:30 a.m. CST. Listen to the live call via the Conference Calls page of www.teldta.com.

Telephone and Data Systems, Inc. (NYSE: TDS) reported operating revenues of $1,316.7 million for the fourth quarter of 2011, versus $1,265.8 million in the comparable period one year ago.  Net loss attributable to TDS was $6.2 million, or $0.06 diluted loss per share.  In the fourth quarter of 2010, net income attributable to TDS was $13.1 million, or $0.12 diluted earnings per share.

The fourth quarter of 2011 was impacted by a $7.2 million expense related to the Share Consolidation (see below) that was not deductible for tax purposes, as well as a $6 million adjustment that increased tax expense related to prior periods.

For the twelve months ended Dec. 31, 2011, TDS reported operating revenues of $5,180.5 million, versus $4,986.8 million in 2010.  Net income attributable to TDS for 2011 was $200.5 million, or $1.83 diluted earnings per share. In 2010, net income attributable to TDS was $144.8 million, or $1.31 diluted earnings per share.

"TDS increased revenues and improved profitability in 2011, despite very competitive industry environments for both U.S. Cellular and TDS Telecom," said LeRoy T. Carlson, Jr., TDS president and CEO. "Both companies are making significant investments in their networks and operational infrastructure to enhance customer experiences and improve operational efficiency.

"Average total service revenue per customer at U.S. Cellular grew six percent in 2011, through greater smartphone penetration, the resulting higher-revenue data plans, and data-driven increases in inbound roaming revenues. Effective cost controls, including careful management of device subsidies, helped to improve profitability. U.S. Cellular had solid holiday sales with positive net retail additions in December, though not enough to offset customer losses for the quarter. 

"Growing the postpaid customer base is U.S. Cellular's top priority for 2012. The company's strategy to compete includes bringing 4G LTE speeds and devices to customers, attracting new customers by building awareness, increasing our focus on small-to-medium business customers, and looking to expand other points of distribution. U.S. Cellular is also striving to increase profitability by continuing to improve its cost structure and by efficiently managing data growth.

"TDS Telecom continued to build its broadband business in 2011, adding high-speed data customers in its ILEC business, and offering more data services and faster speeds. On the commercial side, TDS Telecom continued to grow the number of stations for its managedIP voice and data solution, and expanded its hosted and managed services business through acquisitions and organic growth.

"TDS Telecom's strategic priorities for 2012 include continuing to increase broadband speeds, and launching TDS TV® in 19 markets. The company is increasing the range of its services and products for businesses, and will continue to expand the hosted and managed services footprint and service portfolio. TDS Telecom also plans to make substantial progress toward completion of its broadband stimulus projects in 2012 to bring high-speed data access to rural communities.

"At the TDS corporate level, we increased our financial flexibility and reduced the complexity of the capital structure through the Share Consolidation, which was approved by shareholders and became effective in January 2012.  We are also evaluating additional steps to increase shareholder value, while continuing to focus on profitable growth."

Share Consolidation

On Jan. 13, 2012, TDS shareholders approved Charter Amendments to the TDS Restated Certificate of Incorporation, including a Share Consolidation Amendment to reclassify each Special Common Share as one Common Share, each Common Share as 1.087 Common Shares, and each Series A Common Share as 1.087 Series A Common Shares.  Additionally, there was a Vote Amendment that fixed the percentage voting power in certain matters, and amendments to eliminate obsolete and inoperative provisions.  

These approved Charter Amendments were effected on Jan. 24, 2012, and the Special Common Shares ceased to be outstanding and consequently ceased trading on the New York Stock Exchange under the symbol "TDS.S." 

As of Jan. 24, 2012, immediately prior to the reclassification, there were outstanding 6,549,000 Series A Common Shares, 49,980,000 Common Shares and 47,012,000 Special Common Shares.  As of Jan. 24, 2012, immediately following the reclassification, there were outstanding 7,119,000 Series A Common Shares and 101,340,000 Common Shares.

As a result of the Share Consolidation Amendment, shares outstanding as of Dec. 31, 2011, as well as average basic and diluted shares outstanding used to calculate earnings per share as of the beginning of all periods presented, were retroactively restated to reflect the impact of the increased shares outstanding.

