Business Segment Information

U.S. Cellular and TDS Telecom are billed for 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. TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, has changed its reportable segments. Effective January 1, 2018, HMS is no longer reported under TDS Telecom, but is reported as a part of Corporate, Eliminations and Other. Prior periods have been recast to conform to the revised presentation.

Financial data for TDS’ reportable segments for 2018, 2017 and 2016, 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, 2018¹	U.S. Cellular			Wireline			Cable			TDS Telecom Total²			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	2,978		$	697		$	230		$	925		$	96		$	3,999
Equipment and product sales	989			2			—			2			119			1,110
Total operating revenues	3,967			699			230			927			215			5,109
Cost of services (excluding Depreciation, amortization and accretion expense reported below)	758			266			104			369			79			1,206
Cost of equipment and products	1,031			1			—			1			98			1,130
Selling, general and administrative	1,388			197			57			254			52			1,694
Depreciation, amortization and accretion	640			142			69			212			31			883
(Gain) loss on asset disposals, net	10			(3		)	1			(2		)	1			9
(Gain) loss on license sales and exchanges, net	(18		)	—			—			—			—			(18		)
Operating income (loss)	158			95			(2		)	93			(46		)	205
Equity in earnings of unconsolidated entities	159			—			—			—			1			160
Interest and dividend income	15			7			1			8			3			26
Interest expense	(116		)	2			—			2			(58		)	(172		)
Other, net	(1		)	3			—			2			1			2
Income (loss) before income taxes	215			106			(1		)	105			(99		)	221
Income tax expense (benefit)³	51									16			(21		)	46
Net income	164									89			(78		)	175
Add back:
Depreciation, amortization and accretion	640			142			69			212			31			883
(Gain) loss on asset disposals, net	10			(3		)	1			(2		)	1			9
(Gain) loss on license sales and exchanges, net	(18		)	—			—			—			—			(18		)
Interest expense	116			(2		)	—			(2		)	58			172
Income tax expense (benefit)³	51									16			(21		)	46
Adjusted EBITDA⁴	$	963		$	243		$	70		$	313		$	(9	)	$	1,267

Investments in unconsolidated entities	$	441		$	4		$	—		$	4		$	35		$	480
Total assets	$	7,274		$	1,304		$	639		$	1,934		$	575		$	9,783
Capital expenditures	$	515		$	176		$	56		$	232		$	20		$	767



				TDS Telecom
Year ended or as of December 31, 2017	U.S. Cellular			Wireline		Cable		TDS Telecom Total²			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	2,978		$	713	$	206	$	917		$	84		$	3,979
Equipment and product sales	912			1		—		1			152			1,065
Total operating revenues	3,890			714		206		919			235			5,044
Cost of services (excluding Depreciation, amortization and accretion expense reported below)	732			258		98		355			77			1,164
Cost of equipment and products	1,071			2		—		2			122			1,195
Selling, general and administrative⁵	1,412			194		54		248			29			1,689
Depreciation, amortization and accretion	615			151		44		195			34			844
Loss on impairment of goodwill⁶	370			—		—		—			(108		)	262
(Gain) loss on asset disposals, net	17			1		2		3			1			21
(Gain) loss on sale of business and other exit costs, net	(1		)	—		—		—			—			(1		)
(Gain) loss on license sales and exchanges, net	(22		)	—		—		—			—			(22		)
Operating income (loss)	(304		)	108		8		116			80			(108		)
Equity in earnings of unconsolidated entities	137			—		—		—			—			137
Interest and dividend income	8			5		—		5			2			15
Interest expense	(113		)	—		—		—			(57		)	(170		)
Other, net⁵	—			3		—		3			1			4
Income (loss) before income taxes	(272		)	117		8		125			25			(122		)
Income tax expense (benefit)³	(287		)					(13		)	21			(279		)
Net income (loss)	15							138			4			157
Add back:
Depreciation, amortization and accretion	615			151		44		195			34			844
Loss on impairment of goodwill⁶	370			—		—		—			(108		)	262
(Gain) loss on asset disposals, net	17			1		2		3			1			21
(Gain) loss on sale of business and other exit costs, net	(1		)	—		—		—			—			(1		)
(Gain) loss on license sales and exchanges, net	(22		)	—		—		—			—			(22		)
Interest expense	113			—		—		—			57			170
Income tax expense (benefit)³	(287		)					(13		)	21			(279		)
Adjusted EBITDA⁴	$	820		$	269	$	54	$	323		$	9		$	1,152

