US Cellular 2008 Annual Report Download - page 186

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14 LONG-TERM DEBT (Continued)
U.S. Cellular’s long-term debt indentures do not contain any provisions resulting in acceleration of the
maturities of outstanding debt in the event of a change in U.S. Cellular’s credit rating. However, a
downgrade in U.S. Cellular’s credit rating could adversely affect its ability to obtain long-term debt
financing in the future.
The annual requirements for principal payments on long-term debt over the next five years are
$10.3 million in 2009. No principal payments, excluding capital lease obligations, are required in the
years 2010 through 2013.
NOTE 15 FINANCIAL INSTRUMENTS
Financial instruments at December 31, 2008 and 2007 were as follows:
2008 2007
December 31, Book Value Fair Value Book Value Fair Value
(Dollars in thousands)
Cash and cash equivalents ............... $170,996 $170,996 $ 204,533 $204,533
Current portion of long-term debt(1) ........ 10,000 9,887 — —
Long-term debt(1) ..................... 992,748 663,432 1,002,293 888,807
(1) Excludes capital lease obligations
The book value of cash and cash equivalents approximates the fair value due to the short-term nature of
these financial instruments. The fair value of U.S. 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 notes and discounted cash flow analysis for the remaining debt. The
computation of these fair values at December 31, 2008 is consistent with the guidance and framework
set forth in SFAS 157.
NOTE 16 COMMITMENTS AND CONTINGENCIES
Contingent obligations not related to income taxes, including indemnities, litigation and other possible
commitments, are accounted for in accordance with SFAS 5, which requires that an estimated loss be
recorded if it is probable that an asset has been impaired or a liability has been incurred at the date of
the financial statements and the amount of the loss can be reasonably estimated. Accordingly, those
contingencies that are deemed to be probable and where the amount of the loss is reasonably estimable
are accrued in the financial statements. 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 accrued. Disclosure of a contingency is required if there is at least a reasonable
possibility that a loss has been or will be incurred, even if the amount is not estimable. The assessment
of contingencies is a highly subjective process that requires judgments about future events.
Contingencies are reviewed at least quarterly to determine the adequacy of accruals and related financial
statement disclosures. The ultimate outcomes of contingencies could differ materially from amounts
accrued in the financial statements.
Lease Commitments
U.S. Cellular is a party to various lease agreements, both as lessee and lessor, for office space, retail
store sites, cell sites and equipment which are accounted for as operating leases. Certain leases have
renewal options and/or fixed rental increases. Renewal options that are reasonably assured are included
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