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## NOTE 2 INCOME TAXES 

Income tax provisions charged to Income (loss) before cumulative effect of accounting change are summarized as follows: 

<img src='content_image/117524.jpg'>

Included in cumulative effect of accounting changes were deferred tax benefits of $9.7 million in 2003 and $5.3 million in 2002. 

A reconciliation of U.S. Cellular’s expected income tax expense (benefit) computed at the statutory rate to the reported income tax expense (benefit), and the statutory federal income tax expense (benefit) rate to U.S. Cellular’s effective income tax expense (benefit) rate is as follows: 

<img src='content_image/117520.jpg'>

(1) Represents a reassessment of the rate at which U.S. Cellular provides for deferred taxes. 

U.S. Cellular had current deferred tax assets totaling $16.8 million and $10.8 million at December 31, 2003 and 2002, respectively, resulting primarily from the allowance for customer receivables. 

The temporary differences that gave rise to the noncurrent deferred tax assets and liabilities are as follows: 

<img src='content_image/117525.jpg'>

U.S. Cellular and certain subsidiaries had $62.0 million of federal net operating loss carryforwards (generating a $15.2 million deferred tax asset) at December 31, 2003 expiring between 2004 and 2023. In addition, U.S. Cellular and certain subsidiaries had $264.2 million of state net operating loss (“NOL”) carryforward (generating a $15.5 million deferred tax asset) at December 31, 2003. The state NOL carryforward, available to offset future taxable income, is primarily from the individual subsidiaries which generated the loss, and expires between 2004 and 2023. A valuation allowance has been provided when it is more likely than not that some portion of the deferred tax asset will not be realized. 

## NOTE 3 EARNINGS PER SHARE 

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using net income (loss) and weighted average common shares adjusted to include the effect of potentially dilutive securities. Potentially dilutive securities include incremental shares issuable upon exercise of outstanding stock options and conversion of debentures. 

The amounts used in computing Earnings per Common and Series A Common Shares and the effect on income and the weighted average number of Common and Series A Common Shares of dilutive potential common stock are as follows: 