TDS' consolidated balance sheet as of Dec. 31, 2011 was also retroactively adjusted to reflect the incremental shares issued to Common and Series A shareholders based on the closing price of TDS Common Shares as of Dec. 31, 2011.  As a result of the reclassification, an increase in Common Shares, Series A Common Shares and capital in excess of par was offset by a corresponding decrease in retained earnings, with no change to the overall amount of shareholders' equity.

Guidance for year ending Dec. 31, 2012

This guidance represents the views of management as of Feb. 24, 2012, and should not be assumed to be current as of any other date.  There can be no assurance that final results will not differ materially from this guidance.  TDS undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.

2012 

2011 

U.S. Cellular

Estimated Results (1)

Actual Results

Service revenues

$4,050-$4,150 million

$4,053.8 million

Operating income

$200-$300 million

$280.8 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

$571.7 million

Adjusted OIBDA (5)

$800-$900 million

$852.5 million

Capital expenditures

Approx. $850 million

$782.5 million

2012 

2011 

TDS Telecom ILEC and CLEC operations:

Estimated Results (3)

Actual Results

Operating revenues

$810-$840 million

$815.4 million

Operating income

$55-$85 million

$98.7 million

Depreciation, amortization and accretion expenses,  

  and net gain or loss on asset disposals and exchanges

  and loss on impairment of assets (4)

Approx. $190 million

$181.8 million

Adjusted OIBDA (5)

$245-$275 million

$280.9 million

Capital expenditures (6)

$150-$180 million

$191.2 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)

2011 Actual Results include gains on asset disposals and exchanges, net of $1.9 million.  The 2012 Estimated Results include only Depreciation, amortization and accretion expenses; such estimated results do not include net gains or losses on disposals and exchanges of assets or losses on impairment of assets (since such transactions and their effects cannot be predicted).  

(3)

These estimates are based on TDS Telecom's current operations.  Various other factors, including possible acquisitions, dispositions or exchanges, could affect TDS Telecom's estimated guidance in 2012.

(4)

2011 Actual Results include losses on asset disposals of $1.2 million.  The 2012 Estimated Results include only the estimate for Depreciation, amortization and accretion expenses; such estimated results do not include net gains or losses on asset disposals and exchanges or losses on impairment of assets (since such transactions and their effects cannot be predicted).

(5)

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.

(6)

Under the American Recovery and Reinvestment Act of 2009 ("the Recovery Act"), TDS Telecom will receive $105.1 million in federal grants and will provide $30.9 million (a portion of which is included in 2012 estimated capital expenditures) of its own funds to complete 44 projects.  Under the terms of the grants, the projects must be completed by June of 2015.

Stock repurchase summary

The following represents repurchases of TDS Common Shares and TDS Special Common Shares.

Repurchase Period

# Shares

Cost (in millions)

2011 (full year)

748,246

$

21.5

2010 (full year)

2,394,476

$

68.1

2009 (full year)

6,374,741

$

176.6

2008 (full year)

5,861,822

$

199.6

Total  

15,379,285

$

465.8

Conference call information

TDS will hold a conference call on Feb. 24, 2012 at 9:30 a.m. CST.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls 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 Dec. 31, 2011.

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 U.S. Cellular to successfully grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; 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; risks and uncertainties relating to possible future restatements; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, 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 used by TDS to furnish this press release to the SEC, which are incorporated by reference herein.

For more information about TDS and its subsidiaries, visit our websites at:

TDS:  www.teldta.com

TDS Telecom: www.tdstelecom.com

U.S. Cellular: www.uscellular.com

UNITED STATES CELLULAR CORPORATION

SUMMARY OPERATING DATA (UNAUDITED)

Quarter Ended

12/31/2011

9/30/2011

6/30/2011

3/31/2011

12/31/2010

Total population

Consolidated markets (1)

91,965,000

91,965,000

91,204,000

91,090,000

90,468,000

Consolidated operating markets (1)

46,888,000

46,888,000

46,888,000

46,774,000

46,546,000

Market penetration at end of period

Consolidated markets (2)

6.4%

6.5%

6.5%

6.6%

6.7%

Consolidated operating markets (2)

