TDS 10-Q Quarterly Report Sept. 30, 2022 | Alphaminr
TELEPHONE & DATA SYSTEMS INC /DE/

TDS 10-Q Quarter ended Sept. 30, 2022

TELEPHONE & DATA SYSTEMS INC /DE/
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PROXIES
DEF 14A
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DEF 14A
Filed on April 19, 2024
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Filed on April 5, 2023
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Filed on April 6, 2022
DEF 14A
Filed on April 7, 2021
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Filed on April 8, 2020
DEF 14A
Filed on April 10, 2019
DEF 14A
Filed on April 11, 2018
DEF 14A
Filed on April 12, 2017
DEF 14A
Filed on April 13, 2016
DEF 14A
Filed on April 16, 2012
DEF 14A
Filed on Aug. 31, 2011
DEF 14A
Filed on April 14, 2011
DEF 14A
Filed on April 23, 2010
tds-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to
Commission file number 001-14157
tds-20220930_g1.jpg
TELEPHONE AND DATA SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
36-2669023
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

30 North LaSalle Street, Suite 4000 , Chicago , Illinois 60602
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (312) 630-1900
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
Depository Shares each representing a 1/1000th interest in a share of 6.625% Series UU Cumulative Redeemable Perpetual Preferred Stock, $.01 par value TDSPrU New York Stock Exchange
Depository Shares each representing a 1/1000th interest in a share of 6.000% Series VV Cumulative Redeemable Perpetual Preferred Stock, $.01 par value TDSPrV New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer Smaller reporting company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The number of shares outstanding of each of the issuer's classes of common stock, as of September 30, 2022, is 106,181,800 Common Shares, $.01 par value, and 7,383,300 Series A Common Shares, $.01 par value.



Telephone and Data Systems, Inc.
Quarterly Report on Form 10-Q
For the Period Ended September 30, 2022
Index Page No.


Table of Contents

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Telephone and Data Systems, Inc.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Executive Overview
The following discussion and analysis compares Telephone and Data Systems, Inc.’s (TDS) financial results for the three and nine months ended September 30, 2022, to the three and nine months ended September 30, 2021. It should be read in conjunction with TDS’ interim consolidated financial statements and notes included herein, and with the description of TDS’ business, its audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) included in TDS’ Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2021. Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers.
This report contains statements that are not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions. These statements constitute and represent “forward looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward looking statements. See Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement for additional information.
TDS uses certain “non-GAAP financial measures” and each such measure is identified in the MD&A. A discussion of the reasons TDS determines these metrics to be useful and reconciliations of these measures to their most directly comparable measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) are included in the Supplemental Information Relating to Non-GAAP Financial Measures section within the MD&A of this Form 10-Q Report.
General
TDS is a diversified telecommunications company that provides high-quality communications services to approximately 6 million connections nationwide. TDS provides wireless services through its 83%-owned subsidiary, United States Cellular Corporation (UScellular). TDS also provides broadband, video and voice services through its wholly-owned subsidiary, TDS Telecommunications LLC (TDS Telecom). TDS operates entirely in the United States.

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TDS Mission and Strategy
TDS’ mission is to provide outstanding communications services to its customers and meet the needs of its shareholders, its people, and its communities. In pursuing this mission, TDS seeks to grow its businesses, create opportunities for its associates, support the communities it serves, and build value over the long-term for its shareholders. Across all of its businesses, TDS is focused on providing exceptional customer experiences through best-in-class services and products and superior customer service. Since its founding, TDS has been committed to bringing high-quality communications services to rural and underserved communities. TDS continues to make progress on developing and enhancing its Environmental, Social and Governance (ESG) program, including the publication of the most recent TDS ESG Report in September 2022.
TDS’ long-term strategy calls for the majority of its operating capital to be reinvested in its businesses to strengthen their competitive positions and financial performance, while also returning value to TDS shareholders primarily through the payment of a regular quarterly cash dividend.
TDS plans to build shareholder value by continuing to execute on its strategies to build strong, competitive businesses providing high-quality, data-focused services and products. Strategic efforts include:
UScellular offers economical and competitively priced service plans and devices to its customers and is focused on increasing revenues from sales of related products such as device protection plans and from new services such as fixed wireless home internet. In addition, UScellular is focused on increasing revenues from prepaid plans, tower rent revenues and expanding its solutions available to business and government customers.
UScellular continues to enhance its network capabilities, including by deploying 5G technology. 5G technology helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency. UScellular's 5G deployment is initially focused on mobility services using its low band spectrum. UScellular has acquired high-band and mid-band spectrum, deployed high-band spectrum on a limited basis, and will further deploy high-band and mid-band in the future to further enable the delivery of 5G services. UScellular has launched 5G services in portions of substantially all of its markets and will continue to expand to additional areas in the coming years.
UScellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on capital. As part of this strategy, UScellular actively seeks attractive opportunities to acquire wireless spectrum, including pursuant to FCC auctions.
TDS Telecom strives to be the preferred broadband provider in its markets with the ability to provide value-added bundling with video and voice service options. TDS Telecom focuses on driving growth by investing in fiber deployment in its expansion markets and in its incumbent markets that have historically utilized copper and coaxial cable technologies.
TDS Telecom seeks to grow its operations and expand its total footprint by creating new clusters of markets in attractive, growing locations and may seek to acquire businesses that support and complement its existing markets.
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Terms Used by TDS
The following is a list of definitions of certain industry terms that are used throughout this document:
5G – fifth generation wireless technology that helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency.
Account – represents an individual or business financially responsible for one or multiple associated connections. An account may include a variety of types of connections such as handsets and connected devices.
Alternative Connect America Cost Model (A-CAM) – a USF support mechanism for certain carriers, which provides revenue support through 2028. This support comes with an obligation to build defined broadband speeds to a certain number of locations.
Auctions 105, 107, 108 and 110 – Auction 105 was an FCC auction of 3.5 GHz wireless spectrum licenses that started in July 2020 and concluded in September 2020. Auction 107 was an FCC auction of 3.7-3.98 GHz wireless spectrum licenses that started in December 2020 and concluded in February 2021. Auction 110 was an FCC auction of 3.45-3.55 GHz wireless spectrum licenses that started in October 2021 and concluded in January 2022. Auction 108 is an FCC auction of 2.5 GHz wireless spectrum licenses that started in July 2022 and concluded in August 2022.
Broadband Connections – refers to the individual customers provided high-speed internet access through various transmission technologies, including fiber, coaxial and copper.
Broadband Penetration – metric which is calculated by dividing total broadband connections by total service addresses.
Churn Rate – represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.
Connected Devices – non-handset devices that connect directly to the UScellular network. Connected devices include products such as tablets, wearables, modems, and hotspots.
Coronavirus Aid, Relief, and Economic Security (CARES) Act – economic relief package signed into law on March 27, 2020 to address the public health and economic impacts of COVID-19, including a variety of tax provisions.
EBITDA – refers to earnings before interest, taxes, depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted EBITDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Expansion Markets – markets utilizing fiber networks in areas where TDS does not serve as the incumbent service provider.
Free Cash Flow – non-GAAP metric defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Gross Additions – represents the total number of new connections added during the period, without regard to connections that were terminated during that period.
Incumbent Markets – markets where TDS is positioned as the traditional local telephone or cable company.
IPTV – internet protocol television.
Net Additions (Losses) – represents the total number of new connections added during the period, net of connections that were terminated during that period.
OIBDA – refers to operating income before depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted OIBDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Postpaid Average Revenue per Account (Postpaid ARPA) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
Postpaid Average Revenue per User (Postpaid ARPU) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid connections and by the number of months in the period.
Residential Revenue per Connection – metric which is calculated by dividing total residential revenue by the average number of residential connections and by the number of months in the period.
Retail Connections – individual lines of service associated with each device activated by a postpaid or prepaid customer. Connections are associated with all types of devices that connect directly to the UScellular network.
Service Addresses – number of single residence homes, multi-dwelling units, and business locations that are capable of being connected to the TDS network, based on best available information.
Universal Service Fund (USF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States.
Video Connections – represents the individual customers provided video services.
Voice Connections – refers to the individual circuits connecting a customer to TDS' central office facilities that provide voice services or the billable number of lines into a building for voice services.
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Results of Operations — TDS Consolidated
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
(Dollars in millions)
Operating revenues
UScellular $ 1,083 $ 1,016 7 % $ 3,120 $ 3,053 2 %
TDS Telecom 256 252 2 % 763 752 1 %
All other 1
53 60 (13) % 173 152 14 %
Total operating revenues 1,392 1,328 5 % 4,056 3,957 3 %
Operating expenses
UScellular 1,098 971 13 % 3,024 2,888 5 %
TDS Telecom 246 224 10 % 702 665 6 %
All other 1
59 64 (9) % 183 167 9 %
Total operating expenses 1,403 1,259 11 % 3,909 3,720 5 %
Operating income (loss)
UScellular (15) 45 N/M 96 165 (42) %
TDS Telecom 10 27 (63) % 61 87 (30) %
All other 1
(6) (3) (66) % (10) (15) 35 %
Total operating income (loss) (11) 69 N/M 147 237 (38) %
Investment and other income (expense)
Equity in earnings of unconsolidated entities 40 48 (16) % 123 138 (11) %
Interest and dividend income 4 3 39 % 10 9 16 %
Interest expense (46) (54) 13 % (118) (193) 38 %
Other, net N/M 1 (1) N/M
Total investment and other income (expense) (2) (3) 17 % 16 (47) N/M
Income (loss) before income taxes (13) 66 N/M 163 190 (15) %
Income tax expense (benefit) (3) 19 N/M 62 38 59 %
Net income (loss) (10) 47 N/M 101 152 (33) %
Less: Net income (loss) attributable to noncontrolling interests, net of tax (2) 7 N/M 14 26 (46) %
Net income (loss) attributable to TDS shareholders (8) 40 N/M 87 126 (30) %
TDS Preferred Share dividends 17 12 44 % 52 21 N/M
Net income (loss) attributable to TDS common shareholders $ (25) $ 28 N/M $ 35 $ 105 (66) %
Adjusted OIBDA (Non-GAAP) 2
$ 227 $ 290 (22) % $ 853 $ 923 (8) %
Adjusted EBITDA (Non-GAAP) 2
$ 271 $ 341 (21) % $ 987 $ 1,069 (8) %
Capital expenditures 3
$ 305 $ 279 9 % $ 938 $ 726 29 %
Numbers may not foot due to rounding.
N/M - Percentage change not meaningful
1 Consists of corporate and other operations and intercompany eliminations.
2 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
3 Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
Refer to individual segment discussions in this MD&A for additional details on operating revenues and expenses at the segment level.
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Equity in earnings of unconsolidated entities
Equity in earnings of unconsolidated entities represents TDS’ share of net income from entities in which it has a noncontrolling interest and that are accounted for using the equity method or the net asset value practical expedient. TDS’ investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $18 million and $22 million for the three months ended September 30, 2022 and 2021, respectively and $52 million and $63 million for the nine months ended September 30, 2022 and 2021, respectively. See Note 8 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.
Interest expense
Interest expense decreased for the three and nine months ended September 30, 2022, due primarily to the write-off of unamortized debt issuance costs related to Senior Notes redeemed during 2021 and replaced by other debt facilities with lower interest rates .
Income tax expense
Income tax expense decreased for the three months ended September 30, 2022 due primarily to the decrease in Income (loss) before income taxes.
Income tax expense increased for the nine months ended September 30, 2022 due primarily to the 2021 reduction of tax accruals resulting from expiration of state statutes of limitations of prior tax years, which did not recur in 2022. This was partially offset by the tax effect of the decrease in Income (loss) before income taxes.
During the nine months ended September 30, 2022, TDS received a federal income tax refund of $125 million related to the 2020 net operating loss carryback enabled by the CARES Act.
Net income (loss) attributable to noncontrolling interests, net of tax
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 2021
(Dollars in millions)
UScellular noncontrolling public shareholders’ $ (2) $ 6 $ 10 $ 23
Noncontrolling shareholders’ or partners’ 1 4 3
Net income (loss) attributable to noncontrolling interests, net of tax $ (2) $ 7 $ 14 $ 26
Net income (loss) attributable to noncontrolling interests, net of tax includes the noncontrolling public shareholders’ share of UScellular’s net income (loss), the noncontrolling shareholders’ or partners’ share of certain UScellular subsidiaries’ net income (loss) and other TDS noncontrolling interests.
TDS Preferred Share dividends
TDS Preferred Share dividends increased for the three and nine months ended September 30, 2022, due to quarterly dividends for Series UU Preferred Shares issued in March 2021 and Series VV Preferred Shares issued in August 2021.
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Earnings
(Dollars in millions)
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Three Months Ended
Net income (loss) decreased due primarily to higher operating expenses, partially offset by higher operating revenues and lower income tax expense. Adjusted EBITDA decreased due primarily to higher operating expenses, partially offset by higher operating revenues.
Nine Months Ended
Net income (loss) decreased due primarily to higher operating and income tax expenses, partially offset by higher operating revenues and lower interest expense. Adjusted EBITDA decreased due primarily to higher operating expenses, partially offset by higher operating revenues.
*Represents a non-GAAP financial measure. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
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UScellular OPERATIONS
Business Overview
UScellular owns, operates, and invests in wireless markets throughout the United States. UScellular is an 83%-owned subsidiary of TDS. UScellular’s strategy is to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service, and competitive devices, plans, and pricing - all provided with a community focus.
OPERATIONS

