Edgar Filing: UNITED STATES CELLULAR CORP

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-9712

UNITED STATES CELLULAR CORPORATION
(Exact name of registrant as specified in its charter)

Delaware			62-1147325
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

8410 West Bryn Mawr, Suite 700, Chicago, Illinois 60631
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (773) 399-8900

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨

(Do not check if a smaller reporting company)

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at March 31, 2011
Common Shares, $1 par value		52,228,673 Shares
Series A Common Shares, $1 par value		33,005,877 Shares

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United States Cellular Corporation

Quarterly Report on Form 10-Q
For the Quarterly Period Ended March 31, 2011

Index

				Page No.
Part I.	Financial Information

	Item 1.	Financial Statements (Unaudited)

		Consolidated Statement of Operations
			Three Months Ended March 31, 2011 and 2010	3

		Consolidated Statement of Cash Flows
			Three Months Ended March 31, 2011 and 2010	4

		Consolidated Balance Sheet
			March 31, 2011 and December 31, 2010	5

		Consolidated Statement of Changes in Equity
			Three Months Ended March 31, 2011 and 2010	7

		Notes to Consolidated Financial Statements		9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

		Overview		15
		Results of Operations		18
		Recent Accounting Pronouncements		23
		Financial Resources		24
		Liquidity and Capital Resources		26
		Application of Critical Accounting Policies and Estimates		29
		Safe Harbor Cautionary Statement		30

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33

	Item 4.	Controls and Procedures		34

Part II.	Other Information

	Item 1.	Legal Proceedings		35

	Item 1A.	Risk Factors		35

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36

	Item 5.	Other Information		36

	Item 6.	Exhibits		37

Signatures

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Part I. Financial Information
Item 1. Financial Statements

United States Cellular Corporation

Consolidated Statement of Operations
(Unaudited)

			Three Months Ended
			March 31,
(Dollars and shares in thousands, except per share amounts)			2011			2010

Operating revenues
	Service		$	985,113		$	965,008
	Equipment sales			71,979			58,849
		Total operating revenues		1,057,092			1,023,857

Operating expenses
	System operations (excluding Depreciation, amortization and accretion reported below)			217,603			207,114
	Cost of equipment sold			194,360			161,105
	Selling, general and administrative (including charges from affiliates of $26.2 million and $27.7 million, respectively)			442,004			429,605
	Depreciation, amortization and accretion			145,045			143,233
	Loss on asset disposals, net			1,037			5,176
		Total operating expenses		1,000,049			946,233

Operating income				57,043			77,624

Investment and other income (expense)
	Equity in earnings of unconsolidated entities			20,891			24,694
	Interest and dividend income			849			1,021
	Interest expense			(15,186	)		(16,524	)
	Other, net			(125	)		(65	)
		Total investment and other income (expense)		6,429			9,126

Income before income taxes				63,472			86,750
	Income tax expense			24,092			33,662

Net income				39,380			53,088
	Less: Net income attributable to noncontrolling interests, net of tax			(5,269	)		(5,719	)
Net income attributable to U.S. Cellular shareholders			$	34,111		$	47,369

Basic weighted average shares outstanding				85,484			86,576
Basic earnings per share attributable to U.S. Cellular shareholders			$	0.40		$	0.55

Diluted weighted average shares outstanding				86,101			86,978
Diluted earnings per share attributable to U.S. Cellular shareholders			$	0.40		$	0.54

The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Consolidated Statement of Cash Flows
(Unaudited)

			Three Months Ended
			March 31,
(Dollars in thousands)			2011			2010

Cash flows from operating activities
	Net income		$	39,380		$	53,088
	Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
		Depreciation, amortization and accretion		145,045			143,233
		Bad debts expense		13,507			19,193
		Stock-based compensation expense		5,792			3,830
		Deferred income taxes, net		44,413			(2,419	)
		Equity in earnings of unconsolidated entities		(20,891	)		(24,694	)
		Distributions from unconsolidated entities		8,323			7,238
		Loss on asset disposals, net		1,037			5,176
		Other operating activities		1,064			274
	Changes in assets and liabilities from operations
		Accounts receivable		4,950			1,313
		Inventory		3,461			(722	)
		Accounts payable - trade		(2,244	)		(39,375	)
		Accounts payable - affiliate		(2,041	)		(5,843	)
		Customer deposits and deferred revenues		10,245			403
		Accrued taxes		11,174			30,723
		Accrued interest		9,205			9,221
		Other assets and liabilities		(70,598	)		(48,387	)
				201,822			152,252

