Dish Network 2011 Annual Report Download - page 122

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-28
This transaction was accounted for as a business combination using purchase price accounting. The allocation of the
purchase consideration is in the table below.
Purchase
Price
Allocation
(In thousands)
Cash................................................ 107,061$
Current assets.................................. 153,258
Property and equipment.................. 28,663
Acquisition intangibles................... 17,826
Other noncurrent assets................... 12,856
Current liabilities............................ (86,080)
Total purchase price........................ 233,584$
The pro forma revenue and earnings associated with the Blockbuster Acquisition are not included in this filing. Due to
the material ongoing modifications of the business, management has determined that insufficient information exists to
accurately develop meaningful historical pro forma financial information. Moreover, the historical operations of
Blockbuster materially changed during the periods preceding the acquisition as a result of Blockbuster Inc.’s bankruptcy
proceedings, and any historical pro forma information would not prove useful in assessing our post acquisition earnings
and cash flows. The cost of goods sold on a unit basis for Blockbuster in the current period was lower-than-historical
costs. The carrying values in the current period of the rental library and merchandise inventories (“Blockbuster
Inventory”) were reduced to their estimated fair value due to the application of purchase accounting. This impact on
cost of goods sold on a unit basis will diminish in the future as we purchase new Blockbuster Inventory.
10. Spectrum Investments
TerreStar Transaction
Gamma Acquisition L.L.C. (“Gamma”), a wholly-owned subsidiary of DISH Network, entered into the TerreStar
Transaction on June 14, 2011. On July 7, 2011, the U.S. Bankruptcy Court for the Southern District of New York
approved the asset purchase agreement with TerreStar and we subsequently paid $1.345 billion of the cash purchase
price. DISH Network is a party to the asset purchase agreement solely with respect to certain guaranty obligations. We
have paid all but $30 million of the purchase price for the TerreStar Transaction, which will be paid upon closing of the
TerreStar Transaction, or upon certain other conditions being met under the asset purchase agreement. Consummation
of the acquisition contemplated in the asset purchase agreement is subject to, among other things, approval by the FCC.
On February 7, 2012, the Canadian federal Department of Industry (“Industry Canada”) approved the transfer of the
Canadian spectrum licenses held by TerreStar to us. If the remaining required approvals are not obtained, subject to
certain exceptions, we have the right to require and direct the sale of some or all of the TerreStar assets to a third party
and we would be entitled to the proceeds from such a sale. These proceeds could, however, be substantially less than
amounts we have paid in the TerreStar Transaction. Additionally, Gamma is responsible for providing certain working
capital and certain administrative expenses of TerreStar and certain of its subsidiaries after December 31, 2011.
We expect that the TerreStar Transaction will be accounted for as a business combination using purchase price
accounting. We also expect to allocate the purchase price to the various components of the acquisition based upon the
fair value of each component using various valuation techniques, including the market approach, income approach
and/or cost approach. We expect the purchase price of the TerreStar assets to be allocated to, among other things,
spectrum and satellites.