US Cellular 2008 Annual Report Download - page 177

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 VARIABLE INTEREST ENTITIES (Continued)
purchase the general partner’s interest in the limited partnership at a price and on other terms and
conditions specified in the limited partnership agreement. In accordance with EITF Issue D-98,
Classification and Measurement of Redeemable Securities, U.S. Cellular calculates a theoretical
redemption value for all of the puts assuming they are exercisable at the end of each reporting period,
even though such exercise is not contractually permitted. This theoretical redemption value, net of
amounts payable to U.S. Cellular for loans (and accrued interest thereon) made by U.S. Cellular to the
general partners, is recorded as a component of Minority Interest in U.S. Cellular’s Consolidated Balance
Sheet. Changes in the redemption value of the put options, net of interest accrued on the loans, are
recorded as a component of Minority share of income.
These consolidated and non-consolidated VIEs are in the process of developing long-term business and
financing plans. These entities were formed to participate in FCC auctions of wireless spectrum and to
fund, establish, and provide wireless service with respect to any FCC licenses won in the auctions. As
such, these entities have risks similar to those described in the ‘‘Risk Factors’’ in the U.S. Cellular’s
Annual Report on Form 10-K.
NOTE 5 EARNINGS PER SHARE
Basic earnings per share is computed by dividing Net income by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is computed by dividing Net
income by the weighted average number of common shares adjusted to include the effects of potentially
dilutive securities. Potentially dilutive securities include incremental shares issuable upon exercise of
outstanding stock options and the vesting of restricted stock units.
The amounts used in computing Earnings per Common and Series A Common Share and the effect of
potentially dilutive securities on the weighted average number of Common and Series A Common Shares
are as follows:
Year ended December 31, 2008 2007 2006
(Dollars and shares in thousands, except earnings per share)
Net income ............................................ $32,990 $314,734 $179,490
Weighted average number of shares used in basic earnings per share . 87,457 87,730 87,346
Effect of dilutive securities:
Stock options(1) ...................................... 150 569 633
Restricted stock units(2) ................................. 147 182 130
Weighted average number of shares used in diluted earnings per share . 87,754 88,481 88,109
Basic earnings per share .................................. $ 0.38 $ 3.59 $ 2.05
Diluted earnings per share ................................. $ 0.38 $ 3.56 $ 2.04
(1) Stock options exercisable into 1,102,551 Common Shares in 2008, 2,506 Common Shares in 2007
and 188,749 Common Shares in 2006 were not included in computing Diluted earnings per share
because their effects were antidilutive.
(2) Restricted stock units exercisable into 176,023 Common Shares in 2008 were not included in
computing Diluted earnings per share because their effects were antidilutive.
The 2007 weighted average number of shares used in computing Diluted earnings per share does not
include the impact of the unsettled accelerated share repurchases (‘‘ASR’’) at December 31, 2007
because the effects were antidilutive. See Note 17—Common Shareholders’ Equity for a discussion of
U.S. Cellular’s purchase of its Common Shares from an investment banking firm pursuant to ASR
transactions.
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