Business Segment Information

9 Months Ended

Sep. 30, 2019

Note 13 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.

Financial data for TDS’ reportable segments for the three and nine month periods ended, or as of September 30, 2019 and 2018, is as follows. See Note 1 — Basis of Presentation for additional information.



				TDS Telecom
Three Months Ended or as of September 30, 2019	U.S. Cellular			Wireline			Cable		TDS Telecom Total¹			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	774		$	169		$	62	$	231		$	25		$	1,030
Equipment and product sales	257			—			—		—			34			291
Total operating revenues	1,031			169			62		231			59			1,321
Cost of services (excluding Depreciation, amortization and accretion reported below)	199			68			27		94			20			313
Cost of equipment and products	266			—			—		—			29			295
Selling, general and administrative	358			52			15		67			14			439
Depreciation, amortization and accretion	181			33			17		50			6			237
(Gain) loss on asset disposals, net	5			—			—		—			1			6
(Gain) loss on license sales and exchanges, net	2			—			—		—			—			2
Operating income (loss)	20			16			3		20			(11		)	29
Equity in earnings of unconsolidated entities	44			—			—		—			—			44
Interest and dividend income	4			3			—		3			—			7
Interest expense	(29		)	1			—		1			(14		)	(42		)
Income (loss) before income taxes	39			20			4		24			(25		)	38
Income tax expense (benefit)²	15								5			(5		)	15
Net income (loss)	24								18			(19		)	23
Add back:
Depreciation, amortization and accretion	181			33			17		50			6			237
(Gain) loss on asset disposals, net	5			—			—		—			1			6
(Gain) loss on license sales and exchanges, net	2			—			—		—			—			2
Interest expense	29			(1		)	—		(1		)	14			42
Income tax expense (benefit)²	15								5			(5		)	15
Adjusted EBITDA³	$	256		$	52		$	21	$	73		$	(4	)	$	325

Investments in unconsolidated entities	$	471		$	4		$	—	$	4		$	36		$	511
Total assets	$	8,291		$	1,430		$	644	$	2,066		$	524		$	10,881
Capital expenditures	$	170		$	61		$	20	$	81		$	2		$	253



				TDS Telecom
Three Months Ended or as of September 30, 2018	U.S. Cellular			Wireline			Cable		TDS Telecom Total¹			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	759		$	176		$	58	$	234		$	24		$	1,017
Equipment and product sales	242			—			—		—			38			280
Total operating revenues	1,001			177			58		234			62			1,297
Cost of services (excluding Depreciation, amortization and accretion reported below)	200			68			26		94			20			314
Cost of equipment and products	258			—			—		—			33			291
Selling, general and administrative	346			49			14		63			12			421
Depreciation, amortization and accretion	160			35			17		53			7			220
(Gain) loss on asset disposals, net	3			(4		)	1		(3		)	—			—
Operating income (loss)	34			28			—		28			(11		)	51
Equity in earnings of unconsolidated entities	42			—			—		—			—			42
Interest and dividend income	4			2			—		2			—			6
Interest expense	(29		)	1			—		1			(15		)	(43		)
Other, net	—			1			—		1			1			2
Income (loss) before income taxes	51			31			—		31			(24		)	58
Income tax expense (benefit)²	14								(5		)	(4		)	5
Net income (loss)	37								36			(20		)	53
Add back:
Depreciation, amortization and accretion	160			35			17		53			7			220
(Gain) loss on asset disposals, net	3			(4		)	1		(3		)	—			—
Interest expense	29			(1		)	—		(1		)	15			43
Income tax expense (benefit)²	14								(5		)	(4		)	5
Adjusted EBITDA³	$	243		$	61		$	18	$	80		$	(2	)	$	321

Investments in unconsolidated entities	$	461		$	4		$	—	$	4		$	35		$	500
Total assets	$	7,228		$	1,302		$	637	$	1,929		$	562		$	9,719
Capital expenditures	$	118		$	41		$	13	$	54		$	5		$	177



