US Cellular 2008 Annual Report Download

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Notice of Meeting and Proxy Statement
for 2009 Annual Meeting of Shareholders
and 2008 Annual Report
uscellular.com

Table of contents

  • Page 1
    Notice of Meeting and Proxy Statement for 2009 Annual Meeting of Shareholders and 2008 Annual Report uscellular.com

  • Page 2
    ... postpay customers • 8,500 full-time equivalent associates Network and Infrastructure • Invested $586 million to build new cell sites, increase capacity of existing cell sites, purchase equipment to expand 3G / EVDO services to additional markets, create new retail stores and...

  • Page 3
    ... new Mobile Internet plans. To support both current and future data needs, U.S. Cellular expanded its 3G/Evolution Data Optimized (EVDO) network to cell sites in key markets during the year. These complementary initiatives, along with customers' increased use of text and picture messaging services...

  • Page 4
    ... network quality. J.D. Power and Associates has ranked U.S. Cellular ''Highest Call Quality Performance Among Wireless Cell Phone Users in the North Central Region'' for seven consecutive reporting periods. U.S. Cellular, indirectly through its limited partnership interest in King Street Wireless...

  • Page 5
    ... repairs for all sales channels, including agents, through a new handset logistics system. U.S. Cellular will continue to build its portfolio of data services and products in 2009, supported by the ongoing expansion of its 3G network. The company also plans to introduce new and competitive iii

  • Page 6
    ... on its retail postpay customers. Although U.S. Cellular expects total roaming revenues to decrease in 2009 as a result of the merger of Verizon and Alltel, its continued growth in cell sites and network quality ensures an attractive voice and data roaming experience for its roaming partners. Thank...

  • Page 7
    ...report on the plans and accomplishments of United States Cellular Corporation. The formal notice of the meeting and our board of directors' proxy statement are enclosed. Appendix I to the proxy statement contains audited financial statements and certain other financial information for the year ended...

  • Page 8
    ... and annual report to shareholders are available at www.uscellular.com under Investor Relations-Proxy Vote, or at www.uscellular.com/investor/2009proxy. The following items have been posted to this Web site: 1. 2. 3. Proxy Statement for the 2009 Annual Meeting Annual Report to Shareholders for 2008...

  • Page 9
    ... Common Shares. The Common Shares are listed on the New York Stock Exchange under the symbol ''USM.'' No public market exists for the Series A Common Shares, but the Series A Common Shares are convertible on a share-for-share basis into Common Shares. On March 30, 2009, U.S. Cellular had outstanding...

  • Page 10
    ... than the election of directors? The following shows certain information relating to the outstanding shares and voting power of such shares in matters other than the election of directors as of the record date: Class or Series of Common Stock Outstanding Shares Votes per Share Total Voting Power...

  • Page 11
    ..., the approval of the amended Non-Employee Director Plan, the approval of U.S. Cellular's 2005 Long-Term Incentive Plan, as amended, and the ratification of independent registered public accountants. Whether or not you plan to attend the meeting, please sign and mail your proxy in the enclosed...

  • Page 12
    ... proposals to approve the amended Non-Employee Director Compensation Plan and to approve U.S. Cellular's 2005 Long-Term Incentive Plan, as amended will require the affirmative vote of a majority of the voting power of the Common Shares and Series A Common Shares voting together and present in person...

  • Page 13
    ... to Proposal 4? If a quorum is present at the annual meeting, the proposal to ratify independent registered public accountants will require the affirmative vote of a majority of the voting power of the Common Shares and Series A Common Shares voting together and present in person or represented by...

  • Page 14
    ... of sales and executive vice president. Prior to CDW, Mr. Harczak was a partner at PricewaterhouseCoopers LLP . CDW is a provider of technology products and services and was a public company until it was acquired and became privately held in 2007. Mr. Harczak is a director of Tech Data Corporation...

  • Page 15
    ... Chief Accounting Officer of U.S. Cellular and Executive Vice President and Chief Financial Officer of TDS 2004 1999 Background of Class II Directors Paul-Henri Denuit. Mr. Denuit is a private investor. Prior to retiring from S.A. Coditel in 2001, Paul-Henri Denuit served as managing director of...

  • Page 16
    ... and Director of U.S. Cellular and President and Chief Executive Officer of TDS Director of U.S. Cellular, non-executive Chairman of the Board of TDS and Partner, Sidley Austin LLP , Chicago, Illinois 1984 1989 Background of Class III Directors J. Samuel Crowley. Mr. Crowley is a private investor...

  • Page 17
    ... is available on U.S. Cellular's web site, www.uscellular.com, under About Us-Investor Relations-Corporate Governance-Code of Business Conduct and Ethics for Officers and Directors. Director Independence and New York Stock Exchange Listing Standards Prior to September 15, 2008, U.S. Cellular Common...

  • Page 18
    ...(vi) annual performance evaluation of the Board, (vii) Board committees, (viii) management succession and (ix) periodic review of the guidelines. A copy of such guidelines are available on U.S. Cellular's web site, www.uscellular.com, under About Us- Investor Relations-Corporate Governance-Corporate...

  • Page 19
    ... Audit Committee is financially literate and has ''accounting or related financial management expertise'' pursuant to listing standards of the NYSE. In addition, although Mr. Harczak previously was an executive officer of CDW Corporation, which provides products and services to U.S. Cellular and its...

  • Page 20
    ... NYSE. As a controlled company, except with respect to matters within the authority of the Stock Option Compensation Committee, U.S. Cellular considers it sufficient and appropriate that LeRoy T. Carlson, Jr., who is a director and president and chief executive officer of TDS, approves compensation...

  • Page 21
    ... to our board of directors new long-term compensation plans or changes in existing plans. The Stock Option Compensation Committee held three meetings during 2008. A copy of the current charter of the Stock Option Compensation Committee is not available on U.S. Cellular's web site and, accordingly...

  • Page 22
    ... generally based on the recommendation of TDS. With respect to candidates for director to be elected by the Common Shares, the U.S. Cellular board may from time to time informally consider candidates recommended by shareholders that hold a significant number of Common Shares. The U.S. Cellular board...

  • Page 23
    ... or group. Information on communicating with directors is available on U.S. Cellular's web site, www.uscellular.com, under About Us-Investor Relations-Corporate Governance-Contact the Board. U.S. Cellular Policy on Attendance of Directors at Annual Meeting of Shareholders All directors are invited...

  • Page 24
    ... year and ended on the last day of February of the calendar year of payment. The number of shares will be determined on the basis of the closing price of U.S. Cellular Common Shares for the last trading day in the month of February of each year. Notwithstanding the foregoing, the annual stock...

  • Page 25
    ... to such cash payment, and in the year of payment U.S. Cellular will be allowed a deduction for federal income tax purposes equal to the compensation recognized by such non-employee director. Plan Benefits No disclosure is being made of the benefits or amounts that will be received by or allocated...

