Restructuring, Impairment, and Other Corporate Matters

6 Months Ended

Jun. 30, 2020

Restructuring, Impairment, and Other Corporate Matters

4) RESTRUCTURING, IMPAIRMENT AND OTHER CORPORATE MATTERS

During the three and six months ended June 30, 2020 and 2019, we recorded the following on the Consolidated Statements of Operations:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Severance	$	128	$	—	$	304	$	98
Exit costs	6		—		32		30
Restructuring charges	134		—		336		128
Merger-related costs	10		—		41		—
Other corporate matters	14		7		14		57
Restructuring and other corporate matters	$	158	$	7	$	391	$	185

Impairment charges	$	25	$	—	$	25	$	—

Depreciation of abandoned technology	$	—	$	—	$	12	$	—

Restructuring Charges

During the three and six months ended June 30, 2020, we recorded restructuring charges of $134 million and $336 million, respectively, associated with cost-transformation initiatives in connection with the Merger in an effort to reduce redundancies across our businesses. These charges primarily include severance costs and the acceleration of stock-based compensation. During the six months ended June 30, 2019, we recorded restructuring charges of $128 million primarily for severance costs associated with a restructuring plan initiated in the first quarter of 2019 under which severance payments were provided to certain eligible employees who voluntarily elected to participate. Restructuring charges for the three and six months ended June 30, 2020 and the six months ended June 30, 2019 also included exit costs resulting from the termination of contractual obligations.

The following table presents a rollforward of our restructuring liability, which is recorded in “Other current liabilities” and “Other liabilities” on the Consolidated Balance Sheets. The remaining restructuring liability at June 30, 2020, which primarily relates to severance payments, is expected to be substantially paid by the end of 2021.



	Balance at			2020 Activity									Balance at
	December 31, 2019			Charges ^(a)		Payments				Other			June 30, 2020
TV Entertainment		$	99	$	75		$	(41	)	$	—			$	133
Cable Networks		137		135			(85		)	(6		)		181
Filmed Entertainment		17		11			(5		)	2				25
Publishing		4		2			(2		)	(1		)		3
Corporate		143		67			(80		)	(9		)		121
Total		$	400	$	290		$	(213	)	$	(14	)		$	463

(a) Excludes stock-based compensation expense of $46 million.

Merger-related Costs and Other Corporate Matters

During the three and six months ended June 30, 2020, in addition to the above-mentioned restructuring charges, we incurred merger-related costs of $10 million and $41 million, respectively, consisting of transaction-related bonuses and professional fees mainly associated with integration activities. In addition, we recorded a charge of $14 million to write down property and equipment that has been classified as held for sale to its fair value less costs to sell at June 30, 2020. During the three and six months ended June 30, 2019, we incurred costs of $7 million and $57 million, respectively, consisting of costs associated with legal proceedings involving the Company and for the six-month period, the settlement of a commercial dispute.

Impairment Charges

We perform a fair value-based impairment test of goodwill and intangible assets with indefinite lives, comprised primarily of television FCC licenses, on an annual basis, and also between annual tests if an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its carrying value. During the second quarter of 2020, we assessed the relevant factors that could impact the fair value of our reporting units and indefinite-lived intangible assets, including the effects of COVID-19, and determined that an interim impairment test was necessary for three markets in which we hold FCC licenses. The impairment test indicated that the estimated fair values of FCC licenses in two markets were lower than their respective carrying values, which resulted from recent declines in industry projections in the markets where these FCC licenses are held, that were further accelerated by COVID-19. Accordingly, during the three and six months ended June 30, 2020, we recorded an impairment charge of $25 million to write down the carrying values of these FCC licenses to their aggregate estimated fair value of $216 million. This charge is included within “Depreciation and amortization” in the Consolidated Statement of Operations and was recorded within the TV Entertainment segment. Additionally, the estimated fair value of the FCC license in the third market exceeded its carrying value of $53 million at June 30, 2020 by 7%.

The impairment tests were performed using the Greenfield Discounted Cash Flow Method, which estimates the fair value of FCC licenses by valuing a hypothetical start-up station using industry projections in the relevant market and assuming the station builds up to average market share over a five-year period. Discounted cash flows for this period are added to a residual value, which is calculated using a long-term growth rate based on projected long-range inflation and industry projections. The estimated fair values of FCC licenses are highly dependent on the assumptions of future economic conditions in the individual geographic markets in which we own and operate television stations. A decline in revenue projections, or an increase in the cost of capital, could result in a downward revision to the fair values of our FCC licenses.

Accelerated Depreciation

Also, during the six months ended June 30, 2020, we recorded accelerated depreciation expense of $12 million resulting from the abandonment of technology in connection with synergy plans related to the Merger, which is recorded in “Depreciation and amortization” in the Consolidated Statement of Operations.