Verizon Wireless 2010 Annual Report Download - page 54

52
Pro Forma Information
The unaudited pro forma information presents the combined operating
results of Verizon and Alltel, with the results prior to the acquisition date
adjusted to include the pro forma impact of: the elimination of transactions
between Verizon and Alltel; the adjustment of amortization of intangible
assets and depreciation of fixed assets based on the purchase price alloca-
tion; the elimination of merger expenses and management fees incurred
by Alltel; and the adjustment of interest expense reflecting the assump-
tion and partial redemption of Alltel’s debt and incremental borrowing
incurred by Verizon Wireless to complete the acquisition of Alltel.
The unaudited pro forma results are presented for illustrative purposes
only and do not reflect the realization of potential cost savings, or any
related integration costs. These pro forma results do not purport to be
indicative of the results that would have actually been obtained if the
merger had occurred as of January 1, 2008, nor does the pro forma data
intend to be a projection of results that may be obtained in the future.
The following unaudited pro forma consolidated results of operations
assume that the acquisition of Alltel was completed as of January 1, 2008:
(dollars in millions, except per share amounts)
Year ended December 31, 2008
Operating revenues $ 106,509
Net loss attributable to Verizon (2,140)
Loss per common share from net loss attributable to Verizon:
Basic (.75)
Diluted (.75)
Consolidated results of operations reported for the year ended December
31, 2009 were not significantly different than the pro forma consolidated
results of operations assuming the acquisition of Alltel was completed
on January 1, 2009.
Acquisition of Rural Cellular Corporation
On August 7, 2008, Verizon Wireless acquired 100% of the outstanding
common stock and redeemed all of the preferred stock of Rural Cellular
Corporation (Rural Cellular) in a cash transaction valued at approximately
$1.3 billion. The final purchase price allocation primarily resulted in $1.1
billion of wireless licenses and $0.9 billion in goodwill. Rural Cellular was
a wireless communications service provider operating under the trade
name of “Unicel,” focusing primarily on rural markets in the United States.
As part of its regulatory approval for the Rural Cellular acquisition, the FCC
and DOJ required the divestiture of six operating markets. On December
22, 2008, we exchanged assets acquired from Rural Cellular and an addi-
tional cellular license with AT&T for assets having a total aggregate value
of approximately $0.5 billion.
Other
On August 23, 2010, Verizon Wireless acquired the net assets and related
customers of six operating markets in Louisiana and Mississippi in a trans-
action with AT&T Inc. for cash consideration of $0.2 billion. These assets
were acquired to enhance Verizon Wireless’ network coverage in these
operating markets. The preliminary purchase price allocation primarily
resulted in $0.1 billion of wireless licenses and $0.1 billion in goodwill.
Terremark Worldwide, Inc.
On January 27, 2011, Verizon announced that it had entered into a
definitive agreement to acquire all of the common stock of Terremark
Worldwide, Inc., a global provider of IT infrastructure and cloud ser-
vices, for $19 per share in cash (or approximately $1.4 billion). Terremark
had approximately $0.5 billion of debt outstanding as of December 31,
2010. The acquisition, which is subject to the satisfaction of conditions,
including the receipt of a regulatory approval, is expected to close in the
first quarter of 2011. The acquisition will enhance Verizon’s offerings to
governmental and large enterprise customers.
Merger Integration and Acquisition Related Charges
During 2010, we recorded pre-tax merger integration charges of $0.9
billion primarily related to the Alltel acquisition. These charges primarily
related to the decommissioning of overlapping cell sites, preacquisition
contingencies, handset conversions and trade name amortization.
During 2009, we recorded pre-tax merger integration and acquisition
charges of $1.2 billion. These charges primarily related to the Alltel acqui-
sition and were comprised of trade name amortization, re-branding
initiatives and handset conversions. The charges during 2009 were also
comprised of transaction fees and costs associated with the acquisition,
including fees related to the credit facility that was entered into and uti-
lized to complete the acquisition.
During 2008, we recorded pre-tax charges of $0.2 billion, primarily
comprised of systems integration activities and other costs related to re-
branding initiatives, facility exit costs and advertising associated with the
MCI acquisition.
Notes to Consolidated Financial Statements continued