US Cellular 2008 Annual Report Download - page 176

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 VARIABLE INTEREST ENTITIES (Continued)
The following table presents the classification of the consolidated VIEs’ assets and liabilities in U.S.
Cellular’s Consolidated Balance Sheet:
December 31, 2008 2007
(Dollars in thousands)
Assets
Cash .......................................... $ 684 $ 91
Licenses ....................................... 487,962 256,836
Total assets ..................................... $488,646 $256,927
Liabilities
Unearned revenues ............................... 63 13
Total liabilities ................................... $ 63 $ 13
Non-consolidated VIE
U.S. Cellular has a variable interest in Aquinas Wireless, Inc., the general partner of Aquinas Wireless, as
a result of providing a loan of $18,000 to Aquinas Wireless, Inc. Considering the relative insignificance of
such loan in relation to the amount of Aquinas Wireless, Inc.’s equity investment at risk, it was
determined that U.S. Cellular is not the primary beneficiary of this entity. Accordingly, this variable interest
entity is not consolidated into U.S. Cellular’s financial statements because U.S. Cellular does not
anticipate benefiting from or absorbing a majority of this VIE’s expected gains or losses.
U.S. Cellular’s loan of $18,000 to Aquinas Wireless, Inc. represented U.S. Cellular’s maximum exposure
to loss from its relationship with Aquinas Wireless, Inc. as of December 31, 2008. This amount was
included in Other current assets in U.S. Cellular’s Consolidated Balance Sheet as of December 31, 2008.
Other Related Matters
U.S. Cellular may agree to make additional capital contributions and/or advances to the VIEs discussed
above and/or to their general partners to provide additional funding for the development of licenses
granted in the various auctions. U.S. Cellular may finance such amounts with a combination of cash on
hand, borrowings under its revolving credit agreement and/or long-term debt. There is no assurance that
U.S. Cellular will be able to obtain additional financing on commercially reasonable terms or at all to
provide such financial support.
The general partner of each of these consolidated and non-consolidated VIEs has the right to manage
and operate the limited partnerships; however, the general partner needs consent of the limited partner, a
subsidiary of U.S. Cellular, in certain limited circumstances, such as to make certain large expenditures,
admit other partners, or liquidate the limited partnerships.
The limited partnership agreements also provide the general partner with a put option whereby the
general partner may require the limited partner, a subsidiary of U.S. Cellular, to purchase its interest in
the limited partnerships. The general partner’s put options related to its interests in Carroll Wireless and
Barat Wireless will become exercisable 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 put option price is determined pursuant to a formula that takes into
consideration fixed interest rates and the market value of U.S. Cellular’s Common Shares. Upon exercise
of the put option, the general partner is required to repay borrowings due to U.S. Cellular. If the general
partner does not elect to exercise its put option, the general partner may trigger an appraisal process in
which the limited partner (a subsidiary of U.S. Cellular) may have the right, but not the obligation, to
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