  • Page 26
    ... and retaining key executive and management employees of U.S. Cellular and such affiliates; and • motivate such employees to act in the long-term best interests of U.S. Cellular's shareholders. Amendment. The U.S. Cellular board of directors may amend the Amended Plan as it deems advisable...

  • Page 27
    ... to time. U.S. Cellular and its affiliates currently have approximately 1,850 key executive and management employees. Maximum Award. Subject to adjustment in the event of changes in the capital structure of U.S. Cellular, and to the extent necessary for an award to be ''qualified performance-based...

  • Page 28
    ... fair market value (determined as of the date the option is granted) of the Common Shares with respect to which ISOs are exercisable for the first time by the optionee in any calendar year (under the Amended Plan and any other incentive stock option plan of U.S. Cellular or any related corporation...

  • Page 29
    ... mature shares, or, to the extent legally permissible, through an arrangement between the option holder and a broker-dealer acceptable to U.S. Cellular for the payment of the purchase price. All of the terms relating to the exercise or cancellation of a stock option upon a termination of employment...

  • Page 30
    ... or her deferred compensation account subject to Section 409A of the Code will be paid before the date which is six months after the date of the employee's separation from service (or if earlier, the date of the employee's death). Payment of deferrals related to bonus years prior to 2009 generally...

  • Page 31
    ... income tax withholding) upon exercise of a nonqualified stock option equal to the excess of the fair market value on the date of exercise of the shares purchased over their exercise price, and U.S. Cellular will be entitled to a corresponding corporate income tax deduction, except to the extent the...

  • Page 32
    ... elects not to receive currently by deferring such amount into a deferred compensation account; or • upon the grant of a company match award, and U.S. Cellular will not be entitled to a corporate income tax deduction at such time. At the time the award recipient receives a distribution from his...

  • Page 33
    ... award the number and class of shares into which an outstanding Common Share will be converted pursuant to the Change in Control (and adjusting the purchase price or base price, if any, accordingly). For the definition of Change in Control, see U.S. Cellular's 2005 Long-Term Incentive Plan, as...

  • Page 34
    ... PLAN Restricted Stock Units Number Of Common Company Match Award (2) Shares Subject To Number of Number of Options(1) Dollar Value(3) Shares Dollar Value(3) Shares Name John E. Rooney ...President and Chief Executive Officer Steven T. Campbell ...Executive Vice President-Finance, Chief Financial...

  • Page 35
    ... firm for the year ending December 31, 2009. The board of directors recommends a vote ''FOR'' ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year. FEES PAID TO PRINCIPAL ACCOUNTANTS The following sets forth the...

  • Page 36
    ... Cellular board of directors, a copy of which is available on U.S. Cellular's web site, www.uscellular.com, under About Us-Investor Relations-Corporate Governance-Audit Comm. Charter. Management is responsible for U.S. Cellular's internal controls and the financial reporting process. U.S. Cellular...

  • Page 37
    ...'' as set forth in Item 406 of Regulation S-K of the SEC. The foregoing code has been posted to U.S. Cellular's internet website, www.uscellular.com, under About Us-Investor Relations- Corporate Governance-Code of Business Conduct and Ethics for Officers and Directors, and is available in print...

  • Page 38
    ... to the board of directors new long-term compensation plans or changes in existing plans. Specifically, the charter of the Stock Option Compensation Committee provides that it shall consider, review and approve the long-term compensation of officers and key employees of U.S. Cellular, involving the...

  • Page 39
    ...than the President and CEO, the Chairman reviews the President's evaluation of the performance of such executive officers and sets the annual base and bonus compensation levels for such executive officers, and recommends long-term compensation to the Stock Option Compensation Committee based on such...

  • Page 40
    ... similar companies in order to attract and retain high quality management, attain business objectives and financial performance and increase shareholder value. Executive compensation is intended to provide an appropriate balance between the long-term and short-term performance of U.S. Cellular, and...

  • Page 41
    ... times of the year as it deems appropriate. U.S. Cellular does not backdate stock options and does not have any program, plan or practice to time the grant of awards in coordination with the release of material non-public information. The exercise price of stock options is based on the closing price...

  • Page 42
    ... of companies used for calculating the Stock Performance Graph in the Annual Report to Shareholders. U.S. Cellular reviews or considers this broad-based third-party survey for only general purposes, including to obtain a general understanding of current compensation practices. U.S. Cellular, the...

  • Page 43
    ... the calculation of the overall performance percentage for 2007 based on the 2007 Executive Bonus Plan for bonuses approved and paid in 2008. The below amounts cannot be derived from the financial statements. The results of markets that are owned but not managed by U.S. Cellular are not included in...

  • Page 44
    ...of 441 new cell sites, upgrades to all of its switches and other enhancements. • U.S. Cellular won the J.D. Power and Associates Award for overall call quality among wireless telephone users in the North Central Region for the fourth consecutive reporting period. • U.S. Cellular's retail postpay...

  • Page 45
    ... companies that are much larger than U.S. Cellular, possess greater resources, possess more extensive coverage areas and more spectrum within some coverage areas, and market other services with their communications services that U.S. Cellular does not offer; U.S. Cellular's performance...

  • Page 46
    ... $423,000 or by 12% effective March 1, 2008, reflecting his rating of far exceeds expectations for the reasons discussed above and his additional responsibilities as Executive Vice President, Chief Financial Officer and Treasurer. The amount reported in the Summary Compensation Table represents two...

  • Page 47
    ...8% effective March 1, 2008, reflecting his rating of far exceeds expectations for the reasons discussed above. In addition, the base pay increase for Mr. Irizarry reflects the addition of all Information Systems (IS) responsibilities to his existing engineering and network operation responsibilities...

  • Page 48
    ... are: to provide incentive for the officers of U.S. Cellular to extend their best efforts toward achieving superior results in relation to key business measures; to reward U.S. Cellular's executive officers in relation to their success in meeting and exceeding the performance targets; and to help...

  • Page 49
    ... peer companies included in the ''Stock Performance Graph'' in the 2008 annual report to shareholders and as discussed above under ''Benchmarking''. No specific measures of performance were considered determinative with respect to the bonus of the President. As with the other executive officers, all...

  • Page 50
    ... described for annual base salary and bonus decisions above, except that the stock options and restricted stock units are generally intended to vest over several years, in order to reflect the goal of relating long-term compensation of the named executive officers to increases in shareholder value...

  • Page 51
    ... of a U.S. Cellular Common Share based on the closing stock price on the grant date and (ii) a vesting discount factor to account for forfeitures. The Company performance multiple used was 107% as discussed above. The officer performance multiple represents a number based on information from Towers...