12.6%

12.7%

12.7%

12.9%

13.0%

All customers

Total at end of period

5,891,000

5,932,000

5,968,000

6,033,000

6,072,000

Gross additions

306,000

299,000

257,000

293,000

327,000

Net additions (losses)

(41,000)

(36,000)

(70,000)

(39,000)

(31,000)

Smartphones sold as a percent of

     total devices sold (3)

52.5%

39.9%

39.6%

42.5%

39.6%

Retail customers

Total at end of period

5,608,000

5,621,000

5,644,000

5,698,000

5,729,000

Smartphone penetration (3) (4)

30.5%

26.2%

23.1%

20.3%

16.7%

Gross additions

298,000

284,000

226,000

256,000

292,000

Net retail additions (losses) (5)

(13,000)

(23,000)

(58,000)

(31,000)

(21,000)

     Net postpaid additions (losses)

(20,000)

(34,000)

(41,000)

(22,000)

(10,000)

     Net prepaid additions (losses)

7,000

11,000

(17,000)

(9,000)

(11,000)

Service revenue components (000s)

Retail service

$

882,091

$

871,199

$

868,630

$

864,602

$

864,905

Inbound roaming

93,353

107,810

82,760

64,386

67,545

Other

54,601

57,600

50,640

56,125

59,464

Total service revenues (000s)

$

1,030,045

$

1,036,609

$

1,002,030

$

985,113

$

991,914

Total ARPU (6)

58.13

$

58.09

$

55.69

$

54.29

$

54.37

Billed ARPU (7)

49.78

$

48.82

$

48.27

$

47.65

$

47.41

Postpaid ARPU (8)

$

53.35

$

52.41

$

51.84

$

51.21

$

50.99

Postpaid churn rate (9)

1.6%

1.5%

1.4%

1.4%

1.5%

Capital expenditures (000s)

$

276,400

$

248,000

$

162,100

$

95,900

$

203,400

Cell sites in service

7,882

7,828

7,770

7,663

7,645

(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.

TELEPHONE AND DATA SYSTEMS, INC.

SUMMARY OPERATING DATA (UNAUDITED)

Quarter Ended

12/31/2011

9/30/2011

6/30/2011

3/31/2011

12/31/2010

TDS Telecom

ILEC:

Equivalent access lines (1)

754,400

762,500

764,600

765,300

767,200

Physical access lines (2)

482,000

490,200

496,300

501,200

507,700

High-speed data customers (3)

238,400

239,000

235,600

231,800

227,700

Long-distance customers

371,500

373,300

373,200

370,600

370,100

managedIP stations (4)

6,900

5,800

5,100

4,300

3,600

Capital expenditures (000s)

$

56,200

$

51,500

$

39,100

$

22,100

$

55,700

CLEC:

Equivalent access lines (1)

317,500

322,600

328,700

331,000

335,400

High-speed data customers (3)

28,900

30,200

31,500

32,300

33,100

managedIP stations (4)

36,200

33,600

30,200

27,200

23,800

Capital expenditures (000s)

$

7,200

$

4,700

$

6,200

$

4,200

$

6,200

(1)

Sum of physical access lines and high-capacity data lines, adjusted to estimate the equivalent number of physical access lines in terms of capacity, plus the number of managed Internet Protocol telephony ("managedIP") stations.

(2)

Individual circuits connecting customers to a telephone company's central office facilities.

(3)

The number of customers provided high-capacity data circuits via various technologies, including DSL, managedIP and dedicated Internet circuit technologies.

(4)

The number of telephone handsets providing communications using IP networking technology.

TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS

Three Months Ended December 31,

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

Increase/ (Decrease)

2011 

2010 

Amount

  Percent   

Operating revenues

U.S. Cellular

$

1,099,633

$

1,063,150

$

36,483

3%

TDS Telecom

206,770

199,101

7,669

4%

All Other (1)

10,324

3,508

6,816

>(100%)

1,316,727

1,265,759

50,968

4%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion (2) (3)

937,473

921,778

15,695

2%

Depreciation, amortization and accretion

141,976

143,124

(1,148)

(1%)

(Gain) loss on asset disposals, net

3,868

2,310

1,558

67%

1,083,317

1,067,212

16,105

2%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

144,748

129,981

14,767

11%

Depreciation, amortization and accretion

46,168

43,837

2,331

5%

(Gain) loss on asset disposals, net

485

464

21

5%

191,401

174,282

17,119

10%

All Other (1)

