Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

 v2.3.0.11
Discontinued Operations
 9 Months Ended
Jun. 26, 2011
Notes to Financial Statements [Abstract]  
Note 10 - Discontinued Operations
Note 10 — Discontinued Operations
On December 20, 2010, the Company agreed to sell substantially all of its 700 MHz spectrum for $1.9 billion, subject to the satisfaction of customary closing conditions, including approval by the U.S. Federal Communications Commission. The agreement followed the Company’s previously announced plan to restructure and evaluate strategic options related to the FLO TV business and network. The FLO TV business and network were shut down on March 27, 2011. Since then, the Company has been working to sell the remaining assets and exit contracts. The 700 MHz spectrum with a carrying value of $746 million that the Company has agreed to sell was classified as held for sale, and all other assets were considered disposed of, at June 26, 2011. Accordingly, the results of operations of the FLO TV business were presented as discontinued operations at June 26, 2011. The Company’s statements of operations for all prior periods presented have been adjusted to conform.
Summarized results from discontinued operations were as follows (in millions):
 
Three Months Ended
 
Nine Months Ended
 
June 26, 2011
 
June 27, 2010
 
June 26, 2011
 
June 27, 2010
Revenues
$
1

 
$
5

 
$
5

 
$
9

Income (loss) from discontinued operations
1

 
(105
)
 
(502
)
 
(334
)
Income tax benefit
43

 
40

 
195

 
134

Discontinued operations, net of income taxes
$
44

 
$
(65
)
 
$
(307
)
 
$
(200
)
Income (loss) from discontinued operations includes share-based payments and excludes certain general corporate expenses allocated to the FLO TV business during the periods presented. During the third quarter of fiscal 2011, in connection with the presentation of the FLO TV business as discontinued operations and the requirement to compute the tax effect of discontinued operations on a discrete basis, the Company recorded a tax benefit of $43 million for tax benefits related to losses incurred in the first and second quarter of fiscal 2011 that were previously included in the calculation of the estimated annual effective tax rate.
The carrying amounts of the major classes of assets and liabilities of discontinued operations in the condensed consolidated balance sheet were as follows (in millions):
 
June 26, 2011
Assets
 
Current assets
$
8

Property, plant and equipment, net
170

Assets held for sale
746

Other assets
2

Total assets
$
926

Liabilities
 
Trade accounts payable
$
2

Payroll and other benefits related liabilities
2

Other current liabilities
88

Other noncurrent liabilities
198

Total liabilities
$
290


The Company has a significant number of site leases, and the Company has corresponding capital lease assets, capital lease liabilities and asset retirement obligations (Note 8). The capital lease assets, included in property, plant and equipment, net, were considered disposed of at March 27, 2011 when the Company shut down the FLO TV business.
Restructuring and restructuring-related activities under the Company’s plan related to discontinued operations were initiated in the fourth quarter of fiscal 2010 and are expected to be substantially complete by the end of fiscal 2012 as the Company continues to negotiate the exit of certain contracts and removes certain of its equipment from the network sites. The Company estimates that it will incur future restructuring and restructuring-related charges of up to $40 million, primarily related to lease exit costs. Restructuring charges consist of lease exit and other contract termination costs and certain severance costs. Restructuring-related charges primarily consist of asset impairment and accelerated depreciation. The Company may also realize certain gains, primarily due to the potential release of liabilities associated with ongoing efforts to exit certain contracts, the amount of which cannot be reasonably estimated at this time. Future cash expenditures are expected to be in the range of $100 million to $140 million. As a result of exiting various contractual obligations on favorable terms, the Company recorded net reversals of $4 million and $8 million in restructuring charges and restructuring-related charges, respectively, during the three months ended June 26, 2011. During the nine months ended June 26, 2011, the Company recorded net restructuring charges of $58 million, including $48 million in contract termination costs, and net restructuring-related charges of $308 million, including $305 million in asset impairments and accelerated depreciation.
Changes in the restructuring accrual, which is reported as a component of other liabilities, for the nine months ended June 26, 2011 were as follows (in millions):
 
Balance at
September 26,
2010
 
Initial Costs
 
Adjustments to Costs
 
Cash Payments
 
Balance at
June 26,
2011
Contract termination costs
$
—

 
$
63

 
$
(2
)
 
$
(18
)
 
$
43

Other costs
—

 
16

 
(6
)
 
(6
)
 
4

 
$
—

 
$
79

 
$
(8
)
 
$
(24
)
 
$
47