US Cellular 2013 Annual Report Download - page 29

United States Cellular Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Apple iPhone Products Purchase Commitment
In March 2013, U.S. Cellular entered into an agreement with Apple to purchase certain minimum quantities of
iPhone products over a three-year period beginning in November 2013. The minimum quantity of iPhone
products to be purchased during the first contract year is fixed and is subject to adjustment for the second
and third contract years based on the percentage growth in smartphone sales in the United States for the
immediately preceding calendar year. Based on current forecasts, U.S. Cellular estimates that the remaining
contractual purchase commitment as of December 31, 2013 is approximately $950 million. At this time, U.S.
Cellular expects to meet its contractual commitment with Apple.
Off-Balance Sheet Arrangements
U.S. Cellular had no transactions, agreements or other contractual arrangements with unconsolidated entities
involving ‘‘off-balance sheet arrangements,’’ as defined by SEC rules, that had or are reasonably likely to
have a material current or future effect on its financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources.
Dividends
On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of
$482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11,
2013.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
U.S. Cellular prepares its consolidated financial statements in accordance with GAAP. U.S. Cellular’s
significant accounting policies are discussed in detail in Note 1—Summary of Significant Accounting Policies
and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements.
Management believes the application of the following critical accounting policies and the estimates required
by such application reflect its most significant judgments and estimates used in the preparation of U.S.
Cellular’s consolidated financial statements. Management has discussed the development and selection of
each of the following accounting policies and related estimates and disclosures with the Audit Committee of
U.S. Cellular’s Board of Directors.
Goodwill and Licenses
See the Goodwill and Licenses Impairment Assessment section of Note 1—Summary of Significant
Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial
Statements for information on Goodwill and Licenses impairment testing policies and methods. U.S. Cellular
performs annual impairment testing of Goodwill and Licenses, as required by GAAP, in the fourth quarter of
its fiscal year, based on fair values and net carrying values determined as of November 1.
See Note 6—Intangible Assets in the Notes to Consolidated Financial Statements for additional information
related to Goodwill and Licenses activity in 2013 and 2012.
Goodwill
U.S. Cellular tests Goodwill for impairment at the level of reporting referred to as a reporting unit. For
purposes of impairment testing of Goodwill in 2013, U.S. Cellular identified four reporting units based on
geographic service areas. For purposes of the impairment testing of Goodwill in 2012, U.S. Cellular identified
five reporting units based on geographic service areas. The change in reporting units resulted from the
NY1 & NY2 Deconsolidation more fully described in Note 7—Investments in Unconsolidated Entities in the
Notes to Consolidated Financial Statements. There were no changes to U.S. Cellular’s overall Goodwill
impairment testing methodology between November 1, 2013 and November 1, 2012.
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