Verizon Wireless 2013 Annual Report Download - page 25

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determine the current year liabilities from 5.75% at December 31, 2010 to
5% at December 31, 2011 ($5.0 billion); the dierence 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.
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 benet (credits) charges presented above.
Early Debt Redemption and Other Costs
During November 2012, we recorded debt redemption costs of $0.8 bil-
lion in connection with the purchase of $0.9 billion of the $1.25 billion of
8.95% Verizon Communications Notes due 2039 in a cash tender oer.
During December 2012, we recorded debt redemption costs of $0.3 bil-
lion in connection with the early redemption of $0.7 billion of the $2.0
billion of 8.75% Verizon Communications Notes due 2018, $1.0 billion of
4.625%VerizonVirginiaLLCDebentures,SeriesA,dueMarch2013and
$0.75billionof4.35%VerizonCommunicationsNotesdueFebruary2013,
as well as $0.3 billion of other 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.
Litigation Settlements
In the third quarter of 2012, we settled a number of patent litigation mat-
ters, including cases with ActiveVideo Networks Inc. (ActiveVideo) and TiVo
Inc. (TiVo). In connection with the settlements with ActiveVideo and TiVo,
we recorded a charge of $0.4 billion in the third quarter of 2012 and will
pay and recognize over the following six years an additional $0.2 billion.
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResultsofOperations”)excludesthelitigationsettlement
costs presented above.
OTHER ITEMS
Gain on Spectrum License Transaction
During the third quarter of 2013, after receiving the required regulatory
approvals,VerizonWirelesssold39 lower700MHzBblock spectrum
licenses to AT&T in exchange for a payment of $1.9 billion and the
transferbyAT&TtoVerizonWirelessofAWS(10MHz)licensesincertain
markets in the western United States. Verizon Wireless also sold certain
lower700MHzBblockspectrumlicensestoaninvestmentrmforapay-
ment of $0.2 billion. As a result, we received $0.5 billion of AWS 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 state-
ment of income for the year ended December 31, 2013.
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResultsofOperations”)excludesthegainonthespectrum
license transaction described above.
Wireless Transaction Costs
During 2013, as a result of the Wireless Transaction, we recorded costs
of $0.9 billion primarily for interest expense of $0.7 billion related to the
issuance of the new notes, as well as $0.2 billion in fees primarily in con-
nectionwiththebridgecreditagreement(see“ConsolidatedFinancial
Condition”).
Severance, Pension and Benet (Credits) Charges
During 2013, we recorded net pre-tax severance, pension and benets
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 dierence 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).
During 2012, we recorded net pre-tax severance, pension and benets
charges of approximately $7.2 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 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%
at December 31, 2011 to a weighted-average of 4.2% at December 31,
2012 ($5.3 billion) and revisions to the retirement assumptions for partici-
pants and other assumption adjustments, partially oset by the dierence
between our estimated return on assets of 7.5% and our actual return on
assets of 10% ($0.7 billion). As part of this charge, we also recorded $1.0 bil-
lionrelatedtotheannuitizationofpensionliabilities(see“EmployeeBenet
PlanFundedStatusandContributions”)aswellasseverancechargesof
$0.4 billion primarily for approximately 4,000 management employees.
During 2011, we recorded net pre-tax severance, pension and benets
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
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued