What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-16 compared with 2023-02-16 · 129 added, 153 removed, 1044 unchanged (21% of the section changed)

34 unchanged sentences

Interest and dividend income 10 8 6

Gain (loss) on investments — — 2

Interest expense ( 196 ) ( 163 ) ( 175 )

Total investment and other income 3 10 77

Total investment and other income (expense) ( 28 ) 3 10

Income before income taxes 111 72 180

26 unchanged sentences

(Gain) loss on license sales and exchanges, net ( 2 ) — —

(Gain) loss on investments — — ( 2 )

Other operating activities 6 9 33

11 unchanged sentences

Cash paid for licenses ( 130 ) ( 585 ) ( 1,302 )

Cash received from divestitures and exchanges 8 3 26

Advance payments for license acquisitions — — ( 20 )

10 unchanged sentences

Distributions to noncontrolling interests ( 3 ) ( 3 ) ( 3 )

Payments to acquire additional interest in subsidiaries — — ( 11 )

Cash paid for software license agreements ( 66 ) ( 22 ) ( 9 )

Other financing activities — ( 1 ) ( 1 )

Net cash provided by financing activities 456 142 926

Net cash provided by (used in) financing activities ( 274 ) 456 142

Net increase (decrease) in cash, cash equivalents and restricted cash ( 129 ) 109 ( 1,092 )

57 unchanged sentences

Issued 88 shares ( 33 Series A Common and 55 Common Shares)

Outstanding 85 shares ( 33 Series A Common and 52 Common Shares) and 86 shares ( 33 Series A Common and 53 Common Shares), respectively

Outstanding 85 shares ( 33 Series A Common and 52 Common Shares)

Par Value ($ 1.00 per share) ($ 33 Series A Common and $ 55 Common Shares)

Additional paid-in capital 1,726 1,703

Treasury shares, at cost, 3 and 2 Common Shares, respectively

Treasury shares, at cost, 3 Common Shares

( 80 ) ( 98 )

19 unchanged sentences

Net income attributable to noncontrolling interests classified as equity — — — — — 3 3

Repurchase of Common Shares — — ( 43 ) — ( 43 ) — ( 43 )

Incentive and compensation plans — 23 18 ( 23 ) 18 — 18

25 unchanged sentences

December 31, 2020 $ 88 $ 1,651 $ ( 67 ) $ 2,739 $ 4,411 $ 15 $ 4,426

Cumulative effect of accounting change — — — ( 2 ) ( 2 ) — ( 2 )

Net income attributable to UScellular shareholders — — — 155 155 — 155

3 unchanged sentences

Distributions to noncontrolling interests — — — — — ( 3 ) ( 3 )

Acquisitions of noncontrolling interests — ( 10 ) — — ( 10 ) 4 ( 6 )

December 31, 2021 $ 88 $ 1,678 $ ( 68 ) $ 2,849 $ 4,547 $ 16 $ 4,563

12 unchanged sentences

Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC.

The consolidated financial statements include the accounts of UScellular, subsidiaries in which it has a controlling financial interest, general partnerships in which UScellular has a majority partnership interest and certain entities in which UScellular has a variable interest that requires consolidation under GAAP.

See Note 14 — Variable Interest Entities for additional information relating to UScellular’s VIEs.

1 unchanged sentence

The Consolidated Statement of Comprehensive Income was not included because comprehensive income for the years ended December 31, 2023, 2022 and 2021 equaled net income.

Certain numbers included herein are rounded to millions for ease of presentation;

however, certain calculated amounts and percentages are determined using the unrounded numbers.

Use of Estimates

38 unchanged sentences

UScellular performs its annual impairment assessment of wireless spectrum licenses as of November 1 of each year or more frequently if there are events or circumstances that cause UScellular to believe it is more likely than not that the carrying value of wireless spectrum licenses exceeds fair value.

For purposes of the 2022 impairment test, UScellular had one unit of accounting as a result of aggregating all developed operating market wireless spectrum licenses (built wireless spectrum licenses) and non-operating market wireless spectrum licenses (unbuilt wireless spectrum licenses), and for the 2021 test, UScellular had eight units of accounting, which consisted of one unit of accounting for built wireless spectrum licenses and seven unbuilt wireless spectrum licenses.

UScellular believes this change in units of accounting assessed for impairment better reflects the integrated use of licenses as part of its national interdependent network.

This change does not impact the results of the impairment assessment for the current or prior years.

UScellular performed a qualitative impairment assessment to determine whether the wireless spectrum licenses were impaired.

In 2022 and 2021, UScellular considered several qualitative factors, including analyst estimates of wireless spectrum license values which contemplated recent spectrum auction results, recent UScellular and other market participant transactions, and other industry and market factors.

Based on these assessments, UScellular concluded that it was more likely than not that the fair value of the unit of accounting exceeded its carrying value.

Therefore, no quantitative impairment evaluation was completed.

For purposes of its impairment test, UScellular has one unit of accounting.

UScellular performed a quantitative assessment in 2023 and a qualitative assessment in 2022 to determine whether the wireless spectrum licenses were impaired.

Based on the impairment assessments performed, UScellular did not have an impairment of its wireless spectrum licenses in 2023 or 2022.

The events and circumstances related to the strategic alternatives review of UScellular may require an impairment assessment of the wireless spectrum licenses in the future.

See Note 7 — Intangible Assets for additional details related to wireless spectrum licenses.

8 unchanged sentences

Software licenses that qualify for capitalization as an asset are accounted for as the acquisition of a fixed asset and the incurrence of a liability to the extent that the license fees are not fully paid at acquisition.

Index to Financial Statements and Supplementary Data

Depreciation and Amortization

2 unchanged sentences

such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Index to Financial Statements and Supplementary Data

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets.