  • Page 52
    ...1, 2008 Base Salary ...Performance Multiple ...Long Term Incentive Target Value . . Option Value ...Closing Stock Price on April 1, 2008 Closing Price Ç, Black-Scholes Ratio ...Adj. Price Ç, Option Vesting Discount Factor ...Options Granted (rounded) ...RSU Value ...Company Performance % ...Adjusted...

  • Page 53
    ... 28, 2000 relating to his employment as President and Chief Executive Officer. As with the annual salary and bonus, executive officers do not become entitled to any stock options or restricted stock units as a result of the achievement of any corporate or individual performance levels. The award...

  • Page 54
    ... Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payments (which we refer to as ''FAS 123R'') as relevant in its executive compensation decisions. Accordingly, the following table reconciles the compensation expense reported in the Summary Compensation Table using the...

  • Page 55
    .... As noted herein, U.S. Cellular recognizes that it must compensate its executive officers in a competitive manner comparable to similar companies in order to attract and retain high quality management, attain business objectives and financial performance and increase shareholder value. Considering...

  • Page 56
    ... with the financial performance of U.S. Cellular. To achieve these objectives, the Chairman and the Stock Option Compensation Committee believe that the named executive officers must be offered a competitive compensation package, including benefits and plans. U.S. Cellular's compensation packages...

  • Page 57
    ... for financial statement reporting purposes with respect to the fiscal year in accordance with FAS 123R, disregarding the estimate of forfeitures related to service-based vesting conditions. Stock options may be granted under the U.S. Cellular 2005 Long-Term Incentive Plan. Column (f), ''Option...

  • Page 58
    ... date of death. Other Termination of Employment or Service. If the officer's employment terminates for any reason other than Disability, Special Retirement, Retirement, resignation of employment or service with the prior consent of the U.S. Cellular board of directors or death, then the stock option...

  • Page 59
    ... cash payment from U.S. Cellular. The foregoing outlines the potential effect of a Change in Control relating to all awards available under the U.S. Cellular 2005 Long-Term Incentive Plan. However, U.S. Cellular currently only has outstanding RSUs, options and phantom stock units related to deferred...

  • Page 60
    ... below table of Potential Payments upon Termination or Change in Control. The balance of the SERP as of December 31, 2008 for each named executive officer is set forth in the ''Nonqualified Deferred Compensation'' table below. Perquisites U.S. Cellular does not provide any significant perquisites to...

  • Page 61
    ... scope, terms, or operation in favor of executive officers and are available generally to all employees of TDS or U.S. Cellular, as applicable, and benefits are not enhanced upon any termination or change in control. Accordingly, no amounts are reported in the below table of Potential Payments upon...

  • Page 62
    ... of an employee's account becomes payable following the employee's termination of employment as (a) an annuity or (b) a lump sum payment. This plan does not discriminate in scope, terms, or operation in favor of executive officers and is available generally to all employees, and benefits are not...

  • Page 63
    ... Information relating to U.S. Cellular's primary compensation consultant is discussed above under ''Corporate Governance-Stock Option Compensation Committee.'' Compensation Committee Report The undersigned directors oversee U.S. Cellular's compensation programs on behalf of the board of directors...

  • Page 64
    ... fiscal year as set forth in column (j), reduced by any amount in column (h). LeRoy T. Carlson, Jr., Chairman of U.S. Cellular, and LeRoy T. Carlson, a director of U.S. Cellular and executive officers of TDS, receive no compensation from U.S. Cellular. In addition, Kenneth R. Meyers, a director of...

  • Page 65
    ... 18-Stock Based Compensation, in U.S. Cellular's financial statements for the year ended December 31, 2008 included in its Form 10-K for the year ended December 31, 2008. All above stock awards were valued based on grant date fair value using an annual forfeiture rate (the percentage of stock awards...

  • Page 66
    ...- Stock Based Compensation, in U.S. Cellular's financial statements for the year ended December 31, 2008 included in its Form 10-K for the year ended December 31, 2008. All above stock options were valued based on grant date fair value using a forfeiture rate (the percentage of stock options granted...

  • Page 67
    ... or U.S. Cellular employee stock purchase plans because such discounts are available generally to all employees of U.S. Cellular. The per share cost to each participant is 85% of the market value of the TDS Special Common Shares or U.S. Cellular Common Shares as of the issuance date, as applicable...

  • Page 68
    ... Vice President and Chief Operating Officer, is included above as one of the three most highly compensated executive officers other than the principal executive officer or principal financial officer who was serving as an executive officer at the end of the last completed fiscal year. U.S. Cellular...

  • Page 69
    ...information regarding plan-based awards in 2008. Grants of Plan-Based Awards All Other All Other Estimated Stock Option Future Estimated Awards: Awards: Grant Date Payouts Future Number of Number of Exercise or Fair Value Under Payouts of Securities Base Price of Stock Non-Equity Under Equity Shares...

  • Page 70
    ... the number of U.S. Cellular Common Shares underlying stock options awarded during the fiscal year pursuant to the U.S. Cellular 2005 Long-Term Incentive Plan. The U.S. Cellular stock options were granted at an exercise price of $57.19 per share, which was the closing price of a U.S. Cellular Common...

  • Page 71
    ...executive officers who are named in the Summary Compensation Table, certain information regarding outstanding equity awards at December 31, 2008. Outstanding Equity Awards at Fiscal Year-End Option Awards Stock Awards Equity Incentive Equity Plan Incentive Awards: Plan Market or Awards Payout Number...

  • Page 72
    ...as of December 31, 2008. Represents the aggregate market value of shares underlying stock awards that have not vested as of December 31, 2008, calculated using the closing price of U.S. Cellular Common Shares of $43.24 on December 31, 2008, the last trading day of 2008. (c) (d) (e) (f) (g) (h) 65

  • Page 73
    ... to correct the exercise price of the stock option to the closing price of the underlying Common Shares as of the date of approval of the original stock option by the Stock Option Compensation Committee of $75.00 on September 8, 2000. In connection therewith, U.S. Cellular agreed to pay $7,784 to Mr...

  • Page 74
    ...officers who are named in the Summary Compensation Table, certain information regarding option exercises and stock vested in 2008. Option Exercises and Stock Vested Option Awards Number of Shares Value Acquired on Realized Exercise Upon (#) Exercise ($) (b) (c) Stock Awards Number of Shares Acquired...

  • Page 75
    ... is payable, provided that the officer is an employee of U.S. Cellular or an affiliate on such date. The stock price used to calculate the value on vesting was the closing price of U.S. Cellular Common Shares of $43.24 on December 31, 2008, the last trading day in 2008. See ''Information Regarding...

  • Page 76
    ...a portion of his bonus earned in 2008 (based upon 2007 performance). The officer makes an election as to when to receive a distribution of the deferred compensation account. Represents the dollar amount of aggregate contributions by U.S. Cellular during the last fiscal year. With respect to the SERP...