Expenses excluding depreciation and amortization

19,117

1,677

17,440

>(100%)

Depreciation and amortization

3,735

2,643

1,092

41%

(Gain) loss on asset disposals, net

(193)

(34)

(159)

>(100%)

22,659

4,286

18,373

>(100%)

Total operating expenses

1,297,377

1,245,780

51,597

4%

Operating income (loss)

U.S. Cellular

16,316

(4,062)

20,378

>(100%)

TDS Telecom

15,369

24,819

(9,450)

(38%)

All Other (1)

(12,335)

(778)

(11,557)

>(100%)

19,350

19,979

(629)

(3%)

Investment and other income (expense)

Equity in earnings of unconsolidated entities

18,507

23,027

(4,520)

(20%)

Interest and dividend income

2,229

2,608

(379)

(15%)

Loss on investment

(2,000)

(2,000)

N/M

Interest expense (2)

(24,017)

(30,290)

6,273

21%

Other, net

2,157

468

1,689

>(100%)

Total investment and other income (expense)

(3,124)

(4,187)

1,063

25%

Income before income taxes

16,226

15,792

434

3%

Income tax expense (benefit) (3)

18,239

(4,716)

22,955

>(100%)

Net income (loss)

(2,013)

20,508

(22,521)

>(100%)

Less: Net income attributable to noncontrolling interests, net of tax

(4,173)

(7,364)

3,191

43%

Net income (loss) attributable to TDS shareholders

(6,186)

13,144

(19,330)

>(100%)

Preferred dividend requirement

(12)

(12)

Net income (loss) available to common

$

(6,198)

$

13,132

$

(19,330)

>(100%)

Basic weighted average shares outstanding (4)

108,492

108,979

(487)

Basic earnings (loss) per share attributable to TDS shareholders (4)

$

(0.06)

$

0.12

$

(0.18)

>(100%)

Diluted weighted average shares outstanding (4)

108,492

109,790

(1,298)

(1%)

Diluted earnings (loss) per share attributable to TDS shareholders (4)

$

(0.06)

$

0.12

$

(0.18)

>(100%)

(1)

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

(2)

During the quarter ended December 31, 2010, TDS recorded adjustments to reduce its liability for transactional taxes in the amount of $5.8 million. Of this amount, $2.7 million and $3.1 million reduced Selling, general and administrative expenses and Interest expense, respectively, in the quarter ended December 31, 2010. These transactional taxes related to periods from 2002 through the first quarter of 2010. This adjustment reflects a change in TDS' estimate of its liability for transactional taxes and interest and the actual amounts due and settled with the taxing authorities of taxes and interest.

(3)

During the quarter ended December 31, 2011, TDS recorded an immaterial adjustment to correct its liabilities and prepaid expense related to property taxes for errors occurring primarily prior to 2009. This adjustment reduced Selling, general and administrative expenses by $5.4 million in the quarter. TDS also recorded an immaterial adjustment to correct its deferred tax balances related to a difference in the tax basis in certain partnerships for errors occurring prior to 2009. This adjustment increased Income tax expense by $6.0 million in the quarter. TDS also recorded other immaterial adjustments to correct errors in prior periods which, together with the foregoing adjustments, reduced Net income (loss) attributable to TDS shareholders by a net of $5.4 million. The correction of such errors in the fourth quarter of 2011 did not have a material effect on any prior periods, the full year ended December 31, 2011, or the trend in earnings.

(4)

On January 13, 2012 TDS shareholders approved a Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS.  Shares outstanding at December 31, 2011, as well as average basic and diluted shares outstanding used to calculate earnings per share as of the beginning of all periods 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

TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS

Year Ended December 31,

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

Increase/(Decrease)

2011 

2010 

Amount

  Percent   

Operating revenues

U.S. Cellular

$

4,343,346

$

4,177,681

$

165,665

4%

TDS Telecom

815,388

795,842

19,546

2%

All Other (1)

21,737

13,306

8,431

63%

5,180,471

4,986,829

193,642

4%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

3,490,882

3,394,536

96,346

3%

Depreciation, amortization and accretion

573,557

570,955

2,602

(Gain) loss on asset disposals and exchanges, net

(1,873)

