Clearwire 2008 Annual Report Download - page 80

l
en
d
ers was o
b
ta
i
ne
d
. On Novem
b
er 21, 2008, O
ld
C
l
earw
i
re entere
di
nto t
h
e Amen
d
e
d
Cre
di
t Agreement
w
ith the lenders to satisf
y
this closin
g
condition. The Amended Credit A
g
reement resulted in additiona
l
f
ees to be paid and adjustments to the underlying interest rates. The Sprint Pre-Closing Financing Amount
w
as assume
db
yC
l
earw
i
re on t
h
eC
l
os
i
ng as a resu
l
to
f
t
h
e
fi
nanc
i
ng o
f
t
h
e Spr
i
nt W
i
MAX Bus
i
ness
by
Sprint for the period April 1, 2008 throu
g
h the Closin
g
, and added as an additional tranche under the
Amen
d
e
d
Cre
di
t Agreement. Pro
f
orma
i
nterest expense was ca
l
cu
l
ate
d
over t
h
e per
i
o
d
us
i
ng t
h
ee
ff
ect
i
ve
interest method resulting in an adjustment of
$
175.7 million and
$
191.6 million for the years ended
Decem
b
er 31, 2008 an
d
2007, respect
i
ve
ly
,
b
ase
d
on an e
ff
ect
i
ve
i
nterest rate o
f
14.0 percent. Pro
f
orma
interest expense also reflects an adjustment to accrete the debt to par value. Pro forma interest expense was
calculated based on the contractual terms under the Amended Credit Agreement, assuming a term equal t
o
its contractual maturit
y
of 30 months and the underl
y
in
g
interest rate was the base rate of 2.75 percent, a
s
t
he 3 month LIBOR rate in effect at the Closin
g
was less than the base rate. A one-ei
g
hth percenta
ge
change in the interest rate would increase or decrease interest expense by
$
1.6 million and
$
1.7 million for
th
e
y
ears en
d
e
d
Decem
b
er 31, 2008 an
d
2007, respect
i
ve
ly.
(i) Represents the allocation of a portion of the pro forma combined net loss to the non-controllin
g
interests
i
n conso
lid
ate
d
su
b
s
idi
ar
i
es
b
ase
d
on Spr
i
nt’s an
d
t
h
e Investors’ (ot
h
er t
h
an Goog
l
e) owners
hi
po
f
t
he
C
learwire Communications Class B Common Interests in Clearwire Communications upon Closin
g
and
reflects the contributions by CW Investments and the Investors at
$
17.00 per share following the post-
c
l
os
i
ng a
dj
ustment. T
hi
sa
dj
ustment
i
s
b
ase
d
on pre-tax
l
oss s
i
nce
i
ncome tax consequences assoc
i
ate
d
w
ith an
y
loss allocated to the Clearwire Communications Class B Common Interests will be incurre
d
directly by the Investors (other than Google) and by Sprint
.
(
j
) Represents t
h
ea
dj
ustment to re
fl
ect t
h
e pro
f
orma
i
ncome tax expense
f
or eac
h
per
i
o
d
w
hi
c
h
was
determined b
y
computin
g
the pro forma effective tax rates for each period,
g
ivin
g
effect to th
e
Transactions. Clearwire expects to generate net operating losses into the foreseeable future and thu
s
h
as recor
d
e
d
ava
l
uat
i
on a
ll
owance
f
or t
h
e
d
e
f
erre
d
tax assets not expecte
d
to
b
e rea
li
ze
d
.T
h
ere
f
ore,
f
or
t
he
y
ears ended December 31, 2008 and 2007, no tax benefit was reco
g
nized.
Liquidity and Capital Resource Requirement
s
At the Closing, we received an aggregate of
$
3.2 billion of cash proceeds from the Investors. We expect the
c
as
h
procee
d
s
f
rom t
hi
s
i
nvestment to pr
i
mar
ily b
e use
d
to expan
d
our mo
bil
eW
i
MAX networ
ki
nt
h
eUn
i
te
d
S
tates,
f
or spectrum acqu
i
s
i
t
i
ons, an
df
or
g
enera
l
corporate purposes. As o
f
Decem
b
er 31, 2008, w
i
t
h
t
h
e procee
d
s
of the investment, we believe that we held sufficient cash, cash e
q
uivalents and marketable securities to cause ou
r
e
st
i
mate
dli
qu
idi
ty nee
d
sto
b
e sat
i
s
fi
e
df
or at
l
east 12 mont
h
s
.
T
o execute our plans, we will likel
y
seek additional capital in the near future and over the lon
g
term. An
y
a
ddi
t
i
ona
ld
e
b
t
fi
nanc
i
ng wou
ld i
ncrease our
f
uture
fi
nanc
i
a
l
comm
i
tments, w
hil
e any a
ddi
t
i
ona
l
equ
i
ty
fi
nanc
i
n
g
wou
ld b
e
dil
ut
i
ve to our stoc
kh
o
ld
ers. T
hi
sa
ddi
t
i
ona
lfi
nanc
i
ng may not
b
eava
il
a
bl
etouson
f
avora
bl
e terms or a
t
all. Our abilit
y
to obtain additional financin
g
depends on several factors, includin
g
our market success as we deplo
y
n
ew mobile WiMAX markets, general economic conditions and the state of the capital markets, our futur
e
c
re
di
twort
hi
ness an
d
restr
i
ct
i
ons conta
i
ne
di
nex
i
st
i
ng or
f
uture
d
e
b
t agreements
.
We re
g
ularl
y
evaluate our plans and strate
gy
, and these evaluations often result in chan
g
es, some of which ma
y
be material and ma
y
si
g
nificantl
y
increase or decrease our cash requirements. Chan
g
es in our plans and strate
gy
m
ay
i
nc
l
u
d
e, among ot
h
er t
hi
ngs, c
h
anges to t
h
e extent an
d
t
i
m
i
ng o
f
our networ
kd
ep
l
oyment,
i
ncreases o
r
decreases in the number of our emplo
y
ees, introduction of new features or services, investments in capital an
d
n
etwork infrastructure, acquisitions of spectrum or an
y
combination of the fore
g
oin
g.
I
na
ddi
t
i
on, recent
di
stress
i
nt
h
e
fi
nanc
i
a
l
mar
k
ets
h
as resu
l
te
di
n extreme vo
l
at
ili
t
yi
n secur
i
t
y
pr
i
ces,
di
m
i
n
i
s
h
e
dli
qu
idi
t
y
an
d
cre
di
tava
il
a
bili
t
y
an
dd
ec
li
n
i
n
g
va
l
uat
i
ons o
f
certa
i
n
i
nvestments. Ot
h
er t
h
an t
he
i
m
p
airment of our auction rate securities, we have assessed the im
p
lications of these factors on our curren
t
b
us
i
ness an
dd
eterm
i
ne
d
t
h
at t
h
ere
h
as not
b
een a s
ig
n
ifi
cant
i
mpact to our
fi
nanc
i
a
l
pos
i
t
i
on or
li
qu
idi
t
yd
ur
i
n
g
2008. I
f
t
h
e nat
i
ona
l
or
gl
o
b
a
l
econom
y
or cre
di
t mar
k
et con
di
t
i
ons
i
n
g
enera
l
were to
d
eter
i
orate
f
urt
h
er
i
nt
h
e
future, it is possible that such chan
g
es could adversel
y
affect our cash flows throu
g
h increased interest costs or our
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