Notes to Consolidated Financial Statements United States Cellular Corporation (“U.S. Cellular”), a Delaware Corporation, is an 82.1%-owned subsidiary of Telephone and Data Systems, Inc. (“TDS”). In addition, as a result of the restatement discussed above, U.S. Cellular also reperformed the annual impairment test for its investment in licenses for 2003, which was originally performed during the second quarter of 2003. This resulted in the recognition of an additional impair- ment loss of $49.6 million, before income taxes of $19.6 million. This additional loss has been recorded in the second quarter of 2003. A summary of the changes to the affected captions in the 2003 and 2002 statement of operations and balance sheets are included below: U.S. Cellular owns, manages and invests in wireless systems throughout the United States. U.S. Cellular owned interests in 235 wireless markets, representing a total population of approximately 46.3 million, as of December 31, 2003. U.S. Cellular’s 182 majority-owned markets served 4.4 million customers in 28 states as of December 31, 2003. U.S. Cellular operates as one reportable segment. On April 19, 2004, U.S. Cellular announced that it would restate its  2003 and 2002 financial statements relating to the implementation of Statement of Financial Accounting Standards (“SFAS”) No. 142 “Goodwill and Other Intangible Assets,” which was adopted on January 1, 2002. Prior to January 1, 2002, U.S. Cellular allocated the excess of purchase price over tangible assets and liabilities acquired to investment in licenses and goodwill. At that time, the accounting treatment for  U.S. Cellular’s investment in licenses and goodwill was the same for  book purposes, with both asset classes amortized over an expected life of 40 years. However, no deferred taxes were provided on the amounts allocated to goodwill. Based upon a subsequent review of goodwill, U.S. Cellular has restated the allocation of $138.9 million of purchase price recorded as goodwill to investment in licenses as of January 1, 2002, the date of the adoption of SFAS No. 142. In connection with this restatement, an additional deferred tax liability of $90.7 million was recorded as of January 1, 2002. The additional deferred tax liability recorded in conjunction with this restatement increased the carrying value of U.S. Cellular’s investment in licenses by a corresponding $90.7 million. Following these adjustments, U.S. Cellular reperformed the impairment tests for its investment in licenses as of January 1, 2002, and recorded an impairment loss of $12.7 million, net of taxes ($20.9 million before income taxes of $8.2 million). This impairment has been recorded as a cumulative effect of an account- ing change at January 1, 2002, the date of the adoption of SFAS No. 142. In the first quarter of 2003, U.S. Cellular had recorded a loss on assets held for sale related to the pending disposition of certain wireless prop- erties. The investment in licenses upon which the impairment was recorded in the first quarter of 2002 included the investment in licenses of these properties. As a result, a portion of the originally recognized loss on assets held for sale in the first quarter of 2003 was recognized in the first quarter of 2002. Consequently, loss on assets held for sale in 2003 has been reduced by $1.9 million, before income taxes of $0.8 million. In the third quarter of 2003, U.S. Cellular had originally recorded an income tax expense upon the closing of the disposition of such wireless proper- ties. This tax expense has been reduced due to the reversal of additional deferred tax liabilities that were recorded with respect to the wireless properties exchanged in conjunction with the restatement from goodwill to investment in licenses. Consequently, income tax expense in 2003 has been reduced by $10.7 million. Nature of Operations Restatement NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Effects of 2003 As Originally Accounting  Year Ended or at December 31, 2003 Reported Changes As Restated (Dollars in thousands, except per share amounts) Statement of Operations: Operating Expenses (Loss) on assets held for sale $ (47,847) $ 1,939 $ (45,908) (Loss) on impairment of intangible assets — (49,595) (49,595) Operating Income  166,639 (47,656) 118,983 Income (Loss) Before Income Taxes  and Minority Interest 153,806 (47,656) 106,150 Income tax expense (benefit)  Tax effect of changes to loss on assets  held for sale (9,952) Tax effect of impairments (19,590) 66,774 (29,542) 37,232 Income (loss) before cumulative effect  of accounting change  75,120 (18,114) 57,006 Cumulative effect of accounting change, net of tax (14,346) — (14,346) Net income (loss)  $ 60,774 $ (18,114) $ 42,660 Basic earnings (loss) per share  Income (loss) before cumulative effect  of accounting change $ 0.88 $ (0.21) $ 0.67 Cumulative effect  of accounting change  (0.17) — (0.17) Net income (loss) $ 0.71 $ (0.21) $ 0.50 Diluted earnings (loss) per share  Income (loss) before cumulative effect  of accounting change $ 0.87 $ (0.21) $ 0.66 Cumulative effect of accounting change  (0.17) — (0.17) Net income (loss) $ 0.70 $ (0.21) $ 0.49 Balance Sheet: Investment in licenses Restatement from goodwill $ 138,885 Increase in deferred tax liability on  restatement of investment in licenses 90,677 2002 impairment (20,921) 2003 impairment (49,595) Adjustment to amount transferred to  Assets of operations held for sale (21,759) $1,052,039 137,287 $1,189,326 Goodwill Restatement to investment in licenses (138,885) Adjustment to amount transferred to  Assets of operations held for sale 23,698 545,443 (115,187) 430,256 Total Assets $4,923,647 $ 22,100 $4,945,747 45