Cash flows from investing activities
	Additions to property, plant and equipment			(95,933	)		(121,514	)
	Cash paid for acquisitions and licenses			—			(3,800	)
	Cash paid for investments			—			(25,000	)
	Cash received for investments			35,000			126
	Other investing activities			2,200			230
				(58,733	)		(149,958	)

Cash flows from financing activities
	Common shares reissued for benefit plans, net of tax payments			1,305			486
	Common shares repurchased			(17,357	)		(5,186	)
	Distributions to noncontrolling interests			(186	)		(2,284	)
	Other financing activities			17			(63	)
				(16,221	)		(7,047	)

Net increase (decrease) in cash and cash equivalents				126,868			(4,753	)

Cash and cash equivalents
	Beginning of period			294,426			294,411
	End of period		$	421,294		$	289,658

The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Consolidated Balance Sheet — Assets
(Unaudited)

			March 31,		December 31,
(Dollars in thousands)			2011		2010

Current assets
	Cash and cash equivalents		$	421,294	$	294,426
	Short-term investments			121,252		146,586
	Accounts receivable
		Customers and agents, less allowances of $21,674 and $24,455, respectively		302,532		331,452
		Roaming		36,109		37,218
		Affiliated		272		226
		Other, less allowances of $1,180 and $1,361, respectively		66,650		55,123
	Inventory			108,818		112,279
	Prepaid income taxes			4,910		41,397
	Prepaid expenses			62,709		53,356
	Net deferred income tax asset			26,757		26,757
	Other current assets			10,282		10,804
				1,161,585		1,109,624
Investments
	Licenses			1,452,401		1,452,101
	Goodwill			494,737		494,737
	Customer lists, net of accumulated amortization of $96,264 and $96,153, respectively			648		759
	Investments in unconsolidated entities			171,485		160,847
	Notes and interest receivable — long-term			4,033		4,070
	Long-term investments			35,737		46,033
				2,159,041		2,158,547
Property, plant and equipment
	In service and under construction			6,465,667		6,382,581
	Less: Accumulated depreciation			3,898,393		3,767,509
				2,567,274		2,615,072

Other assets and deferred charges				74,028		50,367

Total assets			$	5,961,928	$	5,933,610

The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Consolidated Balance Sheet — Liabilities and Equity
(Unaudited)

					March 31,			December 31,
(Dollars and shares in thousands)					2011			2010

Current liabilities
	Current portion of long-term debt				$	101		$	101
	Accounts payable
		Affiliated				8,750			10,791
		Trade				279,657			281,601
	Customer deposits and deferred revenues					156,673			146,428
	Accrued taxes					36,263			39,299
	Accrued compensation					41,651			65,952
	Other current liabilities					94,696			121,823
						617,791			665,995

Deferred liabilities and credits
	Net deferred income tax liability					624,884			579,769
	Other deferred liabilities and credits					287,217			284,949

Long-term debt						868,102			867,941

Commitments and contingencies

Noncontrolling interests with redemption features						894			855

Equity
	U.S. Cellular shareholders’ equity
		Series A Common and Common Shares
			Authorized 190,000 shares (50,000 Series A Common and 140,000 Common Shares)
			Issued 88,074 shares (33,006 Series A Common and 55,068 Common Shares)
			Outstanding 85,234 shares (33,006 Series A Common and 52,228 Common Shares) and 85,547 shares (33,006 Series A Common and 52,541 Common Shares), respectively
			Par Value ($1 per share) ($33,006 Series A Common and $55,068 Common Shares)			88,074			88,074
		Additional paid-in capital				1,374,323			1,368,487
		Treasury shares, at cost, 2,840 and 2,527 Common Shares, respectively				(120,475	)		(105,616	)
		Retained earnings				2,162,556			2,129,638
			Total U.S. Cellular shareholders’ equity			3,504,478			3,480,583

