US Cellular 2009 Annual Report Download - page 21

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Interest expense
Interest expense is summarized by related debt instrument in the following table:
Year Ended December 31, 2009 2008 2007
(Dollars in thousands)
6.7% senior notes .................................. $37,084 $37,085 $37,084
7.5% senior notes .................................. 25,114 25,113 25,113
8.75% senior notes(1) ............................... 11,166 11,383 11,380
Forward contracts(2) ................................ — — 3,514
Revolving credit facility ............................... 3,011 3,061 4,967
Other ........................................... (8) 548 2,621
Total interest expense ................................ $76,367 $77,190 $84,679
(1) The 8.75% senior notes were due November 1, 2032. Interest was paid quarterly. U.S. Cellular
redeemed the notes in whole at a redemption price equal to 100% of the principal amount plus
accrued and unpaid interest on December 24, 2009, which resulted in a total redemption
payment of $131.7 million.
(2) In May 2002, U.S. Cellular entered into the forward contracts relating to its investment in
Vodafone ADRs. Taken together, the forward contracts allowed U.S. Cellular to borrow an
aggregate of $159.9 million against the Vodafone ADRs. The forward contracts bore interest,
payable quarterly, at the London InterBank Offered Rate (‘‘LIBOR’’) plus 50 basis points.
Income tax expense
The effective tax rates on Income before income taxes (‘‘pre-tax income’’) for 2009, 2008 and 2007 were
32.4%, 12.2% and 39.7%, respectively. The following significant discrete and other items impacted
income tax expense for these years:
2009—Includes tax benefits of $7.7 million and $7.2 million resulting from a state tax law change and the
release of state valuation allowances, respectively.
2008—Includes tax benefits of $7.6 million and $2.5 million resulting from a change in filing positions in
certain states and the resolution of a prior period tax issue, respectively. The percentage impact of these
benefits was magnified due to the 2008 Loss on impairment of intangible assets of $386.7 million, which
decreased pre-tax income.
2007—Includes tax expense of $3.3 million and $4.6 million due to the increase in valuation allowances
resulting from the restructuring of certain legal entities and the write-off of deferred tax assets for certain
partnerships, respectively.
INFLATION
Management believes that inflation affects U.S. Cellular’s business to no greater or lesser extent than the
general economy.
RECENT ACCOUNTING PRONOUNCEMENTS
In general, recent accounting pronouncements did not have and are not expected to have a significant
effect on U.S. Cellular’s financial condition and results of operations.
See Note 1—Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the
Notes to Consolidated Financial Statements for information on recent accounting pronouncements.
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