SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-14157
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Telephone and Data Systems, Inc.
Tax-Deferred Savings Plan
30 North LaSalle Street
40th Floor
Chicago, IL 60602
B. Name of issuers of the securities held pursuant to the plan and the
addresses of the principal executive office:
Telephone and Data Systems, Inc.
30 North LaSalle Street
40th Floor
Chicago, IL 60602
United States Cellular Corporation
8410 West Bryn Mawr Ave.
Suite 700
Chicago, IL 60631
Required Information
(a) Financial Statements
1. Independent Auditors Report.
2. Audited Statements of Net Assets Available for Benefits as of December
31, 2000 and December 31, 1999.
3. Audited Statements of Changes in Net Assets Available for Benefits for
the year ended December 31, 2000 and for the year ended December 31,
1999.
4. Notes to Financial Statements.
5. Schedule of Assets (Held at End of Year).
6. Schedule of Reportable Transactions.
(b) Exhibits
No. Description
-- -----------
1. Consent of Independent Public Accountants
2
INDEPENDENT AUDITOR'S REPORT
To the Investment Management Committee
Telephone and Data Systems, Inc.
Tax-Deferred Savings Plan
Middleton, Wisconsin
We have audited the accompanying statements of net assets available for benefits
of Telephone and Data Systems, Inc. Tax-Deferred Savings Plan as of December 31,
2000 and 1999, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) and reportable transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
McGLADREY & PULLEN, LLP
Madison, Wisconsin
May 25, 2001
3
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2000 and 1999
ASSETS 2000 1999
--------------------------------------------------------------------------------------------------------------------
Investments, at fair value $ 110,357,893 $ 144,686,096
------------- -------------
Receivables:
Employers' contributions 4,152,574 4,626,108
Accrued interest and dividends 7,551 10,403
Due from broker 18,072 27,790
Other - 34,718
------------- -------------
Total receivables 4,178,197 4,699,019
------------- -------------
Total assets 114,536,090 149,385,115
LIABILITIES
Due to Broker for Securities Purchased 434,914 544,930
------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $ 114,101,176 $ 148,840,185
============= =============
See Notes to Financial Statements.
4
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2000 and 1999
2000 1999
--------------------------------------------------------------------------------------------------------------------
ADDITIONS
Investment income:
Net appreciation (depreciation) in fair value of:
Registered investment companies $ (6,938,897) $ 4,737,796
Common stock (21,375,858) 55,875,131
Interest 1,633,353 722,406
Dividends 1,334,227 1,448,144
------------- -------------
(25,347,175) 62,783,477
Less investment expenses (30,284) (26,405)
------------- -------------
(25,377,459) 62,757,072
------------- -------------
Contributions:
Employers' 4,192,569 4,717,571
Participants' 14,973,755 15,450,117
Participant rollovers 768,370 1,028,264
Forfeitures (499,452) (91,463)
Transfer of assets from merged plans 1,843,248 -
------------- -------------
21,278,490 21,104,489
------------- -------------
Total additions (4,098,969) 83,861,561
------------- -------------
DEDUCTIONS
Benefits paid to participants 11,878,249 10,696,744
Transfer of assets to other plan (Note 5) 18,761,791 -
------------- -------------
Total deductions 30,640,040 10,696,744
------------- -------------
Net increase (decrease) (34,739,009) 73,164,817
Net assets available for benefits:
Beginning of year 148,840,185 75,675,368
------------- -------------
End of year $ 114,101,176 $ 148,840,185
============= =============
See Notes to Financial Statements.
5
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 1. Plan Description
The following description of the Telephone and Data Systems, Inc. (TDS)
Tax-Deferred Savings Plan (the Plan) provides only general information.
Participants should refer to the Plan agreement for a more complete description
of the Plan's provisions.
General: The Plan, a contributory tax-exempt profit-sharing plan, qualifies
under Section 401 and 501 of the Internal Revenue Code, and is subject to and
files reports under the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA). The Plan (together with Social Security, any other tax
qualified retirement plan or plans maintained by TDS and personal savings)
provides for the livelihood of the employees of TDS and its participating
subsidiaries upon their retirement or other separation from service.
The Plan's assets are administered by an investment management committee
appointed by TDS. The investment management committee is authorized to invest
Plan assets as directed by the participants, except in the case of the employer
match which is invested in the common stock of TDS or the common stock of its
subsidiaries: United States Cellular Corporation (USCC), and Aerial
Communications, Inc. (Aerial). All administrative, recordkeeping and auditing
fees are borne by TDS.
Eligibility and Vesting: All employees age 21 and older are generally eligible
to participate after completing three months of service. Participation is
completely voluntary.
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in TDS's matching contributions plus actual earnings thereon is
based on years of continuous service and is subject to a three-year graded
vesting schedule. Participants vest one-third in all employer matching
contributions for each year of service they complete. A participant becomes 100
percent vested in employer contributions after three years of service, or upon
retirement, death or disability.
