tds-20201105

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2020

TELEPHONE AND DATA SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware

001-14157

36-2669023

(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer Identification No.)

30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602

(Address of principal executive offices and 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:


☐			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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Shares, $.01 par value

TDS

New York Stock Exchange

6.625% Senior Notes due 2045

TDI

New York Stock Exchange

6.875% Senior Notes due 2059

TDE

New York Stock Exchange

7.000% Senior Notes due 2060

TDJ

New York Stock Exchange

5.875% Senior Notes due 2061

TDA

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).


☐			Emerging growth company


☐			If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Item 2.02. Results of Operations and Financial Condition

On November 5, 2020, Telephone and Data Systems, Inc. (TDS) issued a news release announcing its results of operations for the period ended September 30, 2020. 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, nor will any such information or exhibits be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(d) The following exhibits are being filed herewith:


Exhibit Number						Description of Exhibits
99.1						Earnings Press Release dated November 5, 2020

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

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 hereunto duly authorized.


		TELEPHONE AND DATA SYSTEMS, INC.
		(Registrant)

Date:	November 5, 2020	By:	/s/ Peter L. Sereda
			Peter L. Sereda
			Executive Vice President and Chief Financial Officer
			(principal financial officer)

Document

Exhibit 99.1 NEWS RELEASE

As previously announced, TDS will hold a teleconference November 6, 2020, at 9:00 a.m. CST. Listen to the call live via the Events & Presentations page of investors.tdsinc.com.

FOR IMMEDIATE RELEASE

TDS reports third quarter 2020 results

UScellular and TDS Telecom report strong subscriber and financial results driving increases to 2020 guidance

CHICAGO (November 5, 2020) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,324 million for the third quarter of 2020, versus $1,321 million for the same period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $78 million and $0.66, respectively, for the third quarter of 2020 compared to $18 million and $0.15, respectively, in the same period one year ago.

"The TDS Enterprise had a strong quarter," said LeRoy T. Carlson, Jr., TDS President and CEO. "Impressive financial results produced by UScellular and TDS Telecom demonstrate how much our customers value our essential communications and high-quality data services. Both businesses have lifted their expectations for 2020 financial performance. Our associates continue to show exceptional dedication and resilience in keeping our operations and networks performing at top levels for our customers.

"At UScellular, churn remained very low and retail net additions grew through an increase in connected devices. The positive impact of higher ARPU, combined with operational and cost discipline throughout the quarter, helped drive a strong increase in profitability, compared to the same period a year ago. LT Therivel has successfully transitioned into his new role as CEO. During the quarter UScellular successfully completed a 5G millimeter wave test data session showing significant expansion of signal reach and speed. This is important in enabling UScellular to move faster and more cost-efficiently in its 5G evolution and it will also leverage this technology to better serve its customers and help close the digital divide. UScellular has launched a new logo and brand identity with a modern look – a visual signal of how they are working to expand their brand appeal.

"At TDS Telecom, our fiber investments are delivering results. TDS Telecom grew its Wireline video and broadband connections, and combined with demand for higher broadband speeds, drove increases in average residential revenue per connection and total residential revenue. TDS Telecom continues its fiber strategy and has now deployed fiber to 280,000 or 34% of its wireline service addresses. Bolstered by the Continuum acquisition, cable operations produced an exceptional quarter with increased broadband connections generating a 19% growth in revenues and a strong increase in profitability."

2020 Estimated Results

TDS’ current estimates of full-year 2020 results for UScellular and TDS Telecom are shown below. Such estimates represent management’s view as of November 5, 2020 and should not be assumed to be current as of any future date. TDS undertakes no duty to update such estimates, whether as a result of new information, future events, or otherwise. There can be no assurance that final results will not differ materially from estimated results.


2020 Estimated Results

UScellular	Previous	Current
(Dollars in millions)
Service revenues	$3,000-$3,100	$3,025-$3,075
Adjusted OIBDA1	$725-$850	$800-$875
Adjusted EBITDA1	$900-$1,025	$975-$1,050
Capital expenditures	$850-$950	Unchanged


TDS Telecom	Previous	Current
(Dollars in millions)
Total operating revenues	$950-$1,000	Unchanged
Adjusted OIBDA1	$280-$310	$300-$320
Adjusted EBITDA1	$290-$320	$305-$325
Capital expenditures	$300-$350	Unchanged

The following tables provide reconciliations of Net income to Adjusted OIBDA and Adjusted EBITDA for 2020 estimated results, actual results for the nine months ended September 30, 2020, and actual results for the year ended December 31, 2019. In providing 2020 estimated results, TDS has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, TDS is unable to provide such guidance.