  • Page 77
    ...'s account based on the closing price of the underlying shares of $43.24 on December 31, 2008, the last trading day of the year. (e) (f) Footnotes: (1) Each of the identified officers participates in a supplemental executive retirement plan (''SERP''). This plan provides supplemental benefits to...

  • Page 78
    ...'s account on December 1, 2008. The distribution represented 51,551 gross USM Common Shares, having a value of $1,846,027, based on the closing price at December 1, 2008 of $35.81 per share. Relating to this amount, $1,570,000 had been reported as bonus and $457,655 had been reported as company...

  • Page 79
    ... based on performance during their continued employment with U.S. Cellular and are designed to motivate executive officers to act in the best long-term interest of U.S. Cellular, recognizing that U.S. Cellular is a controlled company. As a result, these objectives do not contemplate providing...

  • Page 80
    ... does not report any amount to be provided to a named executive officer under any arrangement that does not discriminate in scope, terms, or operation in favor of our executive officers and which is available generally to all employees. Also, the following table does not repeat information disclosed...

  • Page 81
    ... closing market price as of December 31, 2008, the last trading day in 2008. The stock price used was the closing price of U.S. Cellular Common Shares of $43.24 on December 31, 2008. Includes only the aggregate difference between the exercise price of such stock options and such year end stock price...

  • Page 82
    ...'s securities is the closing market price as of December 31, 2008, the last trading day in 2008. The stock price used was the closing price of U.S. Cellular Common Shares of $43.24 on December 31, 2008. (e) There were no other potential payments upon a termination or change in control as of...

  • Page 83
    ...371,864 $3,502,889 $2,220,738 $1,107,656 $ 392,418 Option (Per Share Exercise Price of Options) Steven T. Campbell(2) 2008 Options ($57.19) 2007 Options ($73.84) 2006 Options ($59.43) 2005 Options ($47.76) ... Value at 12/31/08 based on $43.24 per share $1,175,047 $ 557,796 $ 163,793 $ 55,434 Less...

  • Page 84
    ... table shows, as to directors who are not executive officers of U.S. Cellular or TDS, certain information regarding director compensation. Director Compensation Change in Pension Value and Fees Nonqualified Earned Non-Equity Deferred or Paid Stock Option Incentive Plan Compensation All Other in Cash...

  • Page 85
    ... year and ended on the last day of February of the calendar year of payment. The number of shares will be determined on the basis of the closing price of U.S. Cellular Common Shares for the last trading day in the month of February of each year. Notwithstanding the foregoing, the annual stock...

  • Page 86
    ...Rooney, a director and President and Chief Executive Officer of U.S. Cellular, participated in executive compensation decisions for U.S. Cellular, other than for himself. Long-term compensation for executive officers is approved by our Stock Option Compensation Committee, which currently consists of...

  • Page 87
    ... transfer the interest free of any restrictions on its sale or transfer. If we desire to purchase any interest so offered, TDS is required to negotiate with us concerning the terms and conditions of the transaction, including the price and the method of payment. If we are unable to agree with TDS on...

  • Page 88
    ...other from time to time services relating to operations, marketing, human resources, accounting, customer services, customer billing, finance, and general administration, among others. Unless otherwise provided by written agreement, services provided by TDS or any of its subsidiaries are charged and...

  • Page 89
    ... that TDS may hold at any time. TDS will pay all costs relating thereto and any underwriting discounts and commissions relating to any such offering, except that we will pay the fees of any counsel, accountants, trustees, transfer agents or other agents retained by U.S. Cellular in connection...

  • Page 90
    ... of all related party transactions, as such term is defined by the rules of the New York Stock Exchange. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table provides information as of December 31, 2008 regarding U.S. Cellular Common Shares that may be issued under...

  • Page 91
    ... Employee Stock Purchase Plan . 2009 Employee Stock Purchase Plan . Non-Employee Director Compensation Plan ...2005 Long-Term Incentive Plan ... Number of securities to be issued upon the exercise of outstanding options and rights - - - 2,125,466 2,125,466 Number of securities remaining available...

  • Page 92
    ...579 Common Shares and has reported sole voting power with respect to 3,539,279 Common Shares. Security Ownership of U.S. Cellular by Management Several of our officers and directors indirectly hold substantial ownership interests in U.S. Cellular by virtue of their ownership of the capital stock of...

  • Page 93
    ...and TDS Special Common Shares are entitled to elect 25% of the directors of TDS, rounded up to the nearest whole number, plus one director, and the holders of TDS Series A Shares and TDS Preferred Shares, voting as a group, are entitled to elect the remaining members of the board of directors of TDS...

  • Page 94
    Beneficial Ownership of TDS by Directors and Executive Officers of U.S. Cellular The following table sets forth the number of TDS Common Shares, TDS Special Common Shares and TDS Series A Shares beneficially owned by each director of U.S. Cellular, by each executive officer named in the Summary ...

  • Page 95
    ...partnership, of which Mr. Carlson is a general partner. (7) Includes the following number of TDS Common Shares and TDS Special Common Shares that may be purchased pursuant to stock options and/or restricted stock units which are currently exercisable or exercisable within 60 days: LeRoy T. Carlson...

  • Page 96
    ... In addition to the persons listed under ''Beneficial Ownership of TDS by Directors and Executive Officers of U.S. Cellular,'' the following table sets forth, as of February 28, 2009, or the latest practicable date, information regarding the persons who own beneficially more than 5% of any class of...

  • Page 97
    ...or direct the vote of 2,890,200 TDS Special Common Shares and sole or shared power to dispose or to direct the disposition of 2,928,200 TDS Special Common Shares. (12) Based on the most recent Schedule 13G filed with the SEC, State Street Bank and Trust Company reports that it has sole power to vote...

  • Page 98
    ... to forward proxy soliciting material to the beneficial owners of shares of record. FINANCIAL INFORMATION We will furnish you or any shareholder as of the record date without charge a copy of our report on Form 10-K for the fiscal year ended December 31, 2008, including the financial statements...

  • Page 99
    ... other than those set forth above, but if other matters are properly brought before the annual meeting, the persons named in the proxy will vote in accordance with their best judgment. By order of the Board of Directors 1MAR200512431936 KEVIN C. GALLAGHER Vice President and Corporate Secretary 92

  • Page 100
    ... to the long-term compensation of executive officers of the Company who are subject to the requirements of Section 16 of the Exchange Act or as otherwise provided in the applicable plan; (ii) consider, approve and recommend to the Board of Directors of the Company any new stock option or other long...

  • Page 101
    ... year of payment. The number of shares shall be determined on the basis of the closing price of the Company's Common Shares, as reported in the New York Stock Exchange Composite Transaction section of the Wall Street Journal for the last trading day in the month of February of each year. (A director...

