US Cellular 2008 Annual Report Download - page 133
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Communications, LLC (‘‘Midwest Wireless’’) in 2006, partially offset by an $8.9 million increase in income
from U.S. Cellular’s investment in the LA Partnership in 2007.
Interest and dividend income
Interest income reflects interest earned on cash balances. Interest income decreased by $7.3 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 January 2006
through August 2007 and in money market funds that invested exclusively in short-term U.S. Treasury
securities thereafter. The increase in 2007 was due to higher interest earned on U.S. Cellular’s cash
balances.
Dividend income remained flat in 2008. Dividend income decreased $10.1 million in 2007 primarily due
to the disposition of Vodafone ADRs in connection with the maturing of the related variable prepaid
forward contracts in May 2007.
Fair value adjustment of derivative instruments
Fair value adjustment of derivative instruments in 2007 and 2006 reflected the change in the fair value of
the bifurcated embedded collars within the variable prepaid forward contracts related to the Vodafone
Group ADRs. U.S. Cellular settled the forward contracts related to the Vodafone ADRs and sold the
remaining ADRs in May 2007.
Gain on disposition of investments
Gain on disposition of investments in 2008 consisted primarily of the gain on exchange of Rural Cellular
Corporation (‘‘RCC’’) shares of $16.4 million in conjunction with Verizon’s acquisition of RCC. Gain on
disposition of investments in 2007 was attributable primarily to the settlement of variable prepaid forward
contracts related to Vodafone ADRs and the disposition of the remaining Vodafone ADRs of
$131.7 million. In 2006, U.S. Cellular recorded a gain of $70.4 million related to the sale of Midwest
Wireless. See Note 2—Investment Gains and Losses in the Notes to Consolidated Financial Statements
for additional information regarding these transactions.
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