US Cellular 2011 Annual Report Download - page 22

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$34.0 million deposit was paid to TDS for U.S. Cellular’s proportionate share of a deposit TDS made to
the Internal Revenue Service (‘‘IRS’’) to eliminate any potential interest due to the IRS subsequent to
the date of the deposit. In 2010, after closure of the IRS audit for the tax years 2002 through 2005, the
IRS returned TDS’ $38.0 million deposit, of which TDS returned $34.0 million to U.S. Cellular,
representing U.S. Cellular’s proportionate share. This $34.0 million was included in Change in other
assets and liabilities in 2010 as a cash inflow. Changes in amounts due to agents and accrued rebates
were the primary cause of the remaining $46.8 million year-over-year change in Other assets and
liabilities.
Cash flows from operating activities in 2010 were $834.4 million, a decrease of $37.4 million from 2009.
Significant changes included the following:
• Adjusted OIBDA, as shown in the table above, decreased by $137.5 million primarily due to a
decrease in operating income. See discussion in the ‘‘Results of Operations’’ for factors that affected
operating income.
• Changes in Inventory provided $40.3 million in 2010 and required $36.0 million in 2009, resulting in a
$76.3 million year-over-year increase in cash flows. Inventory units on hand were lower in 2010 than
2009 reflecting differences in purchases and actual versus expected sales in the respective periods.
• Changes in Accounts payable required $56.5 million in 2011 and provided $41.3 million in 2009
causing a year-over-year decrease in cash flows of $97.8 million. Changes in Accounts payable were
driven primarily by payment timing differences.
• The change in Accrued taxes during 2010 includes an outflow of approximately $25 million related to
sales tax payments made during 2010 related to prior years. U.S. Cellular had accrued these sales
taxes at December 31, 2009. The 2009 period does not include a similar outflow related to the
retroactive payment of sales taxes.
• Changes in Other assets and liabilities provided $77.6 million in 2010 and required $49.8 million in
2009, resulting in a $127.4 million year-over-year increase in cash flows. As described above, in 2009,
a $34.0 million deposit was paid to the IRS. In 2010, the IRS returned TDS’ $34.0 million deposit. This
$34.0 million was included in Change in other assets and liabilities in 2010, as a cash inflow, and in
2009, as a cash outflow. This activity resulted in a year-over-year increase in cash flows of $68.0 million
from 2009 to 2010. Changes in Prepaid expenses, Other current liabilities and amounts due to agents
were the primary cause of the remaining $59.4 million year-over-year change in Other assets and
liabilities.
Cash Flows from Investing Activities
U.S. Cellular makes substantial investments to construct and upgrade modern high-quality wireless
telecommunications networks and facilities as a basis for creating long-term value for shareholders. In
recent years, rapid changes in technology and new opportunities have required substantial investments
in potentially revenue-enhancing and cost-reducing upgrades of U.S. Cellular’s networks. Cash flows
used for investing activities also represent cash required for the acquisition of wireless properties or
licenses.
The primary purpose of U.S. Cellular’s construction and expansion expenditures is to provide for
customer and usage growth, to upgrade service and to take advantage of service-enhancing and
cost-reducing technological developments.
Capital expenditures (i.e. additions to property, plant and equipment and system development
expenditures) totaled $782.5 million in 2011, $583.1 million in 2010 and $546.8 million in 2009. Cash
used for additions to property, plant and equipment totaled $771.8 million, $569.3 million and
530.8 million in 2011, 2010 and 2009, respectively. These expenditures were made to construct new cell
sites, increase capacity in existing cell sites and switches, deploy 4G LTE technology, develop new and
enhance existing office systems, and construct new and remodel existing retail stores.
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