US Cellular 2010 Annual Report Download - page 61

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 VARIABLE INTEREST ENTITIES (VIEs) (Continued)
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 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 partnership. The general partner’s put options related to its interests in Carroll Wireless, Barat
Wireless, King Street Wireless and Aquinas Wireless will become exercisable in 2013, 2017, 2019 and
2020, respectively. 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 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 requirements under GAAP, U.S.
Cellular is required to calculate 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. Pursuant to GAAP, 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
Noncontrolling interests with redemption features in U.S. Cellular’s Consolidated Balance Sheet. Also in
accordance with GAAP, changes in the redemption value of the put options, net of interest accrued on
the loans, are recorded as a component of Net income attributable to noncontrolling interests, net of tax,
in U.S. Cellular’s Consolidated Statements of Operations.
These VIEs are in the process of developing Long-Term Evolution (‘‘LTE’’) deployment 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 U.S. Cellular’s Annual Report on Form 10-K.
NOTE 6 EARNINGS PER SHARE
Basic earnings per share attributable to U.S. Cellular shareholders is computed by dividing Net income
attributable to U.S. Cellular shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share attributable to U.S. Cellular shareholders is
computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average
number of common shares outstanding during the period adjusted to include the effects of potentially
dilutive securities. Potentially dilutive securities primarily include incremental shares issuable upon
exercise of outstanding stock options and the vesting of restricted stock units.
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