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Serves customers with 4.8 million retail connections including 4.3 million postpaid and 0.5 million prepaid connections
Operates in 21 states
Employs approximately 4,900 associates
4,329 owned towers
6,933 cell sites in service
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Operational Overview — UScellular
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As of September 30, 2022 2021
Retail Connections – End of Period
Postpaid 4,264,000 4,391,000
Prepaid 493,000 518,000
Total 4,757,000 4,909,000
Q3 2022 Q3 2021 Q3 2022 vs. Q3 2021 YTD 2022 YTD 2021 YTD 2022 vs. YTD 2021
Postpaid Activity and Churn
Gross Additions
Handsets 107,000 105,000 2 % 292,000 309,000 (6) %
Connected Devices 44,000 40,000 10 % 113,000 118,000 (4) %
Total Gross Additions 151,000 145,000 4 % 405,000 427,000 (5) %
Net Additions (Losses)
Handsets (22,000) (5,000) N/M (89,000) (8,000) N/M
Connected Devices (9,000) (3,000) N/M (26,000) (11,000) N/M
Total Net Additions (Losses) (31,000) (8,000) N/M (115,000) (19,000) N/M
Churn
Handsets 1.15 % 0.95 % 1.12 % 0.92 %
Connected Devices 3.40 % 2.59 % 2.94 % 2.60 %
Total Churn 1.42 % 1.15 % 1.34 % 1.13 %
N/M - Percentage change not meaningful
Total postpaid handset net losses increased for the three and nine months ended September 30, 2022, when compared to the same period last year due primarily to higher defections resulting from aggressive industry-wide competition and an increase in non-pay customers.
Total postpaid connected device net losses increased for the three and nine months ended September 30, 2022, when compared to the same period last year due primarily to higher defections of devices activated by schools and local municipalities during the pandemic, which were partly funded by various government subsidies which have since ended.
Macroeconomic factors have caused some supply chain disruption and delays, including constraints on certain devices. These supply constraints are due primarily to component availability, resulting in extended lead times and additional uncertainty, which may negatively impact UScellular in future periods.

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Postpaid Revenue
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Average Revenue Per User (ARPU) $ 50.21 $ 48.12 4 % $ 49.99 $ 47.83 5 %
Average Revenue Per Account (ARPA) $ 130.27 $ 125.99 3 % $ 130.20 $ 125.50 4 %
Postpaid ARPU and Postpaid ARPA increased for the three and nine months ended September 30, 2022, when compared to the same period last year, due to (i) favorable plan and product offering mix, (ii) an increase in cost recovery surcharges, (iii) other price plan products and fees and (iv) an increase in device protection plan revenues. These increases were partially offset by an increase in promotional discounts.
2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue related to a third quarter out-of-period error. See Note 2 — Revenue Recognition in the Notes to Consolidated Financial Statements for additional information.
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Financial Overview — UScellular
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
(Dollars in millions)
Retail service 1
$ 696 $ 697 $ 2,098 $ 2,064 2 %
Inbound roaming 17 30 (43) % 56 86 (36) %
Other 1
68 61 11 % 197 183 8 %
Service revenues 781 788 (1) % 2,351 2,333 1 %
Equipment sales 302 228 32 % 769 720 7 %
Total operating revenues 1,083 1,016 7 % 3,120 3,053 2 %
System operations (excluding Depreciation, amortization and accretion reported below) 197 205 (4) % 574 594 (3) %
Cost of equipment sold 354 252 40 % 887 786 13 %
Selling, general and administrative 369 346 7 % 1,032 984 5 %
Depreciation, amortization and accretion 177 160 10 % 520 510 2 %
Loss on impairment of licenses 3 N/M
(Gain) loss on asset disposals, net 1 8 (89) % 9 15 (43) %
(Gain) loss on sale of business and other exit costs, net 8 % (1) (1) 40 %
Total operating expenses 1,098 971 13 % 3,024 2,888 5 %
Operating income (loss) $ (15) $ 45 N/M $ 96 $ 165 (42) %
Net income (loss) $ (12) $ 35 N/M $ 62 $ 132 (53) %
Adjusted OIBDA (Non-GAAP) 2
$ 163 $ 213 (23) % $ 627 $ 689 (9) %
Adjusted EBITDA (Non-GAAP) 2
$ 205 $ 262 (22) % $ 754 $ 831 (9) %
Capital expenditures 3
$ 136 $ 185 (27) % $ 541 $ 458 18 %
N/M - Percentage change not meaningful
1 For the three and nine months ended September 30, 2021, amounts have been adjusted to reclassify $2 million and $5 million, respectively, of Internet of Things (IoT) and Reseller revenues from Retail service to Other.
2 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
3 Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
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Operating Revenues
Three Months Ended September 30, 2022 and 2021
(Dollars in millions)
tds-20220930_g7.jpg
Operating Revenues
Nine Months Ended September 30, 2022 and 2021
(Dollars in millions)
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Service revenues consist of:
Retail Service - Postpaid and prepaid charges for voice, data and value-added services and cost recovery surcharges
Inbound Roaming - Charges to other wireless carriers whose customers use UScellular’s wireless systems when roaming
Other Service - Amounts received from the Federal USF, tower rental revenues, miscellaneous other service revenues and Internet of Things (IoT)
Equipment revenues consist of :
Sales of wireless devices and related accessories to new and existing customers, agents, and third-party distributors
Key components of changes in the statement of operations line items were as follows:
Total operating revenues
Retail service revenues decreased for the three months ended September 30, 2022 partially due to a $9 million out-of-period error that increased revenue recognized in the three months ended September 30, 2021. Excluding this impact, retail service revenues increased primarily as a result of an increase in Postpaid ARPU as previously discussed in the Operational Overview section, partially offset by a decrease in average postpaid connections.
Retail service revenues increased for the nine months ended September 30, 2022 as a result of an increase in Postpaid ARPU, partially offset by a decrease in average postpaid connections, as well as a $9 million out-of-period error that increased revenue recognized in the nine months ended September 30, 2021. See Note 2 — Revenue Recognition in the Notes to Consolidated Financial Statements for additional information.
Inbound roaming revenues decreased for the three and nine months ended September 30, 2022, primarily driven by lower data revenues resulting from lower rates, partially offset by higher usage. UScellular expects inbound roaming revenues to continue to decline for the remainder of 2022 relative to prior year levels.
Other service revenues increased for the three and nine months ended September 30, 2022, resulting from increases in tower rental revenues, miscellaneous revenues, and IoT revenues.
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Equipment sales revenues increased for the three and nine months ended September 30, 2022, due primarily to increased customer upgrades driven by more promotional activity, combined with a higher average price of new smartphone sales.
In recent periods, wireless service providers have increased promotional aggressiveness to attract new customers and retain existing customers. Operating revenues and Operating income (loss) may be negatively impacted in future periods by the competitive response to offer increased promotional discounts to new and existing customers.
Systems operations expenses
System operations expenses decreased for the three and nine months ended September 30, 2022, due primarily to decreases in roaming and customer usage expenses, partially offset by an increase in maintenance, utility, and cell site expenses.
Cost of equipment sold
Cost of equipment sold increased for the three and nine months ended September 30, 2022, due primarily to increased customer upgrades driven by more promotional activity, combined with higher average cost per unit sold.
Selling, general and administrative expenses
Selling, general and administrative expenses increased for the three and nine months ended September 30, 2022, due primarily to increases in bad debts expense, partially offset by a decrease in advertising expense.
Bad debts expense was $42 million and $13 million for the three months ended September 30, 2022 and 2021, respectively, and $93 million and $34 million for the nine months ended September 30, 2022 and 2021, respectively, as customer payment behavior and the corresponding rate of involuntary churn, which had been favorable in the prior year due to the continuing impacts of the pandemic, which included government stimulus payments and higher consumer savings rates, returned to pre-pandemic trends in the 2022 periods. In addition, customers have purchased higher priced devices in recent periods, which has resulted in higher write-off amounts per uncollectible account in the 2022 periods relative to the corresponding 2021 periods.
Depreciation, amortization and accretion
Depreciation, amortization and accretion increased for the three and nine months ended September 30, 2022 due to increased capital expenditures in recent years relative to historical periods.
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TDS TELECOM OPERATIONS
Business Overview
TDS Telecom owns, operates and invests in communications services in a mix of rural and suburban communities throughout the United States. TDS Telecom is a wholly-owned subsidiary of TDS and provides a wide range of broadband, video and voice communications services to residential, commercial and wholesale customers. TDS Telecom's strategic goal is to be the preferred broadband provider in the markets it serves. TDS Telecom invests in high-quality networks, services and products, with the constant focus on delivering a best-in-class customer experience.
OPERATIONS

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Serves 1.2 million connections in 32 states
Employs approximately 3,300 associates
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Operational Overview — TDS Telecom
Total Service Address Mix
As of September 30,
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*2021 fiber addresses in cable markets are included in Coaxial.





As of September 30, 2022, TDS Telecom increased its service addresses 7% to 1.5 million through network expansion.

TDS Telecom offers 1Gig service to 64% of its total footprint as of September 30, 2022, compared to 57% a year ago.

In 2022, TDS Telecom began measuring fiber service addresses in its cable markets. Including cable, 36% of service addresses are served by fiber.
As of September 30,
2022 2021 2022 vs. 2021
Residential connections
Broadband
Wireline, Incumbent 252,600 252,100
Wireline, Expansion 49,400 32,600 52 %
Cable 204,500 202,700 1 %
Total Broadband 506,500 487,400 4 %
Video 136,600 143,100 (5) %
Voice 295,500 306,300 (4) %
Total Residential Connections 938,600 936,800
Commercial connections 242,800 269,000 (10) %
Total connections 1,181,400 1,205,700 (2) %
Numbers may not foot due to rounding.
Total connections decreased due to legacy voice, video, and competitive local exchange carrier (CLEC) commercial connections declines, partially offset by broadband connection growth.
A majority of TDS Telecom's residential customers take advantage of bundling options as 61% of customers subscribe to more than one service.
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Residential Broadband Connections by Speed
As of September 30,
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Residential broadband customers continue to choose higher speeds with 69% taking speeds of 100 Mbps or greater and 10% choosing 1Gig.

Residential Revenue per Connection

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Total residential revenue per connection increased 4% for the three months ended September 30, 2022, and 3% for the nine months ended September 30, 2022, due to price increases and product mix changes.

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Financial Overview — TDS Telecom
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
(Dollars in millions)
Residential
Wireline, Incumbent $ 89 $ 87 2 % $ 262 $ 258 2 %
Wireline, Expansion 13 9 43 % 35 24 48 %
Cable 68 66 3 % 203 197 3 %
Total residential 170 162 5 % 500 479 4 %
Commercial 43 45 (5) % 130 138 (6) %
Wholesale 43 44 (2) % 132 135 (2) %
Total service revenues 256 251 2 % 763 751 1 %
Equipment revenues (13) % 1 1 (8) %
Total operating revenues 256 252 2 % 763 752 1 %
Cost of services (excluding Depreciation, amortization and accretion reported below) 109 102 7 % 308 301 2 %
Cost of equipment and products 49 % 1 21 %
Selling, general and administrative 81 72 12 % 231 216 7 %
Depreciation, amortization and accretion 53 49 8 % 158 147 8 %
(Gain) loss on asset disposals, net 3 1 N/M 4 2 N/M
Total operating expenses 246 224 10 % 702 665 6 %
Operating income $ 10 $ 27 (63) % $ 61 $ 87 (30) %
Net income $ 10 $ 21 (54) % $ 51 $ 68 (24) %
Adjusted OIBDA (Non-GAAP) 1
$ 66 $ 77 (14) % $ 224 $ 235 (5) %
Adjusted EBITDA (Non-GAAP) 1
$ 66 $ 77 (13) % $ 226 $ 235 (4) %
Capital expenditures 2
$ 166 $ 91 82 % $ 391 $ 260 50 %
Numbers may not foot due to rounding.
1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
2 Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
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Operating Revenues
Three Months Ended September 30, 2022 and 2021
(Dollars in millions)
tds-20220930_g14.jpg
Numbers may not foot due to rounding.
Operating Revenues
Nine Months Ended September 30, 2022 and 2021
(Dollars in millions)
tds-20220930_g15.jpg
Residential revenues consist of:
Broadband services, including security and support services
Video services, including IPTV, traditional cable programming and satellite offerings
Voice services
Commercial revenues consist of:
High-speed and dedicated business internet services
Video services
Voice services
Wholesale revenues consist of:
Network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom's networks
Federal and state regulatory support, including A-CAM
Key components of changes in the statement of operations items were as follows:
Total operating revenues
Residential revenues increased for the three and nine months ended September 30, 2022, due primarily to price increases and growth in broadband connections, partially offset by a decline in video and voice connections and federal universal service charges.

Commercial revenues decreased for the three and nine months ended September 30, 2022, due primarily to declining connections in CLEC markets and declining video connections, partially offset by an increase in broadband connections.

