Cricket Wireless 2010 Annual Report Download - page 71

ended December 31, 2009 compared to $52.7 million of capitalized interest during the corresponding period of the
prior year. We capitalize interest costs associated with our wireless licenses and property and equipment during the
build-out of new markets. The amount of such capitalized interest depends on the carrying values of the wireless
licenses and property and equipment involved in those markets and the duration of the build-out.
Other Income (Expense), Net
During the years ended December 31, 2010 and 2009, we recognized gains of $3.2 million and $0.7 million,
respectively, on the sale of certain of our investments in asset-backed commercial paper. These gains partially offset
impairment charges recorded in prior periods.
Loss on Extinguishment of Debt
In connection with our issuance of $1,200 million of unsecured senior notes in November 2010, we
repurchased and redeemed all of our outstanding $1,100 million in aggregate principal amount of
9.375% senior notes due 2014 through a tender offer and redemption, respectively, and the indenture
governing such senior notes was satisfied and discharged in accordance with its terms. As a result, we
recognized a $54.5 million loss on extinguishment of debt during the year ended December 31, 2010, which
was comprised of $46.6 million of tender offer consideration (including $18.3 million in consent payments),
$8.6 million of redemption premium, $1.1 million of dealer manager fees, $10.7 million of unamortized debt
issuance costs and $0.2 million of related professional fees, net of $12.7 million of unamortized premium.
In connection with our issuance of $1,100 million of senior secured notes in June 2009 we repaid all principal
amounts outstanding under our former credit agreement, which amounted to approximately $875.3 million,
together with accrued interest and related expenses, a prepayment premium of $17.5 million and a payment of
$8.5 million in connection with the unwinding of associated interest rate swap agreements. In connection with such
repayment, we terminated the former credit agreement and the $200 million revolving credit facility thereunder. As
a result of the termination of the former credit agreement, we recognized a $26.3 million loss on extinguishment of
debt during the year ended December 31, 2009, which was comprised of the $17.5 million prepayment premium,
$7.5 million of unamortized debt issuance costs and $1.3 million of unamortized accumulated other comprehensive
loss associated with our interest rate swaps.
Income Tax Expense
During the year ended December 31, 2010, we recorded income tax expense of $42.5 million compared to
income tax expense of $40.6 million in the corresponding period of the prior year. The increase in income tax
expense during the year ended December 31, 2010 compared to the prior year period was primarily due to an
increase of $20.0 million in income tax expense associated with the deferred tax effects of our investments in LCW
Wireless, STX Wireless and Denali. This income tax expense was partially offset by a $15.5 million income tax
benefit associated with the deferred tax effect related to the goodwill impairment charge recorded during the year
ended December 31, 2010.
During the year ended December 31, 2009, we recorded income tax expense of $40.6 million compared to
income tax expense of $39.0 million for the year ended December 31, 2008. The increase in income tax expense
during the year ended December 31, 2009 was attributable to several factors, including a decrease in income tax
expense associated with our investment in LCW Wireless and a decrease in our effective state income tax rate as a
result of the enactment of the California Budget Act of 2008, which was signed into law on February 20, 2009,
which was more than offset by an increase to our tax expense resulting from the termination of our interest rate
swaps. The new California law permits taxpayers to elect an alternative method to attribute taxable income to
California for tax years beginning on or after January 1, 2011. This decrease in our effective state income tax rate
resulted in a decrease in our net deferred tax liability and a corresponding decrease in our income tax expense.
We recorded a $0.7 million income tax expense, $1.8 million income tax benefit, and a $1.0 million income tax
expense during the years ended December 31, 2010, 2009 and 2008, respectively, related to changes in our effective
state income tax rate. For the year ended December 31, 2010, our effective state income tax rate increased as a result
of the expansion of our operating footprint in fiscal 2009 into new, higher-taxing states. This increase in our
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