America Online 2015 Annual Report Download - page 27

Other Items
Severance, Pension and Benefit (Credits) Charges
During 2015, we recorded net pre-tax severance, pension and benefit
credits of approximately $2.3billion primarily for our pension and post-
retirement plans in accordance with our accounting policy to recognize
actuarial gains and losses in the year in which they occur. The credits
were primarily driven by an increase in our discount rate assumption
used to determine the current year liabilities from a weighted- average
of 4.2% at December31, 2014 to a weighted- average of 4.6% at
December31, 2015 ($2.5billion), the execution of a new prescription
drug contract during 2015 ($1.0billion) and a change in mortality
assumptions primarily driven by the use of updated actuarial tables
(MP-2015) issued by the Society of Actuaries ($0.9billion), partially
offset by the difference between our estimated return on assets of
7.25% at December31, 2014 and our actual return on assets of 0.7% at
December31, 2015 ($1.2billion), severance costs recorded under our
existing separation plans ($0.6billion) and other assumption adjust-
ments ($0.3billion).
During 2014, we recorded net pre-tax severance, pension and
benefit charges of approximately $7.5billion primarily for our
pensionand postretirement plans in accordance with our accounting
policy to recognize actuarial gains and losses in the year in which
they occur. The charges were primarily driven by a decrease in
our discount rate assumption used to determine the current year
liabilities from a weighted- average of 5.0% at December31, 2013 to
a weighted- average of 4.2% at December31, 2014 ($5.2billion), a
change in mortality assumptions primarily driven by the use of updated
actuarial tables (RP-2014 and MP-2014) issued by the Society of
Actuaries in October 2014 ($1.8billion) and revisions to the retirement
assumptions for participants and other assumption adjustments,
partially offset by the difference between our estimated return on
assets of 7.25% and our actual return on assets of 10.5% ($0.6billion).
As part of this charge, we recorded severance costs of $0.5billion
under our existing separation plans.
During 2013, we recorded net pre-tax severance, pension and benefit
credits of approximately $6.2billion primarily for our pension and post-
retirement plans in accordance with our accounting policy to recognize
actuarial gains and losses in the year in which they occur. The credits
were primarily driven by an increase in our discount rate assumption
used to determine the current year liabilities from a weighted- average
of 4.2% at December31, 2012 to a weighted- average of 5.0% at
December31, 2013 ($4.3billion), lower than assumed retiree medical
costs and other assumption adjustments ($1.4billion) and the differ-
ence between our estimated return on assets of 7.5% at December31,
2012 and our actual return on assets of 8.6% at December31, 2013
($0.5billion).
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (see
“Consolidated Results of Operations”) excludes the severance,
pension and benefit (credits) charges presented above.
Early Debt Redemption and Other Costs
During March 2014, we recorded net debt redemption costs of
$0.9billion in connection with the early redemption of $1.25billion
aggregate principal amount of Cellco Partnership and Verizon Wireless
Capital LLC 8.50% Notes due 2018, and the purchase of the following
notes pursuant to the Tender Offer: $0.7billion of the then outstanding
$1.5billion aggregate principal amount of Verizon 6.10% Notes due
2018, $0.8billion of the then outstanding $1.5billion aggregate
principal amount of Verizon 5.50% Notes due 2018, $0.6billion of the
then outstanding $1.3billion aggregate principal amount of Verizon
8.75% Notes due 2018, $0.7billion of the then outstanding $1.25billion
aggregate principal amount of Verizon 5.55% Notes due 2016,
$0.4billion of the then outstanding $0.75billion aggregate principal
amount of Verizon 5.50% Notes due 2017, $0.6billion of the then out-
standing $1.0billion aggregate principal amount of Cellco Partnership
and Verizon Wireless Capital LLC 8.50% Notes due 2018, $0.2billion
of the then outstanding $0.3billion aggregate principal amount of
Alltel Corporation 7.00% Debentures due 2016 and $0.3billion of
the then outstanding $0.6billion aggregate principal amount of GTE
Corporation 6.84% Debentures due 2018.
See Note7 to the consolidated financial statements for additional
information regarding the Tender Offer.
During the fourth quarter of 2014, we recorded net debt redemp-
tion costs of $0.5billion in connection with the early redemption of
$0.5billion aggregate principal amount of Verizon 4.90% Notes due
2015, $0.6billion aggregate principal amount of Verizon 5.55% Notes
due 2016, $1.3billion aggregate principal amount of Verizon 3.00%
Notes due 2016, $0.4billion aggregate principal amount of Verizon
5.50% Notes due 2017, $0.7billion aggregate principal amount of
Verizon 8.75% Notes due 2018, $1.0billion of the then outstanding
$3.2billion aggregate principal amount of Verizon 2.50% Notes due
2016, $0.1billion aggregate principal amount Alltel Corporation 7.00%
Debentures due 2016 and $0.4billion aggregate principal amount of
Cellco Partnership and Verizon Wireless Capital LLC 8.50% Notes due
2018, as well as $0.3billion of other costs.
We recognize early debt redemption costs in Other income and
(expense), net on our consolidated statements of income.
Gain on Spectrum License Transactions
During the fourth quarter of 2015, we completed a license exchange
transaction with an affiliate of T- Mobile USA Inc. (T- Mobile USA)
to exchange certain AWS and Personal Communication Services
(PCS) licenses. As a result of this non-cash exchange, we received
$0.4billion of AWS and PCS spectrum licenses at fair value and we
recorded a pre-tax gain of approximately $0.3billion in Selling, general
and administrative expense on our consolidated statement of income
for the year ended December31, 2015.
During the second quarter of 2014, we completed license exchange
transactions with T- Mobile USA to exchange certain AWS and PCS
licenses. The exchange included a number of swaps that we expect
will result in more efficient use of the AWS and PCS bands. As a
result of these exchanges, we received $0.9billion of AWS and PCS
spectrum licenses at fair value and we recorded an immaterial gain.
25Verizon Communications Inc. and Subsidiaries
Management’s Discussion and Analysis ofFinancialCondition and Results of Operations continued