EX-99.2 2 Ex992.htm EX-99.2  

Exhibit 99.2

 

UNAUDITED PRO FORMA FINANCIAL INFORMATION

 

On November 6, 2012, United States Cellular Corporation (“U.S. Cellular”) entered into a Purchase and Sale Agreement with subsidiaries of Sprint Nextel Corporation (“Sprint”). The Purchase and Sale Agreement also contemplates certain other agreements, collectively with the Purchase and Sale Agreement referred to as the “Divestiture Transaction.”

 

The Purchase and Sale Agreement provides that U.S. Cellular will transfer to Sprint certain rights and assets (collectively, the “Subject Assets”), and Sprint will assume certain liabilities (“Subject Liabilities”), related to U.S. Cellular’s Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (the “Divestiture Markets”), in consideration for $480 million in cash at closing (“Purchase Price”), subject to pro-rations of certain assets and liabilities.  U.S. Cellular will retain all other assets (“Retained Assets”) and liabilities (“Retained Liabilities”) related to the Divestiture Markets.  U.S. Cellular is not transferring and will continue to operate and provide services in Peoria, Rockford and certain other areas in Illinois, and in Columbia, Joplin, Jefferson City and certain other areas in Missouri.

 

On April 3, 2013, U.S. Cellular entered into an agreement relating to the Partnerships (as defined below) with Cellco Partnership d/b/a Verizon Wireless (“Verizon Wireless”).  U.S. Cellular holds a 60.00% interest in St. Lawrence Seaway RSA Cellular Partnership (“NY1”) and a 57.14% interest in New York RSA 2 Cellular Partnership (“NY2” and, together with NY1, the “Partnerships”).  The remaining interests are held by Verizon Wireless.  The Partnerships are operated by Verizon Wireless under the Verizon Wireless brand.  Because U.S. Cellular owns a greater than 50% interest in each of these markets and based on U.S. Cellular’s rights under the Partnership Agreements, prior to April 3, 2013, U.S. Cellular consolidated the financial results of these markets in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  The agreement amends the Partnership Agreements in several ways, which provide Verizon Wireless with substantive participating rights that allow Verizon Wireless to make decisions that are in the ordinary course of business of the Partnerships and which are significant to directing and executing the activities of the business.   Accordingly, as required by GAAP, effective April 3, 2013, U.S. Cellular will deconsolidate the Partnerships and thereafter will report them as equity method investments in its consolidated financial statements (the “Deconsolidation”).

 

The unaudited pro forma financial information is based on financial statements prepared in accordance with GAAP.  In addition, the unaudited pro forma financial information is based upon available information and assumptions that U.S. Cellular considers to be reasonable, and have been made solely for purposes of developing such unaudited pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the Securities and Exchange Commission (“SEC”).

 

The unaudited pro forma financial information is based on various assumptions. The actual results reported by U.S. Cellular in periods following the Divestiture Transaction and the Deconsolidation may differ significantly from those reflected in this unaudited pro forma financial information.  As a result, the unaudited pro forma financial information does not purport to project the future financial condition and results of operations of the consolidated company. The pro forma assumptions and adjustments are described in the accompanying schedules.  Pro forma adjustments are shown in the “Divestiture Markets” and “NY1 & NY2” columns and are those that are directly attributable to the transaction, are factually supportable and, with respect to the unaudited pro forma Statement of Operations, are expected to have a continuing impact on the consolidated results. Pro forma adjustments do not include allocations of corporate costs, as those costs are not directly attributable to these transactions.

 

The unaudited pro forma financial information should be read together with U.S. Cellular’s audited consolidated financial statements and accompanying notes, as of and for the fiscal year ended December 31, 2012, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in U.S. Cellular’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which was filed with the SEC on February 26, 2013, and U.S. Cellular’s Quarterly report on Form 10-Q for the period ended March 31, 2013, which was filed with the SEC on May 3, 2013.

