Verizon Wireless 2007 Annual Report Download - page 50

48
NOTE 2
DISCONTINUED OPERATIONS, EXTRAORDINARY ITEM AND
OTHER DISPOSITIONS
Discontinued Operations
Telecomunicaciones de Puerto Rico, Inc.
On March 30, 2007, we completed the sale of our 52% interest in
Telecomunicaciones de Puerto Rico, Inc. (TELPRI) and received gross pro-
ceeds of approximately $980 million. The sale resulted in a pretax gain of
$120 million ($70 million after-tax). Verizon contributed $100 million ($65
million after-tax) of the proceeds to the Verizon Foundation.
Verizon Dominicana C. por A.
On December 1, 2006, we closed the sale of Verizon Dominicana C. por
A (Verizon Dominicana). The transaction resulted in net pretax cash
proceeds of $2,042 million, net of a purchase price adjustment of $373
million. The U.S. taxes that became payable and were recognized at the
time the transaction closed exceeded the $30 million pretax gain on the
sale resulting in an overall after-tax loss of $541 million.
Verizon Information Services
In October, 2006, we announced our intention to spin-off our domestic
print and Internet yellow pages directories publishing operations, which
have been organized into a newly formed company known as Idearc
Inc. On October 18, 2006, the Verizon Board of Directors declared a divi-
dend consisting of 1 share of the newly formed company for each 20
shares of Verizon owned. In making its determination to effect the spin-
off, Verizon’s Board of Directors considered, among other things, that the
spin-off may allow each company to separately focus on its core busi-
ness, which may facilitate the potential expansion and growth of Verizon
and the newly formed company, and allow each company to determine
its own capital structure.
On November 17, 2006, we completed the spin-off of our domestic print
and Internet yellow pages directories business. Cash was paid for frac-
tional shares. The distribution of common stock of the newly formed
company to our shareowners was considered a tax free transaction for
us and for our shareowners, except for the cash payments for fractional
shares which were generally taxable.
At the time of the spin-off, the exercise price and number of shares of
Verizon common stock underlying options to purchase shares of Verizon
common stock, restricted stock units (RSU’s) and performance stock units
(PSU’s) were adjusted pursuant to the terms of the applicable Verizon
equity incentive plans, taking into account the change in the value of
Verizon common stock as a result of the spin-off.
In connection with the spin-off, Verizon received approximately $2 bil-
lion in cash from the proceeds of loans under a term loan facility of the
newly formed company and transferred to the newly formed company
debt obligations in the aggregate principal amount of approximately
$7.1 billion thereby reducing Verizon’s outstanding debt at that time. We
incurred pretax charges of approximately $117 million ($101 million after-
tax), including debt retirement costs, costs associated with accumulated
vested benefits of employees of the newly formed company, investment
banking fees and other transaction costs related to the spin-off, which
are included in discontinued operations.
In accordance with SFAS No. 144 we have classified TELPRI, Verizon
Dominicana and our former domestic print and Internet yellow page
directories publishing operations as discontinued operations in the con-
solidated financial statements for all periods presented through the date
of the spin-off or divestiture.
The assets and liabilities of TELPRI are disclosed as current assets held for
sale and current liabilities related to assets held for sale in the consoli-
dated balance sheet as of December 31, 2006. Additional details related
to those assets and liabilities were as follows:
(dollars in millions)
At December 31, 2006
Current assets $ 303
Plant, property and equipment, net 1,436
Other non-current assets 853
Total assets $ 2,592
Current liabilities $ 181
Long-term debt 575
Other non-current liabilities 1,398
Total liabilities $ 2,154
Related to the assets and liabilities above was $241 million included as
Accumulated Other Comprehensive Loss in the consolidated balance
sheet as of December 31, 2006.
Income from discontinued operations, net of tax, presented in the con-
solidated statements of income included the following:
(dollars in millions)
Year Ended December 31, 2007 2006 2005
Operating revenues $ 306 $ 5,077 $ 5,595
Income before provision for income taxes $ 185 $ 2,041 $ 2,159
Provision for income taxes (43) (1,282) (789)
Income from discontinued operations,
net of tax $ 142 $ 759 $ 1,370
Extraordinary Item
Compañía Anónima Nacional Teléfonos de Venezuela (CANTV)
In January 2007, the Bolivarian Republic of Venezuela (the Republic)
declared its intent to nationalize certain companies, including CANTV. On
February 12, 2007, we entered into a Memorandum of Understanding
(MOU) with the Republic, which provided that the Republic offer to pur-
chase all of the equity securities of CANTV, including our 28.5% interest,
through public tender offers in Venezuela and the United States. Under
the terms of the MOU, the prices in the tender offers would be adjusted
downward to reflect any dividends declared and paid subsequent to
February 12, 2007. During the second quarter of 2007, the tender offers
were completed and Verizon received an aggregate amount of approxi-
mately $572 million, which included $476 million from the tender offers
as well as $96 million of dividends declared and paid subsequent to the
MOU. Based upon our investment balance in CANTV, we recorded an
extraordinary loss of $131 million, including taxes of $38 million.
Other Dispositions
Telephone Access Lines Spin-off
On January 16, 2007, we announced a definitive agreement with FairPoint
Communications, Inc. (FairPoint) that will result in Verizon establishing
a separate entity for its local exchange and related business assets in
Maine, New Hampshire and Vermont, spinning off that new entity into
a newly formed company, known as Northern New England Spinco Inc.
(Spinco), to Verizon’s shareowners, and immediately merging it with and
into FairPoint. These local exchange and business assets are included
in Verizon’s continuing operations. It is anticipated that as long as all
conditions are satisfied and assuming completion of the related financing
transactions, both the spin-off of Spinco to Verizon shareowners and the
merger of Spinco with FairPoint will occur on March 31, 2008. Verizon’s
Notes to Consolidated Financial Statements continued