6 unchanged sentences

The cash flows generated by this single interdependent asset group represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

It is possible that any outcomes of the strategic alternatives review could change the composition of UScellular's long-lived assets, how UScellular may derive cash flows from these assets and may result in uncertainty related to asset recoverability.

This may impact UScellular's asset groups for purposes of assessing property, plant and equipment for impairment and may require an impairment assessment to be performed which may result in the need to write down certain long-lived assets in the near term.

A lease is generally present in a contract if the lessee controls the use of identified property, plant or equipment for a period of time in exchange for consideration.

6 unchanged sentences

Debt issuance costs include underwriters’ and legal fees and other charges related to issuing and renewing various borrowing instruments and other long-term agreements and are amortized over the respective term of each instrument.

Debt issuance costs related to UScellular’s revolving credit agreement and receivables securitization agreement are recorded in Other assets and deferred charges in the Consolidated Balance Sheet.

Debt issuance costs related to UScellular’s revolving credit, receivables securitization, and repurchase agreements are recorded in Other assets and deferred charges in the Consolidated Balance Sheet.

All other debt issuance costs are presented as an offset to the related debt obligation in the Consolidated Balance Sheet.

16 unchanged sentences

Advertising costs totaled $ 181 million, $ 171 million and $ 184 million in 2023, 2022 and 2021, respectively.

Index to Financial Statements and Supplementary Data

UScellular is included in a consolidated federal income tax return with other members of the TDS consolidated group.

1 unchanged sentence

Under a tax allocation agreement between TDS and UScellular, UScellular remits its applicable income tax payments to and receives applicable tax refunds from TDS.

UScellular had no tax receivable balance with TDS as of December 31, 2022, and a receivable balance of $ 123 million as of December 31, 2021.

In January 2022, UScellular received an income tax refund of $ 123 million from TDS related to the 2020 net operating loss carryback enabled by the CARES Act.

UScellular had no tax receivable balance with TDS as of December 31, 2023 and 2022, respectively.

Index to Financial Statements and Supplementary Data

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences.

11 unchanged sentences

UScellular recognizes stock compensation expense based upon the fair value of the specific awards granted using established valuation methodologies.

The amount of stock compensation cost recognized on either a straight-line basis or graded attribution method is based on the portion of the award that is expected to vest over the requisite service period, which generally represents the vesting period.

The amount of stock compensation cost recognized on a straight-line basis is based on the portion of the award that is expected to vest over the requisite service period, which generally represents the vesting period.

Stock-based compensation cost recognized has been reduced for estimated forfeitures.

7 unchanged sentences

UScellular also participates in a defined contribution retirement savings plan (401(k) plan) sponsored by TDS.

Total costs incurred for UScellular’s contributions to the 401(k) plan were $ 15 million, $ 15 million and $ 15 million in 2022, 2021 and 2020, respectively.

Total costs incurred for UScellular’s contributions to the 401(k) plan were $ 15 million for each of 2023, 2022 and 2021.

Recent Development

On August 4, 2023, TDS and UScellular announced that the Boards of Directors of both companies have decided to initiate a process to explore a range of strategic alternatives for UScellular.

During 2023, UScellular incurred third-party expenses of $ 8 million related to the strategic alternatives review, which are included in Selling, general and administrative expenses.

At this time, UScellular cannot predict the ultimate outcome of such process or estimate the potential impact of such process on the financial statements.

Index to Financial Statements and Supplementary Data

6 unchanged sentences

Wireless services generally are billed and paid in advance on a monthly basis.

Wireless devices and accessories UScellular offers a comprehensive range of wireless devices such as handsets, tablets, mobile hotspots, home phones and routers for use by its customers, as well as accessories.

Wireless devices and accessories UScellular offers a comprehensive range of wireless devices such as handsets, tablets, mobile hotspots, home phones and routers for purchase by its customers, as well as accessories.

UScellular also sells wireless devices to agents and other third-party distributors for resale.

UScellular frequently discounts wireless devices sold to new and current customers.

UScellular also offers customers the option to purchase certain devices and accessories under installment contracts over a specified time period.

UScellular also offers customers the option to purchase certain devices and accessories under installment contracts whereby they pay over a specified time period.

For certain equipment installment plans, after a specified period of time, the customer may have the right to upgrade to a new device.

24 unchanged sentences

UScellular estimates the standalone selling price of the device or accessory to be its retail price excluding discounts.

UScellular estimates the standalone selling price of wireless service to be the price offered to customers on month-to-month contracts.

UScellular estimates the standalone selling price of service to be the price offered to customers on month-to-month contracts.

Discounts, incentives, and rebates to agents and end customers that are deemed cash are recognized as a reduction of Operating revenues concurrently with the associated revenue.

22 unchanged sentences

$ 3,805 $ 4,076 $ 4,039

1 For 2021 and 2020, amounts have been adjusted to reclassify $ 8 million and $ 5 million, respectively, of Internet of Things (IoT) and Reseller revenues from Retail service to Other service.

2 During the third quarter of 2021, UScellular recorded a $ 9 million out-of-period error related to the timing of recognition of regulatory fee billings.

This adjustment had the impact of increasing Service revenue by $ 9 million in 2021.

UScellular determined that this adjustment was not material to any of the periods impacted.

1 For 2021, amounts have been adjusted to reclassify $ 8 million of Internet of Things (IoT) and Reseller revenues from Retail service to Other service.

2 UScellular recorded an adjustment to correct a prior period error related to the timing of recognition of regulatory fee billings, which increased Service revenue by $ 9 million in 2021.

This adjustment was not material to any of the periods impacted.

3 UScellular recorded an adjustment to correct a prior period error related to the recognition of discounts for certain Prepaid customers, which decreased Service revenue by $ 5 million in 2023.

This adjustment was not material to any of the periods impacted.

4 Revenue line items in this table will not agree to amounts presented in the Consolidated Statement of Operations as the amounts in this table only include revenue resulting from contracts with customers.

