Progress Energy 2008 Annual Report Download - page 72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
70
(in millions) 2006
Revenues $64
Earnings before income taxes $15
Income tax expense (5)
Net earnings from discontinued operations 10
Loss on disposal of discontinued operations, including
income tax benefit of $37 (67)
Loss from discontinued operations $(57)
F. Progress Telecom, LLC
On March 20, 2006, we completed the sale of Progress
Telecom, LLC (PT LLC) to Level 3 Communications, Inc.
We received gross proceeds comprised of cash of
$69 million and approximately 20 million shares of Level
3 Communications, Inc. common stock valued at an
estimated $66 million on the date of the sale. Our net
proceeds from the sale of approximately $70 million, after
consideration of minority interest, were used to reduce
debt. Prior to the sale, we had a 51 percent interest in
PT LLC. See Note 20 for a discussion of the subsequent
sale of the Level 3 Communications, Inc. stock in 2006.
Based on the net proceeds associated with the sale and
after consideration of minority interest, we recorded an
after-tax net gain on disposal of $28 million during the year
ended December 31, 2006.
The accompanying consolidated financial statements
reflect the operations of PT LLC as discontinued
operations. Results of discontinued operations for PT LLC
for the year ended December 31 were as follows:
(in millions) 2006
Revenues $18
Earnings before income taxes and minority interest $7
Income tax expense (4)
Minority interest share of earnings (5)
Net loss from discontinued operations (2)
Gain on disposal of discontinued operations, including
income tax expense of $8 and minority interest of $35 28
Earnings from discontinued operations $26
In connection with the sale, PEC and PEF provided
indemnification against costs associated with certain
asset performances to Level 3 Communications, Inc. See
general discussion of guarantees at Note 22C. The ultimate
resolution of these matters could result in adjustments to
the gain on sale in future periods.
G. Dixie Fuels and Other Fuels Business
On March 1, 2006, we sold Progress Fuels’ 65 percent
interest in Dixie Fuels Limited (Dixie Fuels) to Kirby
Corporation for $16 million in cash. Dixie Fuels operates
a fleet of four ocean-going dry-bulk barge and tugboat
units. Dixie Fuels primarily transported coal from the
lower Mississippi River to Progress Energy’s Crystal River
facility. We recorded an after-tax gain of $2 million on the
sale of Dixie Fuels during the year ended December 31,
2006. During the years ended December 31, 2008 and
2007, we recorded additional gains of $1 million and
$2 million, respectively, primarily related to the expiration
of indemnifications.
The accompanying consolidated financial statements
reflect Dixie Fuels and the other fuels business as
discontinued operations. Results of discontinued
operations for Dixie Fuels and other fuels businesses for
the years ended December 31 were as follows:
(in millions) 2008 2007 2006
Revenues $– $– $20
Earnings before income taxes $– $– $11
Income tax expense ––(4)
Net earnings from discontinued operations –– 7
Gain on disposal of discontinued operations,
including income tax benefit (expense) of
$1, $(1) and $(1), respectively 12 2
Earnings from discontinued operations $1 $2 $9
H. Progress Rail
We completed the sale of Progress Rail Services
Corporation during the year ended December 31, 2005.
As a result of certain legal, tax and environmental
indemnifications provided by Progress Fuels and Progress
Energy, we continue to record adjustments to the loss
on sale. During the year ended December 31, 2008, we
recorded an after-tax gain on disposal of $2 million. During
the year ended December 31, 2006, we recorded an after-
tax loss on disposal of $6 million. The ultimate resolution
of these matters could result in additional adjustments to
the loss on sale in future periods. See general discussion
of guarantees at Note 22C.
I. Net Assets to be Divested
At December 31, 2007, the assets and liabilities of Terminals
and the remaining assets and liabilities of Coal Mining
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: