Sprint - Nextel 2015 Annual Report Download - page 35

Table of Contents
Equity in Losses of Unconsolidated Investments, net
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. Equity in losses from Clearwire were $482
million and $202 million for the Predecessor 190-day period ended July 9, 2013 and Predecessor unaudited three-month period ended March 31, 2013,
respectively. The equity in losses from our investment in Clearwire consisted of our share of Clearwire's net loss and other adjustments, if any, such as non-cash
impairment of our investment, gains or losses associated with the dilution of our ownership interest resulting from Clearwire's equity issuances, derivative losses
associated with the change in fair value of the embedded derivative included in exchangeable notes between Clearwire and Sprint, and other items recognized by
Clearwire Corporation that did not affect our economic interest. Sprint's equity in losses for the Predecessor 190-day period ended July 9, 2013, include a $65
million derivative loss associated with the change in fair value of the embedded derivative.
Other income (expense), net
The following table provides additional information on items included in "Other income (expense), net."
Successor
Combined
Successor
Predecessor
Year Ended
March 31,
Year Ended
March 31,
Three Months Ended
March 31,
Year Ended
December 31,
Year Ended
December 31,
191 Days Ended
July 10,
2016
2015
2014
2013
2013
2013
2013
(in millions)
Interest income $ 11
$ 12
$ 4
$ 14
$ 69
$ 36
$ 33
Gain (loss) on early retirement of debt —
—
—
—
44
56
(12)
Other, net 7
15
(3)
(8)
(21)
(19)
(2)
Total $ 18
$ 27
$ 1
$ 6
$ 92
$ 73
$ 19
SuccessorYearEndedDecember31,2013
"Other income (expense), net" represented income of $73 million for the Successor year ended December 31, 2013. 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 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.
Income Tax Expense
The Successor period income tax expense for the year ended March 31, 2016 of $141 million represented a consolidated effective tax rate of
approximately (8)% . The Successor period income tax benefit for the year ended March 31, 2015 of $574 million represented a consolidated effective tax rate of
approximately 15% . The Successor period income tax expense for the three-month transition period ended March 31, 2014 and the year ended December 31, 2013
of $56 million and $45 million , respectively, represented a consolidated effective tax rate of approximately (59)% and (3)% , respectively. The Predecessor period
income tax expense for the three-month period ended March 31, 2013 of $38 million represented a consolidated effective tax rate of approximately (6)%. The
income tax expense for the year ended March 31, 2016 was primarily attributable to tax expense resulting from taxable temporary differences from amortization of
FCC licenses, partially offset by tax benefits from the reversal of state income tax valuation allowance on deferred tax assets and changes in state income tax laws
enacted during the year. The income tax benefit for the year ended March 31, 2015 was primarily attributable to recognition of a tax benefit on the $1.9 billion
Sprint trade name impairment loss, partially offset by tax expense on taxable temporary differences from the amortization of FCC licenses for income tax purposes.
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. The income tax expense for the remaining Successor and Predecessor periods presented was primarily attributable
to taxable temporary differences from amortization of FCC licenses and included net increases to the valuation allowance for federal and state deferred tax assets
primarily related to net operating loss carryforwards generated during the respective periods of $82 million and $708 million , for the Successor three-month
transition period ended March 31, 2014 and year ended December 31, 2013, respectively, and $265 million for the Predecessor three-month period ended March
31, 2013. Additional information related to items impacting the effective tax rates can be found in the Notes to the Consolidated Financial Statements.
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