 

1

 

 

 

 

The unaudited pro forma Statement of Operations for the year ended December 31, 2012 and the three months ended March 31, 2013 give effect to the Divesture Transaction and the Deconsolidation as if those transactions had occurred effective January 1, 2012, the beginning of U.S. Cellular’s 2012 fiscal year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Cellular Corporation

Pro Forma Statement of Operations

(Unaudited)

 

 

 

 

 

 

Less:

 

 

 

Year Ended December 31, 2012

As Reported

 

Divestiture Markets (1)

 

NY1 & NY2 (2)

 

Pro Forma

(Dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

Service

$

 4,098,856  

 

$

 420,342  

 

 

 157,807  

 

$

 3,520,707  

 

Equipment sales

 

 353,228  

 

 

 35,797  

 

 

 11,164  

 

 

 306,267  

 

 

Total operating revenues

 

 4,452,084  

 

 

 456,139  

 

 

 168,971  

 

 

 3,826,974  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

System operations (excluding Depreciation, amortization and

  accretion reported below)

 

 946,805  

 

 

 89,648  

 

 

 40,432  

 

 

 816,725  

 

Cost of equipment sold

 

 935,947  

 

 

 92,955  

 

 

 23,683  

 

 

 819,309  

 

Selling, general and administrative (including charges from

  affiliates of $104.3 million)

 

 1,764,933  

 

 

 143,706  

 

 

 46,317  

 

 

 1,574,910  

 

Depreciation, amortization and accretion

 

 608,633  

 

 

 104,060  

 

 

 10,262  

 

 

 494,311  

 

(Gain) loss on asset disposals and exchanges, net

 

 18,088  

 

 

 9,210  

 

 

 -    

 

 

 8,878  

 

(Gain) loss on sale of business and other exit costs, net

 

 21,022  

 

 

 24,445  

 

 

 -    

 

 

 (3,423) 

 

 

Total operating expenses

 

 4,295,428  

 

 

 464,024  

 

 

 120,694  

 

 

 3,710,710  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 156,656  

 

 

 (7,885) 

 

 

 48,277  

 

 

 116,264  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

 90,364  

 

 

 -  

 

 

 (28,407) 

 

 

 118,771  

 

Interest and dividend income

 

 3,644  

 

 

 -  

 

 

 -    

 

 

 3,644  

 

Gain (loss) on investment

 

 (3,718) 

 

 

 -  

 

 

 -    

 

 

 (3,718) 

 

Interest expense

 

 (42,393) 

 

 

 (279) 

 

 

 -    

 

 

 (42,114) 

 

Other, net

 

 500  

 

 

 -  

 

 

 90  

 

 

 410  

 

 

Total investment and other income (expense)

 

 48,397  

 

 

 (279) 

 

 

 (28,317) 

 

 

 76,993  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 205,053  

 

 

 (8,164) 

 

 

 19,960  

 

 

 193,257  

 

Income tax expense (benefit) (3)

 

 63,977  

 

 

 (3,088) 

 

 

 -    

 

 

 67,065  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 141,076  

 

 

 (5,076) 

 

 

 19,960  

 

 

 126,192  

  

Less: Net income attributable to noncontrolling interests, net of tax

 

 (30,070) 

 

 

 -  

 

 

 (19,960) 

 

 

 (10,110) 

Net income attributable to U.S. Cellular shareholders

$

 111,006  

 

$

 (5,076) 

 

 $  

 -    

 

$

 116,082  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding (4)

 

 84,645  

 

 

 -  

 

 

 -    

 

 

 84,645  

Basic earnings per share attributable to U.S. Cellular shareholders

$

 1.31  

 

$

 -  

 

 $  

 -    

 

$

 1.37  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding (4)

 

 85,067  

 

 

 -  

 

 

 -    

 

 

 85,067  

Diluted earnings per share attributable to U.S. Cellular shareholders

$

 1.30  

 

$

 -  

 

 $  

 -    

 

$

 1.36  

 

2

 

 

 

 

United States Cellular Corporation

Pro Forma Statement of Operations

(Unaudited)

 

 

 

 

 

 

Less:

 

 

 

Three Months Ended March 31, 2013

As Reported

 

Divestiture Markets (1)

 

NY1 & NY2 (2)

 

Pro Forma

(Dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

Service

$

 996,349  

 

$

 95,244  

 

 $  

 40,816  

 

$

 860,289  

 

Equipment sales

 

 85,397  

 

 

 4,643  

 

 

 2,486  

 

 

 78,268  

 

 

Total operating revenues

 

 1,081,746  

 

 

 99,887  

 

 

 43,302  

 

 

 938,557  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

System operations (excluding Depreciation, amortization and

  accretion reported below)

 

 216,299  

 

 

 20,355  

 

 

 11,701  

 

 

 184,243  

 

Cost of equipment sold

 

 241,691  

 

 

 9,230  

 

 

 5,446  

 

 

 227,015  

 

Selling, general and administrative (including charges from

  affiliates of $23.5 million)

 

 420,080  

 

 

 24,844  

 

 

 11,808  

 

 

 383,428  

 

Depreciation, amortization and accretion

 

 189,845  

 

 

 55,969  

 

 

 2,735  

 

 

 131,141  

 

Loss on asset disposals, net

 

 5,434  

 

 

 780  

 

 

 -  

 

 

 4,654  

 

(Gain) loss on sale of business and other exit costs, net

 

 6,931  

 

 

 7,118  

 

 

 -  

 

 

 (187) 

 

 

Total operating expenses

 

 1,080,280  

 

 

 118,296  

 

 

 31,690  

 

 

 930,294  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 1,466  

 

 

 (18,409) 

 

 

 11,612  

 

 

 8,263  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

 26,835  

 

 

 -  

 

 

 (6,824) 

 

 

 33,659  

 

Interest and dividend income

 

 903  

 

 

 -  

 

 

 -  

 

 

 903  

 

Interest expense

 

 (10,910) 

 

 

 (80) 

 

 

 -  

 

 

 (10,830) 

 

Other, net

 

 (215) 

 

 

 -  

 

 

 7  

 

 

 (222) 

 

 

Total investment and other income (expense)

 

 16,613  

 

 

 (80) 

 

 

 (6,817) 

 

 

 23,510  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 18,079  

 

 

 (18,489) 

 

 

 4,795  

 

 

 31,773  

 

Income tax expense (benefit) (3)

 

 7,369  

 

 

 (6,994) 

 

 

 -  

 

 

 14,363  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 10,710  

 

 

 (11,495) 

 

 

 4,795  

 

 

 17,410  

  

Less: Net income attributable to noncontrolling interests, net of tax

 

 (5,796) 

 

 

 -  

 

 

 (4,795) 

 

 

 (1,001) 

Net income attributable to U.S. Cellular shareholders

$

 4,914  

 

$

 (11,495) 

 

$

 -  

 

$

 16,409  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding (4)

 

 83,838  

 

 

 -  

 

 

 -  

 

 

 83,838  

Basic earnings per share attributable to U.S. Cellular shareholders

$

 0.06  

 

$

 -  

 

$

 -  

 

$

 0.20  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding (4)

 

 84,403  

 

 

 -  

 

 

 -  

 

 

 84,403  

Diluted earnings per share attributable to U.S. Cellular shareholders

$

 0.06  

 

$

 -  

 

$

 -  

 

$

 0.19  

 

3

 

 

 

 

The unaudited pro forma balance sheet gives effect to the Divestiture Transaction and Deconsolidation as if those transactions had occurred effective March 31, 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Cellular Corporation

Pro Forma Balance Sheet — Assets

(Unaudited)

 

 

 

 

 

Less:

 

 

March 31, 2013

As Reported

 

Divestiture Markets (5)

 

NY1 & NY2

(6)

 

Pro Forma

(Dollars in thousands)

