Discontinued Operations

9 Months Ended

Sep. 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 assets and liabilities that transferred in the sale (the "disposal group") were presented as held for sale within our historical unaudited condensed consolidated balance sheets, and discontinued operations within our historical unaudited condensed consolidated statements of comprehensive income.

The transaction was structured as an asset sale for income tax purposes. As a result, no current or deferred tax assets or liabilities were included within the disposal group. While our long-term debt did not transfer in the sale, its provisions required us to fully repay all of the debt concurrent with the consummation of the sale. Our debt was therefore presented outside of the disposal group as a current liability as of December 31, 2020. Our related interest rate swap liabilities were also presented outside of the disposal group as a current liability as of December 31, 2020, because management terminated them at consummation. Because repayment of the debt is contractually triggered by the sale, the related interest expense and debt extinguishment costs were presented within discontinued operations under the relevant authoritative guidance.

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


(in thousands)	December 31, 2020
ASSETS
Inventory	$	5,746
Prepaid expenses and other	47,003
Property, plant and equipment, net	299,647
Intangible assets, net	176,459
Goodwill	146,383
Operating lease right-of-use assets	421,586
Deferred charges and other assets	36,470
Current assets held for sale	$	1,133,294

LIABILITIES
Current operating lease liabilities	$	409,887
Accrued liabilities and other	8,770
Asset retirement obligations	33,545
Current liabilities held for sale	$	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 September 30,				Nine Months Ended September 30,
Revenue:	2021		2020		2021		2020
Service revenue and other	$	—	$	100,963	$	201,076	$	302,488
Equipment revenue	—		9,862		12,253		32,222
Total revenue	—		110,825		213,329		334,710
Operating expenses:
Cost of services	—		28,567		38,144		95,242
Cost of goods sold	—		9,600		11,964		31,565
Selling, general and administrative	—		7,696		17,514		25,931
Severance expense	—		—		465		—
Depreciation and amortization	—		15,077		—		62,804
Total operating expenses	—		60,940		68,087		215,542
Operating income	—		49,885		145,242		119,168
Other (expense) income:
Debt extinguishment	(11,032)		—		(11,032)		—
Interest expense and other, net	(733)		(4,508)		(9,434)		(15,477)
Gain on sale of disposition of Wireless assets and operations	1,224,815		—		1,224,815		—
Income before income taxes	1,213,050		45,377		1,349,591		103,691
Income tax expense	326,724		11,868		363,227		27,269
Income from discontinued operations, net of tax	$	886,326	$	33,509	$	986,364	$	76,422

Consummation of the sale triggered the recognition of approximately $21 million of incremental selling costs during the three months ended September 30, 2021, for contingent deal advisory fees and severance expenses, which are netted against the gain on sale of disposition of Wireless assets and operations. Additionally, also triggered by the disposition event, we recognized an $11.0 million loss on debt extinguishment and incurred interest expense of approximately $2.6 million on the termination of our interest rate swaps.