Participant Accounts: Each participant's account is credited with the
participant's contributions and allocations of (a) their employer's
contributions and (b) Plan earnings. Allocations are based on participant
earnings or account balances, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's vested
account.
Contributions: Participants may defer from 1 percent to 15 percent (in whole
increments) of their pre-tax annual compensation, as defined in the plan.
Participants may also contribute amounts representing distributions from other
qualified defined benefit or contribution plans.
The Plan provides for an annual employer matching contribution to each
participant employed by TDS and its participating subsidiaries as of December
31. The employer matching contribution for each USCC, Aerial and Suttle Press
participant is $1.00 per $1.00 for the first 2 percent of salary deferral
contributions and $.25 per $1.00 for the next 4 percent of salary deferral
contributions. The employer matching contribution for all other participants is
$.30 per $1.00 for the first 6 percent of salary deferral contributions.
6
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 1. Plan Description (Continued)
Employer contributions of United States Cellular Corporation and Aerial
Communications, Inc. are made in USCC and Aerial common stock, respectively. All
other employer contributions are made in TDS common stock.
Contributions are subject to certain limitations.
Investment Options: Participants may invest their personal contributions and any
rollover account balances into a variety of investment options as more fully
described in the Plan's literature. Participants may change their investment
options via telephone at any time.
Payment of Benefits: If a participant retires or terminates service for any
reason, the Plan Administrator will provide for the distribution of a
participant's account balance in one lump sum or periodic payments.
Participant Notes Receivable: The Plan loan provision allows participants with
account balances to borrow from their account and repay their account with
interest through payroll deductions. Loans may be taken for any purpose.
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of their account balance
(excluding matching contributions). The repayment period on the loan can range
from one to five years. The loan interest rate will be the prime rate plus 1
percent as published in the Wall Street Journal on the first business day of the
month in which the loan is approved. Loans are secured by the balance of the
participant's account. Loans will be considered in default if no loan payment is
received during any 45-day period.
Forfeited Accounts: During the years ended December 31, 2000 and 1999, all
forfeited nonvested accounts were used to reduce the employer contributions by
$449,452 and $91,463, respectively.
Note 2. Summary of Accounting Policies
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of net assets available for
benefits and changes therein. Actual results could differ from those estimates.
Investment Valuation and Income Recognition: The Plan's investments are stated
at fair value. Shares of registered investment companies, TDS common stock, USCC
common stock, Aerial common stock and VoiceStream common stock are valued at
quoted market price. Shares held in bank common trust funds and money market
funds are reported at fair value based on the unit prices quoted by the fund,
representing the fair value of the underlying investments. Participant notes
receivable are valued at cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are on the ex-dividend date.
Payment of Benefits: Benefits are recorded when paid.
7
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 3. Investments
The following presents investments that represent 5 percent or more of the
Plan's net assets at December 31, 2000 and 1999:
2000 1999
--------------------------------------
Investments at fair value as determined by quoted market price:
Common stock:
Telephone and Data Systems, Inc. $ 23,634,540 * $ 30,019,248 *
United States Cellular Corporation 17,191,374 * 22,533,288 *
VoiceStream Wireless Corporation 5,855,570 * -
Aerial Communications, Inc. - * 24,634,347 *
Mutual funds:
Vanguard Institutional Index Fund 29,410,632 -
BT Institutional Equity 500 Index - 30,474,032
Credit Suisse Institutional Fund International Equity
(FKA Warburg Pincus International Fund) 5,666,193 ** 8,086,956
Yacktman Fund Inc. - 8,483,218
Bank Common Trust Funds:
LaSalle National Pooled Income 10,631,707 * 10,863,394 *
*Includes non-participant directed funds as discussed in Note 4.
**Less than 5 percent of net assets
The 2001 market volatility of equity-based investments is expected to
substantially impact the value of such investments at any given time. It is
likely that the value of the Plan's investments, both in total and in individual
participant accounts, has declined since December 31, 2000.