47 unchanged sentences

UScellular’s “Institutional” debt consists of the 6.7 % Senior Notes which are traded over the counter.

UScellular’s “Other” debt consists of term loan credit agreements, receivables securitization agreement and in 2022, an export credit financing agreement.

UScellular’s “Other” debt consists of term loan credit agreements, receivables securitization agreement and export credit financing agreement.

UScellular estimated the fair value of its Institutional and Other debt through a discounted cash flow analysis using the interest rates or estimated yield to maturity for each borrowing, which ranged from 6.48 % to 7.96 % and 5.38 % to 8.28 % at December 31, 2023 and 2022, respectively.

14 unchanged sentences

Equipment installment plan receivables, net $ 1,061 $ 1,115

UScellular uses various inputs, including internal data, information from credit bureaus and other sources, to evaluate the credit profiles of its customers.

UScellular uses various inputs to evaluate the credit profiles of its customers, including internal data, information from credit bureaus and other sources.

From this evaluation, a credit class is assigned to the customer that determines the number of eligible lines, the amount of credit available, and the down payment requirement, if any.

19 unchanged sentences

Total $ 52 $ 439 $ 660 $ 1,151

The write-offs, net of recoveries for the year ended December 31, 2023 on a gross basis by year of origination were as follows:

2021 2022 2023 Total

(Dollars in millions)

Write-offs, net of recoveries $ 13 $ 45 $ 17 $ 75

Index to Financial Statements and Supplementary Data

Activity for the years ended December 31, 2023 and 2022, in the allowance for credit losses for equipment installment plan receivables was as follows:

3 unchanged sentences

Write-offs, net of recoveries ( 75 ) ( 76 )

( 76 ) ( 44 )

Allowance for credit losses, end of year $ 90 $ 96

1 Write-offs increased in 2022 as customer payment behavior returned to pre-COVID-19 pandemic levels.

Index to Financial Statements and Supplementary Data

Note 5 Income Taxes

23 unchanged sentences

8 7.5 7 9.9 7 3.8

Loss carryback benefit of CARES Act 3

— — — — ( 49 ) ( 19.8 )

Nondeductible compensation 4 3.5 3 3.6 2 1.3

Tax credits — ( 0.6 ) — ( 0.2 ) — ( 0.1 )

Other differences, net — ( 1.0 ) ( 2 ) ( 1.9 ) ( 2 ) ( 0.6 )

1 unchanged sentence

1 State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to state valuation allowances.

State taxes increased in 2022 due primarily to valuation allowance adjustments.

State taxes in 2021 are a net benefit due primarily to the reduction of tax accruals resulting from expirations of state statute of limitations for prior tax years.

2 Change in federal valuation allowance is due primarily to current year interest expense from partnership investments that carryforward but may not be realized.

3 The CARES Act provided a 5-year carryback of net operating losses generated in years 2018-2020.

As the statutory federal tax rate applicable to certain years within the carryback period is 35%, carryback to those years provided a tax benefit in excess of the current federal statutory rate of 21 %.

2 Change in federal valuation allowance is due primarily to annual interest expense from partnership investments that carryforward but may not be realized.

Index to Financial Statements and Supplementary Data

18 unchanged sentences

Net deferred income tax liability $ 755 $ 708

1 Certain prior year deferred tax assets and liabilities have been reclassified to align with the current year presentation.

At December 31, 2022, UScellular and certain subsidiaries had $ 2,346 million of state NOL carryforwards (generating a $ 102 million deferred tax asset) available to offset future taxable income.

The state NOL carryforwards expire between 2023 and 2042.

UScellular and certain subsidiaries had $ 142 million of federal NOL carryforwards (generating a $ 30 million deferred tax asset) available to offset future taxable income.

At December 31, 2023, UScellular and certain subsidiaries had $ 78 million of federal NOL carryforwards (generating a $ 16 million deferred tax asset) available to offset future taxable income.

The federal NOL carryforwards generally expire between 2024 and 2037, with the exception of federal NOLs generated after 2017, which do not expire.

UScellular and certain subsidiaries had $ 2,723 million of state NOL carryforwards (generating a $ 115 million deferred tax asset) available to offset future taxable income.

The state NOL carryforwards expire between 2024 and 2043.

A valuation allowance was established for certain federal and state NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be utilized.

At December 31, 2022, UScellular and certain subsidiaries had $ 350 million of state interest limitation carryforwards (generating a $ 14 million deferred tax asset) available to offset future taxable income.

The state interest limitation carryforwards generally do not expire.

UScellular and certain subsidiaries had $ 241 million of federal interest limitation carryforwards (generating a $ 51 million deferred tax asset) available to offset future taxable income.

The federal interest limitation carryforwards do not expire.

A valuation allowance was established for certain federal and state interest limitation carryforwards since it is more likely than not that a portion of such carryforwards will not be utilized.

At December 31, 2023, UScellular and certain subsidiaries had $ 381 million of federal interest expense carryforwards (generating a $ 80 million deferred tax asset) available to offset future taxable income.

The federal interest expense carryforwards do not expire.

UScellular and certain subsidiaries had $ 487 million of state interest expense carryforwards (generating a $ 19 million deferred tax asset) available to offset future taxable income.

The state interest expense carryforwards generally do not expire.

A valuation allowance was established for certain federal and state interest expense carryforwards since it is more likely than not that a portion of such carryforwards will not be utilized.

A summary of UScellular’s deferred tax asset valuation allowance is as follows:

16 unchanged sentences

Unrecognized tax benefits are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

If these benefits were recognized at each respective year end period, they would have reduced income tax expense in 2022, 2021 and 2020 by $ 28 million, $ 28 million and $ 41 million, respectively, net of the federal benefit from state income taxes.

If these benefits were recognized at each respective year end period, they would have reduced income tax expense by $ 28 million, net of the federal benefit from state income taxes in each of 2023, 2022 and 2021.

