Telephone and Data Systems (TDS) 8-K TDS reports first quarter 2016 results

Exhibit 99.1  NEWS RELEASE  

As previously announced, TDS will hold a teleconference May 6, 2016 at 9:30 a.m. CDT. Interested parties may listen to the call live via the Events & Presentations page of investors.tdsinc.com. 

 FOR IMMEDIATE RELEASE

TDS reports first quarter 2016 results

2016 guidance reaffirmed;

2015 gains affect year-over-year comparisons

CHICAGO, (May 6, 2016) — Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,243 million for the first quarter of 2016, versus $1,252 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $8 million and $0.07, respectively, for the first quarter of 2016, compared to $146 million and $1.33, respectively, in the comparable period one year ago.  Year-over-year comparisons are affected by pre-tax gains of $247 million ($155 million after-tax) from sales and exchanges of businesses and licenses in 2015.

“Building on the successes of 2015, our businesses started the year with a solid first quarter,” said LeRoy T. Carlson Jr., TDS president and CEO.  “U.S. Cellular grew its postpaid customer base and improved customer loyalty.  TDS Telecom experienced growth in both IPTV and cable connections, and we continued to move forward in our broadband and hosted and managed services strategies.

“U.S. Cellular increased sales of smartphones and connected devices through offering competitive products and devices priced to offer the best value in the industry. We continue to see strong customer adoption of Equipment Installment Plans, which increased equipment sales revenues.

“TDS Telecom maintained the momentum of IPTV growth by adding new connections and increasing average revenue per connection. Our cable segment increased connections, generating higher revenue from both residential and commercial broadband services. Our hosted and managed services company, OneNeck IT Solutions, achieved growth in recurring service and equipment revenues as more companies and organizations selected OneNeck IT to outsource their IT needs.”

1

2016 Estimated Results

Current estimates of full-year 2016 results for U.S. Cellular, TDS Telecom, and TDS, which are unchanged from the previous estimates, are shown below. Such estimates represent management’s view as of May 6, 2016. Such forward-looking statements should not be assumed to be current as of any future date. TDS undertakes no duty to update such information, whether as a result of new information, future events, or otherwise. There can be no assurance that final results will not differ materially from such estimated results.

	2016 Estimated Results
				��
	U.S. Cellular			TDS Telecom			TDS(2)
	Current		Previous	Current		Previous	Current		Previous
(Dollars in millions)
Total operating revenues	$3,900-$4,100		Unchanged	$1,130-$1,180		Unchanged	$5,040-$5,290		Unchanged
Operating cash flow (1)	$525-$650		Unchanged	$270-$310		Unchanged	$800-$965		Unchanged
Adjusted EBITDA (1)	$725-$850		Unchanged	$270-$310		Unchanged	$1,000-$1,165		Unchanged
Capital expenditures	Approx. $	500	Unchanged	Approx. $	180	Unchanged	Approx. $	695	Unchanged

The following tables provide a reconciliation to Operating Cash Flow and Adjusted EBITDA for 2016 estimated results, and actual results for the three months ended March 31, 2016 and year ended December 31, 2015:

				Estimated Results (3)
				U.S. Cellular		TDS Telecom		TDS(2)
(Dollars in millions)
Net income (loss) (GAAP)				N/A		N/A		N/A
Add back:
	Income tax expense (benefit)			N/A		N/A		N/A
Income (loss) before income taxes
	(GAAP)		$	0-125	$	40-80	$	(20)-145
Add back:
	Interest expense			105		–		160
	Depreciation, amortization and
		accretion expense		600		230		840
EBITDA			$	705-830	$	270-310	$	980-1,145
Add back:
	(Gain) loss on sale of business and
		other exit costs, net		–		–		–
	(Gain) loss on license sales and
		exchanges, net		–		–		–
		(Gain) loss on asset disposals, net		20		–		20
Adjusted EBITDA (1)			$	725-850	$	270-310	$	1,000-1,165
Deduct:
	Equity in earnings of unconsolidated
		entities		140		–		140
		Interest and dividend income		60		–		60
Operating cash flow (1)(4)			$	525-650	$	270-310	$	800-965

