Note 18 Business Segment Information

U.S. Cellular and TDS Telecom are billed for all services they receive from TDS, consisting primarily of information processing, accounting and finance, and general management services. Such billings are based on expenses specifically identified to U.S. Cellular 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 U.S. Cellular and TDS Telecom are reflected in the accompanying business segment information on a basis that is representative of what they would have been if U.S. Cellular and TDS Telecom operated on a stand-alone basis.

Financial data for TDS’ reportable segments for 2015, 2014 and 2013, is as follows. See Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements for additional information.

					TDS Telecom
Year Ended or as of December 31, 2015			U.S. Cellular		Wireline		Cable		HMS		TDS Telecom Eliminations		TDS Telecom Total		Corporate, Eliminations and Other		Total
(Dollars in thousands)
Operating revenues
	Service		$	3,350,431	$	698,938	$	174,529	$	116,810	$	(4,621)	$	985,656	$	(14,118)	$	4,321,969
	Equipment and product sales			646,422		1,965		437		169,985		–		172,387		35,463		854,272
		Total operating revenues		3,996,853		700,903		174,966		286,795		(4,621)		1,158,043		21,345		5,176,241
Cost of services (excluding Depreciation, amortization
and accretion expense reported below)				775,042		254,879		78,758		85,163		(4,334)		414,466		1,402		1,190,910
Cost of equipment and products				1,052,810		2,212		169		142,927		–		145,308		25,913		1,224,031
Selling, general and administrative				1,493,730		193,850		53,738		47,104		(287)		294,405		(7,672)		1,780,463
Depreciation, amortization and accretion				606,455		165,841		35,271		26,948		–		228,060		9,846		844,361
(Gain) loss on asset disposals, net				16,313		5,094		691		89		–		5,874		(11)		22,176
(Gain) loss on sale of business and other exit costs, net				(113,555)		(9,530)		–		–		–		(9,530)		(12,802)		(135,887)
(Gain) loss on license sales and exchanges				(146,884)		–		–		–		–		–		–		(146,884)
Operating income (loss)				312,942		88,557		6,339		(15,436)		–		79,460		4,669		397,071
Equity in earnings of unconsolidated entities				140,083		17		–		–		–		17		(24)		140,076
Interest and dividend income				36,332		2,193		37		35		–		2,265		186		38,783
Interest expense				(86,194)		1,133		458		(2,329)		–		(738)		(54,787)		(141,719)
Other, net				466		(22)		3		(98)		–		(117)		42		391
Income (loss) before income taxes				403,629		91,878		6,837		(17,828)		–		80,887		(49,914)		434,602
Income tax expense (benefit)¹				156,334										34,972		(19,314)		171,992
Net income (loss)				247,295										45,915		(30,600)		262,610
Add back:
Depreciation, amortization and accretion				606,455		165,841		35,271		26,948		–		228,060		9,846		844,361
(Gain) loss on asset disposals, net				16,313		5,094		691		89		–		5,874		(11)		22,176
(Gain) loss on sale of business and other exit costs, net				(113,555)		(9,530)		–		–		–		(9,530)		(12,802)		(135,887)
(Gain) loss on license sales and exchanges				(146,884)		–		–		–		–		–		–		(146,884)
Interest expense				86,194		(1,133)		(458)		2,329		–		738		54,787		141,719
Income tax expense (benefit)¹				156,334										34,972		(19,314)		171,992
Adjusted EBITDA2			$	852,152	$	252,150	$	42,341	$	11,538	$	–	$	306,029	$	1,906	$	1,160,087

Investments in unconsolidated entities			$	363,384	$	3,802	$	–	$	–	$	–	$	3,802	$	34,534	$	401,720
Total assets			$	7,059,978	$	1,312,394	$	577,788	$	285,929	$	–	$	2,176,111	$	186,373	$	9,422,462
Capital expenditures			$	533,053	$	140,433	$	51,573	$	27,059	$	–	$	219,065	$	7,250	$	759,368