UScellular recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense (benefit).

The amounts charged to income tax expense related to interest and penalties resulted in nominal expense in 2022, a benefit of $ 10 million in 2021, and an expense of $ 2 million in 2020.

Net accrued liabilities for interest and penalties were $ 13 million and $ 12 million at December 31, 2022 and 2021, respectively, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

The amounts charged to income tax expense related to interest and penalties resulted in $ 1 million expense in 2023, nominal expense in 2022 and a benefit of $ 10 million in 2021.

Net accrued liabilities for interest and penalties were $ 13 million at December 31, 2023 and 2022, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

UScellular is included in TDS’ consolidated federal and certain state income tax returns.

4 unchanged sentences

Diluted earnings per share attributable to UScellular shareholders is computed by dividing Net income attributable to UScellular 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 the exercise of outstanding stock options and the vesting of performance and restricted stock units.

Potentially dilutive securities primarily include incremental shares issuable upon the exercise of outstanding stock options and the vesting of performance and restricted stock units, as calculated using the treasury stock method.

The amounts used in computing basic and diluted earnings per share attributable to UScellular shareholders were as follows:

8 unchanged sentences

Certain Common Shares issuable upon the exercise of stock options or vesting of performance and restricted stock units were not included in weighted average diluted shares outstanding for the calculation of Diluted earnings per share attributable to UScellular shareholders because their effects were antidilutive.

The number of such Common Shares excluded was less than 1 million shares in each of 2022, 2021 and 2020.

The number of such Common Shares excluded was 1 million in 2023 and less than 1 million in each of 2022 and 2021.

Note 7 Intangible Assets

1 unchanged sentence

UScellular also may seek to divest outright or exchange wireless spectrum that is not strategic to its long-term success.

Activity related to UScellular's Licenses is presented below.

(Dollars in millions)

Balance at beginning of year $ 4,088 $ 2,629

Acquisitions 595 1,464

Transferred to Assets held for sale 1 ( 18 )

Exchanges - Licenses received 1 —

Capitalized interest 8 13

Balance at end of year $ 4,690 $ 4,088

1 Impairment charge relates to licenses in markets where UScellular no longer expects to meet FCC buildout requirements.

Index to Financial Statements and Supplementary Data

In February 2021, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 254 wireless spectrum licenses in the 3.7-3.98 GHz bands (Auction 107) for $ 1,283 million.

1 unchanged sentence

The wireless spectrum licenses from Auction 107 were granted by the FCC in July 2021.

Additionally, UScellular expects to be obligated to pay approximately $ 185 million in total from 2021 through 2024 related to relocation costs and accelerated relocation incentive payments.

Additionally, UScellular was obligated to pay approximately $ 179 million in total from 2021 through 2025 related to relocation costs and accelerated relocation incentive payments.

Such additional costs were accrued and capitalized at the time the licenses were granted, and are adjusted as necessary as the estimated obligation changes.

UScellular paid $ 36 million and $ 8 million related to the additional costs in October 2021 and September 2022, respectively.

At December 31, 2022, the remaining estimated payments of approximately $ 133 million and $ 8 million are included in Other current liabilities and Other deferred liabilities and credits, respectively, and at December 31, 2021, the remaining payments of approximately $ 17 million and $ 128 million are included in Other current liabilities and Other deferred liabilities and credits, respectively, in the Consolidated Balance Sheet.

The spectrum must be cleared by incumbent providers before UScellular can access it.

UScellular does not expect to have access to this spectrum until late 2023.

UScellular paid $ 122 million, $ 8 million and $ 36 million related to the additional costs for the years ended December 31, 2023, 2022 and 2021, respectively.

At December 31, 2023, the remaining estimated payments of approximately $ 13 million are included in Other current liabilities in the Consolidated Balance Sheet.

At December 31, 2022, the remaining estimated payments of approximately $ 133 million and $ 8 million were included in Other current liabilities and Other deferred liabilities and credits, respectively, in the Consolidated Balance Sheet.

UScellular received full access to the spectrum in the third quarter of 2023.

Index to Financial Statements and Supplementary Data

In January 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110) for $ 580 million.

UScellular paid $ 20 million of this amount in 2021 and the remainder in January and February 2022.

The advance payment was included in Other assets and deferred charges in the December 31, 2021 Consolidated Balance Sheet.

The wireless spectrum licenses from Auction 110 were granted by the FCC on May 4, 2022.

UScellular paid $ 20 million of this amount in 2021 and the remainder in the first quarter of 2022.

The wireless spectrum licenses from Auction 110 were granted by the FCC in May 2022.

Note 8 Investments in Unconsolidated Entities

23 unchanged sentences

Total liabilities and equity $ 7,386 $ 7,502

Index to Financial Statements and Supplementary Data

Year Ended December 31, 2023 2022 2021

6 unchanged sentences

Net income $ 1,566 $ 1,597 $ 1,985

Index to Financial Statements and Supplementary Data

Note 9 Property, Plant and Equipment

15 unchanged sentences

Depreciation and amortization expense totaled $ 637 million, $ 682 million and $ 662 million in 2023, 2022 and 2021, respectively.

In 2022, 2021 and 2020, (Gain) loss on asset disposals, net included charges of $ 19 million, $ 23 million and $ 25 million, respectively, related to disposals of assets from service in the normal course of business.

Note 10 Leases

8 unchanged sentences

Variable lease expense occurs when, subsequent to the lease commencement, lease payments are made that were not originally included in the lease liability calculation.

UScellular’s variable lease payments are primarily a result of leases with escalations that are tied to an index.

The incremental changes due to the index changes are recorded as variable lease expense and are not included in the right-of-use assets or lease liabilities.

UScellular’s variable lease payments include lease payment escalations that are tied to an index, real estate taxes, and additional payments linked to performance.

