Summary
Verizon Communications Inc. (VZ) announced significant financial impacts expected in its fourth quarter of 2018. The company anticipates recording substantial charges related to a voluntary separation program for management employees and a significant goodwill impairment charge for its Media business (formerly Oath). These items will notably affect reported earnings for the quarter, though some are non-cash charges. Additionally, Verizon expects to benefit from a deferred tax gain stemming from an internal reorganization of its wireless legal entities. Investors should pay close attention to the magnitude of these charges and benefits, as they represent significant adjustments to the company's financial performance for the period and provide insights into the strategic outlook for its Media segment.
Key Highlights
- 1Verizon expects a severance charge of $1.8 billion to $2.1 billion ($1.3 billion to $1.6 billion after-tax) due to a voluntary separation program affecting approximately 10,400 U.S. management employees.
- 2A significant non-cash goodwill impairment charge of approximately $4.6 billion ($4.5 billion after-tax) is anticipated for the Media business (Oath) due to increased competitive and market pressures, and lower-than-expected integration benefits from Yahoo and AOL.
- 3Revised financial projections for the Media business, influenced by new leadership and a strategic review, were a key input for the goodwill impairment test.
- 4Verizon expects to recognize a non-recurring deferred tax benefit of approximately $2.1 billion in the fourth quarter of 2018.
- 5This tax benefit is a result of an internal reorganization of legal entities associated with Verizon's wireless business.
- 6The company anticipates these events will impact its reported financial results for the fourth quarter of 2018.