Cost of services
Cost of services increased for the three and nine months ended September 30, 2022, due primarily to higher employee-related expenses, vehicle expenses, video programming costs, and storm damage repair costs.

Selling, general and administrative
Selling, general and administrative expenses increased for the three and nine months ended September 30, 2022, due primarily to increases to support current and future growth, including employee-related expenses, advertising and marketing expenses, and software-related costs, partially offset by decreases to federal universal service charges.
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Depreciation, amortization and accretion
Depreciation, amortization and accretion increased for the three and nine months ended September 30, 2022, due primarily to increased capital expenditures on new fiber assets and customer-related equipment.
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Liquidity and Capital Resources
Sources of Liquidity
TDS and its subsidiaries operate capital-intensive businesses. In the past, TDS’ existing cash and investment balances, funds available under its financing agreements, preferred share offerings, and cash flows from operating and certain investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for TDS to meet its normal day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions. There is no assurance that this will be the case in the future. See Market Risk for additional information regarding maturities of long-term debt.
TDS has incurred negative free cash flow at times in the past and this could occur in the future. However, TDS believes that existing cash and investment balances, funds available under its financing agreements, expected future tax refunds and expected cash flows from operating and investing activities will provide sufficient liquidity for TDS to meet its normal day-to-day operating needs and debt service requirements for the foreseeable future. TDS will continue to monitor the rapidly changing business and market conditions and plans to take appropriate actions, as necessary, to meet its liquidity needs.
TDS may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers of telecommunications services, wireless spectrum license acquisitions, capital expenditures, agreements to purchase goods or services, leases, debt service requirements, repurchases of shares, payment of dividends, or making additional investments, including new technologies and fiber deployments. It may be necessary from time to time to increase the size of the existing credit facilities, to put in place new credit agreements, or to obtain other forms of financing in order to fund potential expenditures.
Cash and Cash Equivalents
Cash and cash equivalents include cash and money market investments. The primary objective of TDS’ Cash and cash equivalents investment activities is to preserve principal. TDS does not have direct access to UScellular cash.
Cash and Cash Equivalents
(Dollars in millions)

tds-20220930_g16.jpg





The majority of TDS’ Cash and cash equivalents are held in bank deposit accounts and in money market funds that purchase only debt issued by the U.S. Treasury or U.S. government agencies. Refer to the Consolidated Cash Flow Analysis for additional information related to changes in Cash and cash equivalents.
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In addition to Cash and cash equivalents, TDS and UScellular had undrawn borrowing capacity from the following debt facilities at September 30, 2022. See the Financing section below for further details.
TDS UScellular
(Dollars in millions)
Revolving Credit Agreement $ 399 $ 300
Receivables Securitization Agreement 250
Repurchase Agreement 140
Total undrawn borrowing capacity $ 399 $ 690
Financing
Revolving Credit Agreements
TDS and UScellular have unsecured revolving credit agreements with maximum borrowing capacities of $400 million and $300 million, respectively. Amounts under the revolving credit agreements may be borrowed, repaid and reborrowed from time to time until maturity in July 2026. During the nine months ended September 30, 2022, UScellular borrowed and repaid $75 million under its revolving credit agreement. As of September 30, 2022, there were no outstanding borrowings under the revolving credit agreements, except for letters of credit, and TDS' and UScellular's unused borrowing capacity was $399 million and $300 million, respectively.
Term Loan Agreements
TDS and UScellular have term loan agreements with maximum borrowing capacities of $500 million and $800 million, respectively. The maturity dates for the term loan agreements range from July 2026 to July 2031. During the nine months ended September 30, 2022, TDS borrowed $300 million under its term loan credit agreements and UScellular borrowed $500 million under its term loan credit agreements. As of September 30, 2022, TDS and UScellular have borrowed the full amounts available under the agreements and the outstanding borrowings were $498 million and $797 million, respectively.
Export Credit Financing Agreement
In December 2021, UScellular entered into a $150 million term loan credit facility with Export Development Canada to finance (or refinance) imported equipment, including equipment purchased prior to entering the term loan credit facility agreement. During the nine months ended September 30, 2022, UScellular borrowed $150 million, which is the full amount available under the agreement and is due in January 2027.
Receivables Securitization Agreement
UScellular, through its subsidiaries, has a receivables securitization agreement to permit securitized borrowings using its equipment installment plan receivables. In March 2022, UScellular amended the agreement to extend the maturity date to March 2024. Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until the maturity date. During the nine months ended September 30, 2022, UScellular repaid $250 million under the agreement. As of September 30, 2022, the outstanding borrowings under the agreement were $200 million and the unused borrowing capacity under the agreement was $250 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement.
Repurchase Agreement
In January 2022, UScellular, through a subsidiary (the repo subsidiary), entered into a repurchase agreement to borrow up to $200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender. The transaction is accounted for as a one-month secured borrowing. The expiration date of the repurchase agreement is in January 2023. During the nine months ended September 30, 2022, the repo subsidiary borrowed $110 million and repaid $50 million under the repurchase agreement. As of September 30, 2022, the outstanding borrowings under the agreement were $60 million and the unused borrowing capacity was $140 million.
Financial Covenants
TDS and UScellular believe they were in compliance with all of the financial covenants and requirements set forth in their revolving credit agreements, term loan credit agreements, export credit financing agreement and receivables securitization agreement as of September 30, 2022.
Other Long-Term Financing
TDS and UScellular have in place effective shelf registration statements on Form S-3 to issue senior or subordinated securities, preferred shares and depositary shares.
See Note 10 — Debt in the Notes to Consolidated Financial Statements for additional information related to the financing agreements.
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Capital Expenditures
Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures; excludes wireless spectrum license additions), which include the effects of accruals and capitalized interest, for the nine months ended September 30, 2022 and 2021, were as follows:

Capital Expenditures
(Dollars in millions)
tds-20220930_g17.jpg




UScellular’s capital expenditures for the nine months ended September 30, 2022 and 2021, were $541 million and $458 million, respectively.
Capital expenditures for the full year 2022 are expected to be between $700 million and $800 million. These expenditures are expected to be used principally for the following purposes:
Continue network modernization and 5G deployment;
Enhance and maintain UScellular's network coverage, including providing additional speed and capacity to accommodate increased data usage by current customers; and
Invest in information technology to support existing and new services and products.

TDS Telecom’s capital expenditures for the nine months ended September 30, 2022 and 2021, were $391 million and $260 million, respectively.
Capital expenditures for the full year 2022 are expected to be between $500 million and $550 million. These expenditures are expected to be used principally for the following purposes:
Continue to expand fiber deployment in incumbent and expansion markets;
Maintain and enhance existing infrastructure including build-out requirements to meet state broadband and A-CAM programs;
Upgrade broadband capacity and speeds; and
Support success-based spending for broadband growth.
Macroeconomic factors may impact the acquisition or cost of products and materials as well as contribute to internal and external labor shortages.
TDS intends to finance its capital expenditures for 2022 using primarily Cash flows from operating activities, existing cash balances and, as required, additional debt financing from its existing agreements and/or other forms of financing.
Acquisitions, Divestitures and Exchanges
TDS may be engaged from time to time in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties, wireless spectrum licenses (including pursuant to FCC auctions) and other possible businesses. In general, TDS may not disclose such transactions until there is a definitive agreement.
Other Obligations
TDS will require capital for future spending on existing contractual obligations, including long-term debt obligations; dividend obligations; lease commitments; commitments for device purchases, network facilities and transport services; agreements for software licensing; long-term marketing programs; commitments for wireless spectrum licenses acquired through FCC auctions; and other agreements to purchase goods or services.
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Variable Interest Entities
TDS consolidates certain “variable interest entities” as defined under GAAP. See Note 11 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities. TDS may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations.
Common Share Repurchase Programs
During the nine months ended September 30, 2022, TDS repurchased 1,595,293 Common Shares for $26 million at an average cost per share of $16.19. As of September 30, 2022, the maximum dollar value of TDS Common Shares that may yet be repurchased under TDS’ program was $152 million. For additional information related to the current TDS repurchase authorization, see Unregistered Sales of Equity Securities and Use of Proceeds.
During the nine months ended September 30, 2022, UScellular repurchased 1,011,177 Common Shares for $29 million at an average cost per share of $28.53. As of September 30, 2022, the total cumulative amount of UScellular Common Shares authorized to be repurchased is 2,506,000.
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Consolidated Cash Flow Analysis
TDS operates a capital-intensive business. TDS makes substantial investments to acquire wireless spectrum licenses and properties and to construct and upgrade communications networks and facilities as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades to TDS’ networks. Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, timing and other factors. The following discussion summarizes TDS' cash flow activities for the nine months ended September 30, 2022 and 2021.
2022 Commentary
TDS’ Cash, cash equivalents and restricted cash increased $67 million. Net cash provided by operating activities was $901 million due to net income of $101 million adjusted for non-cash items of $768 million, distributions received from unconsolidated entities of $100 million, including $37 million in distributions from the LA Partnership, and changes in working capital items which decreased net cash by $68 million. The working capital changes were primarily driven by an increase in customer and agent receivables, increases in inventory purchases and the timing of vendor payments, partially offset by a federal income tax refund of $125 million received during the first quarter.
Cash flows used for investing activities were $1,408 million, which included payments for property, plant and equipment of $794 million and payments for wireless spectrum licenses of $575 million. Cash payments for property, plant and equipment are lower than the total capital expenditures in the nine months ended September 30, 2022 due primarily to future obligations of certain software license agreements that are recorded as current year capital expenditures but are paid over time.
Cash flows provided by financing activities were $574 million, due primarily to $800 million borrowed under the term loan facilities, $150 million borrowed under the UScellular export credit financing agreement, $110 million borrowed under the UScellular EIP receivables repurchase agreement, and $75 million borrowed under the UScellular revolving credit agreement. These were partially offset by $250 million of repayments on the UScellular receivables securitization agreement, a $75 million repayment on the UScellular revolving credit agreement, a $50 million repayment on the UScellular EIP receivables repurchase agreement, the payment of dividends and repurchase of TDS and UScellular Common Shares.
2021 Commentary
TDS’ Cash, cash equivalents and restricted cash decreased $691 million. Net cash provided by operating activities was $863 million due to net income of $152 million adjusted for non-cash items of $725 million and distributions received from unconsolidated entities of $107 million, including $32 million in distributions from the LA Partnership. This was partially offset by changes in working capital items which decreased net cash by $121 million. The working capital changes were primarily influenced by a decrease to accrued taxes and the timing of vendor payments and an increase in customer and agent receivables.
Cash flows used for investing activities were $2,006 million, which included payments for wireless spectrum licenses of $1,283 million and payments for property, plant and equipment of $726 million.
Cash flows provided by financing activities were $452 million, due primarily to the issuance of $1,110 million of TDS Preferred Shares, the issuance of $500 million of 5.5% UScellular Senior Notes, $500 million borrowed under the UScellular receivables securitization agreement, $217 million borrowed under the UScellular term loan, $125 million borrowed under the TDS revolving credit agreement, and $76 million borrowed under the TDS term loan. These were partially offset by the redemption of $641 million of TDS Senior Notes, $917 million of UScellular Senior Notes, a $200 million repayment on the receivables securitization agreement, a $125 million repayment on the TDS revolving credit agreement, the repurchase of TDS and UScellular Common Shares, the payment of dividends and the payment of debt and equity issuance costs.
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Consolidated Balance Sheet Analysis
The following discussion addresses certain captions in the consolidated balance sheet and changes therein. This discussion is intended to highlight the significant changes and is not intended to fully reconcile the changes. Notable balance sheet changes during 2022 were as follows:
Inventory, net
Inventory, net increased $74 million due primarily to increased inventory levels to support new promotions and ensure adequate device supply.
Income taxes receivable
Income taxes receivable decreased $124 million due primarily to a federal income tax refund received related to the 2020 net operating loss carryback enabled by the CARES Act.
Accrued compensation
Accrued compensation decreased $30 million due primarily to associate bonus payments in March 2022.
Other current liabilities
Other current liabilities increased $176 million due primarily to an increase in the short-term accrual for Auction 107 relocation fees, net borrowings under the EIP receivables repurchase agreement and accruals related to software license agreements.
Long-term debt, net
The following table presents the components of the $680 million increase in Long-term debt, net:
Long-term debt, net
(Dollars in millions)
Balance at December 31, 2021 $ 2,928
Borrowings under Revolving Credit Agreements 75
Borrowings under Term Loan Agreements 800
Borrowings under Export Credit Financing Agreement 150
Repayments under Revolving Credit Agreements (75)
Repayments under Receivables Securitization Agreement (250)
Other (20)
Balance at September 30, 2022 $ 3,608
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Supplemental Information Relating to Non-GAAP Financial Measures
TDS sometimes uses information derived from consolidated financial information but not presented in its financial statements prepared in accordance with GAAP to evaluate the performance of its business. Specifically, TDS has referred to the following measures in this Form 10-Q Report:
EBITDA
Adjusted EBITDA
Adjusted OIBDA
Free cash flow