	Noncontrolling interests					58,562			53,518

				Total equity		3,563,040			3,534,101

Total liabilities and equity					$	5,961,928		$	5,933,610

The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Consolidated Statement of Changes in Equity (Unaudited)

	U.S. Cellular Shareholders
(Dollars in thousands)	Series A Common and Common Shares		Additional Paid-In Capital		Treasury Shares			Retained Earnings			Total U.S. Cellular Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, December 31, 2010	$	88,074	$	1,368,487	$	(105,616	)	$	2,129,638		$	3,480,583		$	53,518		$	3,534,101
Add (Deduct)
Net income attributable to U.S. Cellular shareholders		—		—		—			34,111			34,111			—			34,111
Net income attributable to noncontrolling interests classified as equity		—		—		—			—			—			5,230			5,230
Repurchase of Common Shares		—		—		(17,357	)		—			(17,357	)		—			(17,357	)
Incentive and compensation plans		—		32		2,498			(1,193	)		1,337			—			1,337
Stock-based compensation awards		—		5,792		—			—			5,792			—			5,792
Tax windfall (shortfall) from stock awards		—		12		—			—			12			—			12
Distributions to noncontrolling interests		—		—		—			—			—			(186	)		(186	)
Balance, March 31, 2011	$	88,074	$	1,374,323	$	(120,475	)	$	2,162,556		$	3,504,478		$	58,562		$	3,563,040

The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Consolidated Statement of Changes in Equity
(Unaudited)

	U.S. Cellular Shareholders
(Dollars in thousands)	Series A Common and Common Shares		Additional Paid-In Capital			Treasury Shares			Retained Earnings			Total U.S. Cellular Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, December 31, 2009	$	88,074	$	1,356,322		$	(69,616	)	$	2,013,633		$	3,388,413		$	51,701		$	3,440,114
Add (Deduct)
Net income attributable to U.S. Cellular shareholders		—		—			—			47,369			47,369			—			47,369
Net income attributable to noncontrolling interests classified as equity		—		—			—			—			—			5,695			5,695
Repurchase of Common Shares		—		—			(5,186	)		—			(5,186	)		—			(5,186	)
Incentive and compensation plans		—		605			2,608			(2,123	)		1,090			—			1,090
Stock-based compensation awards		—		3,830			—			—			3,830			—			3,830
Tax windfall (shortfall) from stock awards		—		(45	)		—			—			(45	)		—			(45	)
Distributions to noncontrolling interests		—		—			—			—			—			(2,284	)		(2,284	)
Balance, March 31, 2010	$	88,074	$	1,360,712		$	(72,194	)	$	2,058,879		$	3,435,471		$	55,112		$	3,490,583

The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Notes to Consolidated Financial Statements

1. Basis of Presentation

United States Cellular Corporation (“U.S. Cellular”), a Delaware Corporation, is an 83%-owned subsidiary of Telephone and Data Systems, Inc. (“TDS”).

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The consolidated financial statements include the accounts of U.S. Cellular, its majority-owned subsidiaries since acquisition, general partnerships in which U.S. Cellular has a majority partnership interest and certain entities in which U.S. Cellular has a variable interest that require consolidation under GAAP. All material intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the 2011 presentation.

The consolidated financial statements included herein have been prepared by U.S. Cellular, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, U.S. Cellular believes that the disclosures included herein are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in U.S. Cellular’s Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2010.

The accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring items, unless otherwise disclosed) necessary to present fairly the financial position as of March 31, 2011 and December 31, 2010, and the results of operations, cash flows and changes in equity for the three months ended March 31, 2011 and 2010. The results of operations, cash flows and changes in equity for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year.

2. Fair Value Measurements

As of March 31, 2011 and December 31, 2010, U.S. Cellular did not have any financial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP. However, U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.

