Discontinued Operations

6 Months Ended

Jun. 30, 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.

On July 1, 2021, pursuant to the previously announced Asset Purchase Agreement (the “Purchase Agreement”), dated May 28, 2021, between Shentel and T-Mobile, Shentel completed the sale to T-Mobile of its Wireless assets and operations for cash consideration of approximately $1.94 billion, inclusive of the approximately $60 million settlement of the waived management fees by Sprint, and net of certain transaction expenses (the “Transaction”). The Company’s Wireless assets and operations were classified as discontinued operations after Sprint delivered notice to the Company exercising its option to purchase the Wireless assets and operations on August 26, 2020.

The assets and liabilities that transferred in the sale were 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 $49.1 million and $51.7 million at June 30, 2021 and December 31, 2020, respectively, and such current liabilities totaled $8.0 million and $6.1 million at June 30, 2021 and December 31, 2020, respectively.

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 required 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. Our related interest rate swap liabilities are also presented outside of the disposal group as a current liability, because management terminated 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)	June 30, 2021		December 31, 2020
ASSETS
Inventory	$	1,823	$	5,746
Prepaid expenses and other	42,562		47,003
Property, plant and equipment, net	298,471		299,647
Intangible assets, net	155,748		176,459
Goodwill	146,383		146,383
Operating lease right-of-use assets	417,754		421,586
Deferred charges and other assets	38,452		36,470
Current assets held for sale	$	1,101,193	$	1,133,294

LIABILITIES
Current operating lease liabilities	$	383,633	$	409,887
Accrued liabilities and other	5,202		8,770
Asset retirement obligations	34,173		33,545
Current liabilities held for sale	$	423,008	$	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 June 30,				Six Months Ended June 30,
Revenue:	2021		2020		2021		2020
Service revenue and other	$	100,402	$	110,138	$	201,076	$	201,526
Equipment revenue	5,854		9,610		12,253		22,360
Total revenue	106,256		119,748		213,329		223,886
Operating expenses:
Cost of services	18,717		33,192		38,144		66,631
Cost of goods sold	5,743		9,437		11,964		21,965
Selling, general and administrative	6,812		9,348		17,514		18,278
Restructuring expense	254		—		465		—
Depreciation and amortization	—		22,901		—		47,727
Total operating expenses	31,526		74,878		68,087		154,601
Operating income	74,730		44,870		145,242		69,285
Other (expense) income:
Interest expense	(4,317)		(4,742)		(8,701)		(10,970)
Income before income taxes	70,413		40,128		136,541		58,315
Income tax expense	18,847		10,345		36,503		15,402
Income from discontinued operations, net of tax	$	51,566	$	29,783	$	100,038	$	42,913

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. We estimate these expenses to be approximately $34 million.