10,717

(12,590)

>(100%)

4,062,566

3,976,208

86,358

2%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

534,964

520,823

14,141

3%

Depreciation, amortization and accretion

180,530

174,054

6,476

4%

(Gain) loss on asset disposals, net

1,243

1,131

112

10%

716,737

696,008

20,729

3%

All Other (1)

Expenses excluding depreciation and amortization

27,157

7,967

19,190

>(100%)

Depreciation and amortization

11,689

10,640

1,049

10%

(Gain) loss on asset disposals, net

(180)

(85)

(95)

>(100%)

38,666

18,522

20,144

>(100%)

Total operating expenses

4,817,969

4,690,738

127,231

3%

Operating income (loss)

U.S. Cellular

280,780

201,473

79,307

39%

TDS Telecom

98,651

99,834

(1,183)

(1%)

All Other (1)

(16,929)

(5,216)

(11,713)

>(100%)

362,502

296,091

66,411

22%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

82,538

98,074

(15,536)

(16%)

Interest and dividend income

9,145

10,508

(1,363)

(13%)

Gain on investment

24,103

24,103

N/M

Interest expense

(118,201)

(116,810)

(1,391)

(1%)

Other, net

3,658

(2,089)

5,747

>(100%)

Total investment and other income (expense)

1,243

(10,317)

11,560

>(100%)

Income before income taxes

363,745

285,774

77,971

27%

Income tax expense

113,503

95,188

18,315

19%

Net income

250,242

190,586

59,656

31%

Less: Net income attributable to noncontrolling interests, net of tax

(49,676)

(45,737)

(3,939)

(9%)

Net income attributable to TDS shareholders

200,566

144,849

55,717

38%

Preferred dividend requirement

(50)

(50)

Net income available to common

$

200,516

$

144,799

$

55,717

38%

Basic weighted average shares outstanding (2)

108,562

110,016

(1,454)

(1%)

Basic earnings per share attributable to TDS shareholders (2)

$

1.85

$

1.32

$

0.53

40%

Diluted weighted average shares outstanding (2)

109,100

110,489

(1,389)

(1%)

Diluted earnings per share attributable to TDS shareholders (2)

$

1.83

$

1.31

$

0.52

40%

(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.  Shares outstanding at December 31, 2011, as well as average basic and diluted shares outstanding used to calculate earnings per share as of the beginning of all periods 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

TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Unaudited, dollars in thousands)

ASSETS

December 31,

December 31,

2011 

2010 (1)

Current assets

Cash and cash equivalents

$

563,275

$

341,683

Short-term investments

246,273

402,882

Accounts receivable from customers and others

542,577

512,946

Inventory

130,044

116,330

Net deferred income tax asset

40,898

37,079

Prepaid expenses

80,628

76,935

Income taxes receivable

85,636

64,985

Other current assets

16,349

17,384

1,705,680

1,570,224

Assets held for sale

49,647

Investments

Licenses

1,494,014

1,460,126

Goodwill

797,077

728,455

Other intangible assets, net

50,734

30,810

Investments in unconsolidated entities

173,710

197,922

Long-term investments

45,138

102,185

Other investments

3,072

8,988

2,563,745

2,528,486

Property, plant and equipment, net

U.S. Cellular

2,790,302

2,574,522

TDS Telecom

936,757

909,951

Other

57,476

33,311

3,784,535

3,517,784

Other assets and deferred charges

97,398

79,623

Total assets

$

8,201,005

$

7,696,117

(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY

December 31,

December 31,

2011 

2010 (1)

Current liabilities

Current portion of long-term debt

$

1,509

$

1,711

Accounts payable

364,746

317,904

Customer deposits and deferred revenues

207,633

171,781

Accrued interest

7,456

4,308

Accrued taxes

41,069

46,110

Accrued compensation

107,719

99,020

Other current liabilities

144,001

144,938

874,133

785,772

Liabilities held for sale

1,051

Deferred liabilities and credits

Net deferred income tax liability

808,713

589,092

Other deferred liabilities and credits

383,567

354,798

Long-term debt

1,529,857

1,499,862

Noncontrolling interests with redemption features

1,005

855

Equity

TDS shareholders' equity

Series A Common, Special Common and Common Shares, par value $.01 (2)