		March 31,				December 31,
		2011				2010
		Book Value			Fair Value	Book Value		Fair Value
(Dollars in thousands)
Cash and cash equivalents		$	421,294	$	421,294	$	294,426	$	294,426
Short-term investments (1)(2)
	Certificates of deposit		250		250		250		250
	Government-backed securities (3)		121,002		121,002		146,336		146,336
Long-term investments (1)(4)
	Government-backed securities (3)		35,737		35,824		46,033		46,034
Long-term debt (5)			863,770		852,393		863,657		850,374

(1) Designated as held-to-maturity investments and recorded at amortized cost on the Consolidated Balance Sheet.

(2) Maturities are less than twelve months from the respective balance sheet dates.

(3) Includes U.S. treasuries and corporate notes guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.

(4) At March 31, 2011, maturities range between 14 and 21 months.

(5) Excludes capital lease obligations and current portion of Long-term debt.

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The fair values of Cash and cash equivalents and Short-term investments approximate their book values due to the short-term nature of these financial instruments. The fair values of Long-term investments were estimated using quoted market prices for the individual issuances. The fair value of long-term debt, excluding capital lease obligations and the current portion of such long-term debt, was estimated using market prices for the 7.5% senior notes and discounted cash flow analysis for the 6.7% senior notes.

As of March 31, 2011 and December 31, 2010, U.S. Cellular did not have nonfinancial assets or liabilities that required the application of fair value accounting for purposes of reporting such amounts in its Consolidated Balance Sheet.

3. Income Taxes

U.S. Cellular is included in a consolidated federal income tax return and in certain state income tax returns with other members of the TDS consolidated group. For financial statement purposes, U.S. Cellular and its subsidiaries compute their income tax expense as if they comprised a separate affiliated group and were not included in the TDS consolidated group.

U.S. Cellular’s overall effective tax rate on Income before income taxes for the three months ended March 31, 2011 and 2010 was 38.0% and 38.8%, respectively. The effective tax rate for the three months ended March 31, 2011 was lower than the rate for the three months ended March 31, 2010 primarily as a result of a favorable change in estimates for certain state income tax contingencies. The benefit from this change, along with other minor discrete benefits, decreased income tax expense for the three months ended March 31, 2011 by $0.3 million; absent these benefits, the effective tax rate for such period would have been higher by 0.4 percentage points.

U.S. Cellular expects to incur a federal net operating loss in 2011 for federal income tax purposes as a result of 100% bonus depreciation that applies to qualified capital expenditures. U.S. Cellular plans to carryback this federal net operating loss to prior tax years, and has recorded $22.3 million in Other assets and deferred charges at March 31, 2011 related to the benefit associated with this estimated federal net operating loss carryback. U.S. Cellular’s federal income tax liabilities associated with the current benefits being realized from bonus depreciation are accrued as a component of Net deferred income tax liability (noncurrent) in the Consolidated Balance Sheet.

4. 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.

The amounts used in computing Earnings per Common and Series A Common Share and the effects of potentially dilutive securities on the weighted average number of Common and Series A Common Shares are as follows:

		Three Months Ended
		March 31,
		2011		2010
(Dollars and shares in thousands, except per share amounts)
Net income attributable to U.S. Cellular shareholders		$	34,111	$	47,369

Weighted average number of shares used in basic earnings per share			85,484		86,576
Effect of dilutive securities:
	Stock options		177		57
	Restricted stock units		440		345
Weighted average number of shares used in diluted earnings per share			86,101		86,978

Basic earnings per share attributable to U.S. Cellular shareholders		$	0.40	$	0.55

Diluted earnings per share attributable to U.S. Cellular shareholders		$	0.40	$	0.54

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Certain Common Shares issuable upon the exercise of stock options or vesting of restricted stock units were not included in average diluted shares outstanding for the calculation of Diluted earnings per share because their effects were antidilutive. The number of such Common Shares excluded is shown in the table below.

	Three Months Ended
	March 31,
	2011	2010
(Shares in thousands)
Stock options	1,055	1,401

Restricted stock units	1	—

5. Licenses and Goodwill

Changes in U.S. Cellular’s licenses for the three months ended March 31, 2011 and 2010 are presented below.

