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Note 9. | Severance, Exit Costs and Asset Impairments |
Severance and Exit Costs Activity
For the Successor year ended December 31, 2013 as well as for the Predecessor 191-day period ended July 10, 2013 and year ended 2012, we recognized lease exit costs associated with the decommissioning of the Nextel Platform and access exit costs related to payments that will continue to be made under our backhaul access contracts for which we will no longer be receiving any economic benefit.
For the Successor year ended December 31, 2013 as well as the Predecessor 191-day period ended July 10, 2013 and year ended 2011, we also recognized severance costs associated with reductions in our work force. During December 2013, the Company recorded a $165 million severance charge associated with a reduction in force plan in order to reduce operating costs. We also expect to incur additional severance charges during the first quarter of 2014 as certain parts of the plan become finalized. The majority of the cash payments associated with the plan are expected to be made by the end of 2014.
As a result of our network modernization and the completion of the Significant Transactions (see Note 3. Significant Transactions), we expect to incur additional exit costs in the future related to the transition of our existing backhaul architecture to a replacement technology for our network and the efforts associated with the integration of our Significant Transactions, such as the evaluation of future use of the Clearwire 4G broadband network, among other initiatives. These additional exit costs are expected to range between approximately $225 million to $325 million, of which the majority are expected to be incurred through first quarter 2016.
The following provides the activity in the severance and exit costs liability included in "Accounts payable," "Accrued expenses and other current liabilities" and "Other liabilities" within the consolidated balance sheets:
|
| | | | | | | | | | | | | | | | | | | | |
| Predecessor |
| December 31,
2012 | | Purchase Price Adjustments | | Net Expense | | | Cash Payments and Other | | July 10,
2013 |
| (in millions) |
Lease exit costs | $ | 190 |
| | $ | 131 |
| | $ | 478 |
| (1) | | $ | (33 | ) | | $ | 766 |
|
Severance costs | 11 |
| | — |
| | 58 |
| (2) | | (15 | ) | | 54 |
|
Access exit costs | 43 |
| | — |
| | 151 |
| (3) | | (5 | ) | | 189 |
|
| $ | 244 |
| | $ | 131 |
| | $ | 687 |
| | | $ | (53 | ) | | $ | 1,009 |
|
_________________
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(1) | For the 191-day period ended July 10, 2013, we recognized net costs of $478 million (solely attributable to our Wireless segment). |
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(2) | For the 191-day period ended July 10, 2013, we recognized costs of $58 million ($55 million Wireless, and $3 million was Wireline). |
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(3) | Of the $151 million ($133 million Wireless; $18 million Wireline) recognized for the 191-day period ended July 10, 2013, $35 million was recognized as "Cost of services and products" and $116 million was recognized in "Severance, exit costs and asset impairments." |
|
| | | | | | | | | | | | | | | | |
| Predecessor |
| December 31,
2011 | | Net Expense | | | Cash Payments and Other | | December 31,
2012 |
| |
Lease exit costs | $ | 58 |
| | $ | 196 |
| (4) | | $ | (64 | ) | | $ | 190 |
|
Severance costs | 21 |
| | — |
| | | (10 | ) | | 11 |
|
Access exit costs | — |
| | 44 |
| (5) | | (1 | ) | | 43 |
|
| $ | 79 |
| | $ | 240 |
| | | $ | (75 | ) | | $ | 244 |
|
_________________
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(4) | For the year ended December 31, 2012, we recognized costs of $196 million (solely attributable to our Wireless segment). |
| |
(5) | For the year ended December 31, 2012, we recognized costs of $44 million ($21 million Wireless; $23 million Wireline) as "Cost of services and products." |
|
| | | | | | | | | | | | | | | | |
| Predecessor |
| December 31,
2010 | | Net Expense | | | Cash Payments and Other | | December 31,
2011 |
| (in millions) |
Lease exit costs | $ | 87 |
| | $ | — |
| | | $ | (29 | ) | | $ | 58 |
|
Severance costs | 7 |
| | 28 |
| (6) | | (14 | ) | | 21 |
|
| $ | 94 |
| | $ | 28 |
| | | $ | (43 | ) | | $ | 79 |
|
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(6) | For the year ended December 31, 2011, we recognized costs of $28 million ($25 million Wireless; $3 million Wireline). |
|
| | | | | | | | | | | | | | | | | |
| Successor |
| July 11,
2013 |
| | Net Expense |
|
| Cash Payments and Other |
| December 31,
2013 |
| (in millions) |
Lease exit costs | $ | 933 |
| (7) | | $ | 56 |
| (8) |
| $ | (225 | ) |
| $ | 764 |
|
Severance costs | 54 |
|
| | 219 |
| (9) |
| (48 | ) |
| 225 |
|
Access exit costs | 189 |
|
| | 53 |
| (10) |
| (93 | ) |
| 149 |
|
| $ | 1,176 |
|
| | $ | 328 |
|
|
| $ | (366 | ) |
| $ | 1,138 |
|
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(7) | The July 11, 2013 opening balance takes into account purchase price adjustments as it relates to the SoftBank Merger. |
| |
(8) | For the year ended December 31, 2013, we recognized costs of $56 million ($54 million Wireless, $2 million Wireline). |
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(9) | For the year ended December 31, 2013, we recognized costs of $219 million ($191 million Wireless, $28 million Wireline). |
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(10) | For the year ended December 31, 2013, $19 million (solely attributable to Wireline) was recognized as "Cost of services and products" and $34 million (solely attributable to Wireless) was recognized in "Severance, exit costs and assets impairments." |
Asset Impairments
There were no asset impairments for the Successor year ended December 31, 2013 or the Predecessor 191-day period ended July 10, 2013. We recorded asset impairments of $102 million, and $78 million, for the Predecessor years ended 2012, and 2011, respectively. Asset impairments in 2012 consisted of $18 million of assets associated with a decision to utilize fiber backhaul, which we expect to be more cost effective, rather than microwave backhaul, $66 million of capitalized assets that we no longer intend to deploy as a result of the termination of the spectrum hosting arrangement with LightSquared in the first quarter 2012, and $18 million related to network asset equipment ($13 million Wireless; $5 million Wireline) that is no longer necessary for management's strategic plans. Asset impairments in 2011 primarily related to network asset equipment in our Wireless segment that was no longer necessary for management's strategic plans.