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 419,696  

 

$

 (480,000) 

 

 $  

 -  

 

$

 899,696  

 

Short-term investments

 

 110,585  

 

 

 -  

 

 

 -  

 

 

 110,585  

 

Accounts receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

Customers and agents

 

 314,463  

 

 

 -  

 

 

 11,723  

 

 

 302,740  

 

 

Roaming 

 

 29,132  

 

 

 -  

 

 

 -  

 

 

 29,132  

 

 

Affiliated

 

 44  

 

 

 -  

 

 

 -  

 

 

 44  

 

 

Other

 

 51,062  

 

 

 -  

 

 

 23,910  

 

 

 27,152  

 

Inventory

 

 139,136  

 

 

 -  

 

 

 -  

 

 

 139,136  

 

Income taxes receivable

 

 2,776  

 

 

 -  

 

 

 -  

 

 

 2,776  

 

Prepaid expenses 

 

 64,365  

 

 

 -  

 

 

 25  

 

 

 64,340  

 

Net deferred income tax asset

 

 36,302  

 

 

 -  

 

 

 -  

 

 

 36,302  

 

Other current assets

 

 17,111  

 

 

 -  

 

 

 -  

 

 

 17,111  

 

 

 

 

 1,184,672  

 

 

 (480,000) 

 

 

 35,658  

 

 

 1,629,014  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale (7)

 

 213,593  

 

 

 213,593  

 

 

 -  

 

 

 -  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

 1,470,944  

 

 

 -  

 

 

 -  

 

 

 1,470,944  

 

Goodwill

 

 421,743  

 

 

 -  

 

 

 33,714  

 

 

 388,029  

 

Customer lists, net of accumulated amortization of $96,843

 

 68  

 

 

 -  

 

 

 -  

 

 

 68  

 

Investments in unconsolidated entities

 

 165,529  

 

 

 -  

 

 

 (120,000) 

 

 

 285,529  

 

Long-term investments

 

 40,142  

 

 

 -  

 

 

 -  

 

 

 40,142  

 

 

 

 

 2,098,426  

 

 

 -  

 

 

 (86,286) 

 

 

 2,184,712  

Property, plant and equipment

 

 

 

 

 

 

 

 

 

 

 

 

In service and under construction

 

 7,562,931  

 

 

 -  

 

 

 139,112  

 

 

 7,423,819  

 

Less: Accumulated depreciation

 

 4,614,423  

 

 

 -  

 

 

 57,697  

 

 

 4,556,726  

 

 

 

 

 2,948,508  

 

 

 -  

 

 

 81,415  

 

 

 2,867,093  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other assets and deferred charges

 

 78,436  

 

 

 -  

 

 

 69  

 

 

 78,367  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

 6,523,635  

 

$

 (266,407) 

 

$

 30,856  

 

$

 6,759,186  

 

4

 

 

 

 

United States Cellular Corporation

Pro Forma Balance Sheet — Liabilities and Equity

(Unaudited)

 

 

 

 

 

 

 

 

 

Less:

 

 

 

March 31, 2013

As Reported

 

Divestiture Markets (5)

 

NY1 & NY2 (6)

 

Pro Forma

(Dollars and shares in thousands)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

$

 93  

 

$

 -  

 

 $  

 -  

 

$

 93  

 

Accounts payable

  

 

 

  

 -  

 

 

 

 

  

 

 

 

Affiliated

 

 8,792  

 

 

 -  

 

 

 5,048  

 

 

 3,744  

 

 

Trade

 

 281,762  

 

 

 -  

 

 

 5,073  

 

 

 276,689  

 

Customer deposits and deferred revenues

 

 202,209  

 

 

 -  

 

 

 -  

 

 

 202,209  

 

Accrued taxes

 

 43,357  

 

 

 (138,458) 

 

 

 -  

 

 

 181,815  

 

Accrued compensation

 

 50,698  

 

 

 -  

 

 

 -  

 

