US Cellular 2008 Annual Report Download - page 138

Consumer spending also significantly impacts U.S. Cellular’s operations and performance. Recent
economic conditions could cause consumer spending to deteriorate significantly. Factors that influence
levels of consumer spending include: unemployment rates, increases in fuel and other energy costs,
conditions in residential real estate and mortgage markets, labor and health care costs, access to credit,
consumer confidence and other macroeconomic factors. Changes in these and other economic factors
could have a material adverse 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 needs (including working capital,
construction and development expenditures, acquisitions, and share repurchases under its approved
program) for the foreseeable future. As discussed further below, U.S. Cellular also has funds available
under a revolving credit facility which will provide additional flexibility through the date of its expiration in
December 2009. In addition, U.S. Cellular may have access to public and private capital markets to help
meet its financing needs.
U.S. Cellular cannot provide assurances that circumstances that could have a material adverse affect on
its liquidity or capital resources will not occur. Economic conditions, changes in financial markets,
deterioration in the capital markets or other factors could restrict U.S. Cellular’s liquidity and availability of
financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its
construction, development, acquisition or share repurchase programs. Such reductions could have a
material adverse effect on U.S. Cellular’s business, financial condition or results of operations.
Cash and Cash Equivalents
At December 31, 2008, U.S. Cellular had $171.0 million in cash and cash equivalents, which include cash
and short-term, highly liquid investments with original maturities of three months or less. The primary
objective of U.S. Cellular’s cash and cash equivalents investment activities is to preserve principal. At
December 31, 2008, U.S. Cellular invested substantially all of its cash balances in money market funds
that invested exclusively in short-term U.S. Treasury securities or repurchase agreements backed by U.S.
Treasury securities. U.S. Cellular monitors the financial viability of the money market funds in which it
invests and believes that the credit risk associated with these investments is low.
Revolving Credit Facility
U.S. Cellular has a $700.0 million revolving credit facility available for general corporate purposes. This
revolving credit facility is comprised of commitments from fourteen lending institutions, with individual
commitments ranging from 1% to 16% of the total commitment. At December 31, 2008, there were no
outstanding borrowings and $0.3 million of outstanding letters of credit, leaving $699.7 million available
for use. Borrowings under the revolving credit facility bear interest at the London InterBank Offered Rate
(‘‘LIBOR’’) plus a contractual spread based on U.S. Cellular’s credit rating. U.S. Cellular may select
borrowing periods of either seven days or one, two, three or six months. At December 31, 2008, the
one-month LIBOR was 0.44% and the contractual spread was 60 basis points. If U.S. Cellular provides
less than two days’ notice of intent to borrow, interest on borrowings is the prime rate less 50 basis
points (the prime rate was 3.25% at December 31, 2008). This credit facility expires in December 2009.
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 Services (‘‘Standard & Poor’s’’) and/or Moody’s Investors Service
(‘‘Moody’s’’) were lowered and is subject to decrease if the rating were raised. The credit facility would
not cease to be available or accelerate solely as a result of a downgrade in U.S. Cellular’s credit rating.
However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to renew existing,
or obtain access to new, credit facilities in the future. U.S. Cellular’s credit ratings as of December 31,
2008 and the dates that such ratings were issued were as follows:
Moody’s (issued August 15, 2008) .................... Baa2 —stable outlook
Standard & Poor’s (issued March 13, 2008) .............. BBB—with positive outlook
Fitch Ratings (issued August 16, 2007) ................. BBB+ —stable outlook
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