Frontier Communications 2007 Annual Report Download - page 65

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
consideration at fair value in each subsequent reporting period and to expense all acquisition related costs. The
effective date of SFAS No. 141R is for business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December 15, 2008. This standard does not
impact our currently reported results. The Company is currently evaluating the impact that the adoption of the
standard will have on the Company’s future results of operations or financial condition.
(3) ACQUISITION OF COMMONWEALTH TELEPHONE AND GLOBAL VALLEY NETWORKS:
On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (“Commonwealth” or “CTE”)
in a cash-and-stock taxable transaction, for a total consideration of approximately $1.1 billion. We paid $804.1
million in cash ($663.7 million net, after cash acquired) and issued common stock with a value of $247.4 million.
In connection with the acquisition of Commonwealth, we assumed $35.0 million of debt under a revolving
credit facility and $191.8 million face amount of Commonwealth convertible notes (fair value of $209.6 million).
During March 2007, we paid down the $35.0 million credit facility. We have retired all but $8.5 million of the
$191.8 million face amount of Commonwealth convertible notes as of December 31, 2007. The notes were
retired by the payment of $165.4 million in cash and the issuance of our common stock valued at $36.7 million.
The premium paid of $18.9 million was recorded as $17.8 million to goodwill and $1.1 million to other income
(loss), net.
We entered into an agreement on July 5, 2007 with Country Road Communications LLC (“Country Road”)
to acquire Global Valley Networks, Inc. (“GVN”) and GVN Services (“GVS”) through the purchase from
Country Road of 100% of the outstanding common stock of Evans Telephone Holdings, Inc., the parent company
of GVN and GVS. We closed on this acquisition on October 31, 2007. The purchase price of $62.0 million was
paid with cash on hand.
We have accounted for the acquisitions of Commonwealth and GVN as purchases under U.S. generally
accepted accounting principles. Under the purchase method of accounting, the assets and liabilities of
Commonwealth and GVN are recorded as of the acquisition date, at their respective fair values, and consolidated
with those of Citizens. The reported consolidated financial condition of Citizens as of December 31, 2007,
reflects the final allocation of these fair values. The final allocation reflects a decrease of $236.5 million in the
value of the Commonwealth customer base, as compared to our preliminary estimate.
The following schedule provides a summary of the purchase price paid by Citizens in the acquisitions of
Commonwealth and GVN as of December 31, 2007:
($ in thousands)
Commonwealth GVN
Cash paid ................................................... $ 804,085 $62,001
Value of Citizens common stock issued ............................ 247,435 —
Accrued closing costs .......................................... 2,838 —
Total Purchase Price ........................................... $1,054,358 $62,001
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