US Cellular 2011 Annual Report Download - page 60

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6 VARIABLE INTEREST ENTITIES (VIEs) (Continued)
their economic performance is shared. Specifically, the general partner of each of these VIEs has the
exclusive right to manage, operate and control the limited partnerships and make all decisions to carry
on the business of the partnerships; however, the general partner of each partnership needs consent of
the limited partner, a U.S. Cellular subsidiary, to sell or lease certain licenses, to make certain large
expenditures, admit other partners or liquidate the limited partnerships. Although the power to direct the
activities of the VIEs is shared, U.S. Cellular has a disproportionate level of exposure to the variability
associated with the economic performance of the VIEs, indicating that U.S. Cellular is the primary
beneficiary of the VIEs in accordance with GAAP. Accordingly, these VIEs are consolidated. U.S.
Cellular’s capital contributions and advances made to these VIEs totaled $15.8 million and $1.2 million in
the years ended December 31, 2011 and 2010, respectively.
The following table presents the classification of the consolidated VIEs’ assets and liabilities in U.S.
Cellular’s Consolidated Balance Sheet.
December 31, 2011 2010
(Dollars in thousands)
Assets
Cash .......................................... $ 12,086 $ 1,673
Other current assets .............................. 47 323
Licenses ....................................... 483,059 487,962
Property, plant and equipment ....................... 9,450 1,548
Other assets and deferred charges .................... 153 —
Total assets ...................................... $504,795 $491,506
Liabilities
Current liabilities ................................. $ 957 $ 95
Total liabilities ................................... $ 957 $ 95
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 put options assuming they
are exercisable at the end of each reporting period, even though such exercise is not contractually
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