					TDS Telecom
Year Ended or as of December 31, 2014			U.S. Cellular		Wireline		Cable		HMS		TDS Telecom Eliminations		TDS Telecom Total		Corporate, Eliminations and Other		Total
(Dollars in thousands)
Operating revenues
	Service		$	3,397,937	$	714,586	$	116,855	$	109,766	$	(3,697)	$	937,510	$	(6,793)	$	4,328,654
	Equipment and product sales			494,810		1,836		–		148,966		–		150,802		35,172		680,784
		Total operating revenues		3,892,747		716,422		116,855		258,732		(3,697)		1,088,312		28,379		5,009,438
Cost of services (excluding Depreciation, amortization
and accretion expense reported below)				769,911		256,878		54,265		77,392		(3,504)		385,031		9,716		1,164,658
Cost of equipment and products				1,192,669		2,336		–		126,362		–		128,698		25,444		1,346,811
Selling, general and administrative				1,591,914		189,956		36,175		53,020		(193)		278,958		(5,065)		1,865,807
Depreciation, amortization and accretion				605,997		169,044		23,643		26,912		–		219,599		10,936		836,532
Loss on impairment of assets				–		–		–		84,000		–		84,000		3,802		87,802
(Gain) loss on asset disposals, net				21,469		2,091		2,482		181		–		4,754		308		26,531
(Gain) loss on sale of business and other exit costs, net				(32,830)		(2,357)		–		–		–		(2,357)		19,341		(15,846)
(Gain) loss on license sales and exchanges				(112,993)		–		–		–		–		–		–		(112,993)
Operating income (loss)				(143,390)		98,474		290		(109,135)		–		(10,371)		(36,103)		(189,864)
Equity in earnings of unconsolidated entities				129,764		8		–		–		–		8		2,193		131,965
Interest and dividend income				12,148		2,396		8		26		–		2,430		2,379		16,957
Interest expense				(57,386)		2,695		95		(1,602)		–		1,188		(55,199)		(111,397)
Other, net				160		(32)		(1)		12		–		(21)		(24)		115
Income (loss) before income taxes				(58,704)		103,541		392		(110,699)		–		(6,766)		(86,754)		(152,224)
Income tax expense (benefit)¹				(11,782)										17,590		(10,740)		(4,932)
Net income (loss)				(46,922)										(24,356)		(76,014)		(147,292)
Add back:
Depreciation, amortization and accretion				605,997		169,044		23,643		26,912		–		219,599		10,936		836,532
Loss on impairment of assets				–		–		–		84,000		–		84,000		3,802		87,802
(Gain) loss on asset disposals, net				21,469		2,091		2,482		181		–		4,754		308		26,531
(Gain) loss on sale of business and other exit costs, net				(32,830)		(2,357)		–		–		–		(2,357)		19,341		(15,846)
(Gain) loss on license sales and exchanges				(112,993)		–		–		–		–		–		–		(112,993)
Interest expense				57,386		(2,695)		(95)		1,602		–		(1,188)		55,199		111,397
Income tax expense (benefit)¹				(11,782)										17,590		(10,740)		(4,932)
Adjusted EBITDA2			$	480,325	$	269,624	$	26,422	$	1,996	$	–	$	298,042	$	2,832	$	781,199

Investments in unconsolidated entities			$	283,014	$	3,803	$	–	$	–	$	–	$	3,803	$	34,912	$	321,729
Total assets3			$	6,462,309	$	1,419,478	$	563,585	$	268,972	$	–	$	2,252,035	$	140,078	$	8,854,422
Capital expenditures			$	557,615	$	135,805	$	35,640	$	36,618	$	–	$	208,063	$	4,899	$	770,577