These measures are considered “non-GAAP financial measures” under U.S. Securities and Exchange Commission Rules. Following are explanations of each of these measures.
EBITDA, Adjusted EBITDA and Adjusted OIBDA
EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income (loss) adjusted for the items set forth in the reconciliation below. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income (loss) 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 below are non-recurring, infrequent or unusual; such items may occur in the future.
Adjusted EBITDA is a segment measure reported to the chief operating decision maker for purposes of assessing the segments' performance. See Note 13 — Business Segment Information in the Notes to Consolidated Financial Statements for additional information.
Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to applicable GAAP income measures 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 below 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 following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income (loss) and Operating income (loss).
Three Months Ended
September 30,
Nine Months Ended
September 30,
TDS - CONSOLIDATED 2022 2021 2022 2021
(Dollars in millions)
Net income (loss) (GAAP) $ (10) $ 47 $ 101 $ 152
Add back:
Income tax expense (benefit) (3) 19 62 38
Interest expense 46 54 118 193
Depreciation, amortization and accretion 234 213 691 670
EBITDA (Non-GAAP) 267 333 972 1,053
Add back or deduct:
Loss on impairment of licenses 3
(Gain) loss on asset disposals, net 4 8 13 17
(Gain) loss on sale of business and other exit costs, net (1) (1)
Adjusted EBITDA (Non-GAAP) 271 341 987 1,069
Deduct:
Equity in earnings of unconsolidated entities 40 48 123 138
Interest and dividend income 4 3 10 9
Other, net 1 (1)
Adjusted OIBDA (Non-GAAP) 227 290 853 923
Deduct:
Depreciation, amortization and accretion 234 213 691 670
Loss on impairment of licenses 3
(Gain) loss on asset disposals, net 4 8 13 17
(Gain) loss on sale of business and other exit costs, net (1) (1)
Operating income (loss) (GAAP) $ (11) $ 69 $ 147 $ 237
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Three Months Ended
September 30,
Nine Months Ended
September 30,
UScellular 2022 2021 2022 2021
(Dollars in millions)
Net income (loss) (GAAP) $ (12) $ 35 $ 62 $ 132
Add back:
Income tax expense (benefit) (3) 14 46 31
Interest expense 42 45 115 144
Depreciation, amortization and accretion 177 160 520 510
EBITDA (Non-GAAP) 204 254 743 817
Add back or deduct:
Loss on impairment of licenses 3
(Gain) loss on asset disposals, net 1 8 9 15
(Gain) loss on sale of business and other exit costs, net (1) (1)
Adjusted EBITDA (Non-GAAP) 205 262 754 831
Deduct:
Equity in earnings of unconsolidated entities 40 48 122 137
Interest and dividend income 2 1 5 5
Adjusted OIBDA (Non-GAAP) 163 213 627 689
Deduct:
Depreciation, amortization and accretion 177 160 520 510
Loss on impairment of licenses 3
(Gain) loss on asset disposals, net 1 8 9 15
(Gain) loss on sale of business and other exit costs, net (1) (1)
Operating income (loss) (GAAP) $ (15) $ 45 $ 96 $ 165
Three Months Ended
September 30,
Nine Months Ended
September 30,
TDS TELECOM
2022 2021 2022 2021
(Dollars in millions)
Net income (GAAP)
$ 10 $ 21 $ 51 $ 68
Add back:
Income tax expense 3 7 18 22
Interest expense (2) (1) (5) (3)
Depreciation, amortization and accretion 53 49 158 147
EBITDA (Non-GAAP) 63 76 222 233
Add back or deduct:
(Gain) loss on asset disposals, net 3 1 4 2
Adjusted EBITDA (Non-GAAP) 66 77 226 235
Deduct:
Interest and dividend income 1 1 1
Other, net 1 (1)
Adjusted OIBDA (Non-GAAP) 66 77 224 235
Deduct:
Depreciation, amortization and accretion 53 49 158 147
(Gain) loss on asset disposals, net 3 1 4 2
Operating income (GAAP)
$ 10 $ 27 $ 61 $ 87
Numbers may not foot due to rounding.
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Free Cash Flow
The following table presents Free cash flow, which is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. Free 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.
Nine Months Ended
September 30,
2022 2021
(Dollars in millions)
Cash flows from operating activities (GAAP) $ 901 $ 863
Less: Cash paid for additions to property, plant and equipment 794 726
Free cash flow (Non-GAAP) $ 107 $ 137
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Application of Critical Accounting Policies and Estimates
TDS prepares its consolidated financial statements in accordance with GAAP. TDS’ significant accounting policies are discussed in detail in Note 1 — Summary of Significant Accounting Policies, Note 2 — Revenue Recognition and Note 10 — Leases in the Notes to Consolidated Financial Statements and TDS’ Application of Critical Accounting Policies and Estimates is discussed in detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in TDS’ Form 10-K for the year ended December 31, 2021.
Regulatory Matters
Spectrum Auctions
On March 2, 2020, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.5 GHz band (Auction 105). On September 2, 2020, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 243 wireless spectrum licenses for a purchase price of $14 million. On July 15, 2022, the FCC released a Consent Decree related to its spectrum aggregation and ownership attribution rules in which UScellular agreed to relinquish its rights to 27 wireless spectrum licenses awarded in Auction 105 and subsequently received a full refund of $2 million. The remaining 216 wireless spectrum licenses were granted by the FCC on July 26, 2022.
On August 7, 2020, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.7-3.98 GHz bands (Auction 107). On February 24, 2021, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 254 wireless spectrum licenses for $1,283 million. UScellular paid $30 million of this amount in 2020 and the remainder in March 2021. The wireless spectrum licenses from Auction 107 were granted by the FCC in July 2021. Additionally, UScellular expects to be obligated to pay approximately $185 million in total from 2021 through 2024 related to relocation costs and accelerated relocation incentive payments. Such additional costs were accrued and capitalized at the time the licenses were granted, and adjusted as necessary if the estimated obligation changes. UScellular paid $36 million and $8 million related to the additional costs in October 2021 and September 2022, respectively. The spectrum must be cleared by incumbent providers before UScellular can access it. UScellular does not expect to have access to this spectrum until late 2023.
On June 9, 2021, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110). On January 14, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses for $580 million. UScellular paid $20 million of this amount in 2021 and the remainder in January and February 2022. The wireless spectrum licenses from Auction 110 were granted by the FCC on May 4, 2022.
On March 21, 2022, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 2.5 GHz band (Auction 108). On September 1, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 34 wireless spectrum licenses for $3 million. The wireless spectrum licenses from Auction 108 have not yet been granted by the FCC.
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Private Securities Litigation Reform Act of 1995
Safe Harbor Cautionary Statement

This Form 10-Q, including exhibits, contains statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities, events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, but are not limited to, those set forth below, as more fully described under “Risk Factors” in TDS’ Form 10-K for the year ended December 31, 2021 and in this Form 10-Q. Each of the following risks could have a material adverse effect on TDS’ business, financial condition or results of operations. However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. You should carefully consider the Risk Factors in TDS’ Form 10-K for the year ended December 31, 2021, the following factors and other information contained in, or incorporated by reference into, this Form 10-Q to understand the material risks relating to TDS’ business, financial condition or results of operations.
Operational Risk Factors
Intense competition involving products, services, pricing, promotions and network speed and technologies could adversely affect TDS’ revenues or increase its costs to compete.
Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which could have an adverse effect on TDS’ business, financial condition or results of operations.
A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations.
An inability to attract people of outstanding talent throughout all levels of the organization, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on TDS' business, financial condition or results of operations.
TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.
Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations.
Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business.
Complexities associated with deploying new technologies present substantial risk and TDS’ investments in unproven technologies may not produce the benefits that TDS expects.
Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of TDS’ businesses could have an adverse effect on TDS’ business, financial condition or results of operations.
A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations.
Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operational difficulties, including supply chain disruptions, of key suppliers or independent agents and third party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations.
A failure by TDS to maintain flexible and capable telecommunication networks or information technologies, or a material disruption thereof, could have an adverse effect on TDS’ business, financial condition or results of operations.
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Financial Risk Factors
Uncertainty in TDS’ future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, other changes in TDS’ performance or market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, and/or reduce or cease share repurchases and/or the payment of dividends.
TDS has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.
TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry. Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry.
TDS has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on TDS’ financial condition or results of operations.
Regulatory, Legal and Governance Risk Factors
Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect TDS’ business, financial condition or results of operations.
TDS receives significant regulatory support, and is also subject to numerous surcharges and fees from federal, state and local governments – the applicability and the amount of the support and fees are subject to great uncertainty, including the ability to pass through certain fees to customers, and this uncertainty could have an adverse effect on TDS’ business, financial condition or results of operations.
Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations.
The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices or frequencies used by other industries, could have an adverse effect on TDS’ wireless business, financial condition or results of operations.
Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations.
Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences.
General Risk Factors
TDS has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations.
Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations.
The impact of public health emergencies, such as the COVID-19 pandemic, on TDS' business is uncertain, but depending on duration and severity could have a material adverse effect on TDS' business, financial condition or results of operations.
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Risk Factors
In addition to the information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in TDS’ Form 10-K for the year ended December 31, 2021, which could materially affect TDS’ business, financial condition or future results. The risks described in this Form 10-Q and the Form 10-K for the year ended December 31, 2021, may not be the only risks that could affect TDS. Additional unidentified or unrecognized risks and uncertainties could materially adversely affect TDS’ business, financial condition and/or operating results. Subject to the foregoing, TDS has not identified for disclosure any material changes to the risk factors as previously disclosed in TDS’ Form 10-K for the year ended December 31, 2021.
Quantitative and Qualitative Disclosures about Market Risk
Market Risk
As of September 30, 2022, approximately 60% of TDS' long-term debt was in fixed-rate senior notes and approximately 40% in variable-rate debt. Fluctuations in market interest rates can lead to volatility in the fair value of fixed-rate notes and interest expense on variable-rate debt.
The following table presents the scheduled principal payments on long-term debt, lease obligations, and the related weighted average interest rates by maturity dates at September 30, 2022.
Principal Payments Due by Period
Long-Term Debt Obligations 1
Weighted-Avg. Interest Rates on Long-Term Debt Obligations 2
(Dollars in millions)
Remainder of 2022 $ 3 5.3 %
2023 18 4.9 %
2024 18 4.9 %
2025 18 4.9 %
2026 288 4.3 %
Thereafter 3,152 5.7 %
Total $ 3,497 5.6 %
1 The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debt instruments, unamortized discounts related to UScellular's 6.7% Senior Notes, and outstanding borrowings under the receivables securitization agreement, which principal repayments are not scheduled but are instead based on actual receivable collections.
2 Represents the weighted average stated interest rates at September 30, 2022, for debt maturing in the respective periods.
See Note 3 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information related to the fair value of TDS’ Long-term debt as of September 30, 2022.
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Financial Statements

