Verizon Wireless 2011 Annual Report Download - page 41

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Dispositions
Access Line-Spin-off Related 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; professional advisory and
legal fees in connection with this transaction; and fees related to the
early extinguishment of debt from the use of proceeds from the trans-
action. During 2009, we also recorded pre-tax charges of $0.2 billion
for costs incurred related to our Wireline cost reduction initiatives (See
“AcquisitionsandDivestitures”).
Alltel Divestiture Markets
During the second quarter of 2010, we recorded a tax charge of
approximately $0.2 billion for the taxable gain associated with the Alltel
DivestitureMarkets(see“AcquisitionsandDivestitures”).
Medicare Part D Subsidy Charges
Under the Patient Protection and Affordable Care Act and the Health Care
andEducationReconciliationActof2010,bothofwhichbecamelawin
March2010(collectivelytheHealthCareAct),beginningin2013,Verizon
andothercompaniesthatreceiveasubsidyunderMedicarePartDto
provide retiree prescription drug coverage will no longer receive a fed-
eral 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subsidiesarealreadyreflectedinVerizon’sfinancialstatements,
this change in law required Verizon to reduce the value of the related
tax benefits recognized 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.
Other
Debt Redemption Costs
During November 2011, we recorded debt redemption costs of $0.1 bil-
lion in connection with the early redemption of $1.0 billion of 7.375%
Verizon Communications Notes due September 2012, $0.6 billion of
6.875% Verizon Communications Notes due June 2012, $0.4 billion of
6.125%VerizonFloridaInc.DebenturesdueJanuary2013,$0.5billionof
6.125%VerizonMarylandInc.DebenturesdueMarch2012and$1.0bil-
lion of 6.875% Verizon New York Inc. Debentures due April 2012.
Deferred Revenue
Corporate, eliminations and other during the periods presented include
a non-cash adjustment of $0.2 billion and ($0.1 billion) in 2010 and 2009,
respectively, primarily to adjust wireless data revenues. This adjustment
was recorded to properly defer previously recognized wireless data reve-
nues that were earned and recognized in future periods. The adjustment
was recorded during 2010, which reduced Net income (loss) attributable
to Verizon by approximately $0.1 billion. Consolidated revenues in 2009
were not affected as the amounts involved were not material to our con-
solidated financial statements.
OTHER ITEMS
Severance, Pension and Benefit Charges
During 2011, we recorded net pre-tax severance, pension and benefits
charges of approximately $6.0 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. The charges were pri-
marily driven by a decrease in our discount rate assumption used to
determine the current year liabilities from 5.75% at December 31, 2010 to
5% at December 31, 2011 ($5.0 billion); the difference between our esti-
mated return on assets of 8% and our actual return on assets of 5% ($0.9
billion); and revisions to the life expectancy of participants and other
adjustments to assumptions.
During 2010, we recorded net pre-tax severance, pension and benefits
charges of $3.1 billion. The charges during 2010 included 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. Additionally, in 2010, we reached
an agreement 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, we recorded severance, pension and
benefits charges associated with approximately 11,900 union-repre-
sented employees who volunteered for the incentive offer. These charges
included $1.2 billion for severance for the 2010 separation 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
due to the workforce reductions.
During 2009, we recorded net pre-tax severance, pension and benefits
charges of $1.4 billion. These charges were primarily comprised of pen-
sion and postretirement curtailment losses and special termination
benefits of $1.9 billion; $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; and remeasurement gains of $1.4 bil-
lion 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.
Merger Integration and Acquisition Related Charges
During 2010, we recorded pre-tax merger integration charges of $0.9
billion primarily related to the Alltel acquisition. These charges were
primarily due to the decommissioning of overlapping cell sites, preacqui-
sition contingencies, handset conversions and trade name amortization.
During 2009, we recorded pre-tax merger integration and acquisition
related charges of $1.2 billion. These charges primarily related to the Alltel
acquisition 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,
including fees related to the credit facility that was entered into and uti-
lized to complete the acquisition.
ManagEMEnt’s discussiOn and analYsis
OF Financial cOnditiOn and REsults OF OPERatiOns continued