2

			Actual Results
			Three Months Ended March 31, 2016						Year ended December 31, 2015
			U.S. Cellular		TDS Telecom		TDS (2)		U.S. Cellular*		TDS Telecom		TDS (2)*
(Dollars in millions)
Net income (loss) (GAAP)			$	9	$	10	$	10	$	247	$	46	$	263
Add back:
	Income tax expense (benefit)			11		7		13		156		35		172
Income (loss) before income taxes
	(GAAP)		$	20	$	17	$	23	$	404	$	81	$	435
Add back:
	Interest expense			28		–		41		86		1		142
	Depreciation, amortization and
		accretion expense		153		58		212		606		228		844
EBITDA			$	201	$	75	$	276	$	1,096	$	310	$	1,421
Add back:
	(Gain) loss on sale of business and
		other exit costs, net		–		–		–		(114)		(10)		(136)
	(Gain) loss on license sales and
		exchanges, net		–		–		–		(147)		–		(147)
	(Gain) loss on asset disposals, net			5		1		6		16		6		22
Adjusted EBITDA (1)			$	206	$	76	$	282	$	852	$	306	$	1,160
Deduct:
	Equity in earnings of unconsolidated
		entities		35		–		35		140		–		140
	Interest and dividend income			13		1		14		37		2		39
	Other, net			1		(1)		–		–		–		–
Operating cash flow (1)(4)			$	157	$	76	$	233	$	675	$	304	$	981
* Includes $58 million of revenue related to termination of the rewards points program.
Note: Totals may not foot due to rounding differences.

1. Operating cash flow is defined as net income, adjusted for the items set forth in the reconciliation above.  Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation above.  Operating cash flow and Adjusted EBITDA exclude these items in order to show operating results on a more comparable basis from period to period. From time to time, TDS may exclude other items from Operating cash flow and/or Adjusted EBITDA if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future.  Operating cash flow and Adjusted EBITDA 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 as indicators of the company’s operating performance or as alternatives to cash flows from operating activities, determined in accordance with GAAP, as indicators of cash flows or as measures of liquidity. TDS believes Operating cash flow and Adjusted EBITDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as indicated above.
2. The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.
3. In providing 2016 Estimated Results, TDS has not completed the above reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance.
4. A reconciliation of Operating cash flow (Non-GAAP) to operating income (GAAP) for March 31, 2016 actual results can be found on the company's website at investors.tdsinc.com.

3

Stock Repurchase Summary

TDS began repurchasing stock under its $250 million repurchase authorization on August 5, 2013.  The following represents repurchases of TDS Common Shares.  

Repurchase Period	# Shares	Cost (in millions)
2016 (year-to-date through March 31, 2016)	111,700	$	3
2015 (full year)	–	$	–
Total	111,700	$	3

4

Conference Call Information

TDS will hold a conference call on May 6, 2016 at 9:30 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/1145/14974
• Access the call by phone at 877/407-8029 (US/Canada), no pass code required. 

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.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 1000TM company, provides wireless; cable and wireline broadband, TV and voice; and hosted and managed services to approximately 6 million customers nationwide through its businesses, U.S. Cellular, TDS Telecom, OneNeck IT Solutions, and BendBroadband. Founded in 1969 and headquartered in Chicago, TDS employed 10,600 people as of March 31, 2016.

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

Contacts

Jane McCahon, Senior Vice President, Corporate Relations and Corporate Secretary

312-592-5379

jane.mccahon@tdsinc.com

Julie Mathews, IRC, Investor Relations Director

312-592-5341

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: 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 U.S. Cellular indebtedness or comply with the terms of debt covenants; impacts of any pending acquisitions/divestures/exchanges of properties and/or licenses, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transactions and the financial impacts of such transactions; the ability of the company to successfully manage and grow its markets; the overall economy; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; pending and future litigation; changes in income tax rates, laws, regulations or rulings; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of wireless devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission, which are incorporated by reference herein.    

