Earthlink 2010 Annual Report Download - page 105

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Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes the preliminary fair value of consideration transferred to acquire ITC^DeltaCom (in thousands):
The Company allocated the total estimated consideration to the tangible assets and intangible assets acquired and liabilities assumed based
on their estimated fair values. The excess of the purchase price over those fair values was recorded as goodwill. The following table summarizes
the preliminary amounts of identified assets acquired and liabilities assumed recognized at the acquisition date (in thousands):
In connection with the merger, each ITC^DeltaCom stock option was cancelled in exchange for cash equal to the difference between the
merger consideration and the exercise price, and certain ITC^DeltaCom restricted stock units were cancelled in exchange for cash equal to the
merger consideration. Cash paid to settle stock-
based awards attributable to precombination service was recorded as goodwill, and cash paid to
settle stock-
based awards attributable to postcombination service was recorded as operating expense in the postcombination statement of
operations. A total of $14.8 million was paid to settle stock options and restricted stock units, of which $9.1 million was recorded as a liability
assumed and $5.7 million was recorded as operating expense in the postcombination statement of operations.
Also in connection with the merger, certain ITC^DeltaCom restricted stock units were assumed and converted into EarthLink restricted
stock units, determined by multiplying the number of shares of common stock subject to the ITC^DeltaCom restricted stock units by conversion
ratio set forth in the merger agreement. Approximately 1.8 million ITC^DeltaCom restricted stock units were converted into 0.6 million
EarthLink restricted stock units based on a conversion ratio of 0.33, which was calculated as the
98
Acquisition of approximately 83.8 million shares of outstanding
common stock of ITC^DeltaCom at $3.00 per share in cash
$
251,489
Estimated fair value of retricted stock units assumed and converted
2,275
Total estimated consideration
$
253,764
Acquired Assets:
Cash and cash equivalents
$
59,237
Property and equipment
200,546
Goodwill
188,890
Intangible assets
131,200
*
Deferred tax assets, net
66,531
Other assets*
59,365
Total assets
705,769
Assumed Liabilities:
Senior secured notes due 2016
(351,520
)
Deferred revenue
(17,905
)
Other liabilities
(82,580
)
Total liabilities
(452,005
)
Total consideration
$
253,764
*
Includes a fair value of $39.7 million assigned to accounts receivable which had a gross contractual value of
$43.4 million as of December 8, 2010. The $3.7 million difference represents the Company's best estimate of the
contractual cash flows that will not be collected.