		March 31,		March 31,
		2011		2010
(Dollars in thousands)
Balance, beginning of period		$	1,452,101	$	1,435,000
	Acquisitions		300		3,800
Balance, end of period		$	1,452,401	$	1,438,800

There were no changes to Goodwill during the three months ended March 31, 2011 and 2010, respectively.

6. Investment in Unconsolidated Entities

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. These investments are accounted for using either the equity or cost method.

Equity in earnings of unconsolidated entities totaled $20.9 million and $24.7 million in the three months ended March 31, 2011 and 2010, respectively; of those amounts, U.S. Cellular’s investment in the Los Angeles SMSA Partnership (“LA Partnership”) contributed $13.0 million and $16.9 million in the three months ended March 31, 2011 and 2010, respectively. U.S. Cellular held a 5.5% ownership interest in the LA Partnership during these periods.

The following table, which is based on information provided in part by third parties, summarizes the combined results of operations of U.S. Cellular’s equity method investments:

	Three Months Ended
	March 31,
	2011		2010
(Dollars in thousands)
Revenues	$	1,329,000	$	1,214,000
Operating expenses		1,034,000		859,000
Operating income		295,000		355,000
Other income (expense)		1,000		7,000
Net income	$	296,000	$	362,000

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7. Commitments, Contingencies and Other Liabilities

Indemnifications

U.S. Cellular enters into agreements in the normal course of business that provide for indemnification of counterparties. The terms of the indemnifications vary by agreement. The events or circumstances that would require U.S. Cellular to perform under these indemnities are transaction specific; however, these agreements may require U.S. Cellular to indemnify the counterparty for costs and losses incurred from litigation or claims arising from the underlying transaction. U.S. Cellular is unable to estimate the maximum potential liability for these types of indemnifications as the amounts are dependent on the outcome of future events, the nature and likelihood of which cannot be determined at this time. Historically, U.S. Cellular has not made any significant indemnification payments under such agreements.

Legal Proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts. If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss. If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued. The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events. The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures. The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

U.S. Cellular has accrued $1.5 million with respect to legal proceedings and unasserted claims as of March 31, 2011 and December 31, 2010. U.S. Cellular has not accrued any amount for legal proceedings if it cannot estimate the amount of the possible loss or range of loss. U.S. Cellular does not believe that the amount of any contingent loss in excess of the amounts accrued would be material.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular. At March 31, 2011 and December 31, 2010, U.S. Cellular had accrued $50.4 million and $71.3 million, respectively, for amounts due to agents, including rebates and commissions due on equipment and services sold to U.S. Cellular customers by agents. This amount is included in Other current liabilities in the Consolidated Balance Sheet.

8. Variable Interest Entities (VIEs)

From time to time, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services. U.S. Cellular participated in spectrum auctions indirectly through its interests in Aquinas Wireless L.P. (“Aquinas Wireless”), King Street Wireless L.P. (“King Street Wireless”), Barat Wireless L.P. (“Barat Wireless”) and Carroll Wireless L.P. (“Carroll Wireless”), collectively, the “limited partnerships.” Each limited partnership participated in and was awarded spectrum licenses in one of four separate spectrum auctions (FCC Auctions 78, 73, 66, and 58). Each limited partnership qualified as a “designated entity” and thereby was eligible for bidding credits with respect to licenses purchased in accordance with the rules defined by the FCC for each auction. In most cases, the bidding credits resulted in a 25% discount from the gross winning bid.

Consolidated VIEs

As of March 31, 2011, U.S. Cellular consolidates the following VIEs under GAAP:

· Aquinas Wireless;

· King Street Wireless and King Street Wireless, Inc., the general partner of King Street Wireless;

· Barat Wireless and Barat Wireless, Inc., the general partner of Barat Wireless; and

· Carroll Wireless and Carroll PCS, Inc., the general partner of Carroll Wireless.