	2020 Estimated Results
	UScellular	TDS Telecom
(Dollars in millions)
Net income (GAAP)	N/A	N/A
Add back:
Income tax expense	N/A	N/A
Income before income taxes (GAAP)	$165-$240	$95-$115
Add back:
Interest expense	110	—
Depreciation, amortization and accretion expense	680	210
EBITDA (Non-GAAP)1	$955-$1,030	$305-$325
Add back or deduct:
(Gain) loss on asset disposals, net	20	—


Adjusted EBITDA (Non-GAAP)1	$975-$1,050	$305-$325
Deduct:
Equity in earnings of unconsolidated entities	170	—
Interest and dividend income	5	5

Adjusted OIBDA (Non-GAAP)1	$800-$875	$300-$320


	Actual Results
	Nine Months Ended September 30, 2020				Year Ended December 31, 2019
	UScellular		TDS Telecom			UScellular		TDS Telecom
(Dollars in millions)
Net income (GAAP)	$	227	$	81		$	133	$	92
Add back:
Income tax expense	11		13			52		30
Income before income taxes (GAAP)	$	238	$	94		$	185	$	122
Add back:
Interest expense	76		(3)			110		(3)
Depreciation, amortization and accretion expense	516		152			702		200
EBITDA (Non-GAAP)1	$	830	$	243		$	997	$	320
Add back or deduct:

(Gain) loss on asset disposals, net	14		1			19		(7)
(Gain) loss on sale of business and other exit costs, net	—		—			(1)		—

(Gain) loss on investments	(3)		—			—		—
Adjusted EBITDA (Non-GAAP)1	$	841	$	243		$	1,015	$	313
Deduct:
Equity in earnings of unconsolidated entities	137		—			166		—
Interest and dividend income	6		4			17		12
Other, net	—		(1)			—		—
Adjusted OIBDA (Non-GAAP)1	$	698	$	240		$	832	$	300

Numbers may not foot due to rounding.

1EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for September 30, 2020, can be found on TDS' website at investors.tdsinc.com.

Conference Call Information

TDS will hold a conference call on November 6, 2020 at 9:00 a.m. Central Time.

▪Access the live call on the Events & Presentations page of investors.tdsinc.com or at

https://www.webcaster4.com/Webcast/Page/1145/38510.

▪Access the call by phone at (833) 968-2187, conference ID: 7289911.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.tdsinc.com. The call will be archived on the Events & Presentations page of investors.tdsinc.com.

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 1000® company, provides wireless; cable and wireline broadband, video and voice; and hosted and managed services to approximately 6 million connections nationwide through its businesses, UScellular, TDS Telecom, BendBroadband and OneNeck IT Solutions. Founded in 1969 and headquartered in Chicago, TDS employed 9,300 people as of September 30, 2020.

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

Contacts

Jane W. McCahon, Senior Vice President - Corporate Relations and Corporate Secretary

jane.mccahon@tdsinc.com

Julie D. Mathews, IRC, Director - Investor Relations

julie.mathews@tdsinc.com

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: the impact, duration and severity of the COVID-19 pandemic; intense competition; the ability to execute TDS’ business strategy; uncertainties in TDS’ future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and UScellular indebtedness or comply with the terms of debt covenants; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; the state and federal regulatory environment; the ability to attract people of outstanding talent throughout all levels of the organization; conditions in the U.S. telecommunications industry; TDS’ smaller scale relative to larger competitors; changes in demand, consumer preferences, price competition, or churn rates; advances in technology; the value of assets and investments; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of TDS’ businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties; cyber-attacks or other breaches of network or information technology security; changes in facts and circumstances that could require TDS to record adjustments to amounts reflected in the financial statements; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; pending and future litigation. Investors are encouraged to consider these and other risks and uncertainties that are more fully described 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.

The impact of the COVID-19 pandemic on TDS' business is uncertain, but depending on its duration and severity it could have a material adverse effect on TDS' business, financial condition or results of operations.