The incremental changes are recorded as variable lease expense and are not included in the right-of-use assets or lease liabilities.

The identified lease term determines the periods to which expense is allocated and is also utilized in the right-of-use asset and liability calculations.

3 unchanged sentences

UScellular has applied the portfolio approach in cases where asset classes have similar lease characteristics including tower space, retail, and certain ground lease asset classes.

Index to Financial Statements and Supplementary Data

The following table shows the components of lease cost included in the Consolidated Statement of Operations:

4 unchanged sentences

Total $ 203 $ 199 $ 191

Index to Financial Statements and Supplementary Data

The following table shows supplemental cash flow information related to lease activities:

54 unchanged sentences

At December 31, 2023, UScellular had a revolving credit agreement available for general corporate purposes.

Amounts under the revolving credit agreement may be borrowed, repaid and reborrowed from time to time until maturity in July 2026.

Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until maturity in July 2026.

The following table summarizes the revolving credit agreement as of December 31, 2023:

7 unchanged sentences

UScellular’s credit spread and commitment fees on its revolving credit agreement may be subject to increase if its current credit rating from nationally recognized credit rating agencies is lowered, and may be subject to decrease if the rating is raised.

During 2022, UScellular borrowed and repaid $ 75 million under its revolving credit agreeme nt.

Term Loan Agreements

At December 31, 2022, UScellular had senior term loan credit agreements available for general corporate purposes.

Index to Financial Statements and Supplementary Data

Term Loan Agreements

The following table summarizes the term loan credit agreements as of December 31, 2023:

15 unchanged sentences

$ 1 million from December 2026 to maturity date

In 2022, UScellular borrowed $ 500 million under the term loan agreements.

Export Credit Financing Agreement

In December 2021, UScellular entered into a $ 150 million term loan credit facility with Export Development Canada to finance (or refinance) imported equipment, including equipment purchased prior to entering the term loan credit facility agreement.

At December 31, 2023, UScellular had a $ 150 million term loan credit facility with Export Development Canada to finance (or refinance) imported equipment, including equipment purchased prior to entering the term loan credit facility agreement.

Borrowings bear interest at a rate of SOFR plus 1.60 % and are due and payable on the five-year anniversary of the first borrowing, which is in January 2027.

During 2022, UScellular borrowed $ 150 million, which is the full amount available under the agreement.

As of December 31, 2023, UScellular has borrowed the full amount available under the agreement.

Receivables Securitization Agreement

At December 31, 2022, UScellular, through its subsidiaries, had a $ 450 million receivables securitization agreement for securitized borrowings using its equipment installment receivables for general corporate purposes.

Amounts under the receivables securitization agreement may be borrowed, repaid and reborrowed from time to time until maturity in March 2024.

Unless the agreement is amended to extend the maturity date, repayments based on receivable collections commence in April 2024.

The outstanding borrowings bear interest at floating rates.

During 2022, UScellular repaid $ 250 million and borrowed $ 75 million under the agreement.

As of December 31, 2022, the outstanding borrowings under the agreement were $ 275 million and the unused borrowing capacity under the agreement was $ 175 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement.

As of December 31, 2022, the USCC Master Note Trust held $ 447 million of assets pledged as collateral for the receivables securitization agreement.

At December 31, 2023, UScellular, through its subsidiaries, had a $ 450 million receivables securitization agreement that permits securitized borrowings using its equipment installment plan receivables.

In September 2023, UScellular amended the agreement to extend the maturity date to September 2025.

Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until maturity.

Unless the agreement is amended to extend the maturity date, repayments based on receivable collections commence in October 2025.

The outstanding borrowings bear interest at a rate of the lender's cost of funds (which has historically tracked closely to SOFR) plus 1.15 %.

During 2023, UScellular borrowed $ 315 million and repaid $ 440 million under the agreement.

As of December 31, 2023, the outstanding borrowings under the agreement were $ 150 million and the unused borrowing capacity was $ 300 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement.

As of December 31, 2023, the USCC Master Note Trust held $ 304 million of assets available to be pledged as collateral for the receivables securitization agreement.

In connection with entering into the receivables securitization agreement in 2017, UScellular formed a wholly-owned subsidiary, USCC Master Note Trust (Trust), which qualifies as a bankruptcy remote entity.

5 unchanged sentences

Refer to Note 14 — Variable Interest Entities for additional information.

In February 2023, UScellular borrowed $ 25 million under the receivables securitization agreement.

Index to Financial Statements and Supplementary Data

In January 2024, UScellular repaid $ 50 million under the agreement.

Repurchase Agreement

In January 2022, UScellular, through a subsidiary (the repo subsidiary), entered into a repurchase agreement to borrow up to $ 200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender.

The transaction form involves the sale of receivables by the repo subsidiary and the commitment to repurchase at the end of the applicable repurchase term, which may extend up to one month.

The transaction is accounted for as a one-month secured borrowing.

The outstanding borrowings bear interest at a rate of SOFR plus 1.25 %.

Although the lender holds a security interest in the receivables, the repo subsidiary retains effective control and collection risk of the receivables, and therefore, any activity associated with the repurchase agreement will be treated as a secured borrowing.

UScellular will continue to report equipment installment plan receivables and any related balances on the Consolidated Balance Sheet.

During 2022, the repo subsidiary borrowed $ 110 million and repaid $ 50 million under the repurchase agreement.

As of December 31, 2022, the outstanding borrowings under the agreement were $ 60 million and the unused borrowing capacity was $ 140 million.

The outstanding borrowings are included in Other current liabilities in the December 31, 2022 Consolidated Balance Sheet.

At December 31, 2023, UScellular, through a subsidiary (the repo subsidiary), had a repurchase agreement to borrow up to $ 200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender.

In January 2023, UScellular amended the repurchase agreement to extend the expiration date to January 2024.

The outstanding borrowings bear interest at a rate of the lender's cost of funds (which has historically tracked closely to SOFR) plus 1.35 %.

