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Revenue Recognition (Tables) | 6 Months Ended
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Jun. 30, 2018
Revenue from Contract with Customer [Abstract] |
Adoption impact of ASU 2014-09 and ASU 2017-15 on financial statements | The line items impacted by the adoption of ASU 2014-09 and ASU 2017-05 on the Consolidated Statement of Operations, Consolidated Statement of Cash Flows and the Consolidated Balance Sheet are presented below. Consolidated Statement of Operations
|  |  |  | Results under prior accounting standards |  |  |  |  |  |
Three Months Ended June 30, 2018 |  | Adjustment |  | As reported
(Dollars and shares in millions, except per share amounts) |  |  |  |  |  |  |  |
Operating revenues |  |  |  |  |  |  |  |
Service | $ | 1,022 |  | $ | (29) |  | $ | 993
Equipment and product sales |  | 241 |  |  | 21 |  |  | 262
Total operating revenues |  | 1,263 |  |  | (8) |  |  | 1,255
Cost of equipment and products |  | 268 |  |  | (2) |  |  | 266
Selling, general and administrative |  | 413 |  |  | 4 |  |  | 417
(Gain) loss on license sales and exchanges, net |  | (11) |  |  | – |  |  | (11)
Total operating expenses |  | 1,192 |  |  | 2 |  |  | 1,194
Operating income (loss) |  | 71 |  |  | (10) |  |  | 61
Income (loss) before income taxes |  | 75 |  |  | (10) |  |  | 65
Income tax expense (benefit) |  | 23 |  |  | (2) |  |  | 21
Net income (loss) |  | 52 |  |  | (8) |  |  | 44
Less: Net income attributable to noncontrolling interests, net of tax |  | 12 |  |  | (1) |  |  | 11
Net income (loss) attributable to TDS shareholders |  | 39 |  |  | (6) |  |  | 33
Net income (loss) available to TDS common shareholders |  | 39 |  |  | (6) |  |  | 33
Basic earnings (loss) per share available to TDS common shareholders |  | 0.35 |  |  | (0.05) |  |  | 0.30
Diluted earnings (loss) per share available to TDS common shareholders |  | 0.35 |  |  | (0.06) |  |  | 0.29
Numbers may not foot due to rounding.
| Results under prior accounting standards |  | Adjustment |  | As reported
Six Months Ended June 30, 2018 |  |
(Dollars and shares in millions, except per share amounts) |  |  |  |  |  |  |  |
Operating revenues |  |  |  |  |  |  |  |
Service | $ | 2,029 |  | $ | (59) |  | $ | 1,970
Equipment and product sales |  | 468 |  |  | 42 |  |  | 510
Total operating revenues |  | 2,497 |  |  | (17) |  |  | 2,480
Cost of equipment and products |  | 517 |  |  | (5) |  |  | 512
Selling, general and administrative |  | 809 |  |  | 4 |  |  | 813
(Gain) loss on license sales and exchanges, net |  | (16) |  |  | (1) |  |  | (17)
Total operating expenses |  | 2,341 |  |  | (2) |  |  | 2,339
Operating income (loss) |  | 157 |  |  | (16) |  |  | 141
Income (loss) before income taxes |  | 162 |  |  | (16) |  |  | 146
Income tax expense (benefit) |  | 49 |  |  | (4) |  |  | 45
Net income (loss) |  | 112 |  |  | (11) |  |  | 101
Less: Net income attributable to noncontrolling interests, net of tax |  | 31 |  |  | (2) |  |  | 29
Net income (loss) attributable to TDS shareholders |  | 81 |  |  | (9) |  |  | 72
Net income (loss) available to TDS common shareholders |  | 81 |  |  | (9) |  |  | 72
Basic earnings (loss) per share available to TDS common shareholders |  | 0.73 |  |  | (0.08) |  |  | 0.65
Diluted earnings (loss) per share available to TDS common shareholders | $ | 0.72 |  | $ | (0.09) |  | $ | 0.63
Numbers may not foot due to rounding.