The impact of the global spread of COVID-19 on TDS' future operations is uncertain. Public health emergencies, such as COVID-19, pose the risk that TDS or its associates, agents, partners and suppliers may be unable to conduct business activities for an extended period of time and/or provide the level of service expected. TDS' ability to attract customers, maintain an adequate supply chain and execute on its business strategies and initiatives could be negatively impacted by this outbreak. Additionally, COVID-19 has caused and could continue to cause increased unemployment, economic downturn and credit market deterioration, all of which could negatively impact TDS. The extent of the impact of COVID-19 on TDS' business, financial condition and results of operations will depend on future circumstances, including the severity of the disease, the duration of the outbreak, actions taken by governmental authorities and other possible direct and indirect consequences, all of which are uncertain and cannot be predicted.

For more information about TDS and its subsidiaries, visit:

TDS: www.tdsinc.com

UScellular: www.uscellular.com

TDS Telecom: www.tdstelecom.com

OneNeck IT Solutions: www.oneneck.com


United States Cellular Corporation
Summary Operating Data (Unaudited)
As of or for the Quarter Ended	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Retail Connections
Postpaid
Total at end of period	4,401,000			4,372,000			4,359,000			4,383,000			4,395,000
Gross additions	168,000			129,000			132,000			170,000			163,000
Feature phones	4,000			3,000			2,000			2,000			3,000
Smartphones	98,000			82,000			88,000			128,000			121,000
Connected devices	66,000			44,000			42,000			40,000			39,000
Net additions (losses)	28,000			12,000			(26,000)			(12,000)			(19,000)
Feature phones	(8,000)			(8,000)			(10,000)			(11,000)			(11,000)
Smartphones	8,000			11,000			(10,000)			13,000			9,000
Connected devices	28,000			9,000			(6,000)			(14,000)			(17,000)
ARPU1	$	47.10		$	46.24		$	47.23		$	46.57		$	46.16
ARPA2	$	123.27		$	120.70		$	122.92		$	120.99		$	119.87
Churn rate3	1.06		%	0.89		%	1.21		%	1.38		%	1.38		%
Handsets	0.88		%	0.71		%	0.95		%	1.11		%	1.09		%
Connected devices	2.35		%	2.24		%	3.11		%	3.44		%	3.44		%
Prepaid
Total at end of period	506,000			496,000			494,000			506,000			510,000
Gross additions	65,000			62,000			57,000			63,000			70,000
Net additions (losses)	11,000			2,000			(12,000)			(3,000)			9,000
ARPU1	$	35.45		$	34.89		$	34.07		$	34.11		$	34.35
Churn rate3	3.59		%	4.05		%	4.67		%	4.40		%	4.03		%
Total connections at end of period4	4,962,000			4,919,000			4,903,000			4,941,000			4,957,000
Market penetration at end of period
Consolidated operating population	31,314,000			31,292,000			31,292,000			30,740,000			31,310,000
Consolidated operating penetration5	16		%	16		%	16		%	16		%	16		%
Capital expenditures (millions)	$	216		$	168		$	236		$	243		$	170
Total cell sites in service	6,758			6,673			6,629			6,578			6,554
Owned towers	4,246			4,208			4,184			4,166			4,123

1Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:

•Postpaid ARPU consists of total postpaid service revenues and postpaid connections.

•Prepaid ARPU consists of total prepaid service revenues and prepaid connections.

2Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.

3Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.

4Includes reseller and other connections.

5Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.


TDS Telecom
Summary Operating Data (Unaudited)
As of or for the Quarter Ended	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
TDS Telecom
Wireline
Residential connections
Voice1	260,000		261,800		259,100		262,100		266,100
Broadband2	260,700		255,100		242,700		241,300		242,200
Video3	62,300		61,400		59,000		58,500		57,300
Wireline residential connections	583,000		578,300		560,700		561,900		565,600

Total residential revenue per connection4	$	51.45	$	49.73	$	50.12	$	49.11	$	49.02

Commercial connections
Voice1	109,400		112,400		114,400		117,800		121,200
Broadband2	20,800		20,700		20,500		20,400		20,600
managedIP5	114,900		115,500		118,300		121,200		124,500
Video3	200		200		100		100		400
Wireline commercial connections	245,400		248,700		253,400		259,600		266,600

Total Wireline connections	828,400		827,000		814,200		821,500		832,300

Cable
Cable residential and commercial connections
Broadband6	206,200		203,700		196,800		193,500		174,900
Video7	101,800		103,400		105,100		106,600		98,000
Voice8	67,700		69,000		68,900		69,500		63,900
managedIP5	1,800		1,800		1,400		1,300		1,200
Total Cable connections	377,400		378,000		372,300		370,900		338,000

Numbers may not foot due to rounding.