Telephone and Data Systems, Inc.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 2021
(Dollars and shares in millions, except per share amounts)
Operating revenues
Service $ 1,061 $ 1,065 $ 3,186 $ 3,156
Equipment and product sales 331 263 870 801
Total operating revenues 1,392 1,328 4,056 3,957
Operating expenses
Cost of services (excluding Depreciation, amortization and accretion reported below) 326 327 936 950
Cost of equipment and products 377 282 967 852
Selling, general and administrative 462 429 1,300 1,232
Depreciation, amortization and accretion 234 213 691 670
Loss on impairment of licenses 3
(Gain) loss on asset disposals, net 4 8 13 17
(Gain) loss on sale of business and other exit costs, net ( 1 ) ( 1 )
Total operating expenses 1,403 1,259 3,909 3,720
Operating income (loss) ( 11 ) 69 147 237
Investment and other income (expense)
Equity in earnings of unconsolidated entities 40 48 123 138
Interest and dividend income 4 3 10 9
Interest expense ( 46 ) ( 54 ) ( 118 ) ( 193 )
Other, net 1 ( 1 )
Total investment and other income (expense) ( 2 ) ( 3 ) 16 ( 47 )
Income (loss) before income taxes ( 13 ) 66 163 190
Income tax expense (benefit) ( 3 ) 19 62 38
Net income (loss) ( 10 ) 47 101 152
Less: Net income (loss) attributable to noncontrolling interests, net of tax ( 2 ) 7 14 26
Net income (loss) attributable to TDS shareholders ( 8 ) 40 87 126
TDS Preferred Share dividends 17 12 52 21
Net income (loss) attributable to TDS common shareholders $ ( 25 ) $ 28 $ 35 $ 105
Basic weighted average shares outstanding 114 115 114 115
Basic earnings (loss) per share attributable to TDS common shareholders $ ( 0.22 ) $ 0.24 $ 0.31 $ 0.91
Diluted weighted average shares outstanding 114 116 115 116
Diluted earnings (loss) per share attributable to TDS common shareholders $ ( 0.22 ) $ 0.24 $ 0.30 $ 0.89
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 2021
(Dollars in millions)
Net income (loss) $ ( 10 ) $ 47 $ 101 $ 152
Net change in accumulated other comprehensive income
Change related to retirement plan
Amounts included in net periodic benefit cost for the period
Amortization of prior service cost 1 1 2 2
Comprehensive income (loss) ( 9 ) 48 103 154
Less: Net income (loss) attributable to noncontrolling interests, net of tax ( 2 ) 7 14 26
Comprehensive income (loss) attributable to TDS shareholders $ ( 7 ) $ 41 $ 89 $ 128
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2022 2021
(Dollars in millions)
Cash flows from operating activities
Net income $ 101 $ 152
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion 691 670
Bad debts expense 98 36
Stock-based compensation expense 32 35
Deferred income taxes, net 48 55
Equity in earnings of unconsolidated entities ( 123 ) ( 138 )
Distributions from unconsolidated entities 100 107
Loss on impairment of licenses 3
(Gain) loss on asset disposals, net 13 17
(Gain) loss on sale of business and other exit costs, net ( 1 ) ( 1 )
Other operating activities 7 51
Changes in assets and liabilities from operations
Accounts receivable ( 59 ) 26
Equipment installment plans receivable ( 131 ) ( 44 )
Inventory ( 74 ) 12
Accounts payable 16 ( 56 )
Customer deposits and deferred revenues 30 13
Accrued taxes 136 ( 43 )
Accrued interest 10 4
Other assets and liabilities 4 ( 33 )
Net cash provided by operating activities 901 863
Cash flows from investing activities
Cash paid for additions to property, plant and equipment ( 794 ) ( 726 )
Cash paid for intangible assets ( 603 ) ( 1,268 )
Cash received from investments 3
Cash received from divestitures and exchanges 8 2
Advance payments for license acquisitions ( 20 )
Other investing activities ( 19 ) 3
Net cash used in investing activities ( 1,408 ) ( 2,006 )
Cash flows from financing activities
Issuance of long-term debt 1,027 1,418
Repayment of long-term debt ( 330 ) ( 1,884 )
Issuance of short-term debt 110
Repayment of short-term debt ( 50 )
Issuance of TDS Preferred Shares 1,110
TDS Common Shares reissued for benefit plans, net of tax payments ( 4 ) ( 5 )
UScellular Common Shares reissued for benefit plans, net of tax payments ( 5 ) ( 16 )
Repurchase of TDS Common Shares ( 25 ) ( 4 )
Repurchase of UScellular Common Shares ( 28 ) ( 21 )
Dividends paid to TDS shareholders ( 114 ) ( 81 )
Payment of debt and equity issuance costs ( 2 ) ( 59 )
Distributions to noncontrolling interests ( 3 ) ( 2 )
Other financing activities ( 2 ) ( 4 )
Net cash provided by financing activities 574 452
Net increase (decrease) in cash, cash equivalents and restricted cash 67 ( 691 )
Cash, cash equivalents and restricted cash
Beginning of period 414 1,452
End of period $ 481 $ 761
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Assets
(Unaudited)
September 30, 2022 December 31, 2021
(Dollars in millions)
Current assets
Cash and cash equivalents $ 442 $ 367
Accounts receivable
Customers and agents, less allowances of $ 70 and $ 60 , respectively
1,070 1,058
Other, less allowances of $ 2 and $ 2 , respectively
111 93
Inventory, net 252 178
Prepaid expenses 94 103
Income taxes receivable 60 184
Other current assets 57 61
Total current assets 2,086 2,044
Assets held for sale 29 18
Licenses 4,689 4,097
Goodwill 547 547
Other intangible assets, net of accumulated amortization of $ 106 and $ 91 , respectively
210 197
Investments in unconsolidated entities 503 479
Property, plant and equipment
In service and under construction 14,928 14,265
Less: Accumulated depreciation and amortization 10,281 9,904
Property, plant and equipment, net 4,647 4,361
Operating lease right-of-use assets 1,010 1,040
Other assets and deferred charges 758 710
Total assets 1
$ 14,479 $ 13,493
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Liabilities and Equity
(Unaudited)
September 30, 2022 December 31, 2021
(Dollars and shares in millions, except per share amounts)
Current liabilities
Current portion of long-term debt $ 16 $ 6
Accounts payable 506 481
Customer deposits and deferred revenues 266 236
Accrued interest 20 10
Accrued taxes 48 45
Accrued compensation 107 137
Short-term operating lease liabilities 146 141
Other current liabilities 300 124
Total current liabilities 1,409 1,180
Deferred liabilities and credits
Deferred income tax liability, net 967 921
Long-term operating lease liabilities 926 960
Other deferred liabilities and credits 867 759
Long-term debt, net 3,608 2,928
Commitments and contingencies
Noncontrolling interests with redemption features 12 11
Equity
TDS shareholders’ equity
Series A Common and Common Shares
Authorized 290 shares ( 25 Series A Common and 265 Common Shares)
Issued 133 shares ( 7 Series A Common and 126 Common Shares)
Outstanding 114 shares ( 7 Series A Common and 107 Common Shares) and 115 shares ( 7 Series A Common and 108 Common Shares), respectively
Par Value ($ 0.01 per share)
1 1
Capital in excess of par value 2,527 2,496
Preferred Shares, 0.279 shares authorized, par value $ 0.01 per share, .0444 shares outstanding ( .0168 Series UU and .0276 Series VV)
1,074 1,074
Treasury shares, at cost, 19 and 18 Common Shares, respectively
( 468 ) ( 461 )
Accumulated other comprehensive income 7 5
Retained earnings 2,763 2,812
Total TDS shareholders' equity 5,904 5,927
Noncontrolling interests 786 807
Total equity 6,690 6,734
Total liabilities and equity 1
$ 14,479 $ 13,493
The accompanying notes are an integral part of these consolidated financial statements.
1 The consolidated total assets as of September 30, 2022 and December 31, 2021, include assets held by consolidated variable interest entities (VIEs) of $ 1,240 million and $ 1,456 million, respectively, which are not available to be used to settle the obligations of TDS. The consolidated total liabilities as of September 30, 2022 and December 31, 2021, include certain liabilities of consolidated VIEs of $ 21 million for which the creditors of the VIEs have no recourse to the general credit of TDS. See Note 11 — Variable Interest Entities for additional information.
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Telephone and Data Systems, Inc.
Consolidated Statement of Changes in Equity
(Unaudited)
TDS Shareholders
Series A
Common and
Common
shares
Capital in
excess of
par value
Preferred Shares
Treasury
shares
Accumulated
other
comprehensive
income
Retained
earnings
Total TDS
shareholders'
equity
Noncontrolling
interests
Total equity
(Dollars in millions, except per share amounts)
June 30, 2022 $ 1 $ 2,511 $ 1,074 $ ( 463 ) $ 6 $ 2,810 $ 5,939 $ 804 $ 6,743
Net income (loss) attributable to TDS shareholders ( 8 ) ( 8 ) ( 8 )
Net income (loss) attributable to noncontrolling interests classified as equity ( 1 ) ( 1 )
Other comprehensive income 1 1 1
TDS Common and Series A Common share dividends ($ 0.180 per share)
( 21 ) ( 21 ) ( 21 )
TDS Preferred share dividends ($ 414 per Series UU share and $ 375 per Series VV share)
( 17 ) ( 17 ) ( 17 )
Repurchase of Common Shares ( 5 ) ( 5 ) ( 5 )
Dividend reinvestment plan 1 ( 1 )
Incentive and compensation plans
5 5 5
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans
10 10 ( 16 ) ( 6 )
Distributions to noncontrolling interests
( 1 ) ( 1 )
September 30, 2022 $ 1 $ 2,527 $ 1,074 $ ( 468 ) $ 7 $ 2,763 $ 5,904 $ 786 $ 6,690

The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Changes in Equity
(Unaudited)
TDS Shareholders
Series A
Common and
Common
shares
Capital in
excess of
par value
Preferred Shares
Treasury
shares
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total TDS
shareholders'
equity
Noncontrolling
interests
Total equity
(Dollars in millions, except per share amounts)
June 30, 2021 $ 1 $ 2,462 $ 406 $ ( 458 ) $ ( 2 ) $ 2,812 $ 5,221 $ 836 $ 6,057
Net income attributable to TDS shareholders
40 40 40
Net income attributable to noncontrolling interests classified as equity
7 7
TDS Common and Series A Common share dividends ($ 0.175 per share)
( 20 ) ( 20 ) ( 20 )
Issuance of TDS Preferred Shares, net of costs 668 668 668
TDS Preferred share dividends ($ 414 per Series UU share and $ 183 per Series VV share)
( 12 ) ( 12 ) ( 12 )
Repurchase of Common Shares ( 1 ) ( 1 ) ( 1 )
Dividend reinvestment plan
( 1 ) ( 1 ) ( 1 )
Incentive and compensation plans
3 3 3
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans
13 13 ( 26 ) ( 13 )
September 30, 2021 $ 1 $ 2,478 $ 1,074 $ ( 459 ) $ ( 2 ) $ 2,819 $ 5,911 $ 817 $ 6,728

The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Changes in Equity
(Unaudited)
TDS Shareholders
Series A
Common and
Common
shares
Capital in
excess of
par value
Preferred Shares
Treasury
shares
Accumulated
other
comprehensive
income
Retained
earnings
Total TDS
shareholders'
equity
Noncontrolling
interests
Total equity
(Dollars in millions, except per share amounts)
December 31, 2021 $ 1 $ 2,496 $ 1,074 $ ( 461 ) $ 5 $ 2,812 $ 5,927 $ 807 $ 6,734
Net income attributable to TDS shareholders
87 87 87
Net income attributable to noncontrolling interests classified as equity
13 13
Other comprehensive income 2 2 2
TDS Common and Series A Common share dividends ($ 0.540 per share)
( 62 ) ( 62 ) ( 62 )
TDS Preferred share dividends ($ 1,242 per Series UU share and $ 1,125 per Series VV share)
( 52 ) ( 52 ) ( 52 )
Repurchase of Common Shares ( 26 ) ( 26 ) ( 26 )
Dividend reinvestment plan 1 2 ( 1 ) 2 2
Incentive and compensation plans
14 17 ( 21 ) 10 10
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans
16 16 ( 31 ) ( 15 )
Distributions to noncontrolling interests
( 3 ) ( 3 )
September 30, 2022 $ 1 $ 2,527 $ 1,074 $ ( 468 ) $ 7 $ 2,763 $ 5,904 $ 786 $ 6,690
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Changes in Equity
(Unaudited)
TDS Shareholders
Series A
Common and
Common
shares
Capital in
excess of
par value
Preferred Shares
Treasury
shares
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total TDS
shareholders'
equity
Noncontrolling
interests
Total equity
(Dollars in millions, except per share amounts)
December 31, 2020 $ 1 $ 2,482 $ $ ( 477 ) $ ( 4 ) $ 2,802 $ 4,804 $ 789 $ 5,593
Net income attributable to TDS shareholders
126 126 126
Net income attributable to noncontrolling interests classified as equity
26 26
Other comprehensive income 2 2 2
TDS Common and Series A Common share dividends ($ 0.525 per share)
( 60 ) ( 60 ) ( 60 )
Issuance of TDS Preferred Shares, net of costs 1,074 1,074 1,074
TDS Preferred share dividends ($ 966 per Series UU share and $ 183 per Series VV share)
( 21 ) ( 21 ) ( 21 )
Repurchase of Common Shares ( 5 ) ( 5 ) ( 5 )
Dividend reinvestment plan
2 ( 2 )
Incentive and compensation plans
15 21 ( 26 ) 10 10
Adjust investment in subsidiaries for repurchases, issuances and other compensation plans
( 19 ) ( 19 ) 4 ( 15 )
Distributions to noncontrolling interests
( 2 ) ( 2 )
September 30, 2021 $ 1 $ 2,478 $ 1,074 $ ( 459 ) $ ( 2 ) $ 2,819 $ 5,911 $ 817 $ 6,728