  • Page 102
    ..., directors of the Company shall have the authority without further shareholder approval to further amend this Plan from time to time, including amendments to increase the amount of the compensation payable in Common Shares from time to time, provided that the total number of Common Shares issued...

  • Page 103
    ... of the United States Cellular Corporation 2003 Long-Term Incentive Plan. The purposes of the Plan are (i) to align the interests of the stockholders of the Company and the key executive and management employees of the Company and certain of its Affiliates by increasing the proprietary interest of...

  • Page 104
    ...12 ''Employer'' shall mean the Company, USCC Payroll Corporation, and any Affiliate selected by the Committee and approved by the Board. 2.13 ''Exchange Act'' shall mean the Securities Exchange Act of 1934, as amended. 2.14 ''Fair Market Value'' of a share of Stock shall mean its closing sale price...

  • Page 105
    ...may amend or adjust the Performance Measures or other terms and conditions of an outstanding award in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in law or accounting principles. 2.23 ''Performance Period'' shall mean a period designated...

  • Page 106
    ...the Fair Market Value of one share of Stock on the date of exercise over the base price of such SAR, multiplied by the number of shares of Stock subject to such option, or portion thereof, which is surrendered. 2.36 ''TDS'' shall mean Telephone and Data Systems, Inc., a Delaware corporation. ARTICLE...

  • Page 107
    ... the Company's Certificate of Incorporation or by-laws, and under any directors' and officers' liability insurance which may be in effect from time to time. 3.3 Shares Available. (a) Subject to adjustment as provided in Section 9.8, 9,600,000 shares of Common Stock shall be available under the Plan...

  • Page 108
    ... Fair Market Value (determined as of the date of grant) of shares of Stock with respect to which options designated as Incentive Stock Options are exercisable for the first time by an option holder during any calendar year (under the Plan or any other plan of the Company or any related corporation...

  • Page 109
    ... and Base Price. The number of SARs subject to an award shall be determined by the Committee. Any Tandem SAR shall be granted on the same date that the related option is granted. The base price of a Tandem SAR shall be the purchase price per share of Stock of the related option. The base price of...

  • Page 110
    ... notice to the Company specifying the whole number of SARs which are being exercised and (B) by executing such documents as the Company may reasonably request. 4.6 Termination of Employment or Service. All of the terms relating to the exercise, cancellation or other disposition of an option or SAR...

  • Page 111
    ... as a stockholder of the Company with respect to the shares of Stock subject to such award. 6.3 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Restriction Period relating to a Restricted Stock Unit Award, or any...

  • Page 112
    ... a stockholder of the Company with respect to the shares of Stock subject to such award. 7.3 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Performance Period relating to a Performance Award, or any cancellation...

  • Page 113
    ... is six (6) months after the date of the employee's Separation from Service (or if earlier than the end of such six-month period, the date of the employee's death). All payments of deferred compensation hereunder will be made in whole shares of Stock and cash equal to the Fair Market Value of any...

  • Page 114
    ... deferral program set forth in this Article VIII and (ii) was not, at any time during the 24-month period ending on the date on which he or she became eligible to participate in such deferral program, eligible to participate in an Account Balance Plan (irrespective of whether such employee in fact...

  • Page 115
    ... stock exchange on which the Stock is then traded; provided, however, that no amendment shall be made without stockholder approval if such amendment would (a) increase the maximum number of shares of Stock available for issuance under the Plan (subject to Section 9.8) or (b) effect any change...

  • Page 116
    ... to the Company of previously-owned whole shares of Stock, the aggregate Fair Market Value of which shall be determined as of the Tax Date. Notwithstanding the foregoing, withholding of employment taxes owed in connection with a Deferred Compensation Account may be satisfied by a cash payment to the...

  • Page 117
    ...the cash payment shall equal the number of shares of Stock then subject to such option, multiplied by the excess, if any, of the greater of (x) the highest per share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (y) the Fair Market Value...

  • Page 118
    ... cash payment shall equal the number of shares of Stock then deemed to be in the Account, multiplied by the greater of (x) the highest per share price offered to stockholders of the Company in any transaction whereby the Change in Control takes place or (y) the Fair Market Value of a share of Stock...

  • Page 119
    ... of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company. 9.10 No Right of Participation, Employment or Service. No person shall have any...

  • Page 120
    ... shall not be reduced after the date of grant of such award without the affirmative vote of a majority of the voting power of the shares of capital stock of the Company represented at a meeting in which the reduction of such exercise price or base price is considered for approval. 9.15 Compliance...

  • Page 121
    ... STATES CELLULAR CORPORATION ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2008 Pursuant to SEC RULE 14(a)-3 and New York Stock Exchange Section 203.01 The following audited financial statements and certain other financial information for the year ended December 31, 2008, represent...

  • Page 122
    ... Balance Sheet-Liabilities and Shareholders' Equity ...Consolidated Statement of Common Shareholders' Equity ...Notes to Consolidated Financial Statements ...Reports of Management ...Report of Independent Registered Public Accounting Firm ...Selected Consolidated Financial Data ...Five-Year...

  • Page 123
    ... wireless markets and operated 6,877 cell sites. U.S. Cellular operates on a customer satisfaction strategy, seeking to meet customer needs by providing a comprehensive range of wireless products and services, excellent customer support, and a high-quality network. U.S. Cellular's business...

  • Page 124
    ... Cellular's customer base; • Costs of developing and introducing new products and services; • Costs of development and enhancement of office and customer support systems; • Continued enhancements to its wireless networks, including potential deployments of new technology; • Increasing costs...

  • Page 125
    ... from capturing wireless users switching from other wireless carriers, selling additional products and services to its existing customers, and increasing the number of multi-device users among its existing customers, rather than by adding users that are new to wireless service. U.S. Cellular is...

  • Page 126
    ... expiration date to acquire a majority interest in one license under the exchange agreement. (3) U.S. Cellular's customer base consists of the following types of customers: 2008 2007 2006 Customers on postpay service plans in which the end user is a customer of U.S. Cellular (''postpay customers...

  • Page 127
    ... of time U.S. Cellular included such customers during each period. (7) Postpay churn rate represents the percentage of the postpay customer base that disconnects service each month. Components of Operating Income Year Ended December 31, 2008 Increase/ Percentage (Decrease) Change 2007 Increase...

  • Page 128
    ... data products and services. Monthly retail voice minutes of use per customer averaged 695 in 2008, 676 in 2007 and 590 in 2006. The increases in both years were driven primarily by U.S. Cellular's focus on designing sales incentive programs and customer billing rate plans to stimulate overall usage...

  • Page 129
    ... in rates per minute or kilobyte of use with key roaming partners. The increase in inbound usage was driven primarily by the overall growth in the number of customers and higher usage per customer throughout the wireless industry, including usage related to both voice and data products and services...

