Verizon Wireless 2010 Annual Report Download - page 30

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Management’sDiscussionandAnalysis
ofFinancialConditionandResultsofOperations – As Adjusted continued
including fees related to the credit facility that was entered into and uti-
lized to complete the acquisition.
In 2008, we recorded pre-tax charges of $0.2 billion, primarily comprised of
systems integration activities and other costs related to re-branding initia-
tives, facility exit costs and advertising associated with the MCI acquisition.
Medicare Part D Subsidy Charges
Under the Health Care Act, beginning in 2013, Verizon and other com-
panies that receive a subsidy under Medicare Part D to provide retiree
prescription drug coverage will no longer receive a federal income tax
deduction for the expenses incurred in connection with providing the
subsidized coverage to the extent of the subsidy received. Because future
anticipated retiree prescription drug plan liabilities and related subsi-
dieswerealreadyreflectedinVerizon’sfinancialstatements,thischange
required Verizon to reduce the value of the related tax benefits recog-
nized in its financial statements in the period during which the Health
Care Act was enacted. As a result, Verizon recorded a one-time, non-cash
income tax charge of $1.0 billion in the first quarter of 2010 to reflect the
impact of this change.
Dispositions
Access Line Spin-off and Other Charges
During 2010 and 2009, we recorded pre-tax charges of $0.5 billion and
$0.2 billion, respectively, primarily for costs incurred related to network,
non-network software and other activities to enable the divested mar-
kets in the transaction with Frontier to operate on a stand-alone basis
subsequent to the closing of the transaction, and professional advisory
and legal fees in connection with this transaction. Also included during
2010 are fees related to early extinguishment of debt. During 2009, we
also recorded pre-tax charges of $0.2 billion for costs incurred related to
our Wireline cost reduction initiatives.
During 2008, we recorded pre-tax charges of $0.1 billion for costs incurred
related to network, non-network software, and other activities to enable
the operations in Maine, New Hampshire and Vermont to operate on a
stand-alone basis subsequent to the spin-off of our telephone access line
operations in those states, and professional advisory and legal fees in
connection with this transaction.
Alltel Divestiture Markets
During 2010, we recorded a tax charge of approximately $0.2 billion for
the taxable gain on the excess of book over tax basis of the goodwill
associated with the Alltel Divestiture Markets.
Investment Impairment Charges
During 2008, we recorded a pre-tax charge of $48 million related to an
other-than-temporary decline in the fair value of our investments in cer-
tain marketable securities.
Other
Corporate, eliminations and other during the periods presented include
a non-cash adjustment of $0.2 billion, ($0.1) billion and ($34) million
in 2010, 2009 and 2008, respectively, primarily to adjust wireless data
revenues. This adjustment was recorded to properly defer previously
recognized wireless data revenues that will be earned and recognized
in future periods. Consolidated revenues in 2009 and 2008 were not
affected as the amounts involved were not material to the consolidated
financial statements.
OTHER ITEMS
Severance, Pension and Benefit Charges
During 2010, we recorded net pre-tax severance, pension and ben-
efits charges of $3.1 billion primarily in connection with an agreement
we reached with certain unions on temporary enhancements to the
separation programs contained in their existing collective bargaining
agreements. These temporary enhancements were intended to help
address a previously declared surplus of employees and to help reduce
the need for layoffs. Accordingly, during 2010, we recorded severance,
pension and benefits charges associated with the approximately 11,900
union-represented employees who volunteered for the incentive offer.
These charges included $1.2 billion for severance for the 2010 programs
mentioned above and a planned workforce reduction of approximately
2,500 employees in 2011. In addition, we recorded $1.3 billion for pension
and postretirement curtailment losses and special termination benefits
that were due to the workforce reductions, which caused the elimination
of a significant amount of future service. Also, we recorded remeasure-
ment losses of $0.6 billion 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 remeasurement losses
included $0.1 billion of pension settlement losses related to employees
that received lump sum distributions, primarily resulting from our previ-
ously announced separation plans.
During 2009, we recorded net pre-tax severance, pension and benefits
charges of $1.4 billion primarily for pension and postretirement curtail-
ment losses and special termination benefits of $1.9 billion as workforce
reductions caused the elimination of a significant amount of future ser-
vice requiring us to recognize a portion of the prior service costs. These
charges also included $0.9 billion for workforce reductions of approxi-
mately 17,600 employees; 4,200 of whom were separated during late
2009 and the remainder in 2010. Also, we recorded remeasurement gains
of $1.4 billion 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.
During 2008, we recorded net pre-tax severance, pension and benefits
charges of $15.6 billion primarily due to remeasurement losses of $15.0
billion 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. These remeasurement losses included $0.5 billion of
pension settlement losses related to employees that received lump sum
distributions, primarily resulting from our previously announced separa-
tion plans. These severance, pension and benefit charges also included
$0.5 billion for workforce reductions in connection with the separation
of approximately 8,600 employees and related charges; 3,500 of whom
were separated in the second half of 2008 and the remainder in 2009 and
$0.1 billion for pension and postretirement curtailment losses and special
termination benefits, that were due to the workforce reductions, which
caused the elimination of a significant amount of future service.
Merger Integration and Acquisition Costs
During 2010, we recorded pre-tax merger integration charges of $0.9
billion primarily related to the Alltel acquisition. These charges primarily
related to the decommissioning of overlapping cell sites, preacquisition
contingencies, handset conversions and trade name amortization.
During 2009, we recorded pre-tax merger integration and acquisition
charges of $1.2 billion. These charges primarily related to the Alltel acqui-
sition and were comprised of trade name amortization, re-branding
initiatives and handset conversions. The charges during 2009 were also
comprised of transaction fees and costs associated with the acquisition,