US Cellular 2009 Annual Report Download - page 20

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Components of Other Income (Expense)
Increase/ Percentage Increase/ Percentage
Year Ended December 31, 2009 (Decrease) Change 2008 (Decrease) Change 2007
(Dollars in thousands)
Operating income ......... $326,407 $ 298,697 >100% $ 27,710 $(368,489) (93)% $396,199
Equity in earnings of
unconsolidated entities .... 96,800 4,819 5% 91,981 1,948 2% 90,033
Interest and dividend income . 3,597 (2,133) (37)% 5,730 (7,329) (56)% 13,059
Fair value adjustment of
derivative instruments ..... — — N/M — 5,388 N/M (5,388)
Gain on disposition of
investments ............ — (16,628) N/M 16,628 (121,359) (88)% 137,987
Interest expense .......... (76,367) 823 1% (77,190) 7,489 9% (84,679)
Other, net ............... 1,442 173 14% 1,269 1,979 >100% (710)
Total investment and other
income ............... 25,472 (12,946) (34)% 38,418 (111,884) (74)% 150,302
Income before income taxes . 351,879 285,751 >100% 66,128 (480,373) (88)% 546,501
Income tax expense ........ 114,103 (106,048) >100% 8,055 208,656 96% 216,711
Net income .............. 237,776 179,703 >100% 58,073 (271,717) (82)% 329,790
Less: Net income attributable
to noncontrolling interests,
net of tax .............. (21,768) 3,315 13% (25,083) (10,027) (67)% (15,056)
Net income attributable to
U.S. Cellular shareholders . . $216,008 $ 183,018 >100% $ 32,990 $(281,744) (90)% $314,734
N/M—Percentage change not meaningful
Equity in earnings of unconsolidated entities
Equity in earnings of unconsolidated entities represents U.S. Cellular’s share of net income from markets
in which it has a noncontrolling interest and that are accounted for by the equity method. U.S. Cellular
follows the equity method of accounting for unconsolidated entities over which it has the ability to
exercise significant influence, generally entities in which its ownership interest is less than or equal to
50% but equals or exceeds 20% for corporations and 3% for partnerships and limited liability companies.
U.S. Cellular’s investment in the Los Angeles SMSA Limited Partnership (‘‘LA Partnership’’) contributed
$64.7 million, $66.1 million and $71.2 million to Equity in earnings of unconsolidated entities in 2009,
2008 and 2007, respectively. U.S. Cellular also received cash distributions from the LA Partnership of
$66.0 million in each of 2009, 2008 and 2007.
Fair value adjustment of derivative instruments
Fair value adjustment of derivative instruments in 2007 reflected the change in the fair value of the
bifurcated embedded collars within the variable prepaid forward contracts related to the Vodafone Group
American Depository Receipts (‘‘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 related to the exchange of Rural Cellular Corporation (‘‘RCC’’)
shares for cash in conjunction with Verizon’s acquisition of RCC. Gain on disposition of investments in
2007 included $131.7 million resulting from the settlement of variable prepaid forward contracts related to
Vodafone ADRs and the disposition of the remaining Vodafone ADRs. See Note 4—Gain on Disposition
of Investments in the Notes to Consolidated Financial Statements for additional information regarding
these transactions.
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