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U.S. Cellular holds a variable interest in the entities listed above. It has made capital contributions and/or advances to these entities. The power to direct the activities of the VIEs that most significantly impact their economic performance is shared. Specifically, the general partner of each of these VIEs has the exclusive right to manage, operate and control the limited partnerships and make all decisions to carry on the business of the partnerships; however, the general partner of each partnership needs consent of the limited partner, a U.S. Cellular subsidiary, to sell or lease certain licenses, to make certain large expenditures, admit other partners or liquidate the limited partnerships. Although the power to direct the activities of the VIEs is shared, U.S. Cellular has a disproportionate level of exposure to the variability associated with the economic performance of the VIEs, indicating that U.S. Cellular is the primary beneficiary of the VIEs in accordance with GAAP. Accordingly, these VIEs are consolidated. As of March 31, 2011, U.S. Cellular’s capital contributions and advances made to these VIEs totaled $568.8 million.

The following table presents the classification of the consolidated VIEs’ assets and liabilities in U.S. Cellular’s Consolidated Balance Sheet.

		March 31,		December 31,
		2011		2010
(Dollars in thousands)
Assets
	Cash	$	7,918	$	1,673
	Other current assets		1,785		323
	Licenses		487,962		487,962
	Property, plant and equipment		1,259		1,548
	Total assets	$	498,924	$	491,506

Liabilities
	Other current liabilities	$	172	$	95
	Total liabilities	$	172	$	95

Other Related Matters

U.S. Cellular may agree to make additional capital contributions and/or advances to the VIEs discussed above and/or to their general partners to provide additional funding for the development of licenses granted in the various auctions. U.S. Cellular may finance such amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or long-term debt. There is no assurance that U.S. Cellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

These VIEs are in the process of developing Long-Term Evolution (“LTE”) deployment plans. These entities 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 the business risks described in the “Risk Factors” in U.S. Cellular’s Form 10-K for the year ended December 31, 2010.

9. Common Share Repurchases

On November 17, 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis. These purchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions. This authorization does not have an expiration date.

Share repurchases made under this authorization and prior authorizations, were as follows:

	Three Months Ended
	March 31,
	2011		2010
(Dollars and shares in thousands, except cost per share)
Number of shares		357		128
Average cost per share	$	48.61	$	40.68
Total cost	$	17,357	$	5,186

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10. Noncontrolling Interests

Mandatorily Redeemable Noncontrolling Interests in Finite-Lived Subsidiaries

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 and limited liability companies (“LLCs”), where the terms of the underlying partnership or LLC 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 and LLC agreements. The termination dates of these mandatorily redeemable noncontrolling interests range from 2085 to 2107.

The settlement value or estimate of cash that would be due and payable to settle these noncontrolling interests assuming an orderly liquidation of the finite-lived consolidated partnerships and LLCs on March 31, 2011, net of estimated liquidation costs, is $177.3 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 or LLCs prior to their scheduled termination dates. The corresponding carrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships and LLCs at March 31, 2011 was $55.7 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 primarily due to the unrecognized appreciation of the noncontrolling interest holders’ share of the underlying net assets in the consolidated partnerships and LLCs. 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.

11. Supplemental Cash Flow Disclosures

Following are supplemental cash flow disclosures regarding transactions related to stock-based compensation awards:

	Three Months Ended
	March 31,
	2011			2010
(Dollars and shares in thousands)
Common Shares withheld (1)		14			18

Aggregate value of Common Shares withheld	$	675		$	753

Cash receipts upon exercise of stock options	$	1,396		$	538
Cash disbursements for payment of taxes (2)		(91	)		(52	)
Net cash receipts from exercise of stock options and vesting of other stock awards	$	1,305		$	486

(1) Such shares were withheld to cover the exercise price of stock options, if applicable, and required tax withholdings.

(2) In certain situations, U.S. Cellular withholds shares that are issuable upon the exercise of stock options or the vesting of restricted shares to cover, and with a value equivalent to, the exercise price and/or the amount of taxes required to be withheld from the stock award holder at the time of the exercise or vesting. U.S. Cellular then pays the amount of the required tax withholdings to the taxing authorities in cash.

12. Other Disclosures

Amounts Collected from Customers and Remitted to Governmental Authorities

U.S. Cellular records amounts collected from customers and remitted to governmental authorities net within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selli