 

 50,698  

 

Other current liabilities (7)

 

 98,657  

 

 

 (18,360) 

 

 

 -  

 

 

 117,017  

 

 

 

 

 

 

 

 685,568  

 

 

 (156,818) 

 

 

 10,121  

 

 

 832,265  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities held for sale (7)

 

 18,360  

 

 

 18,360  

 

 

 -  

 

 

 -  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred liabilities and credits

 

 

 

 

 

 

 

 

 

 

 

 

Net deferred income tax liability

 

 857,439  

 

 

 26,301  

 

 

 -  

 

 

 831,138  

 

Other deferred liabilities and credits

 

 292,687  

 

 

 -  

 

 

 726  

 

 

 291,961  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 878,975  

 

 

 -  

 

 

 -  

 

 

 878,975  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests with redemption features

 

 466  

 

 

 -  

 

 

 -  

 

 

 466  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Cellular shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Common and Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par Value ($1 per share) ($33,006 Series A Common and $55,068 Common Shares)

 

 88,074  

 

 

 -  

 

 

 -  

 

 

 88,074  

 

 

Additional paid-in capital

 

 1,417,308  

 

 

 -  

 

 

 -  

 

 

 1,417,308  

 

 

Treasury shares, at cost, 4,383 Common Shares

 

 (183,385) 

 

 

 -  

 

 

 -  

 

 

 (183,385) 

 

 

Retained earnings

 

 2,403,325  

 

 

 (154,250) 

 

 

 (23,762) 

 

 

 2,581,337  

 

 

 

Total U.S. Cellular shareholders' equity

 

 3,725,322  

 

 

 (154,250) 

 

 

 (23,762) 

 

 

 3,903,334  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests (8)

 

 64,818  

 

 

 -  

 

 

 43,771  

 

 

 21,047  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

 3,790,140  

 

 

 (154,250) 

 

 

 20,009  

 

 

 3,924,381  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$

 6,523,635  

 

$

 (266,407) 

 

$

 30,856  

 

$

 6,759,186  

 

(1)     The “Divestiture Markets” column reflects amounts included in the “As Reported” column that are directly attributable to the transaction, are factually supportable and are expected to have a continuing impact on the consolidated results.

 

(2)     The “NY1 & NY2” column reflects amounts included in the “As Reported” column that are directly attributable to the Deconsolidation, are factually supportable and are expected to have a continuing impact on the consolidated results as a result of the Deconsolidation.  NY1 & NY2 Equity in earnings of unconsolidated entities represents U.S. Cellular’s share of NY1 & NY2 net income for the period based on U.S. Cellular's interests in the Partnerships.

 

(3)     The income tax expense (benefit) is based on U.S. Cellular’s statutory tax rate applied to the cumulative effect of changes within the Divestiture Markets.

 

 

5

 

 

 

(4)     The number of basic and diluted shares outstanding did not change as a result of the Divestiture Transaction or the Deconsolidation.

 

(5)     Reflects the receipt of cash of approximately $480 million from Sprint.  As a result of the sale of assets and liabilities to Sprint, U.S. Cellular will recognize a gain of approximately $154 million, net of income tax expense of approximately $112 million.  This has not been included as a pro forma adjustment to the unaudited pro forma Statements of Operations due to its non-recurring nature but has been recorded in the unaudited pro forma Balance Sheet as of March 31, 2013.  The following table provides a reconciliation of the Retained Earnings impact resulting from the Divestiture Transaction:   

 

 

(Dollars in thousands)

 

 

 

Divestiture Markets Retained Earnings Reconciliation

 

 

Cash proceeds

$

 480,000  

 

 

Change in assets and liabilities, net (7)

 

 (213,593) 

 

 

Current and deferred tax effect

 

 (112,157) 

 

 

 

Gain, net of tax

$

 154,250  
           

 