For more information about TDS and its subsidiaries, visit:

TDS: www.tdsinc.com 

U.S. Cellular: www.uscellular.com 

TDS Telecom: www.tdstelecom.com 

OneNeck IT Solutions: www.oneneck.com

5

United States Cellular Corporation
Summary Operating Data (Unaudited)
As of or for the Quarter Ended					3/31/2016		12/31/2015		9/30/2015			6/30/2015		3/31/2015
Retail Customers
	Postpaid
		Total at end of period				4,454,000		4,409,000		4,341,000		4,324,000		4,307,000
		Gross additions				215,000		240,000		200,000		191,000		200,000
			Feature phones			9,000		10,000		14,000		15,000		14,000
			Smartphones			124,000		132,000		119,000		115,000		119,000
			Connected devices			82,000		98,000		67,000		61,000		67,000
		Net additions (losses)				45,000		68,000		17,000		17,000		9,000
			Feature phones			(25,000)		(25,000)		(28,000)		(26,000)		(34,000)
			Smartphones			20,000		23,000		6,000		7,000		3,000
			Connected devices			50,000		70,000		39,000		36,000		40,000
		ARPU (1)(8)			$	48.13	$	51.46	$	58.12	$	53.62	$	54.87
		ABPU (2)(8)			$	56.06	$	58.57	$	63.88	$	58.08	$	58.50
		ARPA (3)(8)			$	125.36	$	131.96	$	147.00	$	133.85	$	134.94
		ABPA (4)(8)			$	145.99	$	150.19	$	161.57	$	144.99	$	143.86
		Churn rate (5)				1.28%		1.31%		1.41%		1.34%		1.48%
		Smartphone penetration (6)				75%		74%		72%		69%		67%
	Prepaid
		Total at end of period				399,000		387,000		380,000		368,000		360,000
		Gross additions				75,000		69,000		71,000		65,000		73,000
		Net additions (losses)				12,000		7,000		12,000		8,000		12,000
		ARPU (1)			$	35.51	$	35.54	$	35.64	$	35.98	$	35.72
		Churn rate (5)				5.37%		5.40%		5.24%		5.22%		5.76%
Total customers at end of period						4,926,000		4,876,000		4,807,000		4,779,000		4,775,000
Smartphones sold as a percent of total
	handsets sold					92%		91%		87%		87%		86%
Market penetration at end of period
	Consolidated operating population					31,994,000		31,967,000		31,814,000		31,814,000		31,814,000
	Consolidated operating penetration (7)					15%		15%		15%		15%		15%
Capital expenditures (millions)					$	79	$	198	$	135	$	134	$	66
Total cell sites in service						6,306		6,297		6,246		6,223		6,219
Owned towers						3,989		3,978		3,957		3,940		3,936
(1)		Average Revenue Per User (“ARPU”) are metrics calculated by dividing a revenue base by an average number of customers and by the number of months in the period.  These revenue bases and customer populations are shown below:
			▪	Postpaid ARPU consists of total postpaid service revenues and postpaid customers.
			▪	Prepaid ARPU consists of total prepaid service revenues and prepaid customers.
(2)		Average Billings Per User (“ABPU”) metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid customers and by the number of months in the period.
(3)		Average Revenue Per Account (“ARPA”) metric is calculated by dividing total postpaid service revenue by the average number of postpaid accounts and by the number of months in the period.
(4)		Average Billings Per Account (“ABPA”) metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.
(5)		Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.
(6)		Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid handsets.
(7)		Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.
(8)		The quarter ended September 30, 2015 results include the recognition of $58 million in revenue due to the termination of the awards program.

