Progress Energy 2007 Annual Report Download - page 84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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discontinued operations based on the net assets of the
coal mines, assuming a uniform debt-to-equity ratio
across our operations. Pre-tax interest expense allocated
for the years ended December 31, 2007, 2006 and 2005
was $1 million, $1 million and $3 million, respectively. We
ceased recording depreciation expense upon classification
of the coal mining operations as discontinued operations
in November 2005. After-tax depreciation expense during
the year ended December 31, 2005, was $10 million. Results
of discontinued operations for the coal mining businesses
for the years ended December 31 were as follows:
H. Progress Rail
On March 24, 2005, we completed the sale of Progress
Rail Services Corporation (Progress Rail) to One Equity
Partners LLC, a private equity firm unit of J.P. Morgan Chase
& Co. Cash proceeds from the sale were approximately
$429 million, consisting of $405 million base proceeds plus
a working capital adjustment. Proceeds from the sale
were used to reduce debt.
Based on the gross proceeds associated with the sale
of $429 million, we recorded an estimated after-tax loss
on disposal of $25 million during the year ended
December 31, 2005. During the year ended December 31,
2006, we recorded an additional after-tax loss on
disposal of $6 million in connection with guarantees and
indemnifications provided by Progress Fuels and Progress
Energy for certain legal, tax and environmental matters to
One Equity Partners LLC. The ultimate resolution of these
matters could result in adjustments to the loss on sale in
future periods. See general discussion of guarantees at
Note 22C.
The accompanying consolidated financial statements
reflect the operations of Progress Rail as discontinued
operations. Interest expense has been allocated to
discontinued operations based on the net assets of
Progress Rail, assuming a uniform debt-to-equity ratio
across our operations. Pre-tax interest expense allocated
for the year ended December 31, 2005, was $4 million.
We ceased recording depreciation upon classification
of Progress Rail as discontinued operations in February
2005. After-tax depreciation expense during the year
ended December 31, 2005, was $3 million. Results
of discontinued operations for Progress Rail for the years
ended December 31 were as follows:
I. Net Assets to be Divested
At December 31, 2007, the assets and liabilities of
Terminals and the remaining assets and liabilities of the
coal mining operations were included in net assets to be
divested. At December 31, 2006, the assets and liabilities
of CCO, Terminals, the remaining coal mining operations
and other fuels businesses were included in net assets
to be divested. The major balance sheet classes included
in assets and liabilities to be divested in the Consolidated
Balance Sheets were as follows:
J. Ceredo Synthetic Fuels Interests
On March 30, 2007, our Progress Fuels subsidiary
disposed of its 100 percent ownership interest in Ceredo
Synfuel LLC (Ceredo), a subsidiary that produces and sells
qualifying coal-based solid synthetic fuels, to a third-
party buyer. In addition, we entered into an agreement
to operate the Ceredo facility on behalf of the buyer. At
closing, we received cash proceeds of $10 million and
(in millions) 2006 2005
Revenues $– $358
Earnings before income taxes $– $8
Income tax expense –(3)
Net earnings from discontinued operations – 5
Loss on disposal of discontinued operations,
including income tax (expense) benefit of $(6)
and $15, respectively (6) (25)
Loss from discontinued operations $(6) $(20)
(in millions)
December 31,
2007
December 31,
2006
Accounts receivable $– $44
Inventory 656
Other current assets 245
Property, plant and equipment, net 38 595
Other assets 6226
Assets to be divested $52 $966
Accounts payable $– $43
Accrued expenses 3179
Long-term liabilities 526
Liabilities to be divested $8 $248
(in millions) 2007 2006 2005
Revenues $28 $84 $184
Loss before income taxes $(17) $(11) $(16)
Income tax benefit 67 5
Net loss from discontinued operations (11) (4) (11)
Loss on disposal of discontinued operations,
including income tax benefit of $16 –(10) –
Loss from discontinued operations $(11) $(14) $(11)