Sprint - Nextel 2013 Annual Report Download - page 37

Table of Contents
Equity in Losses of Unconsolidated Investments, net
Successor Year Ended December 31, 2013 and Predecessor Years Ended December 31, 2012 and 2011
As a result of the Clearwire Acquisition on July 9, 2013 and the resulting consolidation of Clearwire results of operations into the accounts of the
Company, the Successor period results of operations do not reflect any equity in losses of unconsolidated investments. The equity in losses of unconsolidated
investments, net in the Predecessor periods primarily consists of our proportionate share of losses from our equity method investment in Clearwire. Sprint's
equity in losses from Clearwire for the years ended
December 31, 2012 and 2011 included $204 million and $135 million, respectively, in pre - tax impairment
reflecting Sprint's reduction in the carrying value of its investment in Clearwire to an estimated fair value. Equity in losses from Clearwire in 2012 and 2011 also
included charges of approximately
$41 million and $361 million, respectively, which were associated with Clearwire's write - off of certain network and other assets
that no longer met its strategic plans. In addition, the year ended December 31, 2011 also included a dilution loss of approximately $27 million primarily
associated with the reduction of our non
- controlling economic interest related to Clearwire's equity issuance.
Other income (expense), net
The following table provides additional information on items included in "Other income (expense), net" for the combined consolidated results of
operations for the year ended
December 31, 2013 , the Successor year ended December 31, 2013 and 87 days ended December 31, 2012 , the Predecessor 191 - day
period ended July 10, 2013, and the Predecessor years ended
December 31, 2012 and 2011.
Successor Year Ended December 31, 2013 and Predecessor Years Ended December 31, 2012 and 2011
"Other income (expense), net" represented income of
$73 million and $10 million for the Successor year ended December 31, 2013 and 87 days ended
December 31, 2012 , as compared to income of $190 million and expense of $3 million in the Predecessor years ended December 31, 2012 and 2011 , respectively.
Other, net in the Successor year ended
December 31, 2013 primarily consisted of $159 million of income related to the recognition of the remaining unaccreted
convertible bond discount. In addition, the Successor year ended
December 31, 2013 included a $175 million loss related to the embedded derivative associated
with the convertible bond. Gain on early retirement of debt in the Successor year ended
December 31, 2013 was a result of early retirement of the Clearwire
Communications LLC and Clearwire Finance, Inc. 12% secured notes due 2015 and 12% secured notes due 2017 and in the Predecessor year ended
December 31,
2012 was attributable to the early redemption of Nextel Communications, Inc. debt. Loss on early retirement of debt in 2011 was due to the redemption of all
outstanding Sprint Capital Corporation 8.375% senior notes.
Income Tax Expense
The Successor period income tax expense for the year ended
December 31, 2013 of $45 million represented a consolidated effective tax rate of
approximately 3%. The Predecessor period income tax expense for the years ended
December 31, 2012 and 2011 of $154 million and $254 million , respectively,
represented a consolidated effective tax rate of approximately 4% and
10% , respectively. The income tax expense for the Successor and Predecessor periods
presented was primarily attributable to taxable temporary differences from amortization of FCC licenses and included a
$708 million , $1.8 billion , and $1.2 billion
net increase to the valuation allowance for federal and state deferred tax assets primarily related to net operating loss carryforwards generated during the
respective periods. The expense for the 191 days ended July 10, 2013 of approximately
$1.6 billion was primarily attributable to the recognition of tax expense on
the $2.9 billion gain on previously
- held equity interests in Clearwire in addition to the Predecessor period items noted above. The income tax expense for 2012
also included a
35
Combined
Successor
Predecessor
Year Ended
December 31,
Year Ended
December 31,
87 Days Ended
December 31,
191 Days Ended
July 10,
Years Ended
December 31,
2013
2013
2012
2013
2012
2011
(in millions)
Interest income
$
69
$
36
$
10
$
33
$
65
$
36
Gain (loss) on early retirement of debt
44
56
—
(12
)
81
(33
)
Other, net
(21
)
(19
)
—
(2
)
44
(6
)
Total
$
92
$
73
$
10
$
19
$
190
$
(3
)