As of December 31, 2022, the outstanding borrowings under the agreement were $ 60 million and were included in Other current liabilities in the Consolidated Balance Sheet.

During 2023, the repo subsidiary repaid $ 60 million under the agreement.

As of December 31, 2023, there were no outstanding borrowings under the agreement and the unused borrowing capacity was $ 200 million, which was restricted from being borrowed due to covenants within the TDS and UScellular credit agreements that limit secured borrowings on an enterprise-wide basis.

As of December 31, 2023, UScellular held $ 669 million of assets available for inclusion in the repurchase facility;

these assets are distinct from the assets held by the USCC Master Note Trust for UScellular's receivables securitization agreement.

In January 2023, UScellular amended the repurchase agreement to extend the expiration date to January 2024.

The outstanding borrowings will bear interest at a rate of the lender's cost of funds (which has historically tracked closely to SOFR) plus 1.35 %.

There were no significant changes to other terms of the repurchase agreement.

Financial Covenants and Other

The revolving credit agreement, term loan agreements, export credit financing agreement and receivables securitization agreement require UScellular to comply with certain affirmative and negative covenants, which include certain financial covenants.

In particular, under these agreements, UScellular is required to maintain the Consolidated Interest Coverage Ratio at a level not lower than 3.00 to 1.00 as of the end of any fiscal quarter.

UScellular also is required to maintain the Consolidated Leverage Ratio at a level not to exceed 3.75 to 1.00 as of the end of any fiscal quarter.

The repurchase agreement expired in January 2024.

Index to Financial Statements and Supplementary Data

Debt Covenants and Other

In March 2023, the agreements were amended to require UScellular to maintain the Consolidated Leverage Ratio as of the end of any fiscal quarter at a level not to exceed the following:

4.25 to 1.00 from January 1, 2023 through March 31, 2024;

4.00 to 1.00 from April 1, 2024 through March 31, 2025;

3.75 to 1.00 from April 1, 2025 and thereafter.

UScellular is also required to maintain the Consolidated Interest Coverage Ratio at a level not lower than 3.00 to 1.00 as of the end of any fiscal quarter.

UScellular believes that it was in compliance as of December 31, 2023 with all such financial covenants.

5 unchanged sentences

UScellular entered into a performance guaranty whereby UScellular guarantees the performance of certain wholly-owned subsidiaries under the receivables securitization agreement and repurchase agreement.

Index to Financial Statements and Supplementary Data

Other Long-Term Debt

17 unchanged sentences

Long-term debt, noncurrent $ 3,044 $ 3,187

UScellular redeemed $ 917 million of outstanding Senior Notes in 2021.

At time of redemption, $ 31 million of interest expense was recorded related to unamortized debt issuance costs for the notes.

The notes were redeemed at a price of 100 % of the principal amount, including accrued and unpaid interest to the redemption date.

UScellular may redeem its 6.25% Senior Notes, 5.5% March 2070 Senior Notes and 5.5% June 2070 Senior Notes, in whole or in part at any time after the respective call date, at a redemption price equal to 100 % of the principal amount redeemed plus accrued and unpaid interest.

3 unchanged sentences

These amounts do not include payments on the $ 150 million of outstanding borrowings under the receivables securitization agreement.

If the maturity date of the facility is not extended, principal repayments begin in April 2024.

If the maturity date of the facility is not extended, principal repayments begin in October 2025.

Principal repayments are not scheduled but are instead based on actual receivable collections.

Index to Financial Statements and Supplementary Data

The covenants associated with UScellular’s long-term debt obligations, among other things, restrict UScellular’s ability, subject to certain exclusions, to incur additional liens, enter into sale and leaseback transactions, and sell, consolidate or merge assets.

UScellular’s long-term debt notes do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in UScellular’s credit rating.

Index to Financial Statements and Supplementary Data

Note 13 Commitments and Contingencies

14 unchanged sentences

The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

UScellular had no significant accruals with respect to legal proceedings and unasserted claims as of December 31, 2022 and 2021.

UScellular had no material accruals with respect to legal proceedings and unasserted claims as of both December 31, 2023 and 2022.

In April 2018, the United States Department of Justice (DOJ) notified UScellular and its parent, TDS, that it was conducting inquiries of UScellular and TDS under the federal False Claims Act relating to UScellular’s participation in wireless spectrum license auctions 58, 66, 73 and 97 conducted by the FCC.

UScellular is/was a limited partner in several limited partnerships which qualified for the 25 % bid credit in each auction.

UScellular is or was a limited partner in several limited partnerships which qualified for the 25 % bid credit in each auction.

The investigation arose from civil actions under the Federal False Claims Act brought by private parties in the U.S.

1 unchanged sentence

In November and December 2019, following the DOJ’s investigation, the DOJ informed UScellular and TDS that it would not intervene in the above-referenced actions.

Subsequently, the private party plaintiffs filed amended complaints in both actions in the U.S.

District Court for the Western District of Oklahoma and are continuing the action on their own.

Subsequently, the private party plaintiffs decided to continue the actions on their own.

In July 2020, these actions were transferred to the U.S.

District Court for the District of Columbia.

In March 2023, the District Court for the District of Columbia granted UScellular’s motions to dismiss the two actions.

The private party plaintiffs are appealing the district court’s decisions to grant the motions to dismiss.

The appeals are pending before the U.S.

Court of Appeals for the D.C.

UScellular believes that its arrangements with the limited partnerships and the limited partnerships’ participation in the FCC auctions complied with applicable law and FCC rules.

At this time, UScellular cannot predict the outcome of any proceeding.

On May 2, 2023, a putative stockholder class action was filed against TDS and UScellular and certain current and former officers and directors in the United States District Court for the Northern District of Illinois.