The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Notes to Consolidated Financial Statements
Note 1 Basis of Presentation
The accounting policies of Telephone and Data Systems, Inc. (TDS) conform to accounting principles generally accepted in the United States of America (GAAP) as set forth in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of TDS and subsidiaries in which it has a controlling financial interest, including TDS’ 83 %-owned subsidiary, United States Cellular Corporation (UScellular) and TDS’ wholly-owned subsidiary, TDS Telecommunications LLC (TDS Telecom). In addition, the consolidated financial statements include certain entities in which TDS has a variable interest that requires consolidation under GAAP. Intercompany accounts and transactions have been eliminated.
TDS’ business segments reflected in this Quarterly Report on Form 10-Q for the period ended September 30, 2022, are UScellular and TDS Telecom. TDS’ non-reportable other business activities are presented as “Corporate, Eliminations and Other”, which includes the operations of TDS’ wholly-owned hosted and managed services (HMS) subsidiary, which operates under the OneNeck IT Solutions brand, and its wholly-owned subsidiary Suttle-Straus, Inc. (Suttle-Straus). HMS’ and Suttle-Straus’ financial results were not significant to TDS’ operations. All of TDS’ segments operate only in the United States. See Note 13 — Business Segment Information for summary financial information on each business segment.
The unaudited consolidated financial statements included herein have been prepared by TDS pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, TDS believes that the disclosures included herein are adequate to make the information presented not misleading. Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in TDS’ Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2021.
The accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring items, unless otherwise disclosed) necessary for the fair statement of TDS’ financial position as of September 30, 2022 and December 31, 2021 and its results of operations, comprehensive income and changes in equity for the three and nine months ended September 30, 2022 and 2021, and its cash flows for the nine months ended September 30, 2022 and 2021. These results are not necessarily indicative of the results to be expected for the full year. TDS has not changed its significant accounting and reporting policies from those disclosed in its Form 10-K for the year ended December 31, 2021.
Software License Agreements
Certain software licenses are recorded as acquisitions of property, plant and equipment and the incurrence of a liability to the extent that the license fees are not fully paid at acquisition, and are treated as non-cash activity in the Consolidated Statement of Cash Flows. Such acquisitions of software licenses that are not reflected as Cash paid for additions to property, plant and equipment were $ 135 million and $ 16 million for the nine months ended September 30, 2022 and 2021, respectively.
Restricted Cash
TDS presents restricted cash with cash and cash equivalents in the Consolidated Statement of Cash Flows. Restricted cash primarily consists of balances required under the receivables securitization agreement. See Note 10 — Debt for additional information related to the receivables securitization agreement. The following table provides a reconciliation of Cash and cash equivalents and restricted cash reported in the Consolidated Balance Sheet to the total of the amounts in the Consolidated Statement of Cash Flows.
September 30, 2022 December 31, 2021
(Dollars in millions)
Cash and cash equivalents $ 442 $ 367
Restricted cash included in Other current assets 39 47
Cash, cash equivalents and restricted cash in the statement of cash flows $ 481 $ 414
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Note 2 Revenue Recognition
Disaggregation of Revenue
In the following table, TDS' revenues are disaggregated by type of service, which represents the relevant categorization of revenues for TDS' reportable segments, and timing of recognition. Service revenues are recognized over time and Equipment and product sales are point in time.
Three Months Ended September 30, 2022 UScellular TDS Telecom Corporate, Eliminations and Other Total
(Dollars in millions)
Revenues from contracts with customers:
Type of service:
Retail service $ 696 $ $ $ 696
Inbound roaming 17 17
Residential 170 170
Commercial 43 43
Wholesale 42 42
Other service 45 18 63
Service revenues from contracts with customers 758 255 18 1,031
Equipment and product sales 302 29 331
Total revenues from contracts with customers 1,060 255 47 1,362
Operating lease income 23 1 6 30
Total operating revenues $ 1,083 $ 256 $ 53 $ 1,392

Three Months Ended September 30, 2021 UScellular TDS Telecom Corporate, Eliminations and Other Total
(Dollars in millions)
Revenues from contracts with customers:
Type of service:
Retail service 1,2
$ 697 $ $ $ 697
Inbound roaming 30 30
Residential 162 162
Commercial 45 45
Wholesale 43 43
Other service 1
40 19 59
Service revenues from contracts with customers 767 251 19 1,037
Equipment and product sales 228 35 263
Total revenues from contracts with customers 995 251 54 1,300
Operating lease income 21 1 6 28
Total operating revenues $ 1,016 $ 252 $ 60 $ 1,328
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Nine Months Ended September 30, 2022 UScellular TDS Telecom Corporate, Eliminations and Other Total
(Dollars in millions)
Revenues from contracts with customers:
Type of service:
Retail service $ 2,098 $ $ $ 2,098
Inbound roaming 56 56
Residential 500 500
Commercial 130 130
Wholesale 129 129
Other service 129 54 183
Service revenues from contracts with customers 2,283 760 54 3,096
Equipment and product sales 769 1 100 870
Total revenues from contracts with customers 3,052 761 154 3,966
Operating lease income 68 3 19 90
Total operating revenues $ 3,120 $ 763 $ 173 $ 4,056

