Business Segment Information

3 Months Ended

Mar. 31, 2020

Note 12 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 month periods ended, or as of March 31, 2020 and 2019, is as follows. See Note 1 — Basis of Presentation for additional information.



				TDS Telecom
Three Months Ended or as of March 31, 2020	U.S. Cellular			Wireline			Cable		TDS Telecom Total¹			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	762		$	169		$	71	$	240		$	24		$	1,026
Equipment and product sales	201			—			—		—			34			235
Total operating revenues	963			169			71		240			58			1,261
Cost of services (excluding Depreciation, amortization and accretion reported below)	180			65			30		95			18			293
Cost of equipment and products	217			—			—		—			29			246
Selling, general and administrative	335			48			17		65			11			411
Depreciation, amortization and accretion	177			32			19		52			6			235
(Gain) loss on asset disposals, net	4			—			—		—			—			4
Operating income (loss)	50			23			5		28			(6		)	72
Equity in earnings of unconsolidated entities	45			—			—		—			—			45
Interest and dividend income	4			2			—		2			—			6
Interest expense	(24		)	1			—		1			(14		)	(37		)
Other, net	1			—			—		—			(1		)	—
Income (loss) before income taxes	76			26			5		31			(21		)	86
Income tax expense (benefit)²	4								4			(5		)	3
Net income (loss)	72								28			(17		)	83
Add back:
Depreciation, amortization and accretion	177			32			19		52			6			235
(Gain) loss on asset disposals, net	4			—			—		—			—			4
Interest expense	24			(1		)	—		(1		)	14			37
Income tax expense (benefit)²	4								4			(5		)	3
Adjusted EBITDA³	$	281		$	57		$	25	$	82		$	(1	)	$	362

Investments in unconsolidated entities	$	469		$	4		$	—	$	4		$	36		$	509
Total assets	$	8,251		$	1,497		$	733	$	2,221		$	423		$	10,895
Capital expenditures	$	236		$	39		$	15	$	54		$	2		$	292



				TDS Telecom
Three Months Ended or as of March 31, 2019	U.S. Cellular			Wireline			Cable		TDS Telecom Total¹			Corporate, Eliminations and Other			Total
(Dollars in millions)
Operating revenues
Service	$	741		$	170		$	60	$	230		$	24		$	995
Equipment and product sales	225			—			—		—			37			262
Total operating revenues	966			171			60		230			61			1,257
Cost of services (excluding Depreciation, amortization and accretion reported below)	176			63			26		88			20			284
Cost of equipment and products	233			—			—		—			31			264
Selling, general and administrative	326			47			14		61			10			397
Depreciation, amortization and accretion	169			34			17		50			8			227
(Gain) loss on asset disposals, net	2			(7		)	—		(7		)	—			(5		)
(Gain) loss on sale of business and other exit costs, net	(2		)	—			—		—			—			(2		)
(Gain) loss on license sales and exchanges, net	(2		)	—			—		—			—			(2		)
Operating income (loss)	64			34			2		37			(7		)	94
Equity in earnings of unconsolidated entities	44			—			—		—			—			44
Interest and dividend income	6			3			—		3			—			9
Interest expense	(29		)	1			—		—			(14		)	(43		)
Income (loss) before income taxes	85			38			3		40			(21		)	104
Income tax expense (benefit)²	27								10			(3		)	34
Net income (loss)	58								31			(19		)	70
Add back:
Depreciation, amortization and accretion	169			34			17		50			8			227
(Gain) loss on asset disposals, net	2			(7		)	—		(7		)	—			(5		)
(Gain) loss on sale of business and other exit costs, net	(2		)	—			—		—			—			(2		)
(Gain) loss on license sales and exchanges, net	(2		)	—			—		—			—			(2		)
Interest expense	29			(1		)	—		—			14			43
Income tax expense (benefit)²	27								10			(3		)	34
Adjusted EBITDA³	$	281		$	63		$	20	$	83		$	1		$	365

Investments in unconsolidated entities	$	468		$	4		$	—	$	4		$	35		$	507
Total assets	$	8,229		$	1,353		$	641	$	1,986		$	572		$	10,787
Capital expenditures	$	102		$	29		$	13	$	42		$	3		$	147

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.