1,326

1,270

Capital in excess of par value (2)

2,268,711

2,107,929

Special Common and Common Treasury shares, at cost (2)

(750,921)

(738,695)

Accumulated other comprehensive loss

(8,854)

(3,208)

Retained earnings (2)

2,451,899

2,450,599

  Total TDS shareholders' equity

3,962,161

3,817,895

Preferred shares

830

830

Noncontrolling interests

639,688

647,013

Total equity

4,602,679

4,465,738

Total liabilities and equity

$

8,201,005

$

7,696,117

(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

(2)

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.  

BALANCE SHEET HIGHLIGHTS

December 31, 2011

(Unaudited, dollars in thousands)

U.S.

TDS

TDS Corporate

Intercompany

TDS

Cellular

Telecom

& Other

Eliminations

Consolidated

Cash and cash equivalents

$

424,155

$

44,241

$

94,879

$

$

563,275

Affiliated cash investments

361,285

(361,285)

Short-term investments

127,039

27,444

91,790

246,273

$

551,194

$

432,970

$

186,669

$

(361,285)

$

809,548

Licenses, goodwill and other intangible assets

$

1,965,820

$

553,464

$

(177,459)

$

$

2,341,825

Investment in unconsolidated entities

138,096

3,808

36,836

(5,030)

173,710

Long-term and other investments

31,978

1,150

15,082

48,210

$

2,135,894

$

558,422

$

(125,541)

$

(5,030)

$

2,563,745

Property, plant and equipment, net

$

2,790,302

$

936,757

$

57,476

$

$

3,784,535

Long-term debt:

Current portion

$

127

$

196

$

1,186

$

$

1,509

Non-current portion

880,320

1,780

647,757

1,529,857

Total

$

880,447

$

1,976

$

648,943

$

$

1,531,366

Preferred shares

$

$

$

830

$

$

830

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 December 31, 2011 and December 31, 2010.

December 31,

December 31,

2011 

2010 

Cash and cash equivalents (1)

$

563,275

$

341,683

Amounts included in short-term investments (2) (3)

Government-backed securities (4)

218,829

305,612

Certificates of deposit  

27,444

97,270

$

246,273

$

402,882

Amounts included in long-term investments (2) (5)

Government-backed securities (4)

$

45,138

$

102,185

(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

(2)

Designated as held-to-maturity investments and are 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)

Maturities range between 15 and 21 months from the balance sheet date.

TELEPHONE AND DATA SYSTEMS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)

2011 

2010 (1)

Cash flows from operating activities

Net income

$

250,242

$

190,586

Add (deduct) adjustments to reconcile net income to net

cash flows from operating activities

Depreciation, amortization and accretion

765,776

755,649

Bad debts expense

68,611

83,098

Stock-based compensation expense

36,837

35,128

Deferred income taxes, net

202,547

76,391

Equity in earnings of unconsolidated entities

(82,538)

(98,074)

Distributions from unconsolidated entities

92,231

100,845

(Gain) loss on asset disposals and exchanges, net

(810)

11,763

Gain on investment

(24,103)

Noncash interest expense

18,849

9,733

Other operating activities

1,067

383

Changes in assets and liabilities from operations

Accounts receivable

(95,426)

(79,182)

Inventory

(13,382)

40,657

Accounts payable

29,291

(47,759)

Customer deposits and deferred revenues

35,457

6,478

Accrued taxes

(27,871)

(95,284)

Accrued interest

3,351

(7,680)

Other assets and liabilities

(4,418)

93,475

1,255,711

1,076,207

Cash flows from investing activities

Cash used for additions to property, plant and equipment

(971,759)

(739,222)

Cash paid for acquisitions and licenses

(105,508)

(81,691)

Cash paid for investments

(180,920)

(493,750)

Cash received from investments

393,246

106,255

Other investing activities

(1,148)

370

(866,089)

(1,208,038)

Cash flows from financing activities

Repayment of short-term debt

(32,671)

Repayment of long-term debt

(614,639)

(220,249)

Issuance of long-term debt

643,700

225,648

TDS Common Shares and Special Common Shares

reissued for benefit plans, net of tax payments

32

309

U.S. Cellular Common Shares reissued for benefit

plans, net of tax payments

1,935

509

Repurchase of TDS Common  and Special Common Shares

(21,500)

