US Cellular 2014 Annual Report Download - page 76

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United States Cellular Corporation
Notes to Consolidated Financial Statements (Continued)
NOTE 13 VARIABLE INTEREST ENTITIES (VIEs) (Continued)
exercisable in 2019 and 2020, respectively. The general partner’s put options related to its interest in
Advantage Spectrum will become exercisable on the fifth and sixth anniversaries of the issuance of any
license. 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 $1.2 million and
$0.5 million at December 31, 2014 and 2013, respectively. 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 Statement of Operations.
NOTE 14 NONCONTROLLING INTERESTS
U.S. Cellular’s consolidated financial statements include certain noncontrolling interests that meet the
GAAP definition of mandatorily redeemable financial instruments. These mandatorily redeemable
noncontrolling interests represent interests held by third parties in consolidated partnerships, where the
terms of the underlying partnership agreement provide for a defined termination date at which time the
assets of the subsidiary are to be sold, the liabilities are to be extinguished and the remaining net
proceeds are to be distributed to the noncontrolling interest holders and U.S. Cellular in accordance with
the respective partnership. The termination dates of these mandatorily redeemable noncontrolling
interests range from 2085 to 2113.
The estimated aggregate amount that would be due and payable to settle all of these noncontrolling
interests assuming an orderly liquidation of the finite-lived consolidated partnerships on December 31,
2014, net of estimated liquidation costs, is $9.9 million. This amount excludes redemption amounts
recorded in Noncontrolling interests with redemption features in the Consolidated Balance Sheet. The
estimate of settlement value was based on certain factors and assumptions which are subjective in
nature. Changes in those factors and assumptions could result in a materially larger or smaller
settlement amount. U.S. Cellular currently has no plans or intentions relating to the liquidation of any of
the related partnerships prior to their scheduled termination dates. The corresponding carrying value of
the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships at
December 31, 2014 was $7.8 million, and is included in Noncontrolling interests in the Consolidated
Balance Sheet. The excess of the aggregate settlement value over the aggregate carrying value of these
mandatorily redeemable noncontrolling interests is due primarily to the unrecognized appreciation of the
noncontrolling interest holders’ share of the underlying net assets in the consolidated partnerships.
Neither the noncontrolling interest holders’ share, nor U.S. Cellular’s share, of the appreciation of the
underlying net assets of these subsidiaries is reflected in the consolidated financial statements.
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