Discontinued Operations

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

On August 26, 2020, Sprint Corporation ("Sprint"), an indirect subsidiary of T-Mobile US, Inc., ("T-Mobile"), on behalf of and as the direct or indirect owner of Sprint PCS, delivered notice to the Company exercising its option to purchase the assets and operations of our Wireless operations for 90% of the “Entire Business Value” (as defined under our affiliate agreement and determined pursuant to the appraisal process set forth therein). Shortly thereafter, the Company committed to a plan to sell the discontinued Wireless operations.

The final and binding appraisal process that determined the transaction price was completed on February 1, 2021. Expected sale proceeds are $1.95 billion based upon the appraisal process and other agreements between the parties.

The closing of the sale is now expected to occur in the third quarter of 2021, subject to execution of the definitive asset purchase agreement, securing required regulatory approvals and customary closing conditions. The Company and T-Mobile submitted required regulatory filings to the Department of Justice (DOJ), the Federal Communications Commission (FCC), and the Public Service Commission of West Virginia (PSCWV), in March 2021. The premerger notification waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, expired on April 26, 2021, without the DOJ’s Antitrust Division or the Federal Trade Commission taking any action in connection with the proposed transaction thus allowing the parties to consummate the transaction upon receipt of pending regulatory approvals from the FCC and the PSCWV.

The assets and liabilities that are expected to transfer in the sale are presented as held for sale within our unaudited condensed consolidated balance sheets, and discontinued operations within our unaudited condensed consolidated statements of comprehensive income. This disposal group excludes the accounts receivable and certain current liabilities generated by our Wireless operations because they are expected to be settled separately from the sale. Such accounts receivable totaled $49.4 million and $51.7 million at March 31, 2021 and December 31, 2020, respectively, and such current liabilities totaled $4.9 million and $6.1 million at March 31, 2021 and December 31, 2020, respectively. Our identification of assets and liabilities held for sale could change based on the terms of the final asset purchase agreement.

The transaction is structured as an asset sale for income tax purposes. As a result, no current or deferred tax assets or liabilities are included within the disposal group. While our long-term debt does not transfer in the sale, its provisions require us to repay all of the debt upon consummation of the sale. Our debt is therefore presented outside of the disposal group as a current liability at December 31, 2020. Our related interest rate swap liabilities are also presented outside of the disposal group as a current liability at December 31, 2020, because management intends to settle them at consummation. Because repayment of the debt is

contractually triggered by the sale, the related interest expense is presented within discontinued operations under the relevant authoritative guidance.

The carrying amounts of the major classes of assets and liabilities, which are classified as held for sale in the consolidated balance sheets, are as follows:


(in thousands)	March 31, 2021		December 31, 2020
ASSETS
Inventory	$	3,651	$	5,746
Prepaid expenses and other	42,942		47,003
Property, plant and equipment, net	299,246		299,647
Intangible assets, net	166,103		176,459
Goodwill	146,383		146,383
Operating lease right-of-use assets	420,410		421,586
Deferred charges and other assets	38,793		36,470
Current assets held for sale	$	1,117,528	$	1,133,294

LIABILITIES
Current operating lease liabilities	$	398,340	$	409,887
Accrued liabilities and other	10,775		8,770
Asset retirement obligations	33,974		33,545
Current liabilities held for sale	$	443,089	$	452,202

Income from discontinued operations, net of tax in the consolidated statements of comprehensive income consist of the following:


(in thousands)	Three Months Ended March 31,
Revenue:	2021		2020
Service revenue and other	$	100,674	$	91,388
Equipment revenue	6,399		12,750
Total revenue	107,073		104,138
Operating expenses:
Cost of services	19,427		33,439
Cost of goods sold	6,221		12,528
Selling, general and administrative	10,702		8,930
Restructuring expense	211		—
Depreciation and amortization	—		24,826
Total operating expenses	36,561		79,723
Operating income	70,512		24,415
Other (expense) income:
Interest expense	(4,384)		(6,228)
Income before income taxes	66,128		18,187
Income tax expense	17,656		5,057
Income from discontinued operations, net of tax	$	48,472	$	13,130

Under the relevant authoritative guidance, consummation of the sale will trigger or accelerate the recognition of certain expense related to contingent deal advisory fees, severance costs, recognition of our interest rate swap losses in net income, and loss on debt extinguishment. Our estimate of the related range of reasonably possible expense extends from $0 if the sale is not consummated to $36 million.