1The individual circuits connecting a customer to Wireline’s central office facilities that provide voice services.

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

3The number of Wireline customers provided video services.

4Total residential revenue per connection is calculated by dividing total Wireline residential revenue by the average number of Wireline residential connections and by the number of months in the period.

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

6Billable number of lines into a building for high-speed data services.

7Generally, 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.

8Billable number of lines into a building for voice services.


TDS Telecom
Capital Expenditures (Unaudited)
Quarter Ended	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
(Dollars in millions)
Wireline	$	74	$	58	$	39	$	98	$	61
Cable	18		17		15		26		20
Total TDS Telecom	$	92	$	75	$	54	$	124	$	81


Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020 vs. 2019		2020		2019		2020 vs. 2019
(Dollars and shares in millions, except per share amounts)
Operating revenues
UScellular	$	1,027	$	1,031	–		$	2,964	$	2,970	–
TDS Telecom	247		231		7	%	728		695		5	%
All Other1	50		59		(16)	%	157		175		(10)	%
	1,324		1,321		–		3,849		3,840		–
Operating expenses
UScellular
Expenses excluding depreciation, amortization and accretion	795		823		(3)	%	2,266		2,319		(2)	%
Depreciation, amortization and accretion	161		181		(11)	%	516		524		(2)	%

(Gain) loss on asset disposals, net	6		5		15	%	14		13		10	%
(Gain) loss on sale of business and other exit costs, net	—		—		N/M		—		(1)		N/M
(Gain) loss on license sales and exchanges, net	—		2		N/M		—		—		N/M
	962		1,011		(5)	%	2,796		2,855		(2)	%
TDS Telecom
Expenses excluding depreciation, amortization and accretion	169		162		4	%	488		467		4	%
Depreciation, amortization and accretion	49		50		–		152		150		2	%
(Gain) loss on asset disposals, net	—		—		65	%	1		(7)		N/M
	219		212		3	%	641		609		5	%
All Other1
Expenses excluding depreciation and amortization	50		62		(19)	%	157		182		(13)	%
Depreciation and amortization	7		6		(26)	%	17		23		(24)	%
(Gain) loss on asset disposals, net	—		1		(96)	%	—		(1)		71	%
	56		69		(20)	%	174		205		(14)	%
Total operating expenses	1,237		1,292		(4)	%	3,611		3,669		(2)	%
Operating income (loss)
UScellular	65		20		N/M		168		115		46	%
TDS Telecom	28		20		44	%	87		86		2	%
All Other1	(6)		(11)		45	%	(17)		(30)		39	%
	87		29		N/M		238		171		39	%
Investment and other income (expense)
Equity in earnings of unconsolidated entities	48		44		10	%	138		129		7	%
Interest and dividend income	4		7		(49)	%	12		24		(52)	%
Gain (loss) on investments	3		—		N/M		3		—		N/M
Interest expense	(43)		(42)		(1)	%	(119)		(128)		8	%
Other, net	—		—		(60)	%	(1)		—		(58)	%
Total investment and other income	12		9		38	%	33		25		35	%
Income before income taxes	99		38		N/M		271		196		38	%
Income tax expense	6		15		(61)	%	17		64		(73)	%
Net income	93		23		N/M		254		132		92	%
Less: Net income attributable to noncontrolling interests, net of tax	15		5		N/M		42		22		87	%
Net income attributable to TDS shareholders	$	78	$	18	N/M		$	212	$	110	93	%

Basic weighted average shares outstanding	114		115		–		114		114		–
Basic earnings per share attributable to TDS shareholders	$	0.68	$	0.15	N/M		$	1.85	$	0.96	93	%

Diluted weighted average shares outstanding	115		116		–		115		116		–
Diluted earnings per share attributable to TDS shareholders	$	0.66	$	0.15	N/M		$	1.81	$	0.93	94	%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

1Consists of TDS corporate, intercompany eliminations and all other business operations not included in the UScellular and TDS Telecom segments.


Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)

	Nine Months Ended September 30,
	2020		2019
(Dollars in millions)
Cash flows from operating activities
Net income	$	254	$	132
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion	685		697
Bad debts expense	55		80
Stock-based compensation expense	39		47
Deferred income taxes, net	217		23
Equity in earnings of unconsolidated entities	(138)		(129)
Distributions from unconsolidated entities	118		100

(Gain) loss on asset disposals, net	15		5
(Gain) loss on sale of business and other exit costs, net	—		(1)

(Gain) loss on investments	(3)		—
Other operating activities	1		4
Changes in assets and liabilities from operations
Accounts receivable	26		(42)
Equipment installment plans receivable	13		(42)
Inventory	2		3
Accounts payable	95		(4)
Customer deposits and deferred revenues	(21)		(2)
Accrued taxes	(156)		37
Accrued interest	14		9
Other assets and liabilities	(50)		(43)
Net cash provided by operating activities	1,166		874

Cash flows from investing activities
Cash paid for additions to property, plant and equipment	(914)		(631)
Cash paid for licenses	(169)		(257)
Cash received from investments	1		29
Cash paid for investments	(1)		(11)
Cash received from divestitures and exchanges	1		32

Other investing activities	4		1
Net cash used in investing activities	(1,078)		(837)

Cash flows from financing activities
Issuance of long-term debt	675		—
Repayment of long-term debt	(8)		(16)
TDS Common Shares reissued for benefit plans, net of tax payments	(3)		(6)
UScellular Common Shares reissued for benefit plans, net of tax payments	(11)		(8)
Repurchase of TDS Common Shares	(14)		—
Repurchase of UScellular Common Shares	(23)		(21)
Dividends paid to TDS shareholders	(58)		(57)
Payment of debt issuance costs	(23)		(1)
Distributions to noncontrolling interests	(2)		(3)
Other financing activities	1		9
Net cash provided by (used in) financing activities	534		(103)

Net increase (decrease) in cash, cash equivalents and restricted cash	622		(66)

Cash, cash equivalents and restricted cash
Beginning of period	474		927
End of period	$	1,096	$	861


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

ASSETS

	September 30, 2020		December 31, 2019
(Dollars in millions)
Current assets
Cash and cash equivalents	$	1,076	$	465

Accounts receivable, net	1,056		1,124
Inventory, net	164		169
Prepaid expenses	109		98
Income taxes receivable	226		36
Other current assets	39		29
Total current assets	2,670		1,921

Assets held for sale	19		—

Licenses	2,637		2,480

Goodwill	547		547

Other intangible assets, net	219		239

Investments in unconsolidated entities	508		488

Property, plant and equipment, net	3,727		3,527

Operating lease right-of-use assets	988		972

Other assets and deferred charges	580		607

Total assets	$	11,895	$	10,781


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

LIABILITIES AND EQUITY

	September 30, 2020		December 31, 2019
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt	$	3	$	10
Accounts payable	399		374
Customer deposits and deferred revenues	168		189
Accrued interest	24		11
Accrued taxes	63		41
Accrued compensation	107		121
Short-term operating lease liabilities	125		116
Other current liabilities	76		100
Total current liabilities	965		962



Deferred liabilities and credits
Deferred income tax liability, net	893		676
Long-term operating lease liabilities	938		931
Other deferred liabilities and credits	530		481

Long-term debt, net	2,970		2,316

Noncontrolling interests with redemption features	10		11

Equity
TDS shareholders' equity
Series A Common and Common Shares, par value $0.01 per share	1		1
Capital in excess of par value	2,479		2,468
Treasury shares, at cost	(478)		(479)
Accumulated other comprehensive loss	(7)		(9)
Retained earnings	2,809		2,672
Total TDS shareholders' equity	4,804		4,653

Noncontrolling interests	785		751

Total equity	5,589		5,404

Total liabilities and equity	$	11,895	$	10,781


Balance Sheet Highlights
(Unaudited)

