Note 10 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 the three month period ended, or as of March 31, 2016 and 2015, is as follows. See Note 1 — Basis of Presentation for additional information.

					TDS Telecom
Three Months Ended or as of March 31, 2016			U.S. Cellular		Wireline		Cable		HMS		TDS Telecom Eliminations		TDS Telecom Total		Corporate, Eliminations and Other		Total
(Dollars in millions)
Operating revenues
	Service		$	760	$	173	$	45	$	29	$	(1)	$	246	$	(6)	$	1,000
	Equipment and product sales			198		–		–		35		–		35		10		243
		Total operating revenues		958		173		45		64		(1)		281		4		1,243
Cost of services (excluding Depreciation, amortization
	and accretion reported below)			184		62		22		21		(1)		104		–		288
Cost of equipment and products				256		1		–		29		–		30		5		291
Selling, general and administrative				361		48		12		11		–		71		(1)		431
Depreciation, amortization and accretion				153		42		9		7		–		58		1		212
(Gain) loss on asset disposals, net				5		–		1		–		–		1		–		6
Operating income (loss)				(1)		20		1		(4)		–		17		(1)		15
Equity in earnings of unconsolidated entities				35		–		–		–		–		–		–		35
Interest and dividend income				13		1		–		–		–		1		–		14
Interest expense				(28)		1		–		(1)		–		–		(13)		(41)
Other, net				1		–		(1)		–		–		(1)		–		–
Income (loss) before income taxes				20		22		–		(5)		–		17		(14)		23
Income tax expense (benefit)1				11										7		(5)		13
Net income (loss)				9										10		(9)		10
Add back:
Depreciation, amortization and accretion				153		42		9		7		–		58		1		212
(Gain) loss on asset disposals, net				5		–		1		–		–		1		–		6
Interest expense				28		(1)		–		1		–		–		13		41
Income tax expense (benefit)1				11										7		(5)		13
Adjusted EBITDA2			$	206	$	63	$	10	$	3	$	–	$	76	$	–	$	282

Investments in unconsolidated entities			$	384	$	4	$	–	$	–	$	–	$	4	$	35	$	423
Total assets			$	7,057	$	1,291	$	581	$	270	$	–	$	2,142	$	184	$	9,383
Capital expenditures			$	79	$	27	$	13	$	2	$	–	$	42	$	4	$	125

					TDS Telecom
Three Months Ended or as of March 31, 2015			U.S. Cellular		Wireline		Cable		HMS		TDS Telecom Eliminations		TDS Telecom Total		Corporate, Eliminations and Other		Total
(Dollars in millions)
Operating revenues
	Service		$	828	$	176	$	44	$	28	$	(1)	$	247	$	(2)	$	1,073
	Equipment and product sales			137		–		–		33		–		33		9		179
		Total operating revenues		965		176		44		61		(1)		280		7		1,252
Cost of services (excluding Depreciation, amortization
	and accretion reported below)			191		62		20		20		–		102		1		294
Cost of equipment and products				238		1		–		27		–		28		6		272
Selling, general and administrative				369		46		13		13		(1)		71		(2)		438
Depreciation, amortization and accretion				147		42		9		6		–		57		3		207
(Gain) loss on asset disposals, net				4		–		1		–		–		1		–		5
(Gain) loss on sale of business and other exit costs, net				(111)		–		–		–		–		–		(13)		(124)
(Gain) loss on license sales and exchanges, net				(123)		–		–		–		–		–		–		(123)
Operating income (loss)				250		25		1		(5)		–		21		12		283
Equity in earnings of unconsolidated entities				34		–		–		–		–		–		1		35
Interest and dividend income				8		–		–		–		–		–		–		8
Interest expense				(20)		1		–		(1)		–		–		(14)		(34)
Other, net				–		1		–		–		–		1		(1)		–
Income (loss) before income taxes				272		27		1		(6)		–		22		(2)		292
Income tax expense (benefit)1				107										9		–		116
Net income (loss)				165										13		(2)		176
Add back:
Depreciation, amortization and accretion				147		42		9		6		–		57		3		207
(Gain) loss on asset disposals, net				4		–		1		–		–		1		–		5
(Gain) loss on sale of business and other exit costs, net				(111)		–		–		–		–		–		(13)		(124)
(Gain) loss on license sales and exchanges, net				(123)		–		–		–		–		–		–		(123)
Interest expense				20		(1)		–		1		–		–		14		34
Income tax expense (benefit)1				107		–		–		–		–		9		–		116
Adjusted EBITDA2			$	209	$	68	$	11	$	1	$	–	$	80	$	2	$	291

Investments in unconsolidated entities			$	305	$	4	$	–	$	–	$	–	$	4	$	34	$	343
Total assets			$	6,606	$	1,366	$	566	$	275	$	–	$	2,207	$	183	$	8,996
Capital expenditures			$	66	$	20	$	12	$	5	$	–	$	37	$	2	$	105