Windstream 2011 Annual Report Download - page 158

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
____
F-50
Acquisition of D&E – On November 10, 2009, we completed our merger with D&E, which as of the date of acquisition served
approximately 145,000 access lines, 45,000 high-speed Internet customers and 9,000 cable television customers. This
acquisition increased our presence in Pennsylvania and provides the opportunity for operating synergies with our contiguous
markets in Pennsylvania. Pursuant to the merger agreement, we acquired all of the issued and outstanding shares of common
stock of D&E, and D&E merged with and into a wholly-owned subsidiary of ours. In accordance with the D&E Merger
Agreement, D&E shareholders received 0.650 shares of common stock and $5.00 in cash per each share of D&E Common
Stock. We issued approximately 9.4 million shares of common stock valued at $94.6 million, based on our closing stock price
of $10.06 on November 9, 2009, and paid $56.6 million, net of cash acquired, as part of the transaction. Subsequently, we
repaid outstanding debt of D&E totaling $182.4 million including current maturities.
The following table summarizes the final fair values of the assets acquired and liabilities assumed for D&E and Lexcom.:
(Millions)
Fair value of assets acquired:
Current assets
Property, plant and equipment
Goodwill
Wireline franchise rights (a)
Cable franchise rights (a)
Customer lists (b)
Wireless licenses
Non-compete agreements
Trade names (c)
Other assets
Total assets acquired
Fair value of liabilities assumed:
Current liabilities
Deferred income taxes on acquired assets
Long-term debt
Other liabilities
Total liabilities assumed
Common stock issued (inclusive of additional paid-in capital)
Cash paid, net of cash acquired
Lexcom
Final
Allocation
$ 1.8
73.1
60.4
20.1
11.6
10.5
—
—
0.3
1.1
178.9
(3.6)
(36.1)
—
(0.5)
(40.2)
—
$ 138.7
D&E
Final
Allocation
$ 14.4
194.8
91.1
80.0
—
60.0
16.6
1.7
1.2
1.1
460.9
(26.0)
(93.2)
(175.3)
(15.2)
(309.7)
(94.6)
$ 56.6
(a) Wireline franchise rights and cable franchise rights will be amortized on a straight-line basis over an estimated life of
30 years and 15 years, respectively.
(b) Customer lists will be amortized using the sum-of-years digit methodology over an estimated useful life of nine years.
(c) Trade names will be amortized on a straight-line basis over an estimated useful life of one year.
We have conducted appraisals necessary to assess the fair values of the assets acquired and liabilities assumed and the amount
of goodwill recognized as of the respective acquisition dates for D&E, Lexcom, NuVox, Iowa Telecom, and Hosted Solutions
and Q-Comm. The accompanying consolidated financial statements reflect our combined operations with NuVox, Iowa
Telecom, Hosted Solutions and Q-Comm (collectively known as the “Acquired Companies”) and D&E, Lexcom and PAETEC
for the periods following the respective acquisition dates. Employee severance and transaction costs incurred by us in
conjunction with these acquisitions have been expensed to merger and integration expense in the accompanying consolidated
statements of income (see Note 10).
Employee severance and transaction costs incurred in conjunction with these acquisitions have been recorded to merger and
integration expense in the accompanying consolidated statements of income in accordance with the revised authoritative
guidance for business combinations. The costs of the acquisitions were allocated to the assets acquired and liabilities assumed
based on their estimated fair values as of the acquisition dates, with amounts exceeding fair value recognized as goodwill.
Goodwill associated with the acquired businesses is attributable to the workforce of acquired businesses and expected
synergies. Approximately $173.7 million and $39.9 million of goodwill associated with the acquisitions of Hosted Solutions
and PAETEC, respectively, is expected to be deductible for tax purposes.