Verizon Wireless 2014 Annual Report Download - page 26

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Early Debt Redemption and Other Costs
DuringMarch2014,werecordednetdebtredemptioncostsof$0.9bil-
lion 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 Oer: $0.7 billion of the then outstanding $1.5 billion aggre-
gate 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 bil-
lion 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 outstanding $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 8 to the consolidated nancial statements for additional infor-
mation regarding the Tender Oer.
During the fourth quarter of 2014, we recorded net debt redemption
costs of $0.5 billion in connection with the early redemption of $0.5 bil-
lion 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.
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.
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 second quarter of 2014, we completed license exchange
transactionswithT-MobileUSAInc.(T-MobileUSA)toexchangecertain
AWS and Personal Communication Services (PCS) licenses. The exchange
included a number of swaps that we expect will result in more effi-
cient 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.
OTHER ITEMS
Severance, Pension and Benet (Credits) Charges
During 2014, we recorded net pre-tax severance, pension and benets
charges of approximately $7.5 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 5.0%
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 adjust-
ments, partially oset by the dierence 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 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 participants
and other assumption adjustments, partially offset by the difference
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
billionrelatedtotheannuitizationofpensionliabilities(see“Employee
BenefitPlanFundedStatusandContributions”)aswellasseverance
charges of $0.4 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 benet (credits) charges presented above.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued