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Restructuring, Impairment, and Other Corporate Matters

9 Months Ended

Sep. 30, 2020

Restructuring, Impairment, and Other Corporate Matters

4) RESTRUCTURING, IMPAIRMENT AND OTHER CORPORATE MATTERS

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Severance	$	30	$	47	$	334	$	145
Exit costs	5		(19)		37		11
Restructuring charges	35		28		371		156
Merger-related costs	10		94		51		94
Other corporate matters	7		—		21		57
Restructuring and other corporate matters	$	52	$	122	$	443	$	307

Impairment charges	$	—	$	—	$	25	$	—

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

Restructuring Charges

During the three and nine months ended September 30, 2020, we recorded restructuring charges of $35 million and $371 million, respectively, associated with cost-transformation initiatives in connection with the Merger in an effort to reduce redundancies across our businesses. These charges primarily consist of severance costs, including the accelerated vesting of stock-based compensation. During the three months ended September 30, 2019, we recorded restructuring charges of $28 million primarily for severance costs in connection with the Merger. During the nine months ended September 30, 2019, we recorded restructuring charges of $156 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, and the aforementioned severance costs in connection with the Merger. Included in restructuring charges for the three and nine months ended September 30, 2020 and the nine months ended September 30, 2019 were costs resulting from the termination of contractual obligations and charges associated with the exit of leases. Restructuring charges for the three and nine months ended September 30, 2019 also included an adjustment to a previously recognized liability associated with the exit of a lease.

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 September 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		September 30, 2020
TV Entertainment		$	99	$	83		$	(82)	$	(11)		$	89
Cable Networks		137		141			(122)		(11)			145
Filmed Entertainment		17		19			(8)		—			28
Publishing		4		2			(2)		(2)			2
Corporate		143		65			(104)		(8)			96
Total		$	400	$	310		$	(318)	$	(32)		$	360

(a) Excludes stock-based compensation expense of $51 million and lease asset impairments of $10 million.

Merger-related Costs and Other Corporate Matters

During the three and nine months ended September 30, 2020, in addition to the above-mentioned restructuring charges, we incurred merger-related costs of $10 million and $51 million, respectively, consisting of professional fees mainly associated with integration activities, as well as transaction-related bonuses for the nine-month period.

In addition, during the three and nine months ended September 30, 2020, we incurred costs of $6 million in connection with planned dispositions, and for the nine months ended September 30, 2020, we recorded a charge of $15 million to write down property and equipment that has been classified as held for sale to its fair value less costs to sell. During the three and nine months ended September 30, 2019, we incurred costs of $94 million in connection with the Merger, consisting of contractual executive compensation, including the accelerated vesting of stock-based compensation, that was triggered by the Merger, as well as financial advisory, legal and other professional fees. Additionally, during the nine months ended September 30, 2019, we incurred costs of $57 million in connection with the settlement of a commercial dispute and legal proceedings involving the Company.

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, 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 for the nine months ended September 30, 2020, 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 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.

During the third quarter of 2020, we performed an annual goodwill impairment test for two of our reporting units, and, in connection with the classification of CMG as held for sale (see Note 2), we performed interim goodwill impairment tests of the CBS Interactive reporting unit both before and after the change to this reporting unit. Based on the qualitative assessments performed on each of these reporting units, considering the aggregation of the relevant factors, we concluded that it is not more likely than not that the fair value of each of these reporting units is less than their respective carrying amounts, and therefore performing quantitative impairment tests was unnecessary.

Accelerated Depreciation

During the nine months ended September 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.