Investments in unconsolidated entities	$	415		$	4	$	—	$	4		$	34		$	453
Total assets	$	6,841		$	1,260	$	644	$	1,897		$	557		$	9,295
Capital expenditures	$	469		$	146	$	55	$	201		$	24		$	694



				TDS Telecom
Year ended or as of December 31, 2016	U.S. Cellular			Wireline			Cable		TDS Telecom Total²			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	3,081		$	696		$	185	$	880		$	89		$	4,050
Equipment and product sales	909			2			—		2			194			1,105
Total operating revenues	3,990			698			185		882			283			5,155
Cost of services (excluding Depreciation, amortization and accretion expense reported below)	760			258			94		352			77			1,189
Cost of equipment and products	1,081			2			—		2			157			1,240
Selling, general and administrative⁵	1,480			200			51		250			32			1,762
Depreciation, amortization and accretion	618			159			37		196			36			850
(Gain) loss on asset disposals, net	22			2			2		4			1			27
(Gain) loss on sale of business and other exit costs, net	—			—			—		—			(1		)	(1		)
(Gain) loss on license sales and exchanges, net	(19		)	(1		)	—		(1		)	—			(20		)
Operating income (loss)	48			77			2		79			(19		)	108
Equity in earnings of unconsolidated entities	140			—			—		—			—			140
Interest and dividend income	6			3			—		3			2			11
Interest expense	(113		)	1			—		1			(58		)	(170		)
Other, net⁵	1			3			—		3			(1		)	3
Income (loss) before income taxes	82			83			2		85			(75		)	92
Income tax expense (benefit)³	33								32			(25		)	40
Net income (loss)	49								54			(51		)	52
Add back:
Depreciation, amortization and accretion	618			159			37		196			36			850
(Gain) loss on asset disposals, net	22			2			2		4			1			27
(Gain) loss on sale of business and other exit costs, net	—			—			—		—			(1		)	(1		)
(Gain) loss on license sales and exchanges, net	(19		)	(1		)	—		(1		)	—			(20		)
Interest expense	113			(1		)	—		(1		)	58			170
Income tax expense (benefit)³	33								32			(25		)	40
Adjusted EBITDA⁴	$	816		$	242		$	41	$	283		$	19		$	1,118

Investments in unconsolidated entities	$	413		$	4		$	—	$	4		$	34		$	451
Total assets	$	7,110		$	1,229		$	599	$	1,831		$	505		$	9,446
Capital expenditures	$	446		$	108		$	54	$	162		$	22		$	630

Numbers may not foot due to rounding.


¹	As of January 1, 2018, TDS adopted ASU 2014-09 using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASU 2014-09, but prior periods remain as previously reported, except as specifically stated. See Note 2 — Revenue Recognition for additional information.


²	TDS Telecom Total includes eliminations between the Wireline and Cable segments.


³	Income tax expense (benefit) is not provided at the individual segment level for Wireline and Cable. TDS calculates income tax expense for “TDS Telecom Total”.

⁴

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. 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.


⁵	ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted as of January 1, 2018, and applied retrospectively. All prior year numbers have been recast to conform to this standard.

⁶

During 2017, U.S. Cellular recorded a goodwill impairment of $370 million while TDS recorded a goodwill impairment of the U.S. Cellular reporting unit of $227 million. Prior to 2009, TDS accounted for U.S. Cellular's share repurchases as step acquisitions, allocating a portion of the share repurchase value to TDS' Goodwill. Further, goodwill of the U.S. Cellular reporting unit was impaired at the TDS level in 2003 but not at U.S. Cellular. Consequently, U.S. Cellular's goodwill on a stand-alone basis and any resulting impairments of goodwill does not equal the TDS consolidated goodwill related to U.S. Cellular. The TDS adjustment of $143 million is included in "Corporate, Eliminations and Other." During 2017, TDS also recorded a goodwill impairment of $35 million related to its HMS operations included in "Corporate, Eliminations and Other." For further information on the goodwill impairment see Note 7 — Intangible Assets.