				TDS Telecom
Nine Months Ended or as of September 30, 2019	U.S. Cellular			Wireline			Cable		TDS Telecom Total¹			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	2,272		$	512		$	183	$	694		$	72		$	3,038
Equipment and product sales	698			1			—		1			103			802
Total operating revenues	2,970			512			184		695			175			3,840
Cost of services (excluding Depreciation, amortization and accretion reported below)	568			195			79		274			58			900
Cost of equipment and products	724			1			—		1			83			808
Selling, general and administrative	1,027			148			44		193			40			1,260
Depreciation, amortization and accretion	524			99			51		150			23			697
(Gain) loss on asset disposals, net	13			(8		)	1		(7		)	(1		)	5
(Gain) loss on sale of business and other exit costs, net	(1		)	—			—		—			—			(1		)
Operating income (loss)	115			78			8		86			(30		)	171
Equity in earnings of unconsolidated entities	128			—			—		—			1			129
Interest and dividend income	14			8			1		9			1			24
Interest expense	(87		)	2			—		2			(43		)	(128		)
Income (loss) before income taxes	170			88			9		97			(71		)	196
Income tax expense (benefit)²	55								23			(14		)	64
Net income (loss)	115								74			(57		)	132
Add back:
Depreciation, amortization and accretion	524			99			51		150			23			697
(Gain) loss on asset disposals, net	13			(8		)	1		(7		)	(1		)	5
(Gain) loss on sale of business and other exit costs, net	(1		)	—			—		—			—			(1		)
Interest expense	87			(2		)	—		(2		)	43			128
Income tax expense (benefit)²	55								23			(14		)	64
Adjusted EBITDA³	$	793		$	177		$	61	$	238		$	(6	)	$	1,025

Capital expenditures	$	467		$	145		$	48	$	193		$	4		$	664



				TDS Telecom
Nine Months Ended or as of September 30, 2018	U.S. Cellular			Wireline			Cable			TDS Telecom Total¹			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	2,224		$	524		$	170		$	693		$	71		$	2,988
Equipment and product sales	692			1			—			1			96			789
Total operating revenues	2,916			526			170			695			166			3,777
Cost of services (excluding Depreciation, amortization and accretion reported below)	566			200			78			277			59			902
Cost of equipment and products	716			1			—			1			87			804
Selling, general and administrative	1,014			146			42			187			31			1,232
Depreciation, amortization and accretion	478			108			52			160			24			662
(Gain) loss on asset disposals, net	5			(3		)	1			(2		)	—			3
(Gain) loss on license sales and exchanges, net	(18		)	—			—			—			—			(18		)
Operating income (loss)	155			75			(4		)	71			(34		)	192
Equity in earnings of unconsolidated entities	120			—			—			—			1			121
Interest and dividend income	10			5			1			5			3			18
Interest expense	(87		)	1			—			1			(43		)	(129		)
Other, net	—			2			—			2			(1		)	1
Income (loss) before income taxes	198			83			(3		)	80			(75		)	203
Income tax expense (benefit)²	55									7			(14		)	48
Net income (loss)	143									73			(61		)	155
Add back:
Depreciation, amortization and accretion	478			108			52			160			24			662
(Gain) loss on asset disposals, net	5			(3		)	1			(2		)	—			3
(Gain) loss on license sales and exchanges, net	(18		)	—			—			—			—			(18		)
Interest expense	87			(1		)	—			(1		)	43			129
Income tax expense (benefit)²	55									7			(14		)	48
Adjusted EBITDA³	$	750		$	186		$	50		$	236		$	(7	)	$	979

Capital expenditures	$	274		$	103		$	37		$	140		$	16		$	430

Numbers may not foot due to rounding.


¹	TDS Telecom Total includes eliminations between the Wireline and Cable segments.


²	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".

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.