Quarterly report pursuant to Section 13 or 15(d)

Acquisition

v3.19.3
Acquisition
 9 Months Ended
Sep. 30, 2019
Business Combinations [Abstract]  
Acquisition Acquisition

The Company accounted for the Transactions contemplated under the reorganization agreement using the acquisition method of accounting. Under this method, HoldCo is the acquirer of GCI Liberty. The acquisition price was $1.1 billion (level 1). The application of the acquisition method resulted in the assignment of purchase price to the GCI Liberty assets acquired and liabilities assumed based on our estimates of their acquisition date fair values (primarily level 3). The assets acquired and liabilities assumed, and as discussed within this note, are those assets and liabilities of GCI Liberty prior to the completion of the Transactions. The determination of the fair values of the acquired assets and liabilities (and the determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment.
    
The acquisition price allocation for GCI Liberty is as follows (amounts in thousands):
 
 
 
Cash and cash equivalents including restricted cash
 
$
147,957

Receivables
 
171,014

Property and equipment
 
1,211,392

Goodwill
 
966,044

Intangible assets not subject to amortization
 
572,500

Intangible assets subject to amortization
 
468,737

Other assets
 
83,422

Deferred revenue
 
(92,561
)
Debt, including capital leases
 
(1,707,002
)
Other liabilities
 
(251,692
)
Deferred income tax liabilities
 
(276,683
)
Preferred stock
 
(174,922
)
Non-controlling interest
 
(7,000
)
 
 
$
1,111,206



Goodwill is calculated as the excess of the consideration transferred over the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce, value associated with future customers, continued innovation and non-contractual relationships. Amortizable intangible assets of $468.7 million were acquired and are comprised of a tradename with an estimated useful life of approximately 10 years, customer relationships with a weighted average useful life of approximately 16 years and right-to-use assets with a weighted average useful life of 8 years. Approximately $170.0 million of the acquired goodwill will be deductible for income tax purposes. The determination of the acquisition date fair value of the acquired assets and assumed liabilities is final.

Since the date of the acquisition, included in net earnings (loss) attributable to GCI Liberty shareholders for the three and nine months ended September 30, 2018 is $40.4 million and $35.9 million in losses related to GCI Holdings, respectively. The unaudited pro forma revenue, net earnings and basic and diluted net earnings per common share of GCI Liberty, prepared utilizing the historical financial statements of HoldCo, giving effect to acquisition accounting related adjustments made at the time of acquisition, as if the acquisition discussed above occurred on January 1, 2017, are as follows:
 
 
Three months ended
 
Nine months ended
 
 
September 30, 2018
 
 
amounts in thousands, except per share amounts
Revenue
 
$
220,737

 
664,287

Net earnings (loss)
 
$
327,046

 
(157,678
)
Net earnings (loss) attributable to GCI Liberty shareholders
 
$
327,173

 
(157,242
)
Basic net earnings (loss) attributable to Series A and Series B GCI Liberty, Inc. shareholders per common share
 
$
3.04

 
(1.46
)
Diluted net earnings (loss) attributable to Series A and Series B GCI Liberty, Inc. shareholders per common share
 
$
3.00

 
(1.46
)


The pro forma results include adjustments directly attributable to the business combination including adjustments related to the amortization of acquired tangible and intangible assets, revenue, interest expense, stock-based compensation, and the exclusion of transaction related costs. These results also include the impact of the Federal Communications Commission's decision to reduce rates paid to us under the Rural Health Care Program and the new revenue standard. The pro forma information is not representative of the Company’s future results of operations nor does it reflect what the Company’s results of operations would have been if the acquisition had occurred previously and the Company consolidated the results of GCI Liberty during the periods presented.