Merger, Integration and Other Costs and Restructuring Charges

12 Months Ended

Dec. 31, 2019

Restructuring and Related Activities [Abstract]

Merger, Integration and Other Costs and Restructuring Charges

Merger, Integration and Other Costs and Restructuring Charges:

We incur costs to complete a merger or acquisition and integrate its operations into our business which are presented as merger and integration expense in our consolidated results of operations. These costs include transaction costs, such as accounting, legal, consulting and broker fees; severance and related costs; IT and network conversion; rebranding and marketing; and contract termination fees. In 2017, we completed a network optimization project designed to consolidate traffic onto network facilities operated by us and reduce the usage of other carriers’ networks in our acquired CLEC markets. In undertaking this initiative, we incurred exit costs to migrate traffic to existing lower cost circuits and to terminate existing contracts prior to their expiration.

Restructuring charges are primarily incurred as a result of evaluations of our operating structure. Among other things, these evaluations explore opportunities to provide greater flexibility in managing and financing existing and future strategic operations, for task automation and the balancing of our workforce based on the current needs of our customers. Severance, lease exit costs and other related charges are included in restructuring charges.

During 2019 and 2018, we completed separate restructurings of our workforce to improve our overall cost structure and gain operational efficiencies. In undertaking these efforts, we eliminated approximately 730 positions and incurred severance and employee benefit costs of $28.5 million in 2019, and we eliminated approximately 800 positions and incurred severance and employee benefit costs of $24.6 million in 2018. Restructuring charges for 2018 also included lease termination costs of $20.4 million due to vacating certain facilities. In 2017, we completed various restructurings of our workforce to streamline our operations and better align our engineering, finance and information technology support functions. In completing these initiatives, we eliminated approximately 1,100 employees and incurred total severance and employee benefit costs of $35.0 million. Restructuring charges for 2017 also included lease termination costs associated with vacated facilities and consulting fees totaling $8.0 million.

The following is a summary of the merger, integration and other costs and restructuring charges recorded for the years ended December 31:

(Millions)	2019		2018		2017
Merger, integration and other costs:
Costs related to merger with EarthLink (a)	$	6.8	$	15.5	$	104.1
Costs related to merger with Broadview (b)	—		4.1		14.3
Costs related to acquisitions of MASS and ATC	—		2.5		—
Legal fees related to Uniti spin-off litigation (see Note 17)	0.3		7.2		7.5
Network optimization and contract termination costs	—		—		8.5
IT conversion, consulting and other costs	1.2		2.6		3.0
Total merger, integration and other costs	8.3		31.9		137.4
Restructuring charges	28.5		45.0		43.0
Total merger, integration and other costs and restructuring charges	$	36.8	$	76.9	$	180.4

(a) In 2019 and 2018, these amounts include severance and employee benefit costs for EarthLink employees terminated after the acquisition of $5.0 million and $6.9 million, respectively, and other miscellaneous expenses of $1.8 million and $3.7 million, respectively. In 2018, we also incurred contract and lease termination costs of $4.9 million as a result of vacating certain facilities related to the acquired operations of EarthLink.

In 2017, these amounts include investment banking, legal and other consulting services of $24.0 million, severance and employee benefit costs for EarthLink employees terminated after the acquisition of $39.0 million, share-based compensation expense of $10.1 million attributable to the accelerated vesting of assumed equity awards for terminated EarthLink employees, rebranding and marketing costs of $5.3 million and other miscellaneous expenses of $3.2 million. We also incurred contract and lease termination costs of $22.5 million as a result of vacating certain facilities related to the acquired operations of EarthLink.

(b) In 2018, these amounts include severance and employee benefit costs for Broadview employees terminated after the acquisition of $1.8 million. We also incurred contract and lease termination costs of $2.3 million as a result of vacating certain facilities related to the acquired operations of Broadview.

13. Merger, Integration and Other Costs and Restructuring Charges, Continued:

In 2017, these amounts include investment banking, legal and other consulting fees of $4.5 million and severance and employee benefit costs for Broadview employees terminated after the acquisition of $4.7 million. We also incurred contract and lease termination costs of $3.7 million as a result of vacating certain facilities related to the acquired operations of Broadview.

After giving consideration to tax benefits on deductible items, merger, integration and other costs and restructuring charges decreased net income $27.5 million, $56.4 million and $113.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The following is a summary of the activity related to the liabilities associated with merger, integration and other costs and restructuring charges at December 31:

				Restructuring Charges
(Millions)	Merger, Integration and Other Charges			Severance and Benefit Costs			Lease Termination Costs			Total
Balance at December 31, 2017	$	10.3		$	5.0		$	4.2		$	19.5
Expenses incurred in period	31.9			24.6			20.4			76.9
Cash outlays during the period	(38.2		)	(17.0		)	(9.3		)	(64.5		)
Balance at December 31, 2018	$	4.0		$	12.6		$	15.3		$	31.9
Reclassified to operating lease obligations upon    adoption of ASU 2016-02	(4.0		)	—			(15.3		)	(19.3		)
Expenses incurred in period	8.3			28.5			—			36.8
Cash outlays during the period	(8.3		)	(33.0		)	—			(41.3		)
Balance at December 31, 2019	$	—		$	8.1		$	—		$	8.1

Payments of these liabilities will be funded through operating cash flows.