Nine Months Ended September 30, 2021 UScellular TDS Telecom Corporate, Eliminations and Other Total
(Dollars in millions)
Revenues from contracts with customers:
Type of service:
Retail service 1,2
$ 2,064 $ $ $ 2,064
Inbound roaming 86 86
Residential 479 479
Commercial 138 138
Wholesale 132 132
Other service 1
122 53 175
Service revenues from contracts with customers 2,272 749 53 3,074
Equipment and product sales 720 1 80 801
Total revenues from contracts with customers 2,992 750 133 3,875
Operating lease income 61 2 19 82
Total operating revenues $ 3,053 $ 752 $ 152 $ 3,957
Numbers may not foot due to rounding.
1 For the three and nine months ended September 30, 2021, amounts have been adjusted to reclassify $ 2 million and $ 5 million, respectively, of Internet of Things (IoT) and Reseller revenues from Retail service to Other service.
2 During the three months ended September 30, 2021, UScellular recorded a $ 9 million out-of-period error related to the timing of recognition of regulatory fee billings. This adjustment had the impact of increasing Service revenue by $ 9 million for the three and nine months ended September 30, 2021. UScellular determined that this adjustment was not material to any of the periods impacted.
Contract Balances
The following table provides balances for contract assets from contracts with customers, which are recorded in Other current assets and Other assets and deferred charges in the Consolidated Balance Sheet, and contract liabilities from contracts with customers, which are recorded in Customer deposits and deferred revenues and Other deferred liabilities and credits in the Consolidated Balance Sheet.
September 30, 2022 December 31, 2021
(Dollars in millions)
Contract assets $ 11 $ 10
Contract liabilities $ 355 $ 289
Revenue recognized related to contract liabilities existing at January 1, 2022 was $ 193 million for the nine months ended September 30, 2022.
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Transaction price allocated to the remaining performance obligations
The following table includes estimated service revenues expected to be recognized related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. These estimates represent service revenues to be recognized when services are delivered to customers pursuant to service plan contracts and under certain roaming agreements with other carriers. These estimates are based on contracts in place as of September 30, 2022 and may vary from actual results. As practical expedients, revenue related to contracts of less than one year, generally month-to-month contracts, and contracts with a fixed per-unit price and variable quantity, are excluded from these estimates.
Service Revenues
(Dollars in millions)
Remainder of 2022 $ 203
2023 239
Thereafter 219
Total
$ 661
Contract Cost Assets
TDS expects that commission fees paid as a result of obtaining contracts are recoverable and therefore TDS defers and amortizes these costs. As a practical expedient, costs with an amortization period of one year or less are expensed as incurred. TDS also incurs fulfillment costs, such as installation costs, where there is an expectation that a future benefit will be realized. Deferred commission fees and fulfillment costs are amortized based on the timing of transfer of the goods or services to which the assets relate, typically the contract term. Contract cost asset balances, which are recorded in Other assets and deferred charges in the Consolidated Balance Sheet, were as follows:
September 30, 2022 December 31, 2021
(Dollars in millions)
Costs to obtain contracts
Sales commissions $ 141 $ 139
Fulfillment costs
Installation costs 8 10
Total contract cost assets $ 149 $ 149
Amortization of contract cost assets was $ 28 million and $ 85 million for the three and nine months ended September 30, 2022, respectively, and $ 29 million and $ 87 million for the three and nine months ended September 30, 2021, respectively, and was included in Selling, general and administrative expenses and Cost of services expenses.
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Note 3 Fair Value Measurements
As of September 30, 2022 and December 31, 2021, TDS did not have any material financial or nonfinancial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP.
The provisions of GAAP establish a fair value hierarchy that contains three levels for inputs used in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.
TDS has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.
Level within the Fair Value Hierarchy September 30, 2022 December 31, 2021
Book Value Fair Value Book Value Fair Value
(Dollars in millions)
Long-term debt
Retail 2 $ 1,500 $ 1,155 $ 1,500 $ 1,594
Institutional 2 536 399 535 659
Other 2 1,631 1,631 944 944
Long-term debt excludes lease obligations, the current portion of Long-term debt and debt financing costs. The fair value of “Retail” Long-term debt was estimated using market prices for UScellular Senior Notes, which are traded on the New York Stock Exchange. TDS’ “Institutional” debt consists of UScellular’s 6.7 % Senior Notes which are traded over the counter. TDS’ “Other” debt consists of term loan credit agreements, receivables securitization agreement and in 2022, export credit financing agreement. TDS estimated the fair value of its Institutional and Other debt through a discounted cash flow analysis using the interest rates or estimated yield to maturity for each borrowing, which ranged from 3.70 % to 8.50 % and 1.31 % to 4.40 % at September 30, 2022 and December 31, 2021, respectively.
The fair values of Cash and cash equivalents, restricted cash and short-term debt approximate their book values due to the short-term nature of these financial instruments.
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Note 4 Equipment Installment Plans
UScellular sells devices to customers under equipment installment plans over a specified time period. For certain equipment installment plans, after a specified period of time or amount of payments, the customer may have the right to upgrade to a new device and have the remaining unpaid equipment installment contract balance waived, subject to certain conditions, including trading in the original device in good working condition and signing a new equipment installment contract.
The following table summarizes equipment installment plan receivables.
September 30, 2022 December 31, 2021
(Dollars in millions)
Equipment installment plan receivables, gross $ 1,161 $ 1,085
Allowance for credit losses ( 87 ) ( 72 )
Equipment installment plan receivables, net $ 1,074 $ 1,013
Net balance presented in the Consolidated Balance Sheet as:
Accounts receivable — Customers and agents (Current portion) $ 642 $ 639
Other assets and deferred charges (Non-current portion) 432 374
Equipment installment plan receivables, net $ 1,074 $ 1,013
UScellular uses various inputs, including internal data, information from credit bureaus and other sources, to evaluate the credit profiles of its customers. From this evaluation, a credit class is assigned to the customer that determines the number of eligible lines, the amount of credit available, and the down payment requirement, if any. These credit classes are grouped into four credit categories: lowest risk, lower risk, slight risk and higher risk. A customer's assigned credit class is reviewed periodically and a change is made, if appropriate. An equipment installment plan billed amount is considered past due if not paid within 30 days. The balance and aging of the equipment installment plan receivables on a gross basis by credit category were as follows:
September 30, 2022 December 31, 2021
Lowest Risk
Lower Risk
Slight Risk
Higher Risk
Total
Lowest Risk
Lower Risk
Slight Risk
Higher Risk
Total
(Dollars in millions)
Unbilled $ 974 $ 93 $ 23 $ 5 $ 1,095 $ 896 $ 94 $ 24 $ 5 $ 1,019
Billed — current 39 5 1 45 40 5 1 1 47
Billed — past due 11 6 3 1 21 10 6 2 1 19
Total $ 1,024 $ 104 $ 27 $ 6 $ 1,161 $ 946 $ 105 $ 27 $ 7 $ 1,085
The balance of the equipment installment plan receivables as of September 30, 2022 on a gross basis by year of origination were as follows:
2019 2020 2021 2022
Total
(Dollars in millions)
Lowest Risk $ 1 $ 87 $ 380 $ 556 $ 1,024
Lower Risk 6 40 58 104
Slight Risk 1 6 20 27
Higher Risk 2 4 6
Total $ 1 $ 94 $ 428 $ 638 $ 1,161
Activity for the nine months ended September 30, 2022 and 2021, in the allowance for credit losses for equipment installment plan receivables was as follows:
September 30, 2022 September 30, 2021
(Dollars in millions)
Allowance for credit losses, beginning of period $ 72 $ 78
Bad debts expense 69 21
Write-offs, net of recoveries ( 54 ) ( 29 )
Allowance for credit losses, end of period $ 87 $ 70
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Note 5 Income Taxes
The effective tax rate on Income (loss) before income taxes for the three and nine months ended September 30, 2022 was 24.4 % and 37.7 %, respectively. These effective tax rates reflect a combined rate of federal and state taxes, adjusted for impacts of nondeductible compensation and interest expense. The effective tax rates also varied during the interim periods due to fluctuations in Income (loss) before income taxes.
The effective tax rate on Income (loss) before income taxes for the three and nine months ended September 30, 2021 was 29.3 % and 20.3 %, respectively. The effective tax rate for the nine months ended September 30, 2021 was lower than normal due primarily to the reduction of tax accruals resulting from expirations of state statutes of limitations for prior tax years.
Note 6 Earnings Per Share
Basic earnings (loss) per share attributable to TDS common shareholders is computed by dividing Net income (loss) attributable to TDS common shareholders by the weighted average number of Common Shares outstanding during the period. Diluted earnings (loss) per share attributable to TDS common shareholders is computed by dividing Net income (loss) attributable to TDS common shareholders by the weighted average number of Common Shares outstanding during the period adjusted to include the effects of potentially dilutive securities. Potentially dilutive securities primarily include incremental shares issuable upon the exercise of outstanding stock options and the vesting of performance and restricted stock units.
The amounts used in computing basic and diluted earnings (loss) per share attributable to TDS common shareholders were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 2021
(Dollars and shares in millions, except per share amounts)
Net income (loss) attributable to TDS common shareholders used in basic earnings (loss) per share $ ( 25 ) $ 28 $ 35 $ 105
Adjustments to compute diluted earnings (loss):
Noncontrolling interest adjustment ( 1 ) ( 2 )
Net income (loss) attributable to TDS common shareholders used in diluted earnings (loss) per share $ ( 25 ) $ 27 $ 35 $ 103
Weighted average number of shares used in basic earnings (loss) per share:
Common Shares 107 108 107 108
Series A Common Shares 7 7 7 7
Total 114 115 114 115
Effects of dilutive securities 1 1 1
Weighted average number of shares used in diluted earnings (loss) per share 114 116 115 116
Basic earnings (loss) per share attributable to TDS common shareholders $ ( 0.22 ) $ 0.24 $ 0.31 $ 0.91
Diluted earnings (loss) per share attributable to TDS common shareholders $ ( 0.22 ) $ 0.24 $ 0.30 $ 0.89
Certain Common Shares issuable upon the exercise of stock options or vesting of performance and restricted stock units were not included in weighted average diluted shares outstanding for the calculation of Diluted earnings (loss) per share attributable to TDS common shareholders because their effects were antidilutive. The number of such Common Shares excluded was 4 million for both the three and nine months ended September 30, 2022, and 4 million for both the three and nine months ended September 30, 2021.
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Note 7 Intangible Assets
Activity related to Licenses for the nine months ended September 30, 2022, is presented below:
Licenses
(Dollars in millions)
Balance at December 31, 2021 $ 4,097
Acquisitions 588
Impairment ( 3 )
Transferred to Assets held for sale 1
Exchanges - Licenses received 1
Capitalized interest 5
Balance at September 30, 2022 $ 4,689
In February 2021, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 254 wireless spectrum licenses in the 3.7-3.98 GHz bands (Auction 107) for $ 1,283 million. UScellular paid $ 30 million of this amount in 2020 and the remainder in March 2021. The wireless spectrum licenses from Auction 107 were granted by the FCC in July 2021. Additionally, UScellular expects to be obligated to pay approximately $ 185 million in total from 2021 through 2024 related to relocation costs and accelerated relocation incentive payments. Such additional costs were accrued and capitalized at the time the licenses were granted, and adjusted as necessary if the estimated obligation changes. UScellular paid $ 36 million and $ 8 million related to the additional costs in October 2021 and September 2022, respectively. The spectrum must be cleared by incumbent providers before UScellular can access it. UScellular does not expect to have access to this spectrum until late 2023.
In January 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110) for $ 580 million. UScellular paid $ 20 million of this amount in 2021 and the remainder in January and February 2022. The advance payment was included in Other assets and deferred charges in the December 31, 2021 Consolidated Balance Sheet. The wireless spectrum licenses from Auction 110 were granted by the FCC on May 4, 2022.
Note 8 Investments in Unconsolidated Entities
Investments in unconsolidated entities consist of amounts invested in entities in which TDS holds a noncontrolling interest. TDS’ Investments in unconsolidated entities are accounted for using the equity method, measurement alternative method or net asset value practical expedient method as shown in the table below. The carrying value of measurement alternative method investments represents cost minus any impairments plus or minus any observable price changes.
September 30, 2022 December 31, 2021
(Dollars in millions)
Equity method investments $ 476 $ 457
Measurement alternative method investments 18 22
Investments recorded using the net asset value practical expedient 9
Total investments in unconsolidated entities $ 503 $ 479
The following table, which is based on unaudited information provided in part by third parties, summarizes the combined results of operations of TDS’ equity method investments.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 2021
(Dollars in millions)
Revenues $ 1,835 $ 1,763 $ 5,430 $ 5,245
Operating expenses 1,402 1,250 4,174 3,752
Operating income 433 513 1,256 1,493
Other income (expense), net ( 7 ) 5 ( 13 ) 15
Net income $ 426 $ 518 $ 1,243 $ 1,508
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Note 9 Asset Retirement Obligations
Asset retirement obligations are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.
During the three months ended September 30, 2022, UScellular and TDS Telecom performed a review of the assumptions and estimated future costs related to asset retirement obligations. The results of the reviews and other changes in asset retirement obligations during the nine months ended September 30, 2022 were as follows:
Asset Retirement Obligations
(Dollars in millions)
Balance at December 31, 2021 $ 469
Additional liabilities accrued 19
Revisions in estimated cash outflows 12
Disposition of assets ( 1 )
Accretion expense 19
Balance at September 30, 2022 $ 518
Note 10 Debt
Revolving Credit Agreements
The following table summarizes the revolving credit agreements as of September 30, 2022:
TDS UScellular
(Dollars in millions)
Maximum borrowing capacity $ 400 $ 300
Letters of credit outstanding $ 1 $
Amount borrowed $ $
Amount available for use $ 399 $ 300
Borrowings under the TDS revolving credit agreement bear interest at a rate of London Inter-bank Offered Rate (LIBOR) plus 1.50 %.
Borrowings under the UScellular revolving credit agreement bear interest at a rate of Secured Overnight Financing Rate (SOFR) plus 1.60 %.
During the nine months ended September 30, 2022, UScellular borrowed and repaid $ 75 million under its revolving credit agreement.
TDS and UScellular believe that they were in compliance with all of the financial and other covenants and requirements set forth in their revolving credit agreements as of September 30, 2022.
Term Loan Agreements
The following table summarizes the term loan credit agreements as of September 30, 2022:
TDS UScellular
(Dollars in millions)
Maximum borrowing capacity $ 500 $ 800
Amount borrowed and outstanding $ 498 $ 797
Amount borrowed and repaid $ 2 $ 3
Amount available for use $ $
Borrowings under the TDS term loan agreements bear interest at a rate of LIBOR plus 2.00 % or LIBOR plus 2.50 %. The maturity dates of the TDS term loan agreements are July 2028 and July 2031. During the nine months ended September 30, 2022, TDS borrowed $ 300 million under the term loan agreements.
Borrowings under the UScellular term loan agreements bear interest at a rate of SOFR plus 1.60 %, SOFR plus 2.10 % or SOFR plus 2.60 %. The maturity dates of the UScellular term loan agreements are July 2026, July 2028 and July 2031. During the nine months ended September 30, 2022, UScellular borrowed $ 500 million under the term loan agreements.
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TDS and UScellular believe that they were in compliance with all of the financial and other covenants and requirements set forth in their term loan credit agreements as of September 30, 2022.
Export Credit Financing Agreement
In December 2021, UScellular entered into a $ 150 million term loan credit facility with Export Development Canada to finance (or refinance) imported equipment, including equipment purchased prior to entering the term loan credit facility agreement. Borrowings bear interest at a rate of SOFR plus 1.60 % and are due and payable on the five-year anniversary of the first borrowing, which is in January 2027. During the nine months ended September 30, 2022, UScellular borrowed $ 150 million, which is the full amount available under the agreement.
TDS believes that UScellular was in compliance with all of the financial and other covenants and requirements set forth in their export credit financing agreement as of September 30, 2022.
Receivables Securitization Agreement
UScellular, through its subsidiaries, has a receivables securitization agreement for securitized borrowings using its equipment installment receivables. In March 2022, UScellular amended the agreement to extend the maturity date to March 2024. There were no significant changes to other terms of the receivable securitization agreement. Amounts under the receivables securitization agreement may be borrowed, repaid and reborrowed from time to time until the maturity date, which may be extended from time to time as specified therein. The outstanding borrowings bear interest at a rate that approximates SOFR plus 0.90 %. During the nine months ended September 30, 2022, UScellular repaid $ 250 million under the agreement. As of September 30, 2022, the outstanding borrowings under the agreement were $ 200 million and the unused borrowing capacity under the agreement was $ 250 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement. As of September 30, 2022, the USCC Master Note Trust held $ 386 million of assets available to be pledged as collateral for the receivables securitization agreement.
TDS believes that UScellular was in compliance with all of the financial and other covenants and requirements set forth in their receivables securitization agreement as of September 30, 2022.
Repurchase Agreement
In January 2022, UScellular, through a subsidiary (the repo subsidiary), entered into a repurchase agreement to borrow up to $ 200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender. The transaction form involves the sale of receivables by the repo subsidiary and the commitment to repurchase at the end of the applicable repurchase term, which may extend up to one month. The transaction is accounted for as a one-month secured borrowing. The outstanding borrowings bear interest at a rate of SOFR plus 1.25 %. Although the lender holds a security interest in the receivables, the repo subsidiary retains effective control and collection risk of the receivables, and therefore, any activity associated with the repurchase agreement will be treated as a secured borrowing. UScellular will continue to report equipment installment plan receivables and any related balances on the Consolidated Balance Sheet. The expiration date of the repurchase agreement is in January 2023. During the nine months ended September 30, 2022, the repo subsidiary borrowed $ 110 million and repaid $ 50 million under the repurchase agreement. As of September 30, 2022, the outstanding borrowings under the agreement were $ 60 million and the unused borrowing capacity was $ 140 million. The outstanding borrowings are included in Other current liabilities in the September 30, 2022 Consolidated Balance Sheet. As of September 30, 2022, UScellular held $ 558 million of assets available for inclusion in the repurchase facility; these assets are distinct from the assets held by the USCC Master Note Trust for UScellular's receivables securitization agreement.
Note 11 Variable Interest Entities
Consolidated VIEs
TDS consolidates VIEs in which it has a controlling financial interest as defined by GAAP and is therefore deemed the primary beneficiary. TDS reviews the criteria for a controlling financial interest at the time it enters into agreements and subsequently when events warranting reconsideration occur. These VIEs have risks similar to those described in the “Risk Factors” in this Form 10-Q and TDS’ Form 10-K for the year ended December 31, 2021.
UScellular formed USCC EIP LLC (Seller/Sub-Servicer), USCC Receivables Funding LLC (Transferor) and the USCC Master Note Trust (Trust), collectively the special purpose entities (SPEs), to facilitate a securitized borrowing using its equipment installment plan receivables. Under a Receivables Sale Agreement, UScellular wholly-owned, majority-owned and unconsolidated entities, collectively referred to as “affiliated entities”, transfer device equipment installment plan contracts to the Seller/Sub-Servicer. The Seller/Sub-Servicer aggregates device equipment installment plan contracts, and performs servicing, collection and all other administrative activities related to accounting for the equipment installment plan contracts. The Seller/Sub-Servicer sells the eligible equipment installment plan receivables to the Transferor, a bankruptcy remote entity, which subsequently sells the receivables to the Trust. The Trust, which is bankruptcy remote and isolated from the creditors of UScellular, will be responsible for issuing asset-backed variable funding notes (Notes), which are collateralized by the equipment installment plan receivables owned by the Trust. Given that UScellular has the power to direct the activities of these SPEs, and that these SPEs lack sufficient equity to finance their activities, UScellular is deemed to have a controlling financial interest in the SPEs and, therefore, consolidates them. All transactions with third parties (e.g., issuance of the asset-backed variable funding notes) will be accounted for as a secured borrowing due to the pledging of equipment installment plan contracts as collateral, significant continuing involvement in the transferred assets, subordinated interests of the cash flows, and continued evidence of control of the receivables.
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The following VIEs were formed to participate in FCC auctions of wireless spectrum licenses and to fund, establish, and provide wireless service with respect to any FCC wireless spectrum licenses won in the auctions:
Advantage Spectrum, L.P. (Advantage Spectrum) and Sunshine Spectrum, Inc., the general partner of Advantage Spectrum; and
King Street Wireless, L.P. (King Street Wireless) and King Street Wireless, Inc., the general partner of King Street Wireless.
These particular VIEs are collectively referred to as designated entities. The power to direct the activities that most significantly impact the economic performance of these VIEs is shared. Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the limited partnerships and make all decisions to carry on the business of the partnerships. The general partner of each partnership needs the consent of the limited partner, an indirect TDS subsidiary, to sell or lease certain wireless spectrum licenses, to make certain large expenditures, admit other partners or liquidate the limited partnerships. Although the power to direct the activities of these VIEs is shared, TDS has the most significant level of exposure to the variability associated with the economic performance of the VIEs, indicating that TDS is the primary beneficiary of the VIEs. Therefore, in accordance with GAAP, these VIEs are consolidated.
TDS also consolidates other VIEs that are limited partnerships that provide wireless service. A limited partnership is a variable interest entity unless the limited partners hold substantive participating rights or kick-out rights over the general partner. For certain limited partnerships, UScellular is the general partner and manages the operations. In these partnerships, the limited partners do not have substantive kick-out or participating rights and, further, such limited partners do not have the authority to remove the general partner. Therefore, these limited partnerships also are recognized as VIEs and are consolidated under the variable interest model.
The following table presents the classification and balances of the consolidated VIEs’ assets and liabilities in TDS’ Consolidated Balance Sheet.
September 30, 2022 December 31, 2021
(Dollars in millions)
Assets
Cash and cash equivalents $ 23 $ 22
Accounts receivable 699 692
Inventory, net 3 2
Other current assets 35 44
Licenses 638 637
Property, plant and equipment, net 113 108
Operating lease right-of-use assets 40 42
Other assets and deferred charges 441 382
Total assets $ 1,992 $ 1,929
Liabilities
Current liabilities $ 90 $ 28
Long-term operating lease liabilities 36 37
Other deferred liabilities and credits 27 23
Total liabilities 1
$ 153 $ 88
1 Total liabilities does not include amounts borrowed under the receivables securitization agreement. See Note 10 – Debt for additional information.
Unconsolidated VIEs
TDS manages the operations of and holds a variable interest in certain other limited partnerships, but is not the primary beneficiary of these entities and, therefore, does not consolidate them under the variable interest model.
TDS’ total investment in these unconsolidated entities was $ 5 million and $ 4 million at September 30, 2022 and December 31, 2021, respectively, and is included in Investments in unconsolidated entities in TDS’ Consolidated Balance Sheet. The maximum exposure from unconsolidated VIEs is limited to the investment held by TDS in those entities.
Other Related Matters
TDS made contributions, loans or advances to its VIEs totaling $ 291 million and $ 64 million, during the nine months ended September 30, 2022 and 2021, respectively, of which $ 269 million in 2022 and $ 32 million in 2021, are related to USCC EIP LLC as discussed above. TDS may agree to make additional capital contributions and/or advances to these or other VIEs and/or to their general partners to provide additional funding for operations or the development of wireless spectrum licenses granted in various auctions. TDS may finance such amounts with a combination of cash on hand, borrowings under its revolving credit or receivables securitization agreements and/or other long-term debt. There is no assurance that TDS will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.
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The limited partnership agreement of Advantage Spectrum also provides the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of UScellular, to purchase its interest in the limited partnership. In June 2022, the limited partnership agreement was amended and the general partner’s put option related to its interest in Advantage Spectru m will now be exercisable in the third quarter of 2023, and if not exercised at that time, will be exercisable in the third quarter of 2024. The greater of the carrying value of the general partner's investment or the value of the put option, net of any borrowings due to TDS, is recorded as Noncontrolling interests with redemption features in TDS’ Consolidated Balance Sheet. Also in accordance with GAAP, minority share of income or changes in the redemption value of the put option, net of interest accrued on the loans, are recorded as a component of Net income (loss) attributable to noncontrolling interests, net of tax, in TDS’ Consolidated Statement of Operations.
Note 12 Noncontrolling Interests
The following schedule discloses the effects of Net income attributable to TDS shareholders and changes in TDS’ ownership interest in UScellular on TDS’ equity:
Nine Months Ended September 30, 2022 2021
(Dollars in millions)
Net income attributable to TDS shareholders $ 87 $ 126
Transfers (to) from noncontrolling interests
Change in TDS' Capital in excess of par value from UScellular's issuance of UScellular shares ( 19 ) ( 48 )
Change in TDS' Capital in excess of par value from UScellular's repurchases of UScellular shares 21 11
Net transfers (to) from noncontrolling interests 2 ( 37 )
Net income attributable to TDS shareholders after transfers (to) from noncontrolling interests $ 89 $ 89
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Note 13 Business Segment Information
UScellular and TDS Telecom are billed for services they receive from TDS, consisting primarily of information processing, accounting, finance, and general management services. Such billings are based on expenses specifically identified to UScellular and TDS Telecom and on allocations of common expenses. Management believes the method used to allocate common expenses is reasonable and that all expenses and costs applicable to UScellular and TDS Telecom are reflected in the accompanying business segment information on a basis that is representative of what they would have been if UScellular and TDS Telecom operated on a stand-alone basis.
Financial data for TDS’ reportable segments for the three and nine month periods ended, or as of September 30, 2022 and 2021, is as follows. See Note 1 — Basis of Presentation for additional information.
Three Months Ended or as of September 30, 2022 UScellular TDS Telecom Corporate, Eliminations and Other Total
(Dollars in millions)
Operating revenues
Service $ 781 $ 256 $ 24 $ 1,061
Equipment and product sales 302 29 331
Total operating revenues 1,083 256 53 1,392
Cost of services (excluding Depreciation, amortization and accretion reported below)
197 109 20 326
Cost of equipment and products 354 23 377
Selling, general and administrative 369 81 12 462
Depreciation, amortization and accretion 177 53 4 234
(Gain) loss on asset disposals, net 1 3 4
Operating income (loss) ( 15 ) 10 ( 6 ) ( 11 )
Equity in earnings of unconsolidated entities 40 40
Interest and dividend income 2 1 1 4
Interest expense ( 42 ) 2 ( 6 ) ( 46 )
Income (loss) before income taxes ( 15 ) 13 ( 11 ) ( 13 )
Income tax expense (benefit) ( 3 ) 3 ( 3 ) ( 3 )
Net income (loss) ( 12 ) 10 ( 8 ) ( 10 )
Add back:
Depreciation, amortization and accretion 177 53 4 234
(Gain) loss on asset disposals, net 1 3 4
Interest expense 42 ( 2 ) 6 46
Income tax expense (benefit) ( 3 ) 3 ( 3 ) ( 3 )
Adjusted EBITDA 1
$ 205 $ 66 $ $ 271
Investments in unconsolidated entities $ 461 $ 4 $ 38 $ 503
Total assets $ 11,056 $ 2,949 $ 474 $ 14,479
Capital expenditures $ 136 $ 166 $ 3 $ 305
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Three Months Ended or as of September 30, 2021 UScellular TDS Telecom Corporate, Eliminations and Other Total
(Dollars in millions)
Operating revenues
Service $ 788 $ 251 $ 26 $ 1,065
Equipment and product sales 228 35 263
Total operating revenues 1,016 252 60 1,328
Cost of services (excluding Depreciation, amortization and accretion reported below)
205 102 20 327
Cost of equipment and products 252 30 282
Selling, general and administrative 346 72 11 429
Depreciation, amortization and accretion 160 49 4 213
(Gain) loss on asset disposals, net 8 1 ( 1 ) 8
Operating income (loss) 45 27 ( 3 ) 69
Equity in earnings of unconsolidated entities 48 48
Interest and dividend income 1 2 3
Interest expense ( 45 ) 1 ( 10 ) ( 54 )
Income (loss) before income taxes 49 28 ( 11 ) 66
Income tax expense (benefit) 14 7 ( 2 ) 19
Net income (loss) 35 21 ( 9 ) 47
Add back:
Depreciation, amortization and accretion 160 49 4 213
(Gain) loss on asset disposals, net 8 1 ( 1 ) 8
Interest expense 45 ( 1 ) 10 54
Income tax expense (benefit) 14 7 ( 2 ) 19
Adjusted EBITDA 1
$ 262 $ 77 $ 2 $ 341
Investments in unconsolidated entities $ 466 $ 4 $ 39 $ 509
Total assets $ 10,144 $ 2,493 $ 809 $ 13,446
Capital expenditures $ 185 $ 91 $ 3 $ 279
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Nine Months Ended or as of September 30, 2022 UScellular TDS Telecom Corporate, Eliminations and Other Total
(Dollars in millions)
Operating revenues
Service $ 2,351 $ 763 $ 72 $ 3,186
Equipment and product sales 769 1 100 870
Total operating revenues 3,120 763 173 4,056
Cost of services (excluding Depreciation, amortization and accretion reported below)
574 308 54 936
Cost of equipment and products 887 1 79 967
Selling, general and administrative 1,032 231 37 1,300
Depreciation, amortization and accretion 520 158 13 691
Loss on impairment of licenses 3 3
(Gain) loss on asset disposals, net 9 4 13
(Gain) loss on sale of business and other exit costs, net ( 1 ) ( 1 )
Operating income (loss) 96 61 ( 10 ) 147
Equity in earnings of unconsolidated entities 122 1 123
Interest and dividend income 5 1 4 10
Interest expense ( 115 ) 5 ( 8 ) ( 118 )
Other, net 1 1
Income (loss) before income taxes 108 68 ( 13 ) 163
Income tax expense (benefit) 46 18 ( 2 ) 62
Net income (loss) 62 51 ( 12 ) 101
Add back:
Depreciation, amortization and accretion 520 158 13 691
Loss on impairment of licenses 3 3
(Gain) loss on asset disposals, net 9 4 13
(Gain) loss on sale of business and other exit costs, net ( 1 ) ( 1 )
Interest expense 115 ( 5 ) 8 118
Income tax expense (benefit) 46 18 ( 2 ) 62
Adjusted EBITDA 1
$ 754 $ 226 $ 7 $ 987
Capital expenditures $ 541 $ 391 $ 6 $ 938
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Nine Months Ended or as of September 30, 2021 UScellular TDS Telecom Corporate, Eliminations and Other Total
(Dollars in millions)
Operating revenues
Service $ 2,333 $ 751 $ 72 $ 3,156
Equipment and product sales 720 1 80 801
Total operating revenues 3,053 752 152 3,957
Cost of services (excluding Depreciation, amortization and accretion reported below)
594 301 55 950
Cost of equipment and products 786 66 852
Selling, general and administrative 984 216 32 1,232
Depreciation, amortization and accretion 510 147 13 670
(Gain) loss on asset disposals, net 15 2 17
(Gain) loss on sale of business and other exit costs, net ( 1 ) ( 1 )
Operating income (loss) 165 87 ( 15 ) 237
Equity in earnings of unconsolidated entities 137 1 138
Interest and dividend income 5 1 3 9
Interest expense ( 144 ) 3 ( 52 ) ( 193 )
Other, net ( 1 ) ( 1 )
Income (loss) before income taxes 163 90 ( 63 ) 190
Income tax expense (benefit) 31 22 ( 15 ) 38
Net income (loss) 132 68 ( 48 ) 152
Add back:
Depreciation, amortization and accretion 510 147 13 670
(Gain) loss on asset disposals, net 15 2 17
(Gain) loss on sale of business and other exit costs, net ( 1 ) ( 1 )
Interest expense 144 ( 3 ) 52 193
Income tax expense (benefit) 31 22 ( 15 ) 38
Adjusted EBITDA 1
$ 831 $ 235 $ 3 $ 1,069
Capital expenditures $ 458 $ 260 $ 8 $ 726
Numbers may not foot due to rounding.
1 Adjusted earnings before interest, taxes, depreciation, amortization and accretion (Adjusted EBITDA) is a segment measure reported to the chief operating decision maker for purposes of assessing segments' performance. Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation above. TDS believes Adjusted EBITDA is a useful measure 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.
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Telephone and Data Systems, Inc.
Additional Required Information