6

TDS Telecom
Summary Operating Data (Unaudited)
Quarter Ended			3/31/2016		12/31/2015		9/30/2015		6/30/2015		3/31/2015
TDS Telecom
Wireline
	Residential connections
		Voice (1)		318,400		319,800		325,900		329,000		333,400
		Broadband (2)		229,100		228,500		231,600		231,200		229,400
		IPTV (3)		38,300		34,400		30,300		27,900		25,600
		Wireline residential connections		585,800		582,700		587,800		588,100		588,400
	Total residential revenue per connection (4)		$	43.28	$	41.24	$	42.83	$	42.10	$	42.32
	Commercial connections
		Voice (1)		167,400		171,500		176,700		181,800		187,500
		Broadband (2)		22,000		22,400		23,000		23,700		24,300
		managedIP (5)		148,500		147,100		145,900		145,100		143,200
		Wireline commercial connections		337,900		341,000		345,600		350,600		355,000
	Total Wireline connections			923,700		923,700		933,400		938,700		943,400
Cable
	Cable Connections
		Video (6)		104,600		106,800		108,300		109,100		109,700
		Broadband (7)		121,700		117,100		114,600		112,300		112,200
		Voice (7)		58,100		56,400		54,000		51,500		49,100
		Cable connections		284,400		280,300		276,900		272,900		271,000
(1)		The individual circuit connecting customers to TDS Telecom’s central office facilities.
(2)		The number of customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.
(3)		The number of customers provided video services using IP networking technology.
(4)		Total residential revenue per connection is calculated by dividing the average monthly residential revenue for the period by the average number of residential connections for the period.
(5)		The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.
(6)		Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.
(7)		Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively.

TDS Telecom
Capital Expenditures (millions)
Quarter Ended	3/31/2016		12/31/2015		9/30/2015		6/30/2015		3/31/2015
Wireline	$	27	$	50	$	38	$	32	$	20
Cable		13		15		13		12		12
HMS		2		8		5		9		5
	$	42	$	73	$	56	$	53	$	37

7

Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
(Unaudited)
				Three Months Ended March 31,
				2016		2015		2016 vs. 2015
(Dollars and shares in millions, except per share amounts)
Operating revenues
	U.S. Cellular			$	958	$	965	$	(7)	(1)%
	TDS Telecom				281		280		1	-
	All Other (1)				4		7		(3)	(51)%
					1,243		1,252		(9)	(1)%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and
			accretion		801		798		3	-
		Depreciation, amortization and accretion			153		147		6	4%
		(Gain) loss on asset disposals, net			5		4		1	19%
		(Gain) loss on sale of business and other exit costs, net			–		(111)		111	100%
		(Gain) loss on license sales and exchanges, net			–		(123)		123	N/M
					959		715		244	34%
	TDS Telecom
		Expenses excluding depreciation, amortization and
			accretion		205		201		4	2%
		Depreciation, amortization and accretion			58		57		1	1%
		(Gain) loss on asset disposals, net			1		1		–	(14)%
					264		259		5	2%
	All Other (1)
		Expenses excluding depreciation and amortization			4		5		(1)	(59)%
		Depreciation and amortization			1		3		(2)	(19)%
		(Gain) loss on sale of business and other exit costs, net (2)			–		(13)		13	100%
					5		(5)		10	>100%
			Total operating expenses		1,228		969		259	27%
Operating income (loss)
	U.S. Cellular (3)				(1)		250		(251)	>(100)%
	TDS Telecom				17		21		(4)	(21)%
	All Other (1)				(1)		12		(13)	>(100)%
					15		283		(268)	(95)%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				35		35		–	2%
	Interest and dividend income				14		8		6	65%
	Interest expense				(41)		(34)		(7)	(24)%
		Total investment and other income			8		9		(1)	(22)%
Income before income taxes					23		292		(269)	(92)%
	Income tax expense (benefit)				13		116		(103)	(89)%
Net income					10		176		(166)	(94)%
	Less: Net income attributable to noncontrolling interests, net of tax				2		30		(28)	(94)%
Net income attributable to TDS shareholders					8		146		(138)	(94)%
	TDS Preferred dividend requirement				–		–		–	-
Net income available to common shareholders				$	8	$	146	$	(138)	(94)%
Basic weighted average shares outstanding					109		108		1	1%
Basic earnings per share attributable to TDS shareholders				$	0.07	$	1.35	$	(1.28)	(95)%
Diluted weighted average shares outstanding					110		109		1	1%
Diluted earnings per share attributable to TDS shareholders				$	0.07	$	1.33	$	(1.26)	(95)%
(1)	Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.
(2)	Compared to U.S. Cellular, TDS recognized an incremental gain of $12 million on the tower sale as a result of a lower basis in the assets disposed in 2015.
(3)	Year-over-year comparisons are affected by gains of $247 million from sales and exchanges of businesses and licenses in 2015.
N/M – Percentage change not meaningful