Consolidated Balance Sheet
| Results under prior accounting standards |  |  |  |  |  |
|  | Adjustment |  | As reported
As of June 30, 2018 |  |
(Dollars in millions) |  |  |  |  |  |  |  |
Accounts receivable |  |  |  |  |  |  |  |
Customers and agents, less allowances | $ | 830 |  | $ | 56 |  | $ | 886
Other, less allowances |  | 113 |  |  | (12) |  |  | 101
Prepaid expenses |  | 122 |  |  | (19) |  |  | 103
Other current assets |  | 26 |  |  | 17 |  |  | 43
Total current assets |  | 2,119 |  |  | 41 |  |  | 2,160
Licenses |  | 2,239 |  |  | 1 |  |  | 2,240
Investments in unconsolidated entities |  | 462 |  |  | 15 |  |  | 477
Other assets and deferred charges |  | 414 |  |  | 172 |  |  | 586
Total assets |  | 9,268 |  |  | 230 |  |  | 9,498
Customer deposits and deferred revenues |  | 183 |  |  | (18) |  |  | 165
Accrued taxes |  | 55 |  |  | (1) |  |  | 54
Other current liabilities |  | 94 |  |  | 4 |  |  | 98
Total current liabilities |  | 745 |  |  | (16) |  |  | 729
Deferred income tax liability, net |  | 580 |  |  | 56 |  |  | 636
Other deferred liabilities and credits |  | 515 |  |  | 8 |  |  | 523
Retained earnings |  | 2,539 |  |  | 153 |  |  | 2,692
Total TDS shareholders' equity |  | 4,331 |  |  | 153 |  |  | 4,484
Noncontrolling interests |  | 659 |  |  | 29 |  |  | 688
Total equity |  | 4,991 |  |  | 181 |  |  | 5,172
Total liabilities and equity |  | 9,268 |  |  | 230 |  |  | 9,498
Numbers may not foot due to rounding. |  |  |  |  |  |  |  |
Disaggregation of Revenues | Disaggregation of Revenue In the following table, revenue is disaggregated by type of service and timing of revenue recognition. Service revenues are recognized over time and Equipment sales are point in time.
|  |  |  |  |  | TDS Telecom |  |  |  |  |  |
Three Months Ended June 30, 2018 |  | U.S. Cellular |  | Wireline |  | Cable |  | TDS Telecom Total |  | Corporate, Eliminations and Other |  | Total
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues from contracts with customers: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Type of service: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Retail service |  | $ | 652 |  | $ | – |  | $ | – |  | $ | – |  | $ | – |  | $ | 652
| Inbound roaming |  |  | 39 |  |  | – |  |  | – |  |  | – |  |  | – |  |  | 39
| Residential |  |  | – |  |  | 80 |  |  | 47 |  |  | 127 |  |  | – |  |  | 127
| Commercial |  |  | – |  |  | 46 |  |  | 10 |  |  | 57 |  |  | – |  |  | 57
| Wholesale |  |  | – |  |  | 46 |  |  | – |  |  | 46 |  |  | – |  |  | 46
| Other service |  |  | 33 |  |  | – |  |  | – |  |  | – |  |  | 18 |  |  | 51
| Service revenues from contracts with customers |  |  | 724 |  |  | 173 |  |  | 57 |  |  | 229 |  |  | 18 |  |  | 971
| Equipment and product sales |  |  | 233 |  |  | – |  |  | – |  |  | 1 |  |  | 28 |  |  | 262
| Total revenues from contracts with customers 1 |  | $ | 957 |  | $ | 173 |  | $ | 57 |  | $ | 230 |  | $ | 46 |  | $ | 1,233
Numbers may not foot due to rounding.
1 | These amounts do not include revenues outside the scope of ASU 2014-09; therefore, revenue line items in this table will not agree to amounts presented in the Consolidated Statement of Operations.
