PR Newswire | Nov 5, 2020 04:06PM EST

11/05 15:05 CST

TDS reports third quarter 2020 resultsUScellular and TDS Telecom report strong subscriber and financial results driving increases to 2020 guidance CHICAGO, Nov. 5, 2020

CHICAGO, Nov. 5, 2020 /PRNewswire/ --

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 ofinvestors.tdsinc.com.

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 OIBDA^1 $725-$850 $800-$875

Adjusted EBITDA^1 $900-$1,025 $975-$1,050

Capital expenditures $850-$950 Unchanged

TDS Telecom Previous Current

(Dollars in millions)

Total operating revenues$950-$1,000Unchanged

Adjusted OIBDA^1 $280-$310 $300-$320

Adjusted EBITDA^1 $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 expense680 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 Year Ended September 30, 2020 December 31, 2019

TDS TDS UScellularTelecomUScellular 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 accretion516 152 702 200 expense

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 - - (1) - other exit costs, net

(Gain) loss on investments (3) - - -

Adjusted EBITDA (Non-GAAP)^1 $841 $ 243$1,015 $ 313

Deduct:

Equity in earnings of unconsolidated 137 - 166 - entities

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.

EBITDA, 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 as1 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(r) 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.

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.comUScellular: www.uscellular.comTDS Telecom: www.tdstelecom.comOneNeck 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)

ARPU^1 $47.10 $46.24 $47.23 $46.57 $46.16

ARPA^2 $123.27 $120.70 $122.92 $120.99 $119.87

Churn rate^3 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

ARPU^1 $35.45 $34.89 $34.07 $34.11 $34.35

Churn rate^3 3.59 %4.05 %4.67 %4.40 %4.03 %

Total connections at end of period^44,962,000 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 penetration^516 %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

^ Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue1 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.

^ Average Revenue Per Account (ARPA) - metric is calculated by dividing total2 postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.

^ Churn rate represents the percentage of the connections that disconnect3 service each month. These rates represent the average monthly churn rate for each respective period.

^ Includes reseller and other connections.4

^ Market penetration is calculated by dividing the number of wireless5 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 9/30/20206/30/20203/31/202012/31/20199/30/2019

TDS Telecom

Wireline

Residential connections

Voice^1 260,000 261,800 259,100 262,100 266,100

Broadband^2 260,700 255,100 242,700 241,300 242,200

Video^3 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 connection^4 $51.45 $49.73 $50.12 $ 49.11 $ 49.02



Commercial connections

Voice^1 109,400 112,400 114,400 117,800 121,200

Broadband^2 20,800 20,700 20,500 20,400 20,600

managedIP^5 114,900 115,500 118,300 121,200 124,500

Video^3 200 200 100 100 400

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

Broadband^6 206,200 203,700 196,800 193,500 174,900

Video^7 101,800 103,400 105,100 106,600 98,000

Voice^8 67,700 69,000 68,900 69,500 63,900

managedIP^5 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.

^ The individual circuits connecting a customer to Wireline's central office1 facilities that provide voice services.

^ The number of Wireline customers provided high-capacity data circuits via2 various technologies, including DSL and dedicated internet circuit technologies.

^ The number of Wireline customers provided video services.3

^ Total residential revenue per connection is calculated by dividing total4 Wireline residential revenue by the average number of Wireline residential connections and by the number of months in the period.

^ The number of telephone handsets, data lines and IP trunks providing5 communications using IP networking technology.

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

Generally, a home or business receiving video programming counts as one^ video connection. In counting bulk residential or commercial connections,7 such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.

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

TDS Telecom

Capital Expenditures (Unaudited)

Quarter Ended 9/30/20206/30/20203/31/2020 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 Nine Months Ended September 30, September 30,

2020 2019 2020 2020 2019 2020 vs. 2019 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 Other^1 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 Other^1

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 Other^1 (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 tax15 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.

^ Consists of TDS corporate, intercompany eliminations and all other business1 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, 2020December 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 entities508 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, 2020December 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 share1 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 CorporateIntercompanyTDS

UScellularTelecom & Other EliminationsConsolidated

(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 Nine Months Ended September 30, September 30,

2020 2019 2020 2020 2019 2020 vs. 2019 vs. 2019

(Dollars in millions)

Wireline

Operating revenues

Residential $90$838 % $260$2456 %

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 accretion120 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$1642 % $73 $78 (6) %



Cable

Operating revenues

Residential $62$5221 % $182$15220 %

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 accretion49 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$2044 % $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 Nine Months Ended Ended September 30, 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, 304 238 914 631 plant and equipment

Free cash flow (Non-GAAP)^1 $55 $44 $252 $243

Free cash flow is a non-GAAP financial measure which TDS believes may be^ useful to investors and other users of its financial information in1 evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

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SOURCE Telephone and Data Systems, Inc.