  • Page 130
    ... in the number of cell sites and other network facilities within U.S. Cellular's systems as it continues to add capacity and enhance quality; • Continued expansion of EVDO services to additional markets; and • Increases in voice minutes of use and data usage, both on U.S. Cellular's network and...

  • Page 131
    ... related to the launch in June 2008 of a new branding campaign, Believe in Something Betterȶ. • Other selling and marketing expenses increased $31.9 million, or 6%, reflecting more retail sales associates, higher retail facilities expenses and higher commissions due to a greater number of retail...

  • Page 132
    ... disposals, net These amounts represent charges related to disposals of assets, trade-ins of older assets for replacement assets and other retirements of assets from service. In 2007, U.S. Cellular conducted a physical inventory of its significant cell site and switching assets. As a result, Loss on...

  • Page 133
    ... million in 2008 and increased by $6.6 million in 2007. The decrease in 2008 was due primarily to a decline in short-term interest rates and a change in the composition of U.S. Cellular's cash investments. U.S. Cellular invested substantially all of its cash balances in prime money market funds from...

  • Page 134
    ...of other prior period tax issues. The 2007 tax rate was higher than the 2006 tax rate due to the increase in deferred tax valuation allowances and the one-time write-off of deferred tax assets noted above. INFLATION Management believes that inflation affects U.S. Cellular's business to no greater or...

  • Page 135
    ... information provides useful information to investors regarding U.S. Cellular's financial condition and results of operations because it breaks out and shows the components and impact of cash and non-cash items on cash flows from operating activities. Cash flows from operating activities in 2008...

  • Page 136
    ... increase capacity in existing cell sites and switches, upgrade technology including the overlay of EVDO technology in certain markets, develop new and enhance existing office systems, and construct new and remodel existing retail stores. Cash required for acquisitions totaled $341.7 million in 2008...

  • Page 137
    ... million in 2007 and $515.0 million in 2006. The re-issuance of treasury shares in connection with employee benefits plans, net of tax payments made by U.S. Cellular on behalf of stock award holders, required $2.3 million in 2008, provided $10.1 million in 2007 and $15.9 million in 2006. In certain...

  • Page 138
    ... effect on demand for U.S. Cellular's products and services and on U.S. Cellular's financial condition and results of operations. U.S. Cellular believes that existing cash balances and cash flows from operating activities provide financial flexibility for U.S. Cellular to meet its normal financing...

  • Page 139
    ... next five years comprise approximately 1% of the total long-term debt obligation at December 31, 2008. Refer to the section Market Risk-Long-Term Debt, for additional information regarding required principal payments and the weighted average interest rates related to U.S. Cellular's long-term debt...

  • Page 140
    ...enhance U.S. Cellular's coverage in its service areas; • Provide additional capacity to accommodate increased network usage by current customers; • Overlay EVDO technology in certain markets; • Enhance U.S. Cellular's retail store network; and • Develop office systems. U.S. Cellular plans to...

  • Page 141
    ... (2) Includes future lease costs related to office space, retail sites, cell sites and equipment. (3) Includes obligations payable under non-cancellable contracts, commitments for network facilities and transport services, agreements for software licensing and long-term marketing programs. The table...

  • Page 142
    ... customers have used U.S. Cellular's wireless systems for roaming and by unaffiliated third-party partnerships or corporations pursuant to equity distribution declarations. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing accounts...

  • Page 143
    ... related to data usage based on contractual rates per kilobyte as kilobytes are used; revenue based on per-use charges, such as for the use of premium services, is recognized as the charges are incurred. As a result of its multiple billing cycles each month, U.S. Cellular is required to estimate...

  • Page 144
    ...that difference. Quoted market prices in active markets are the best evidence of fair value of an asset or reporting unit and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets...

  • Page 145
    ... include technology changes, regulatory requirements, obsolescence and type of use. U.S. Cellular did not materially change the useful lives of its property, plant and equipment in 2008, 2007 or 2006. Expenditures that enhance the productive capacity of assets in service or extend their useful lives...

  • Page 146
    ... U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land, retail store and office premises to their pre-existing condition. The...

  • Page 147
    ...unrecognized tax benefits, including information regarding estimates that impact income taxes. Allowance for Doubtful Accounts The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing accounts receivable. The allowance is estimated based on...

  • Page 148
    ... on the portion of the share-based payment awards that are expected to ultimately vest. The estimated forfeiture rates used by U.S. Cellular are based primarily on historical experience. Total compensation cost for stock options granted by U.S. Cellular in 2008 was estimated to be $7.8 million; the...

  • Page 149
    ... an adverse effect on U.S. Cellular's business, financial condition or results of operations. • U.S. Cellular currently receives a significant amount of roaming revenues. As a result of recently announced acquisitions by other companies in the wireless industry, U.S. Cellular anticipates that its...

  • Page 150
    ..., financial condition or results of operations. • The market price of U.S. Cellular's Common Shares is subject to fluctuations due to a variety of factors. • Changes in interpretations of accounting requirements, changes in industry practice, identification of errors or changes in management...

  • Page 151
    ... any other financial or statistical information to vary from U.S. Cellular's forward-looking estimates by a material amount. You are referred to a further discussion of these risks as set forth under ''Risk Factors'' in U.S. Cellular's Annual Report on Form 10-K for the year ended December 31, 2008...

  • Page 152
    ... and $888.8 million, respectively. The fair value of long-term debt other than capital lease obligations and the current portion of such long-term debt was estimated using market prices for the 7.5% senior notes and the 8.75% senior notes and discounted cash flow analysis for the remaining debt. 30

  • Page 153
    United States Cellular Corporation Consolidated Statement of Operations Year Ended December 31, (Dollars and shares in thousands, except per share amounts) 2008 2007 2006 Operating revenues Service ...Equipment sales ...Total operating revenues ...Operating expenses System operations (excluding ...

  • Page 154
    ... ...Excess tax benefit from stock awards ...Other operating activities ...Changes in assets and liabilities from operations Change in accounts receivable ...Change in inventory ...Change in accounts payable-trade ...Change in accounts payable-affiliate ...Change in customer deposits and deferred...

  • Page 155
    United States Cellular Corporation Consolidated Balance Sheet-Assets December 31, (Dollars in thousands) 2008 2007 Current assets Cash and cash equivalents ...Accounts receivable Customers, less allowances of $8,222 and $12,305, respectively Roaming ...Affiliated ...Other, less allowances of $150 ...

  • Page 156
    United States Cellular Corporation Consolidated Balance Sheet-Liabilities and Shareholders' Equity December 31, (Dollars in thousands) 2008 2007 Current liabilities Current portion of long-term debt ...Accounts payable Affiliated ...Trade ...Customer deposits and deferred revenues Accrued taxes ......

