US Cellular 2012 Annual Report Download - page 62

United States Cellular Corporation
Notes to the Consolidated Financial Statements (Continued)
NOTE 5 VARIABLE INTEREST ENTITIES (VIEs) (Continued)
options related to its interests in King Street Wireless and Aquinas Wireless will become exercisable in
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
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 the (‘‘net put
value’’), was $0.5 million at December 31, 2012. At December 31, 2011, the net put value was
$1.0 million and also included the theoretical redemption value of the put options held by the general
partners of Barat Wireless and Carroll Wireless, which were consolidated as VIEs on that date. The net
put value 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.
Aquinas Wireless and King Street Wireless 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.
U.S. Cellular began offering fourth generation Long-term Evolution (‘‘4G LTE’’) service in certain cities
within its service areas during the first quarter of 2012 and has plans to continue the deployment of
4G LTE. U.S. Cellular currently provides 4G LTE service in conjunction with King Street Wireless. Aquinas
Wireless is still in the process of developing long-term business plans.
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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