US Cellular 2014 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
amount of cash generated by business operations (including cash proceeds from the Sprint Cost
Reimbursement), after Cash used for additions to property, plant and equipment.
2014 2013 2012
(Dollars in thousands)
Cash flows from operating activities ........... $172,342 $ 290,897 $899,291
Add: Sprint Cost Reimbursement(1) ........... 71,097 10,560 —
Less: Cash used for additions to property, plant
and equipment ......................... 605,083 717,862 826,400
Adjusted free cash flow ................... $(361,644) $(416,405) $ 72,891
(1) See Note 6—Acquisitions, Divestitures and Exchanges in the Notes to Consolidated
Financial Statements for additional information related to the Sprint Cost Reimbursement.
See Cash flows from Operating Activities and Cash flows from Investing Activities for additional
information related to the components of Adjusted free cash flow.
LIQUIDITY
U.S. Cellular believes that existing cash and investment balances, funds available under its revolving
credit facility and term loan facility and expected cash flows from operating and investing activities
provide substantial liquidity and financial flexibility for U.S. Cellular to meet its normal day-to-day
operating needs. However, these resources may not be adequate to fund all future expenditures that the
company could potentially elect to make such as acquisitions of spectrum licenses in FCC auctions and
other acquisition, construction and development programs. It may be necessary from time to time to
increase the size of the existing revolving credit facility, to put in place new facilities, or to obtain other
forms of financing in order to fund these potential expenditures. To the extent that sufficient funds are not
available to U.S. Cellular or its subsidiaries on terms or at prices acceptable to U.S. Cellular, it could
require U.S. Cellular to reduce its acquisition, construction and development programs.
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. Additionally, U.S. Cellular expects lower
cash flows from operating activities in the near term as the popularity of its equipment installment plans
increases. 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, U.S. Cellular financial performance and/or prospects 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.
Cash and Cash Equivalents
At December 31, 2014, U.S. Cellular’s cash and cash equivalents totaled $211.5 million. 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, 2014, 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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