					TDS Telecom
Year Ended or as of December 31, 2013			U.S. Cellular		Wireline		Cable		HMS		TDS Telecom Eliminations		TDS Telecom Total		Corporate, Eliminations and Other		Total
(Dollars in thousands)
Operating revenues
	Service		$	3,594,773	$	723,372	$	35,883	$	94,875	$	(1,063)	$	853,067	$	(4,349)	$	4,443,491
	Equipment and product sales			324,063		3,195		–		90,741		–		93,936		39,746		457,745
		Total operating revenues		3,918,836		726,567		35,883		185,616		(1,063)		947,003		35,397		4,901,236
Cost of services (excluding Depreciation, amortization
and accretion reported below)				763,435		266,635		17,274		60,423		(1,000)		343,332		11,416		1,118,183
Cost of equipment and products				999,000		3,831		–		75,991		–		79,822		28,311		1,107,133
Selling, general and administrative				1,677,395		220,097		11,054		44,945		(63)		276,033		(5,650)		1,947,778
Depreciation, amortization and accretion				803,781		170,868		7,571		24,262		–		202,701		11,595		1,018,077
(Gain) loss on asset disposals, net				30,606		130		28		125		–		283		(48)		30,841
(Gain) loss on sale of business and other exit costs, net				(246,767)		–		–		–		–		–		(53,889)		(300,656)
(Gain) loss on license sales and exchanges				(255,479)		–		–		–		–		–		–		(255,479)
Operating income (loss)				146,865		65,006		(44)		(20,130)		–		44,832		43,662		235,359
Equity in earnings of unconsolidated entities				131,949		19		–		–		–		19		746		132,714
Interest and dividend income				3,961		1,759		2		63		–		1,824		3,307		9,092
Gain (loss) on investments				18,556		830		–		–		–		830		(4,839)		14,547
Interest expense				(43,963)		3,265		(74)		(1,626)		–		1,565		(56,413)		(98,811)
Other, net				288		(214)		–		29		–		(185)		(140)		(37)
Income (loss) before income taxes				257,656		70,665		(116)		(21,664)		–		48,885		(13,677)		292,864
Income tax expense (benefit)¹				113,134										19,084		(6,175)		126,043
Net income (loss)				144,522										29,801		(7,502)		166,821
Add back:
Depreciation, amortization and accretion				803,781		170,868		7,571		24,262		–		202,701		11,595		1,018,077
(Gain) loss on asset disposals, net				30,606		130		28		125		–		283		(48)		30,841
(Gain) loss on sale of business and other exit costs, net				(246,767)		–		–		–		–		–		(53,889)		(300,656)
(Gain) loss on license sales and exchanges				(255,479)		–		–		–		–		–		–		(255,479)
Gain (loss) on investments				(18,556)		(830)		–		–		–		(830)		4,839		(14,547)
Interest expense				43,963		(3,265)		74		1,626		–		(1,565)		56,413		98,811
Income tax expense (benefit)¹				113,134										19,084		(6,175)		126,043
Adjusted EBITDA2			$	615,204	$	237,568	$	7,557	$	4,349	$	–	$	249,474	$	5,233	$	869,911

Investments in unconsolidated entities			$	265,585	$	3,809	$	–	$	–	$	–	$	3,809	$	32,378	$	301,772
Total assets3			$	6,430,255	$	1,452,502	$	278,969	$	328,397	$	–	$	2,059,868	$	370,905	$	8,861,028
Capital expenditures			$	737,501	$	140,009	$	8,375	$	16,474	$	–	$	164,858	$	7,301	$	909,660

1		Income tax expense (benefit) is not provided at the individual segment level for Wireline, Cable and HMS. TDS calculates income tax expense for “TDS Telecom Total”.

2		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 making decisions about allocating resources to the segments and assessing their performance. Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation above. Adjusted EBITDA excludes these items in order to show operating results on a more comparable basis from period to period. From time to time, TDS may also exclude other items from Adjusted EBITDA if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any of such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future. TDS believes Adjusted EBITDA is a useful measure of TDS’ operating results before significant recurring non-cash charges, discrete gains and losses, and other items as indicated above.

3		ASU 2015-03, regarding simplification of the presentation of debt issuance costs, was adopted as of December 31, 2015 and applied retrospectively. All prior year numbers have been revised to conform to this standard.