  • Page 157
    ...001) - 32,530 - $44,122 - - (Dollars in thousands) Balance, December 31, 2005 . . Add (Deduct) Employee benefit plans ...Net income ...Other comprehensive income Net unrealized gain (loss) on: Derivative instruments ...Marketable equity securities Retained Earnings $1,368,988 - 179,490 $ 179,490...

  • Page 158
    ...$ 244,486 (2,837) (67,411 10,134 1,340) - $1,823,022 Comprehensive income ...Stock-based compensation awards Tax benefit from stock awards ...Repurchase of Common Shares . . Application of FIN 48 ...Other ... Balance, December 31, 2007 ...$55,046 $33,006 $1,316,042 $(41,094) The accompanying...

  • Page 159
    ...in thousands) Balance, December 31, 2007 ...Add (Deduct) Employee benefit plans ...Net income ...Net unrealized gain (loss) ...on marketable equity securities ...Stock-based compensation awards Tax benefit from stock awards ...Repurchase of Common Shares . . Other ... Balance, December 31, 2008...

  • Page 160
    ... 31, 2008, U.S. Cellular owned, or had the right to acquire pursuant to certain agreements, interests in 278 wireless markets and served 6.2 million customers in 26 states, representing a total population in its operating markets of approximately 46 million. U.S. Cellular operates as one reportable...

  • Page 161
    ... customers have used U.S. Cellular's wireless systems and by unaffiliated third-party partnerships or corporations pursuant to equity distribution declarations. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing accounts receivable...

  • Page 162
    ... fair value for disclosure purposes. Derivative Financial Instruments U.S. Cellular does not hold or issue derivative financial instruments for trading purposes. U.S. Cellular used derivative financial instruments to reduce risks related to fluctuations in market price of its Vodafone Group Plc...

  • Page 163
    ... market prices in active markets are the best evidence of fair value of an intangible asset or reporting unit and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets and the use...

  • Page 164
    ... fourth quarter of 2008 was applied to eighteen units of accounting, thirteen of which represent areas that are not being utilized. For purposes of impairment testing of goodwill, U.S. Cellular prepares valuations of each of the five reporting units. A discounted cash flow approach is used to value...

  • Page 165
    ...the difference. Quoted market prices in active markets are the best evidence of fair value of a tangible long-lived asset and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets...

  • Page 166
    ... to provide better control over handset quality, U.S. Cellular sells handsets to agents. In most cases, the agents receive rebates from U.S. Cellular at the time the agents activate new customers for U.S. Cellular service or retain existing customers. U.S. Cellular accounts for the discount on sales...

  • Page 167
    ... remits its applicable income tax payments to TDS. U.S. Cellular had a tax receivable balance with TDS of $19.4 million as of December 31, 2008 and a tax payable balance with TDS of $7.7 million as of December 31, 2007. Deferred taxes are computed using the liability method, whereby deferred tax...

  • Page 168
    ... for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). Under SFAS 123(R), the long-term incentive plan, the employee stock purchase plans and the non-employee director compensation plan are...

  • Page 169
    ... for office space, retail sites, cell sites and equipment that are accounted for as operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. U.S. Cellular accounts for...

  • Page 170
    ... business combination that did not close until after January 1, 2009. This treatment did not have a significant impact on U.S. Cellular's financial position or results of operations. In December 2007, the FASB issued SFAS No. 160, Consolidated Financial Statements, Including Accounting and Reporting...

  • Page 171
    ...impact to its financial position or results of operations. NOTE 2 INVESTMENT GAINS AND LOSSES Prior to August 7, 2008, U.S. Cellular held 370,882 Common Shares of Rural Cellular Corporation (''RCC''). On August 7, 2008, RCC was acquired by Verizon Wireless, with shareholders of RCC receiving cash of...

  • Page 172
    ... expense rate to U.S. Cellular's effective income tax expense rate is as follows: Year Ended December 31, (Dollars in millions) 2008 Amount Rate 2007 Amount Rate 2006 Amount Rate Statutory federal income tax expense and rate ...State income taxes, net of federal benefit ...Effects of minority share...

  • Page 173
    ... income taxes. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: (Dollars in thousands) 2008 2007 Balance at January 1, ...Additions for tax positions of current year ...Additions for tax positions of prior years ...Reductions for tax positions of prior...

  • Page 174
    ... deferred liabilities and credits in the Consolidated Balance Sheet. As of December 31, 2008, U.S. Cellular believes it is reasonably possible that unrecognized tax benefits could change in the next twelve months. The nature of the uncertainty relates to the exclusion of certain transactions from...

  • Page 175
    ...in the table below. FCC Auction Auction End Date Date Applications Granted by FCC Number of Licenses Won Aquinas Wireless ...King Street Wireless Barat Wireless ...Carroll Wireless ... ... ... ... ... ... ... ... ... ... ... 78 73 66 58 August 20, 2008 March 20, 2008 September 18, 2006 February 15...

  • Page 176
    ...in 2011 and 2017, respectively. The exercise dates of the put options related to the general partner's interests in King Street Wireless and Aquinas Wireless are not yet fixed and are subject to the timing of future events as defined in the terms of the respective limited partnership agreements. The...

  • Page 177
    ...: Year ended December 31, (Dollars and shares in thousands, except earnings per share) 2008 2007 2006 Net income ...Weighted average number of shares used in basic earnings per share . Effect of dilutive securities: Stock options(1) ...Restricted stock units(2) ...Weighted average number of shares...

  • Page 178
    ... Block C licenses in the Lower 700 megahertz band of the wireless spectrum in Maine for $5.0 million in cash. In October 2006, U.S. Cellular's interest in Midwest Wireless Communications, LLC was sold to Alltel Corporation. In connection with the sale, U.S. Cellular became entitled to receive...

  • Page 179
    ... and the licenses acquired in Auction 66. In October 2006, U.S. Cellular sold its interest in Midwest Wireless Communications, LLC to Alltel Corporation. U.S. Cellular received $95.1 million in cash upon closing of the sale. The remaining sale proceeds were distributed in 2008 and 2007, as discussed...

  • Page 180
    ... (Continued) In aggregate, the 2006 acquisitions, divestitures and exchanges increased Licenses by $132.7 million, Goodwill by $4.1 million and Customer lists by $2.0 million. Unaudited pro forma financial information related to U.S. Cellular's 2008 acquisitions has not been presented because the...

  • Page 181
    ...equity securities and unrealized gains on marketable equity securities is summarized below: Year Ended December 31, (Dollars in thousands) 2008 2007 Rural Cellular Corporation-0 and 370,882 Common Shares, respectively ...Accounting cost basis ...Gross unrealized holding gains ...Deferred income tax...

