US Cellular 2013 Annual Report Download - page 25

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United States Cellular Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Free Cash Flow
The following table presents Free cash flow. Free cash flow is defined as Cash flows from operating activities
less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial
measure which U.S. Cellular believes may be useful to investors and other users of its financial information in
evaluating the amount of cash generated by business operations, after Cash used for additions to property,
plant and equipment.
2013 2012 2011
(Dollars in thousands)
Cash flows from operating activities ............. $290,897 $ 899,291 $ 987,862
Cash used for additions to property, plant and
equipment ............................ (717,862) (826,400) (771,798)
Free cash flow ........................... $(426,965) $ 72,891 $ 216,064
See Cash flows from Operating Activities and Cash flows from Investing Activities for details on the changes
to the components of Free cash flow.
LIQUIDITY AND CAPITAL RESOURCES
U.S. Cellular believes that existing cash and investment balances, funds available under its revolving credit
facility and expected cash flows from operating and investing activities provide substantial liquidity and
financial flexibility for U.S. Cellular to meet its normal financing needs for the foreseeable future. In addition,
U.S. Cellular may access public and private capital markets to help meet its financing needs.
U.S. Cellular’s profitability historically has been lower in the fourth quarter as a result of significant marketing
and promotional activities during the holiday season. Changes in these or other economic factors could have
a material adverse effect on demand for U.S. Cellular’s products and services and on U.S. Cellular’s financial
condition and results of operations.
U.S. Cellular cannot provide assurances that circumstances that could have a material adverse effect on its
liquidity or capital resources will not occur. Economic conditions, changes in financial markets or other
factors could restrict U.S. Cellular’s liquidity and availability of financing on terms and prices acceptable to
U.S. Cellular, which could require U.S. Cellular to reduce its capital expenditure, acquisition or share
repurchase programs. Such reductions could have a material adverse effect on U.S. Cellular’s business,
financial condition or results of operations.
The following table summarizes U.S. Cellular’s cash and investments as of December 31, 2013.
(Dollars in thousands)
Cash and cash equivalents ..................................... $342,065
Short-term investments ........................................ $ 50,104
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term, highly liquid investments with original maturities of
three months or less. The primary objective of U.S. Cellular’s Cash and cash equivalents investment activities
is to preserve principal. At December 31, 2013, the majority of U.S. Cellular’s Cash and cash equivalents was
held in bank deposit accounts and in money market funds that invest exclusively in U.S. Treasury Notes or in
repurchase agreements fully collateralized by such obligations. U.S. Cellular monitors the financial viability of
the money market funds and direct investments in which it invests and believes that the credit risk
associated with these investments is low.
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