Acquisition of NTELOS Holdings Corp. and Exchange with Sprint

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Acquisition of NTELOS Holdings Corp. and Exchange with Sprint

Acquisition of NTELOS Holdings Corp. and Exchange with Sprint

On May 6, 2016, the Company completed its previously announced acquisition of NTELOS Holdings Corp. (“nTelos”) for $667.8 million, net of cash acquired.  The acquisition was entered into to improve shareholder value through the expansion of the Company's Wireless service area and customer base while strengthening our relationship with Sprint Corporation ("Sprint"). The purchase price was financed by a credit facility arranged by CoBank, ACB, Royal Bank of Canada, Fifth Third Bank, Bank of America, N.A., Capital One, National Association, Citizens Bank N.A., and Toronto Dominion (Texas) LLC.  The Company has accounted for the acquisition of nTelos under the acquisition method of accounting, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations”, and has accounted for measurement period adjustments under Accounting Standards Update (“ASU”) 2015-16, “Simplifying the Accounting for Measurement Period Adjustments”.  Under the acquisition method of accounting, the total purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values.

The preliminary allocation of the purchase price was based upon management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed of nTelos, with the excess recorded as goodwill. During the first quarter of 2017, the Company made adjustments to the preliminary estimates of fair value resulting in immaterial changes to previously estimated fair values of fixed assets, asset retirement obligation liabilities, accounts receivable and deferred taxes. These adjustments resulted in a $1.3 million reduction to goodwill as shown in the table below. The Company continues to review certain tax positions acquired in the nTelos acquisition.

Changes in the carrying amount of goodwill during the three months ended March 31, 2017 are shown below (in thousands):

	December 31, 2016		Purchase Accounting Adjustments			March 31, 2017
Goodwill - Wireline segment	$	10	$	—		$	10
Goodwill - Cable segment	104		—			104
Goodwill - Wireless segment	145,142		(1,255		)	143,887
Goodwill as of March 31, 2017	$	145,256	$	(1,255	)	$	144,001

Following are the unaudited pro forma results of the Company for the period ended March 31, 2016, as if the acquisition of nTelos had occurred at the beginning of the period. (in thousands)

	March 31, 2016
Operating revenues	$	173,248
Income before income taxes	$	16,905

In connection with these transactions, the Company incurs costs which include the nTelos back office staff and support functions until the nTelos legacy customers are migrated to the Sprint billing platform; costs of the handsets to be provided to nTelos legacy customers as they migrate to the Sprint billing platform; severance costs for back office and other former nTelos employees who will not be retained permanently; and costs to shut down certain cell sites and related backhaul contracts. We have incurred $7.1 million of these costs in the three months ended March 31, 2017, including $0.1 million reflected in cost of goods and services and $2.5 million reflected in selling, general and administrative costs in the three months ended March 31, 2017.