(68,053)

Repurchase of U.S. Cellular Common Shares

(62,294)

(52,827)

Dividends paid

(48,670)

(47,202)

Payment of debt issuance costs

(21,657)

(12,533)

Distributions to noncontrolling interests

(16,236)

(19,630)

Payments to acquire additional interest in subsidiaries

(9,248)

Other financing activities

3,970

2,321

(168,030)

(200,955)

Net increase (decrease) in cash and cash equivalents

221,592

(332,786)

Cash and cash equivalents

Beginning of period

341,683

674,469

End of period

$

563,275

$

341,683

(1)

Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

TDS TELECOM HIGHLIGHTS

Three Months Ended December 31,

(Unaudited, dollars in thousands)

Increase/(Decrease)

2011 

2010 

Amount

  Percent  

Local Telephone Operations

Operating revenues

Voice

$

41,427

$

43,880

$

(2,453)

(6%)

Data

48,395

33,265

15,130

45%

Network access

65,354

68,039

(2,685)

(4%)

Miscellaneous

9,706

10,410

(704)

(7%)

164,882

155,594

9,288

6%

Operating expenses

Cost of services and products

58,042

48,684

9,358

19%

Selling, general and administrative expenses

49,771

43,921

5,850

13%

Depreciation, amortization and accretion

40,718

37,942

2,776

7%

Loss on asset disposals, net

590

425

165

39%

149,121

130,972

18,149

14%

Operating income

$

15,761

$

24,622

$

(8,861)

(36%)

Competitive Local Exchange Carrier Operations

Revenues

$

44,397

$

45,878

$

(1,481)

(3%)

Expenses (excluding Depreciation, amortization

 and accretion)

39,444

39,747

(303)

(1%)

Depreciation, amortization and accretion

5,450

5,895

(445)

(8%)

(Gain) loss on asset disposals, net

(105)

39

(144)

>(100%)

44,789

45,681

(892)

(2%)

Operating income (loss)

$

(392)

$

197

$

(589)

>(100%)

Intercompany revenues

$

(2,509)

$

(2,371)

$

(138)

(6%)

Intercompany expenses

(2,509)

(2,371)

(138)

(6%)

Total TDS Telecom operating income

$

15,369

$

24,819

$

(9,450)

(38%)

TDS TELECOM HIGHLIGHTS

Twelve Months Ended December 31,

(Unaudited, dollars in thousands)

Increase/(Decrease)

2011 

2010 

Amount

Percent

Local Telephone Operations

Operating revenues

Voice

$

170,238

$

179,539

$

(9,301)

(5%)

Data

169,450

126,029

43,421

34%

Network access

265,773

271,964

(6,191)

(2%)

Miscellaneous

39,530

39,862

(332)

(1%)

644,991

617,394

27,597

4%

Operating expenses

Cost of services and products

215,093

196,298

18,795

10%

Selling, general and administrative expenses

173,949

173,020

929

1%

Depreciation, amortization and accretion

158,554

149,375

9,179

6%

Loss on asset disposals, net

1,158

769

389

51%

548,754

519,462

29,292

6%

Operating income

$

96,237

$

97,932

$

(1,695)

(2%)

Competitive Local Exchange Carrier Operations

Revenues

$

180,332

$

187,984

$

(7,652)

(4%)

Expenses (excluding Depreciation, amortization

 and accretion)

155,857

161,041

(5,184)

(3%)

Depreciation, amortization and accretion

21,976

24,679

(2,703)

(11%)

Loss on asset disposals, net

85

362

(277)

(77%)

177,918

186,082

(8,164)

(4%)

Operating income

$

2,414

$

1,902

$

512

27%

Intercompany revenues

$

(9,935)

$

(9,536)

$

(399)

(4%)

Intercompany expenses

(9,935)

(9,536)

(399)

(4%)

Total TDS Telecom operating income

$

98,651

$

99,834

$

(1,183)

(1%)

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited, dollars in thousands)

Consolidated

Three Months Ended December 31, 2011

U.S. Cellular

TDS Telecom (1)

All Other (2)

Total

Operating revenues