FairPoint Communications 2005 Annual Report Download - page 76

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On December 1, 2003, the Company acquired 100% of the capital stock of CST and Commtel. The purchase price for this acquisition was
$32.6 million. The Company believes the entire amount of goodwill will be deductible for income tax purposes. Acquisition costs were $0.3 million in 2003.
This acquisition has been accounted for using the purchase method and, accordingly, the results of operations have been included in the Company’s
consolidated financial statements from the date of acquisition. The excess of the purchase price and acquisition costs over the fair value of the net identifiable
assets acquired was $25.1 million and has been recognized as goodwill.
On May 2, 2005, the Company completed the acquisition of Berkshire Telephone Corporation, or Berkshire. The purchase price was approximately
$20.3 million (or $16.4 million net of cash acquired). Goodwill on this transaction will not be deductible for income tax purposes. The Company incurred
acquisition costs of $0.6 million. Berkshire is an independent local exchange carrier that provides voice communication, cable and internet services.
Berkshire’s communities of service are adjacent to those of Taconic Telephone Corp., one of the Company’s subsidiaries. The acquisition is referred to herein
as the Berkshire acquisition.
The Berkshire acquisition has been accounted for using the purchase method of accounting for business combinations and, accordingly, the acquired
assets and liabilities have been recorded at their estimated fair values as of the date of acquisition, and its results of operations have been included in the
Company’s consolidated financial statements from the date of acquisition. Based upon the Company’s preliminary purchase price allocation, subject to final
settlement of an escrow, the excess of the purchase price and acquisition costs over the fair value of the net identifiable assets acquired was approximately
$11.0 million. The Company recorded an intangible asset related to the acquired company’s customer relationships of $2.4 million and the remaining $8.6
million has been recognized as goodwill. The estimated useful life of the $2.4 million intangible asset is 15 years.
On September 1, 2005, the Company completed the acquisition of Bentleyville Communications Corporation, or Bentleyville. The purchase price was
approximately $11.0 million (or $9.3 million net of cash acquired). Goodwill on this transaction will not be deductible for income tax purposes. The
Company incurred acquisition costs of $0.4 million. Bentleyville provides telecommunications, cable and internet services to rural areas of Southwestern
Pennsylvania which are adjacent to the Company’s existing operations in Pennsylvania. The acquisition is referred to herein as the Bentleyville acquisition.
The Bentleyville acquisition has been accounted for using the purchase method of accounting for business combinations and, accordingly, the acquired
assets and liabilities have been recorded at their estimated fair values as of the date of acquisition, and its results of operations have been included in the
Company’s consolidated financial statements from the date of acquisition. Based upon the Company’s preliminary purchase price allocation, subject to final
settlement of escrow, the excess of the purchase price and acquisition costs over the fair value of the net identifiable assets acquired was approximately $4.6
million. The Company recorded an intangible asset related to the acquired company’s customer relationships of $1.4 million and the remaining $3.2 million
has been recognized as goodwill. The estimated useful life of the $1.4 million intangible asset is 15 years.
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