America Online 2015 Annual Report Download - page 52

Wireline
Access Line Sale
On February5, 2015, we announced that we have entered into a defin-
itive agreement with Frontier Communications Corporation (Frontier)
pursuant to which Verizon will sell its local exchange business and
related landline activities in California, Florida and Texas, including
Fios Internet and video customers, switched and special access lines
and high-speed Internet service and long distance voice accounts
in these three states for approximately $10.5billion (approximately
$7.5billion net of income taxes), subject to certain adjustments and
including the assumption of $0.6billion of indebtedness from Verizon
by Frontier. The transaction, which includes the acquisition by Frontier
of the equity interests of Verizon’s incumbent local exchange carriers
(ILECs) in California, Florida and Texas, does not involve any assets
or liabilities of Verizon Wireless. The assets and liabilities that will be
sold are currently included in Verizon’s continuing operations and
classified as assets held for sale and liabilities related to assets held
for sale on our consolidated balance sheet as of December31, 2015.
For the years ended December31, 2015 and 2014, these businesses
generated approximately $5.4billion of revenues, excluding revenues
with affiliates, for each respective year and operating income of
approximately $0.8billion and an immaterial loss, respectively, based
on the stand-alone financial results of the businesses. These amounts
include direct expenses incurred of approximately $2.7billion in each
of the years ended December31, 2015 and 2014 and (credits) charges
related to pension and benefit actuarial valuation adjustments for these
ILEC employees of $(0.2) billion and $0.6billion for the years ended
December31, 2015 and 2014, respectively. The amounts also include
indirect overhead expenses, which are a significant component of our
cost structure. These stand-alone financial results also include approx-
imately $1.0billion of depreciation and amortization for the years
ended December31, 2015 and 2014, respectively. In our consolidated
results, the depreciation and amortization of these ILEC assets ceased
at the beginning of 2015 in accordance with the accounting model for
assets held for sale. The transaction is subject to the satisfaction of
certain closing conditions including, among others, receipt of federal
approvals from the FCC and the antitrust authorities and state regu-
latory approvals. All federal and state regulatory approvals have been
obtained. We expect this transaction to close at the end of the first
quarter of 2016.
Based on the number of voice connections and Fios Internet and
video subscribers, respectively, as of December31, 2015, the trans-
action would result in Frontier acquiring approximately 3.4million
voice connections, 1.6million Fios Internet subscribers, 1.2million Fios
video subscribers and the related ILEC businesses from Verizon. The
operating results of these businesses, collectively, are included within
our Wireline segment for all periods presented.
The following table summarizes the major classes of assets and liabil-
ities of our local exchange and related landline activities in California,
Florida and Texas which are classified as held for sale on our consoli-
dated balance sheet as of December31, 2015:
(dollars in millions)
Assets held for sale:
Accounts receivable $ 435
Prepaid expense and other 58
Total current assets held for sale 493
Plant, property and equipment, net 8,884
Goodwill (Note3) 1,328
Other assets 55
Total non- current assets held for sale 10,267
Total assets held for sale $ 10,760
Liabilities related to assets held for sale:
Accounts payable and accrued liabilities $ 256
Other current liabilities 207
Total current liabilities related to assets held for sale 463
Long-term debt 594
Employee benet obligations 289
Other liabilities 76
Total non- current liabilities related to assets held for sale 959
Total liabilities related to assets held for sale $ 1,422
Other
On July1, 2014, we sold a non- strategic Wireline business that provides
communications solutions to a variety of government agencies for net
cash proceeds of $0.1billion and recorded an immaterial gain.
During the fourth quarter of 2015, Verizon completed a sale of real
estate for which we received total gross proceeds of $0.2billion and
recognized an immaterial deferred gain. The proceeds received as a
result of this transaction have been classified within Cash flows used in
investing activities on our consolidated statement of cash flows for the
year ended December31, 2015.
Other
Acquisition of AOL Inc.
On May12, 2015, we entered into an Agreement and Plan of Merger
(the Merger Agreement) with AOL Inc. (AOL) pursuant to which we
commenced a tender offer to acquire all of the outstanding shares of
common stock of AOL at a price of $50.00 per share, net to the seller
in cash, without interest and less any applicable withholding taxes.
On June23, 2015, we completed the tender offer and merger, and
AOL became a wholly-owned subsidiary of Verizon. The aggregate
cash consideration paid by Verizon at the closing of these transactions
was approximately $3.8billion. Holders of approximately 6.6million
shares exercised appraisal rights under Delaware law. If they had
not exercised these rights, Verizon would have paid an additional
$330million for such shares at the closing.
50 Verizon Communications Inc. and Subsidiaries
Notes to Consolidated Financial Statements continued