Controls and Procedures
Evaluation of Disclosure Controls and Procedures
TDS maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) that are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to TDS’ management, including its principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As required by SEC Rules 13a-15(b), TDS carried out an evaluation, under the supervision and with the participation of management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of TDS’ disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on this evaluation, TDS’ principal executive officer and principal financial officer concluded that TDS' disclosure controls and procedures were effective as of September 30, 2022, at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal controls over financial reporting that have occurred during the three months ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, TDS’ internal control over financial reporting.
Legal Proceedings
In April 2018, the United States Department of Justice (DOJ) notified TDS that it was conducting inquiries of UScellular and TDS under the federal False Claims Act relating to UScellular’s participation in wireless spectrum license auctions 58, 66, 73 and 97 conducted by the FCC. UScellular is/was a limited partner in several limited partnerships which qualified for the 25% bid credit in each auction. The investigation arose from civil actions under the Federal False Claims Act brought by private parties in the U.S. District Court for the Western District of Oklahoma. In November and December 2019, following the DOJ’s investigation, the DOJ informed TDS and UScellular that it would not intervene in the above-referenced actions. Subsequently, the private party plaintiffs filed amended complaints in both actions in the U.S. District Court for the Western District of Oklahoma and are continuing the action on their own. In July 2020, these actions were transferred to the U.S. District Court for the District of Columbia. TDS and UScellular believe that UScellular’s arrangements with the limited partnerships and the limited partnerships’ participation in the FCC auctions complied with applicable law and FCC rules. At this time, TDS cannot predict the outcome of any proceeding.
Refer to the disclosure under Legal Proceedings in TDS’ Form 10-K for the year ended December 31, 2021, for additional information. There have been no material changes to such information since December 31, 2021.
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Unregistered Sales of Equity Securities and Use of Proceeds
On August 2, 2013, the Board of Directors of TDS authorized, and TDS announced by Form 8-K, a $250 million stock repurchase program for TDS Common Shares. Depending on market conditions, such shares may be repurchased in compliance with Rule 10b-18 of the Exchange Act, pursuant to Rule 10b5-1 under the Exchange Act, or pursuant to accelerated share repurchase arrangements, prepaid share repurchases, private transactions or as otherwise authorized. This authorization does not have an expiration date. TDS did not determine to terminate the foregoing Common Share repurchase program, or cease making further purchases thereunder, during the third quarter of 2022.
The following table provides certain information with respect to all purchases made by or on behalf of TDS, and any open market purchases made by any "affiliated purchaser" (as defined by the SEC) of TDS, of TDS Common Shares during the quarter covered by this Form 10-Q.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 - 31, 2022 31,114 $ 15.80 31,114 $ 156,541,699
August 1 - 31, 2022 $ $ 156,541,699
September 1 - 30, 2022 343,953 $ 14.54 343,953 $ 151,541,710
Total for or as of the end of the quarter ended September 30, 2022 375,067 $ 14.64 375,067 $ 151,541,710
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Exhibits
Exhibit Number Description of Documents
Exhibit 3.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH Inline XBRL Taxonomy Extension Schema Document
Exhibit 101.PRE Inline XBRL Taxonomy Presentation Linkbase Document
Exhibit 101.CAL Inline XBRL Taxonomy Calculation Linkbase Document
Exhibit 101.LAB Inline XBRL Taxonomy Label Linkbase Document
Exhibit 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the inline document.
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Form 10-Q Cross Reference Index
Item Number Page No.
Part I. Financial Information
-
-
-
Part II. Other Information
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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 thereunto duly authorized.
TELEPHONE AND DATA SYSTEMS, INC.
(Registrant)
Date: November 3, 2022 /s/ LeRoy T. Carlson, Jr.
LeRoy T. Carlson, Jr.
President and Chief Executive Officer
(principal executive officer)
Date: November 3, 2022 /s/ Vicki L. Villacrez
Vicki L. Villacrez
Executive Vice President and Chief Financial Officer
(principal financial officer)
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