Severance and Leased Real Estate

12 Months Ended

Dec. 31, 2011

(7) Severance and Leased Real Estate

Periodically, we have reductions in our workforce and have accrued liabilities for related severance costs. These workforce reductions resulted primarily from the progression of our integration plans related to CenturyLink's acquisition of us, increased competitive pressures and reduced workload demands due to the loss of access lines.

We report severance liabilities within accrued expenses and other liabilities- salaries and benefits in our consolidated balance sheets and report severance expenses in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations.

In periods prior to CenturyLink's acquisition of us, we ceased using certain real estate that we were leasing under long-term operating leases. As of the April 1, 2011 acquisition date, we recorded liabilities to reflect our preliminary estimates of the fair values of the existing lease obligations for real estate for which we had ceased using, net of estimated sublease rentals. Our fair value estimates were determined using discounted cash flow methods. We recognize expense to reflect accretion of the discounted liabilities and periodically, we adjust the expense when our actual experience differs from our initial estimates. We report the current portion of liabilities for ceased-use real estate leases in accrued expenses and other liabilities and report the noncurrent portion in deferred credits and other liabilities in our consolidated balance sheets. We report the related expenses in selling, general and administrative expenses in our consolidated statements of operations.

As of the successor date of December 31, 2011 and the predecessor date of December 31, 2010, the current portion of our leased real estate accrual was $27 million and $28 million, respectively, and the long-term portion was $126 million and $195 million, respectively. The remaining lease terms range from 0.1 to 14.0 years, with a weighted average of 9.1 years.

Changes in our accrued liabilities for severance expenses and leased real estate were as follows:

	Severance

	(Dollars in millions)
Balance at January 1, 2010 (Predecessor)	$	77		247
Accrued to expense		70		20
Payments, net		(112	)	(32	)
Reversals and adjustments		(6	)	(12	)

Balance at December 31, 2010 (Predecessor)		29		223
Accrued to expense		4		4
Payments, net		(12	)	(12	)
Reversals and adjustments		(1	)	—

Balance at March 31, 2011 (Predecessor)		20		215



Fair value adjustment		(2	)	(47	)

Balance at April 1, 2011 (Successor)		18		168

Accrued to expense		120		15
Payments, net		(99	)	(21	)
Reversals and adjustments		(10	)	(9	)

Balance at December 31, 2011 (Successor)	$	29		153

Our severance expenses for the successor nine months ended December 31, 2011 also included $12 million of share-based compensation associated with the accelerated vesting of stock awards that occurred in connection with workforce reductions relating to CenturyLink's acquisition of us.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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