Cricket Wireless 2011 Annual Report Download - page 122

LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The consideration was allocated to the tangible and intangible assets acquired and liabilities assumed by
STX Wireless based on their fair values as of October 1, 2010. The excess of the purchase price over the fair
values of the net assets acquired was recorded as goodwill.
The following amounts represent the fair value of identifiable assets acquired and liabilities assumed by the
Company (in thousands):
Fair Value
Assets:
Inventories ............................................................. $ 2,331
Other current assets ...................................................... 845
Property and equipment ................................................... 41,971
Wireless licenses ........................................................ 33,716
Customer relationships .................................................... 50,435
Goodwill ............................................................... 31,326
Total Assets ............................................................ 160,624
Liabilities:
Accounts payable and accrued liabilities ...................................... $ 3,752
Deferred revenue ........................................................ 4,365
Deferred tax liability ..................................................... 10,693
Other long-term liabilities ................................................. 1,190
Total liabilities .......................................................... 20,000
Total net assets acquired .................................................... $140,624
Goodwill primarily represents the future economic benefits arising from other assets acquired that could not
be individually identified and separately recognized. The goodwill arising from the transaction consisted largely
of the synergies expected from the joint venture. As part of the valuation, the Company recorded approximately
$50.4 million of finite-lived intangible assets, representing the fair value of customer relationships, which are
amortized on an accelerated basis over an estimated useful life of four years. Additionally, the Company
recorded approximately $33.7 million of wireless licenses acquired in the transaction. Consistent with the
Company’s policy regarding the useful lives of its wireless licenses, the wireless licenses acquired have an
indefinite useful life.
The Company has not presented pro forma financial information reflecting the effects of the transaction
because such effects are not material.
During the year ended December 31, 2010, a gain of $48.4 million arose from the formation of the joint
venture transaction, representing Cricket’s proportionate interest (75.75%) in the fair value of the Pocket
business acquired by STX Wireless less the proportionate interest (24.25%) in the book value of Cricket’s South
Texas business contributed by Cricket to the venture, and cash payments made by Cricket to Pocket of $40.7
million. Because the Company maintained control over the joint venture after its formation, the gain was
recognized in additional paid-in capital within stockholders’ equity.
Pocket’s 24.25% non-controlling membership interest in STX Wireless was recorded in mezzanine equity as
a component of redeemable non-controlling interests. The non-controlling interest was initially recognized as
part of the purchase accounting in the amount of $51.5 million. The $51.5 million amount comprised the sum of
Pocket’s proportionate share (24.25%) of the fair value in the business contributed to the joint venture by Pocket
plus its proportionate share (24.25%) of the net equity of the business contributed by Cricket.
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