8
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 4. Nonparticipant-Directed Investments
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows:
December 31,
--------------------------------
2000 1999
----------- ------------
Net assets:
Investments:
Common stock:
Telephone and Data Systems, Inc. $ 8,160,074 $ 10,359,726
United States Cellular Corporation, Inc. 6,732,654 9,177,365
VoiceStream Wireless Corporation 52,100 -
Aerial Communications, Inc. - 7,459,416
Bank common trust funds:
Bank of New York 566,548 969,914
------------ ------------
Total investments 15,511,376 27,966,421
Receivables:
Employers' contributions 4,152,574 4,626,108
Other 2,435 3,663
------------ ------------
Total assets 19,666,385 32,596,192
Liabilities 123,539 148,375
------------ ------------
Total nonparticipant-directed net assets $ 19,542,846 $ 32,447,817
============ ============
Years Ended December 31,
---------------------------------
2000 1999
------------ -------------
Changes in nonparticipant-directed net assets:
Net appreciation (depreciation) in fair value of investments $ (8,338,578) $ 19,594,391
Dividends and interest 878,327 59,844
Contributions 3,693,117 4,626,108
Benefits paid to participants (2,030,340) (1,755,199)
Transfer of assets to other plan (Note 5) (7,107,497) -
------------ ------------
Net increase (decrease) $(12,904,971) $ 22,525,144
============ ============
Note 5. Sales of Subsidiaries and Transfer of Participant Accounts
Effective January 1, 2000, TDS sold the stock of its subsidiary, Aerial
Communications, Inc., to VoiceStream Wireless Corporation. Plan assets related
to the accounts of Aerial participants totaling approximately $18,800,000 were
transferred to a new plan on March 20, 2000.
9
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 6. Related-Party Transactions
Certain Plan investments are shares of a common trust fund sponsored by the Bank
of New York. Chicago Trust Company, a subsidiary of the Bank of New York, is the
trustee of the Plan and, therefore, these transactions qualify as
party-in-interest transactions.
All employer contributions for 2000 have been or will be made in common stock of
TDS and USCC. All employer contributions for 1999 have been made in common stock
of TDS, USCC and Aerial.
Note 7. Plan Termination
Although it has not expressed any intent to do so, TDS has the right under the
Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of plan termination,
participants will become 100 percent vested in their accounts.
Note 8. Income Tax Status
The Internal Revenue Service has determined and informed TDS by letter dated
January 27, 1999 that the Plan and related trust are designed in accordance with
applicable sections of the Internal Revenue Code. Although the Plan has been
amended since receiving the determination letter, the Plan administrator
believes that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the Internal Revenue Code.
10
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2000
Current
Shares Cost Value
-----------------------------------------------------------------------------------------------------------------------
Common stocks:
Telephone and Data Systems, Inc.* 262,606 $ 18,344,255 $ 23,634,540
United States Cellular Corporation* 285,334 15,253,963 17,191,374
VoiceStream Wireless Corporation 58,192 1,943,985 5,855,570
Shares of registered investment companies:
Vanguard Institutional Index Fund 243,627 29,410,632 29,410,632
Loomis Sayles Bond Fund 405,402 4,879,709 4,483,743
Credit Suisse Institutional Fund International Equity 519,834 8,096,665 5,666,193
Selected American Shares 73,795 2,772,383 2,607,181
Turner Midcap Growth Fund 183,444 6,881,702 5,611,563
Mercury Select Growth Fund 68,586 1,332,030 970,487
Bank common trust funds:
LaSalle National Pooled Income 10,631,707 10,631,707 10,631,707
Bank of New York* 1,695,579 1,695,579 1,695,579
Participant notes Loan term
1-5 years
Interest rates
prime + 1% 2,599,324 2,599,324
------------- -------------
$ 103,841,934 $ 110,357,893
============= =============
* A party-in-interest as defined by ERISA.
11
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
Year Ended December 31, 2000
Purchase Selling Cost of Net Gain
Description of the Security Price Price Asset or (Loss)
--------------------------------------------------------------------------------------------------------------------
Aerial Communications, Inc.
Common stock* $ 538,363 $ 17,078,488 $ 6,022,996 $ 11,055,492
Telephone and Data Systems, Inc.
Common stock* 10,408,541 7,953,033 4,689,899 3,263,134
United States Cellular Corporation, Inc.
Common stock* 12,755,540 8,843,399 6,821,673 2,021,726
Credit Suisse Institutional Fund International Equity
(FKA Warburg Pincus International Fund) 4,841,931 4,803,368 2,970,655 1,832,713
Deutsche Institutional Equity 500 Index Fund
(FKA BT Institutional Equity 500 Index) 13,287,327 40,895,097 36,668,005 4,227,092
Vanguard Institutional Index Fund 29,410,632 - - -
Turner Midcap Growth Fund 8,512,418 1,487,392 1,630,716 (143,324)
Yacktman Fund Inc. 1,021,734 9,898,680 12,493,176 (2,594,496)
LaSalle National Pooled Income Fund 12,855,525 13,087,211 13,087,211 -
Bank of New York Common
Trust Fund* 38,691,148 39,751,926 39,751,926 -
* A party-in-interest as defined by ERISA.
12
Signatures
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
Telephone and Data Systems, Inc., the Plan Administrator has duly caused this
Annual Report on Form 11-K to be signed on its behalf by the undersigned
hereunto duly authorized.
TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
By /s/ C. Theodore Herbert
-----------------------------------------------------
C. Theodore Herbert, Vice President - Human Resources
Dated: June 19, 2001