  • Page 182
    ...Losses for details on the disposition of Rural Cellular Corporation Common Shares during 2008. NOTE 10 INVESTMENT IN UNCONSOLIDATED ENTITIES Investments in unconsolidated entities consist of amounts invested in wireless entities which are accounted for using either the equity or cost method as shown...

  • Page 183
    ...equipment in service and under construction, and related accumulated depreciation, as of December 31, 2008 and 2007 were as follows: December 31, (Dollars in thousands) Useful Lives (Years) 2008 2007 Land ...Buildings ...Leasehold improvements ...Cell site equipment ...Switching equipment ...Office...

  • Page 184
    ...,000 3.38% 6.03% (1) The average was computed based on month-end balances. U.S. Cellular's interest cost on its revolving credit facility is subject to increase if its current credit rating from Standard & Poor's Rating Service and/or Moody's Investors Service was lowered and is subject to decrease...

  • Page 185
    ...values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis points. The 7.5% senior notes are due June 15, 2034. Interest on the notes is payable quarterly. U.S. Cellular may redeem the notes...

  • Page 186
    ...Cellular's current portion of long-term debt, excluding capital lease obligations, was estimated using a discounted cash flow analysis. The fair value of U.S. Cellular's long-term debt, excluding capital lease obligations, was estimated using market prices for the 7.5% senior notes, the 8.75% senior...

  • Page 187
    ... Current portion of long-term debt and Long-term debt in the Consolidated Balance Sheet. As of December 31, 2008, future minimum rental payments required under operating and capital leases and rental receipts expected under operating leases that have noncancellable lease terms in excess of one year...

  • Page 188
    ...probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss. If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is...

  • Page 189
    ... summarizes Common Shares issued, including reissued Treasury Shares, for the employee benefit plans: Year Ended December 31, 2008 2007 Employee stock options and awards ...Employee stock purchase plan ... 253,390 30,177 283,567 871,493 9,154 880,647 Tax-Deferred Savings Plan U.S. Cellular has...

  • Page 190
    ... 2008, the number of additional Common Shares that U.S. Cellular could have purchased during the twelve-months then ended pursuant to the Limited Authorization was 225,000. In addition to U.S. Cellular's Limited Authorization discussed above, on March 6, 2007, the Board of Directors of U.S. Cellular...

  • Page 191
    ... stock-based compensation plans: a long-term incentive plan, an employee stock purchase plan, and a non-employee director compensation plan. Also, U.S. Cellular employees are eligible to participate in the TDS employee stock purchase plan. Under the U.S. Cellular 2005 Long-Term Incentive Plan...

  • Page 192
    ... exercise price of the option generally equals the market value of U.S. Cellular Common Shares on the date of grant. U.S. Cellular granted 685,000, 477,000 and 559,000 stock options during 2008, 2007 and 2006, respectively. U.S. Cellular estimated the fair value of such stock options using the Black...

  • Page 193
    ..., 2008. Long-Term Incentive Plan-Restricted Stock Units-U.S. Cellular grants restricted stock unit awards, which generally vest after three years, to key employees. U.S. Cellular estimates the fair value of restricted stock units based on the closing market price of U.S. Cellular shares on the date...

  • Page 194
    ... of such matching contribution stock units, participants will receive U.S. Cellular Common Shares. U.S. Cellular estimates the fair value of deferred compensation matching contribution stock units based on the closing market price of U.S. Cellular Common Shares on the date of match. The fair...

  • Page 195
    ... of the shares on the date of issuance. Compensation of Non-Employee Directors-U.S. Cellular issued 700 and 1,150 Common Shares in 2007 and 2006, respectively, under its Non-Employee Director Compensation Plan. No Common Shares were issued under this plan in 2008. Stock-Based Compensation Expense...

  • Page 196
    ... awards during 2008. Of that amount, $5.9 million was disbursed for payments of taxes which was offset by cash proceeds received upon the exercise of stock options of $3.6 million. NOTE 20 RELATED PARTIES U.S. Cellular is billed for all services it receives from TDS, pursuant to the terms of various...

  • Page 197
    ... that were based on management's best estimates and judgments. Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the financial statements. PricewaterhouseCoopers LLP , an independent registered public accounting firm, has...

  • Page 198
    ...U.S. Cellular's internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP , an independent registered public accounting firm, as stated in the firm's report included herein. /s/ John E. Rooney John E. Rooney President and Chief Executive Officer...

  • Page 199
    ... of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of United States Cellular Corporation: In our opinion, based on our audits and the report of other auditors, the accompanying consolidated balance sheets and the related consolidated statements of operations...

  • Page 200
    ... of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of...

  • Page 201
    United States Cellular Corporation SELECTED CONSOLIDATED FINANCIAL DATA Year Ended or at December 31, (Dollars in thousands, except per share amounts) 2008 2007 2006 2005 2004 Operating data Service revenues ...$3,940,326 $3,679,237 $3,214,410 $2,827,022 $2,615,163 Equipment sales ...302,859 267,...

  • Page 202
    .... (b) Calculated using Claritas population estimates for the preceding year. ''Consolidated Markets'' represents 100% of the population of the markets that U.S. Cellular consolidates. ''Consolidated operating markets'' are markets in which U.S. Cellular provides wireless services to customers as of...

  • Page 203
    .... The high, low and closing sales prices as reported by either the American Stock Exchange (''AMEX'') or the New York Stock Exchange (''NYSE''). U.S. Cellular's Common Shares traded on the AMEX prior to and on September 14, 2008, and traded on the NYSE after this date. U.S. Cellular has not paid any...

  • Page 204
    ... and currently intends to retain all earnings for use in U.S. Cellular's business. See ''Consolidated Quarterly Information (Unaudited)'' for information on the high and low trading prices of the USM Common Shares for 2008 and 2007. Stock performance graph The following chart provides a comparison...

  • Page 205
    ... community should be directed to: Mark A. Steinkrauss, Vice President-Corporate Relations Telephone and Data Systems, Inc. 30 North LaSalle Street, Suite 4000 Chicago, IL 60602 312.592.5384 312.630.1908 (fax) [email protected] Directors and executive officers See ''Election of Directors...

  • Page 206
    ... Call Quality Performance Among Wireless Cell Phone Users in the North Central Region" for seven consecutive reporting periods. Associates U.S. Cellular's 8,500 full-time equivalent associates are committed to providing excellent service-the foundation of the company's customer...

  • Page 207
    ... Vice President-Corporate Relations Telephone and Data Systems, Inc. 30 North LaSalle Street, Suite 4000 Chicago, Ill. 60602 Phone: 312-592-5384 Fax: 312-630-1908 [email protected] Transfer agent ComputerShare Investor Services 2 North LaSalle Street, 3rd Floor Chicago, Ill. 60602 Phone...