Sprint will be required to reimburse U.S. Cellular up to $200 million for certain network decommissioning costs, network site lease rent and termination costs, network access termination costs, and employee termination benefits for specified engineering employees (the “Sprint Cost Reimbursement”).  The receipt of the Sprint Cost Reimbursement amounts will be recorded in (Gain) loss on sale of business and other exit costs, net. Such gains recorded as a result of the Sprint Cost Reimbursement will be partially offset by related decommissioning costs that are incurred, as costs that are not already accrued as a component of the liability for asset retirement obligations will also be recorded in (Gain) loss on sale of business and other exit costs, net.  The Sprint Cost Reimbursement has not been reflected in the unaudited pro forma Statements of Operations or Balance Sheet because these amounts will not be received until U.S. Cellular incurs the related costs after the closing of the Divestiture Transaction.

 

(6)     As a result of the Deconsolidation, NY1 & NY2 assets and liabilities previously reflected in “As Reported” amounts are removed.  In addition, in accordance with GAAP, as a result of the Deconsolidation, U.S. Cellular’s interest in the Partnerships is reflected in Investments in unconsolidated entities at fair value as of April 3, 2013. The fair value of U.S. Cellular’s interest in the Partnerships is estimated to be in the range of $112 million to $128 million.  U.S. Cellular therefore expects to recognize a non-cash pre-tax gain in the range of $16 million to $32 million. For purposes of the unaudited pro forma financial information contained herein, U.S. Cellular assumed a fair value of approximately $120 million, which generated a non-cash pre-tax gain of approximately $24 million. This gain has not been included as a pro forma adjustment to the unaudited pro forma Statements of Operations due to its non-recurring nature but has been recorded in the unaudited pro forma Balance Sheet as of March 31, 2013.  Recording U.S. Cellular’s interest in the Partnerships requires various assumptions, including allocation of the excess of fair value over book value to the assets and liabilities of the Partnerships.  Due to the incomplete fair value allocation primarily related to FCC licenses, customer lists and goodwill and the related useful lives, Equity in earnings of unconsolidated entities does not reflect adjustments related to depreciation or amortization of definite-lived tangible or intangible assets.  The actual results reported by U.S. Cellular in periods following the Deconsolidation may differ significantly from those reflected in the pro forma financial information contained herein.  The following table provides a reconciliation of the Retained Earnings impact resulting from the Deconsolidation:   

 

 

(Dollars in thousands)

 

 

 

NY1 & NY2 Retained Earnings Reconciliation

 

 

Estimated Fair Value of NY1 & NY2

$

 120,000  

 

 

Existing investment balance

 

 (62,524) 

 

 

Existing goodwill related to NY1 & NY2

 

 (33,714) 

 

 

 

Gain

$

 23,762  
           

 

(7)     At March 31, 2013, the following assets and liabilities were classified in U.S. Cellular’s Consolidated Balance Sheet as “Assets held for sale” and “Liabilities held for sale” as a result of the Divestiture Transaction:

 

 

(Dollars in thousands)

 

 

 

Assets held for sale

 

 

Licenses

$

 140,599  

 

 

Goodwill

 

 72,994  

 

 

 

Total

$

 213,593  

 

 

 

 

 

 

 

Liabilities held for sale

 

 

Customer deposits and deferred revenues

$

 18,360  

 

6

 

 

 

 

Amounts recorded as Liabilities held for sale will transfer to Sprint upon the closing of the transaction.  Per the Purchase and Sale Agreement with Sprint, the amount of the liabilities transferred to Sprint will be offset against future amounts owed to U.S. Cellular by Sprint under certain other agreements in connection with the Divestiture Transaction.  Therefore, Other current liabilities of $18,360 were recorded in the Consolidated Balance Sheet to reflect this obligation.

 

(8)     As a result of the Deconsolidation, U.S. Cellular’s investment balances in NY1 and NY2 will be recorded as Investments in unconsolidated entities, thereby eliminating the noncontrolling interest portion previously recorded when NY1 and NY2 were consolidated.

 

 

7