An Amended Complaint was filed on September 1, 2023, which names TDS, UScellular, and certain current UScellular officers and directors as defendants, and alleges that certain public statements made between May 6, 2022 and November 3, 2022 (the "potential class period") regarding, among other things, UScellular’s business strategies to address subscriber demand, violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934.

The plaintiff seeks to represent a class of stockholders who purchased TDS equity securities during the potential class period and demands unspecified monetary damages.

UScellular is unable at this time to determine whether the outcome of this action would have a material impact on its results of operations, financial condition, or cash flows.

UScellular intends to contest plaintiffs’ claims vigorously on the merits.

Note 14 Variable Interest Entities

3 unchanged sentences

These VIEs have risks similar to those described in the “Risk Factors” in UScellular’s Form 10-K for the year ended December 31, 2023.

Index to Financial Statements and Supplementary Data

UScellular formed USCC EIP LLC (Seller/Sub-Servicer), USCC Receivables Funding LLC (Transferor) and the Trust, collectively the special purpose entities (SPEs), to facilitate a securitized borrowing using its equipment installment plan receivables.

11 unchanged sentences

(King Street Wireless) and King Street Wireless, Inc., the general partner of King Street Wireless.

Index to Financial Statements and Supplementary Data

These particular VIEs are collectively referred to as designated entities.

3 unchanged sentences

Although the power to direct the activities of these VIEs is shared, UScellular has the most significant level of exposure to the variability associated with the economic performance of the VIEs, indicating that UScellular is the primary beneficiary of the VIEs.

Therefore, in accordance with GAAP, these VIEs are consolidated.

Therefore, in accordance with GAAP, these VIEs are consolidated into the UScellular financial statements.

UScellular also consolidates other VIEs that are limited partnerships that provide wireless service.

2 unchanged sentences

In these partnerships, the limited partners do not have substantive kick-out or participating rights and, further, such limited partners do not have the authority to remove the general partner.

Therefore, these limited partnerships also are recognized as VIEs and are consolidated under the variable interest model.

Therefore, these limited partnerships also are recognized as VIEs and are consolidated into the UScellular financial statements under the variable interest model.

The following table presents the classification and balances of the consolidated VIEs’ assets and liabilities in UScellular’s Consolidated Balance Sheet.

16 unchanged sentences

See Note 12 — Debt for additional information.

Index to Financial Statements and Supplementary Data

Unconsolidated VIEs

UScellular manages the operations of and holds a variable interest in certain other limited partnerships, but is not the primary beneficiary of these entities and, therefore, does not consolidate them under the variable interest model.

UScellular’s total investment in these unconsolidated entities was $ 4 million at both December 31, 2022 and 2021, and is included in Investments in unconsolidated entities in UScellular’s Consolidated Balance Sheet.

UScellular manages the operations of and holds a variable interest in certain other limited partnerships, but is not the primary beneficiary of these entities, and therefore does not consolidate them into the UScellular financial statements under the variable interest model.

UScellular’s total investment in these unconsolidated entities was $ 6 million and $ 4 million at December 31, 2023 and 2022, respectively, and is included in Investments in unconsolidated entities in UScellular’s Consolidated Balance Sheet.

The maximum exposure from unconsolidated VIEs is limited to the investment held by UScellular in those entities.

2 unchanged sentences

of which $ 271 million in 2023 and $ 249 million in 2022 are related to USCC EIP LLC as discussed above.

UScellular may agree to make additional capital contributions and/or advances to these or other VIEs and/or to their general partners to provide additional funding for operations or the development of wireless spectrum licenses granted in various auctions.

UScellular may agree to make additional capital contributions and/or advances to these or other VIEs and/or to their general partners to provide additional funding for their operations or the development of wireless spectrum licenses granted in various auctions.

UScellular may finance such amounts with a combination of cash on hand, borrowings under its revolving credit or receivables securitization agreements and/or other long-term debt.

There is no assurance that UScellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

Index to Financial Statements and Supplementary Data

The limited partnership agreement of Advantage Spectrum also provides the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of UScellular, to purchase its interest in the limited partnership.

In June 2022, the limited partnership agreement was amended and the general partner’s put option related to its interest in Advantage Spectrum will now be exercisable in the third quarter of 2023, and if not exercised at that time, will be exercisable in the third quarter of 2024.

The greater of the carrying value of the general partner's investment or the value of the put option, net of any borrowings due to UScellular is recorded as Noncontrolling interests with redemption features in UScellular’s Consolidated Balance Sheet.

Also in accordance with GAAP, minority share of income or changes in the redemption value of the put option, net of interest accrued on the loans, are recorded as a component of Net income attributable to noncontrolling interests, net of tax, in UScellular’s Consolidated Statement of Operations.

The put option has not been exercised.

Note 15 Noncontrolling Interests

15 unchanged sentences

As of December 31, 2023, a majority of UScellular’s outstanding Common Shares and all of UScellular’s outstanding Series A Common Shares were held by TDS.

Index to Financial Statements and Supplementary Data

Common Share Repurchase Program

9 unchanged sentences

Participating employees have the option of investing their contributions in a UScellular Common Share fund, a TDS Common Share fund or certain unaffiliated funds.

Index to Financial Statements and Supplementary Data

Note 17 Stock-Based Compensation

7 unchanged sentences

Long-Term Incentive Plans – Restricted Stock Units

Restricted stock unit awards granted to key employees generally vest after three years .

The restricted stock unit awards currently outstanding were granted in 2020, 2021 and 2022 and will vest in 2023, 2024 and 2025, respectively.

UScellular grants restricted stock unit awards to key employees that generally vest after three years or one-third graded vesting each year.

Each outstanding restricted stock unit is convertible into one Common Share Award.

The restricted stock unit awards currently outstanding were granted in 2021, 2022 and 2023 and vest in 2024, 2025 and 2026.

UScellular estimates the fair value of restricted stock units based on the closing market price of UScellular shares on the date of grant.

