[ ] Telergee Conference For CFO’s and Controllers October 17 and 18, 2012 Management Reporting Improvements Matt Macdonald, Partner

[ ] 2 Agenda Future – Impact on Financial Reporting Wholesale & Retail Centers Payroll and Cost Allocations Example

[ ] 3 Future – Impact on Reporting ARRA Access Lines Declining Regulated Revenues and Operating Margins Declining USF/ICC Uncertainty

[ ] 4 Retail Profit Segments Voice Data Video LD Other Customer Revenues -Direct Expenses Contribution Margin

[ ] 5 Measuring Results Recurring Monthly Expenses Nonrecurring Expenses Depreciation Expense Customer Revenues Operating Margin Cash Flow Margin Contribution Margin

[ ] 6 Wholesale Segments Network General Support Corporate Customer

[ ] 7 Wholesale Income Expenses Revenues Switched Access/USF Special Access Network Leases Depreciation ’s Plant Specific ’s Plant Nonspecific 6530’s General Taxes 7240’s

[ ] 8 Operating Income This is the report card How do we plan to have operating income How do we break operating income into operating decisions?

[ ] 9 Tools ARPU – Average Revenue per user ACPU – Average Cost per user Service Users = Subscribers Network Users = Households Variable Costs CM = Contribution Margin Budget = One Year Locked Down Forecast

[ ] 10 Do you prepare a Budget? 1.Capital Expenditure Only 2.Capital Expenditures and Income Statement Only 3.Full Budget for Income Statement, Balance Sheet, and Cash Flows 4.We do not prepare a Budget

[ ] 11 How Often Do You Compare the Budget to Actual? 1.Monthly 2.Quarterly 3.Annually 4.Never

[ ] 12 Customer Revenues Historical Revenues Subscribers ARPU Direct Costs Fixed Variable Count ACPU

[ ] 13 Payroll Labor Distribution by Employee Account Separate Labor from other account activity Pay rates Employees Distribution Overheads Clearing

[ ] 14 Cost Allocations Expense Incurred Cost Assignment Directly Assign – Regulated ILECCLEC Directly Assign – Non- regulated VideoInternetCellularCommon Cost Indirect Allocators BuildingPlant AdminVehiclesProperty Tax General Allocator

[ ] 15 Wholesale Cost Centers Network per Household General Support per Household Corporate per Household Customer per Household Net Cost per Household $30 $50

[ ] 16 Retail Profit Centers Today Voice CM per Sub$15100%$15 Data CM per Sub$3560%$21 Video CM per Sub$040%$0 Other CM per Sub$??%$? $36 Tomorrow $15100%$15 $3590%$31 $450%$2 $1050%$5 $53

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[ ] 18 Questions? Matt Macdonald, Partner Madison, WI Thank you!