Sprint - Nextel 2013 Annual Report Download - page 33

Table of Contents
December 31, 2013 does not comply with U.S. GAAP and is not intended to represent what our consolidated results of operations would have been if the
Successor had actually been formed on January 1, 2013 and acquired the Predecessor as of such date, nor have we made any attempt to either include or exclude
expenses or income that would have resulted had the SoftBank Merger actually occurred on January 1, 2013.
The following discussion covers results for the Successor year ended
December 31, 2013 and the Predecessor years ended December 31, 2012 and
2011 . Results for the unaudited combined year ended December 31, 2013 versus the Predecessor year ended December 31, 2012 are also discussed, to the extent
necessary, to provide an analysis of results on comparable periods although the basis of presentation may not be comparable due to the application of the
acquisition method of accounting. Additionally, in certain sections we discuss the activity of the Predecessor 191
- day period ended July 10, 2013 to the extent it
provides useful information for the activity during that period. The results for the Successor 87
- day period ended December 31, 2012 were considered
insignificant and are not comparable to the Successor year ended December 31, 2013 as the Successor entity was established on October 5, 2012 for the sole
purpose of completing the SoftBank Merger. Results for this 87
- day period primarily reflected merger expenses that were incurred (recognized in selling, general
and administrative expense) and interest income related to the $3.1 billion Bond issued in connection with the SoftBank Merger. We have provided information
regarding certain of the elements of the acquisition method of accounting affecting the 2013 Successor period results to enable further comparability.
Acquisition Method of Accounting Effects to the Successor Period Ending December 31, 2013
The allocation of the consideration transferred to assets acquired and liabilities assumed were based on preliminary estimated fair values as of the
date of the SoftBank Merger, as described further in the Notes to the Consolidated Financial Statements. As a result, the following are reflected in our results of
operations for the Successor period ended December 31, 2013 as compared to the Predecessor periods ended December 31, 2012 and 2011 :
Predecessor 191 - Day Period Ended July 10, 2013
Significant changes in the underlying trends affecting the Company's consolidated results of operations and net loss for the 191 days ended July 10,
2013 were as follows:
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•
Reduced postpaid wireless revenue and wireless cost of service of approximately $59 million each as a result of preliminary purchase accounting
adjustments to deferred revenue and deferred costs, respectively;
•
Reduced prepaid wireless revenue of approximately $96 million as a result of preliminary purchase accounting adjustments to eliminate deferred
revenue;
•
Increased rent expense of $55 million, which is included in cost of service, primarily attributable to the write - off of deferred rents associated with
our operating leases, offset by the amortization of our net unfavorable leases recorded in purchase accounting;
•
Increased cost of products sold of approximately $31 million as a result of preliminary purchase price account adjustments to accessory
inventory;
•
Reduced depreciation expense of approximately $400 million as a result of preliminary purchase accounting adjustments reflecting a net decrease
to property, plant and equipment;
•
Incremental amortization expense of approximately $772 million, which is primarily attributable to the recognition of customer relationships of
approximately
$6.9 billion ; and
•
The purchase accounting adjustment to unrecognized net periodic pension and other post - retirement benefits resulting in a decrease in pension
expense of approximately $46 million which was primarily reflected in selling, general and administrative expense.
•
We recorded a gain on previously - held Clearwire equity interests of approximately $2.9 billion for the difference between the estimated fair value
of the equity interests owned prior to the acquisition ($5.00 per share offer price less an estimated control premium of approximately $0.60) and
the carrying value of approximately
$325 million for those previously - held equity interests; and