12 unchanged sentences

The performance share units generally vest after three years .

Beginning with the 2021 grants, each recipient may be entitled to shares of UScellular common stock equal to 0 % to 200 % of a communicated target award depending on the achievement of a predetermined performance based operating target over the performance period, which is generally a three-year period beginning on January 1 in the year of grant to December 31 of the third year.

The performance-based operating target for the 2021 and 2022 grants is Return on Capital.

Prior to the 2021 grants, each recipient was entitled to shares of UScellular common stock equal to 50 % to 200 % of a communicated target award depending on the achievement of predetermined performance-based operating targets over the performance period, which was generally a one-year period beginning on January 1 in the year of grant to December 31 in the year of grant.

The remaining time through the end of the vesting period is considered the “time-based period”.

Performance-based operating targets for grants made in 2020 included Consolidated Total Service Revenues, Consolidated Operating Cash Flow, Consolidated Capital Expenditures and Postpaid Handset Voluntary Defections;

and for grants made prior to 2020 included Simple Free Cash Flow, Consolidated Total Operating Revenues and Postpaid Handset Voluntary Defections.

Grants made prior to 2021 are subject to vesting during the time-based period and their performance share unit award agreements provide that in no event shall the awards be less than 50 % of the target opportunity as of their grant dates.

Index to Financial Statements and Supplementary Data

During 2023, UScellular’s Long-Term Incentive Compensation Committee adopted resolutions to apply a 75 % floor, and allow for an additional discretionary amount up to a maximum of 100 %, for the performance based operating target for the 2021 and 2022 grants.

These modifications resulted in additional expense recognized in 2023 of $ 3 million and $ 1 million for the 2021 and 2022 grants, respectively.

For the 2021 and 2022 grants, each recipient may be entitled to shares of UScellular common stock equal to 75 % to 200 % of a communicated target award depending on the achievement of a predetermined Return on Capital target over the performance period, which is a three -year period beginning on January 1 in the year of grant to December 31 of the third year.

For the 2023 grants, each recipient may be entitled to shares of UScellular common stock equal to 0 % to 150 % of a communicated target award depending on the achievement of a predetermined Return on Capital target over the performance period, which is a one -year period beginning on January 1 in the year of grant to December 31 in the year of grant.

The performance share units currently outstanding were granted in 2021, 2022 and 2023 and will vest in 2024, 2025 and 2026, respectively.

3 unchanged sentences

If one, or both, of the performance targets are not satisfied, the award will be forfeited.

Index to Financial Statements and Supplementary Data

UScellular estimates the fair value of performance share units using UScellular’s closing stock price on the date of grant.

14 unchanged sentences

All stock options are exercisable and expire between 2024 and 2026.

The aggregate intrinsic value of UScellular stock options exercised in 2021 was less than $ 1 million.

No stock options were exercised in 2022 or 2020.

Long-Term Incentive Plans – Deferred Compensation Stock Units

1 unchanged sentence

All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in UScellular Common Share stock units.

Beginning with the 2021 performance year, the amount of UScellular's matching contribution is a 33 % match for the amount of their total annual bonus that is deferred into the program.

Prior to the 2021 performance year, the amount of UScellular’s matching contribution was a 25 % match for amounts deferred up to 50% of their total annual bonus and a 33 % match for amounts that exceeded 50% of their total annual bonus.

The amount of UScellular's matching contribution is a 33 % match for the amount of their total annual bonus that is deferred into the program.

Matching contributions are also deemed to be invested in UScellular Common Share stock units and vest over three years .

1 unchanged sentence

UScellular issued 36,000 , 22,000 and 20,000 Common Shares in 2023, 2022 and 2021, respectively, under its Non-Employee Director compensation plan.

Index to Financial Statements and Supplementary Data

Stock‑Based Compensation Expense

8 unchanged sentences

Total stock-based compensation expense, net of income taxes $ 17 $ 18 $ 20

Index to Financial Statements and Supplementary Data

The following table provides a summary of the classification of stock-based compensation expense included in the Consolidated Statement of Operations for the years ended:

5 unchanged sentences

At December 31, 2023, unrecognized compensation cost for all UScellular stock‑based compensation awards was $ 51 million and is expected to be recognized over a weighted average period of 1.8 years.

UScellular’s tax benefits realized from the exercise of stock options and the vesting of other awards totaled $ 4 million in 2022.

UScellular’s tax benefits realized from the vesting of awards totaled $ 5 million in 2023.

Note 18 Supplemental Cash Flow Disclosures

15 unchanged sentences

Such acquisitions of software licenses that are not reflected as Cash paid for additions to property, plant and equipment were $ 24 million, $ 130 million and $ 21 million for the years ended 2023, 2022 and 2021, respectively.

At December 31, 2022, liabilities of $ 64 million and $ 76 million related to software license agreements were recorded to Other current liabilities and Other deferred liabilities and credits, respectively, and at December 31, 2021, liabilities of $ 17 million and $ 13 million related to software license agreements were recorded to Other current liabilities and Other deferred liabilities and credits, respectively.

At December 31, 2023, liabilities of $ 68 million and $ 35 million related to software license agreements were recorded to Other current liabilities and Other deferred liabilities and credits, respectively, in the Consolidated Balance Sheet.

Index to Financial Statements and Supplementary Data

2 unchanged sentences

Carlson, a director of UScellular, a director and non-executive Chair of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS is Senior Counsel at Sidley Austin LLP;

Kelsh, the General Counsel and/or an Assistant Secretary of TDS and UScellular and certain other subsidiaries of TDS is a partner at Sidley Austin LLP.

Kelsh, the former General Counsel of UScellular and the General Counsel and/or an Assistant Secretary of TDS and certain other subsidiaries of TDS is a partner at Sidley Austin LLP.

Carlson does not provide legal services to TDS, UScellular or their subsidiaries.

67 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data