|  |  |  |  |  | TDS Telecom |  |  |  |  |  |
Six Months Ended June 30, 2018 |  | U.S. Cellular |  | Wireline |  | Cable |  | TDS Telecom Total |  | Corporate, Eliminations and Other |  | Total
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue from contracts with customers: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Type of service: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Retail service |  | $ | 1,301 |  | $ | – |  | $ | – |  | $ | – |  | $ | – |  | $ | 1,301
| Inbound roaming |  |  | 66 |  |  | – |  |  | – |  |  | – |  |  | – |  |  | 66
| Residential |  |  | – |  |  | 160 |  |  | 92 |  |  | 253 |  |  | – |  |  | 253
| Commercial |  |  | – |  |  | 94 |  |  | 20 |  |  | 114 |  |  | – |  |  | 114
| Wholesale |  |  | – |  |  | 93 |  |  | – |  |  | 93 |  |  | – |  |  | 93
| Other service |  |  | 65 |  |  | – |  |  | – |  |  | (1) |  |  | 34 |  |  | 98
| Service revenues from contracts with customers |  |  | 1,432 |  |  | 348 |  |  | 112 |  |  | 459 |  |  | 34 |  |  | 1,925
| Equipment and product sales |  |  | 450 |  |  | 1 |  |  | – |  |  | 1 |  |  | 59 |  |  | 510
| Total revenues from contracts with customers 1 |  | $ | 1,882 |  | $ | 349 |  | $ | 112 |  | $ | 460 |  | $ | 93 |  | $ | 2,435
Numbers may not foot due to rounding.
1 | These amounts do not include revenues outside the scope of ASU 2014-09; therefore, revenue line items in this table will not agree to amounts presented in the Consolidated Statement of Operations.
Contract with Customer, Assets and Liabilities | The accounts receivable balance related to amounts billed and not paid on contracts with customers, net of allowances, is shown in the table below. Bad debts expense recognized for the three and six months ended June 30, 2018, related to receivables was $23 million and $43 million, respectively.
|  |  | June 30, 2018
(Dollars in millions) |  |  |  |  |
Accounts receivable |  |  |  |  |
Customer and agents |  |  |  | $ | 882
Other |  |  |  |  | 78
Total 1 |  |  |  | $ | 960
1 | These amounts do not include accounts receivable related to revenues outside the scope of ASU 2014-09; therefore, accounts receivable line items presented in this table will not agree to amounts presented in the Consolidated Balance Sheet.
The following table provides a rollforward of contract assets from contracts with customers, which are recorded in Other current assets and Other assets and deferred charges in the Consolidated Balance Sheet.
| Contract Assets
(Dollars in millions) |  |
Balance at December 31, 2017 | $ | –
Change in accounting policy |  | 28
Contract additions |  | 14
Terminated contracts |  | (1)
Revenue recognized |  | (14)
Balance at June 30, 2018 | $ | 27
The following table provides a rollforward of contract liabilities from contracts with customers, which are recorded in Customer deposits and deferred revenues and Other deferred liabilities and credits in the Consolidated Balance Sheet.
| Contract Liabilities
(Dollars in millions) |  |
Balance at December 31, 2017 | $ | –
Change in accounting policy - Deferred revenues reclassification 1 |  | 209
Change in accounting policy - Retained earnings impact |  | (22)
Contract additions |  | 85
Revenue recognized |  | (107)
Balance at June 30, 2018 | $ | 165
1 | This amount represents TDS' obligation to transfer goods or services to customers for which it had received payment and classified as deferred revenue at December 31, 2017.
Remaining Performance Obligations | Transaction price allocated to the remaining performance obligations The following table includes estimated service revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The estimates represent service revenue to be recognized when services are delivered to customers pursuant to service plan contracts. These estimates are based on contracts in place as of June 30, 2018, and may vary from actual results due to future contract modifications. As a practical expedient, revenue related to contracts of less than one year, generally contracts with month-to-month customers, are excluded from these estimates.
|  |  | Service Revenue
(Dollars in millions) |  |
Remainder of 2018 | $ | 285
2019 |  | 200
Thereafter |  | 93
| Total | $ | 578
Contract Cost Assets | Capitalized commission fees and fulfillment costs are amortized based on the transfer of the goods or services to which the assets relate, typically the contract term which ranges from thirteen months to five years. Contract cost asset balances, which are recorded in Other assets and deferred charges in the Consolidated Balance Sheet, were as follows:
| June 30, 2018
(Dollars in millions) |  |
Costs to obtain contracts |  |
Sales commissions | $ | 149
Fulfillment costs |  |
Installation costs |  | 10
Total contract cost assets | $ | 159

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