	September 30, 2020
			TDS		TDS Corporate		Intercompany		TDS
	UScellular		Telecom		& Other		Eliminations		Consolidated
(Dollars in millions)


Cash and cash equivalents	$	931	$	573	$	147	$	(575)	$	1,076

Licenses, goodwill and other intangible assets	$	2,628	$	766	$	9	$	—	$	3,403
Investment in unconsolidated entities	467		4		48		(11)		508
	$	3,095	$	770	$	57	$	(11)	$	3,911

Property, plant and equipment, net	$	2,322	$	1,303	$	102	$	—	$	3,727

Long-term debt, net:
Current portion	$	2	$	—	$	1	$	—	$	3
Non-current portion	2,108		4		858		—		2,970
	$	2,110	$	4	$	859	$	—	$	2,973


TDS Telecom Highlights
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020 vs. 2019		2020		2019		2020 vs. 2019
(Dollars in millions)
Wireline
Operating revenues
Residential	$	90	$	83	8	%	$	260	$	245	6	%
Commercial	38		41		(8)	%	115		127		(9)	%
Wholesale	45		45		1	%	136		139		(2)	%
Total service revenues	173		169		2	%	511		512		–
Equipment and product sales	—		—		4	%	1		1		(30)	%
	173		169		2	%	512		512		–
Operating expenses
Cost of services	69		68		2	%	197		195		1	%
Cost of equipment and products	—		—		(25)	%	1		1		(30)	%
Selling, general and administrative expenses	51		52		(3)	%	148		148		(1)	%
Expenses excluding depreciation, amortization and accretion	120		120		–		345		344		–
Depreciation, amortization and accretion	30		33		(8)	%	94		99		(5)	%
(Gain) loss on asset disposals, net	—		—		(70)	%	—		(8)		N/M
	150		153		(2)	%	439		435		1	%
Operating income	$	23	$	16	42	%	$	73	$	78	(6)	%

Cable
Operating revenues
Residential	$	62	$	52	21	%	$	182	$	152	20	%
Commercial	12		10		13	%	34		32		9	%
	74		62		19	%	216		184		18	%
Operating expenses
Cost of services	31		27		15	%	91		79		15	%
Selling, general and administrative expenses	18		15		23	%	52		44		18	%
Expenses excluding depreciation, amortization and accretion	49		42		18	%	143		124		16	%
Depreciation, amortization and accretion	20		17		15	%	59		51		15	%
(Gain) loss on asset disposals, net	—		—		N/M		1		1		(14)	%
	69		59		17	%	202		175		15	%
Operating income (loss)	$	5	$	3	55	%	$	14	$	8	76	%

Total TDS Telecom operating income	$	28	$	20	44	%	$	87	$	86	2	%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
(Dollars in millions)
Cash flows from operating activities (GAAP)	$	359	$	282	$	1,166	$	874
Less: Cash paid for additions to property, plant and equipment	304		238		914		631
Free cash flow (Non-GAAP)1	$	55	$	44	$	252	$	243

1Free 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 liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

Document and Entity Information Document	Nov. 05, 2020
Entity Central Index Key	0001051512
Document Type	8-K
Document Period End Date	Nov. 05, 2020
Entity Registrant Name	TELEPHONE AND DATA SYSTEMS, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	001-14157
Entity Tax Identification Number	36-2669023
Entity Address, Address Line One	30 North LaSalle Street, Suite 4000
Entity Address, City or Town	Chicago
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60602
City Area Code	(312)
Local Phone Number	630-1900
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Amendment Flag	false
Common Shares
Title of 12(b) Security	Common Shares, $.01 par value
Trading Symbol	TDS
Security Exchange Name	NYSE
6.625% Senior Notes
Title of 12(b) Security	6.625% Senior Notes due 2045
Trading Symbol	TDI
Security Exchange Name	NYSE
6.875% Senior Notes
Title of 12(b) Security	6.875% Senior Notes due 2059
Trading Symbol	TDE
Security Exchange Name	NYSE
7.0% Senior Notes
Title of 12(b) Security	7.000% Senior Notes due 2060
Trading Symbol	TDJ
Security Exchange Name	NYSE
5.875% Senior Notes
Title of 12(b) Security	5.875% Senior Notes due 2061
Trading Symbol	TDA
Security Exchange Name	NYSE