8

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
					Three Months Ended March 31,
					2016		2015
(Dollars in millions)
Cash flows from operating activities
	Net income (loss)				$	10	$	176
		Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
			Depreciation, amortization and accretion			212		207
			Bad debts expense			19		30
			Stock-based compensation expense			9		8
			Deferred income taxes, net			5		(47)
			Equity in earnings of unconsolidated entities			(35)		(35)
			Distributions from unconsolidated entities			14		13
			(Gain) loss on asset disposals, net			6		5
			(Gain) loss on sale of business and other exit costs, net			–		(124)
			(Gain) loss on license sales and exchanges, net			–		(123)
			Noncash interest expense			1		1
		Changes in assets and liabilities from operations
			Accounts receivable			20		21
			Equipment installment plans receivable			(41)		(36)
			Inventory			(1)		95
			Accounts payable			39		(14)
			Customer deposits and deferred revenues			(6)		13
			Accrued taxes			63		252
			Accrued interest			9		9
			Other assets and liabilities			(78)		(96)
				Net cash provided by operating activities		246		355
Cash flows from investing activities
	Cash used for additions to property, plant and equipment					(159)		(166)
	Cash paid for acquisitions and licenses					–		(281)
	Cash received from divestitures and exchanges					2		274
	Other investing activities					–		3
				Net cash used in investing activities		(157)		(170)
Cash flows from financing activities
	Repayment of long-term debt					(3)		–
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments					1		–
	Repurchase of TDS Common Shares					(3)		–
	Repurchase of U.S. Cellular Common Shares					(2)		(2)
	Dividends paid to TDS shareholders					(16)		(15)
	Payment of debt issuance costs					–		(3)
	Other financing activities					3		(2)
				Net cash provided by financing activities		(20)		(22)
Net increase in cash and cash equivalents						69		163
Cash and cash equivalents
	Beginning of period					985		472
	End of period				$	1,054	$	635

9

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
		March 31,		December 31,
		2016		2015
(Dollars in millions)
Current assets
	Cash and cash equivalents	$	1,054	$	985
	Accounts receivable from customers and others, net		792		803
	Inventory, net		160		158
	Prepaid expenses		130		112
	Income taxes receivable		5		70
	Other current assets		32		30
			2,173		2,158
Assets held for sale			26		–
Licenses			1,818		1,844
Goodwill			766		766
Franchise rights			244		244
Other intangible assets, net			43		47
Investments in unconsolidated entities			423		402
Property, plant and equipment, net			3,679		3,764
Other assets and deferred charges			211		197
Total assets		$	9,383	$	9,422

10

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
				March 31,		December 31,
				2016		2015
(Dollars in millions)
Current liabilities
		Current portion of long-term debt		$	14	$	14
		Accounts payable			355		349
		Customer deposits and deferred revenues			283		288
		Accrued interest			21		12
		Accrued taxes			36		41
		Accrued compensation			75		113
		Other current liabilities			106		127
					890		944
Deferred liabilities and credits
		Net deferred income tax liability			905		900
		Other deferred liabilities and credits			441		433
Long-term debt					2,437		2,440
Noncontrolling interests with redemption features					2		1
Equity
	TDS shareholders' equity
		Series A Common and Common Shares, par value $.01			1		1
		Capital in excess of par value			2,372		2,365
		Treasury shares, at cost			(726)		(727)
		Accumulated other comprehensive income (loss)			–		–
		Retained earnings			2,479		2,487
			Total TDS shareholders' equity		4,126		4,126
	Preferred shares				1		1
	Noncontrolling interests				581		577
		Total equity			4,708		4,704
Total liabilities and equity				$	9,383	$	9,422

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Balance Sheet Highlights
(Unaudited)
		March 31, 2016
		U.S.		TDS		TDS Corporate		Intercompany		TDS
		Cellular		Telecom		& Other		Eliminations		Consolidated
(Dollars in millions)
Cash and cash equivalents		$	772	$	47	$	235	$	–	$	1,054
Affiliated cash investments			–		330		–		(330)		–
		$	772	$	377	$	235	$	(330)	$	1,054
Licenses, goodwill and other intangible
	assets	$	2,178	$	831	$	(138)	$	–	$	2,871
Investment in unconsolidated entities			384		4		40		(5)		423
		$	2,562	$	835	$	(98)	$	(5)	$	3,294
Property, plant and equipment, net		$	2,573	$	1,082	$	24	$	–	$	3,679
Long-term debt:
	Current portion	$	11	$	–	$	3	$	–	$	14
	Non-current portion		1,626		1		810		–		2,437
		$	1,637	$	1	$	813	$	–	$	2,451

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TDS Telecom Highlights
(Unaudited)
			Three Months Ended March 31,
			2016		2015		2016 vs. 2015
(Dollars in millions)
Wireline
Operating revenues
	Residential		$	76	$	75	$	1	2%
	Commercial			54		56		(2)	(4)%
	Wholesale			43		45		(2)	(5)%
		Total service revenues		173		176		(3)	(2)%
	Equipment sales			–		–		–	19%
				173		176		(3)	(2)%
Operating expenses
	Cost of services			62		62		–	(1)%
	Cost of equipment sold			1		1		–	(8)%
	Selling, general and administrative expenses			48		46		2	6%
	Depreciation, amortization and accretion			42		42		–	(1)%
				153		151		2	1%
	Operating income		$	20	$	25	$	(5)	(19)%
Cable
Operating revenues
	Residential		$	35	$	35	$	–	1%
	Commercial			10		9		1	10%
		Total service revenues		45		44		1	3%
Operating expenses
	Cost of services			22		20		2	12%
	Selling, general and administrative expenses			12		13		(1)	(4)%
	Depreciation, amortization and accretion			9		9		–	5%
	(Gain) loss on asset disposals, net			1		1		–	(20)%
				44		43		1	5%
	Operating income		$	1	$	1	$	–	(56)%
HMS
Operating revenues
	Service revenues		$	29	$	28	$	1	2%
	Equipment sales			35		33		2	8%
				64		61		3	5%
Operating expenses
	Cost of services			21		20		1	6%
	Cost of equipment sold			29		27		2	8%
	Selling, general and administrative expenses			11		13		(2)	(16)%
	Depreciation, amortization and accretion			7		6		1	13%
				68		66		2	3%
	Operating (loss)		$	(4)	$	(5)	$	1	21%
Intercompany revenues			$	(1)	$	(1)	$	–	(47)%
Intercompany expenses				(1)		(1)		–	(47)%
Total TDS Telecom operating income			$	17	$	21	$	(4)	(21)%

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Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited)
		Three Months Ended March 31,
		2016		2015
(Dollars in millions)
Cash flows from operating activities		$	246	$	355
Less: Cash used for additions to property, plant and equipment			159		166
	Free cash flow		87		189
Add: Sprint Cost Reimbursement			2		16
	Adjusted free cash flow (1)	$	89	$	205
(1)	Free cash flow is defined as Cash flows from operating activities less Cash used for additions to property, plant and equipment.  Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash used for additions to property, plant and equipment.  Sprint decommissioning and Sprint Cost Reimbursement are further defined and discussed in our Annual Report on Form 10-K for the year ended December 31, 2015.  Free cash flow and Adjusted free cash flow are non-GAAP financial measures which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash used for additions to property, plant and equipment.

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