VZC Verizon Comms

 
TIDMVZC 
 
Verizon Reports Fifth Consecutive Quarter of Double-Digit Operating Income and 
                                Earnings Growth 
 
NEW YORK, April 24, 2014 -- 
 
                               1Q 2014 HIGHLIGHTS 
 
Consolidated 
 
  * $1.15 in earnings per share (EPS) and 84 cents in adjusted EPS (non-GAAP), 
    excluding net non-operational gains and losses - compared with 68 cents in 
    both reported and adjusted EPS in 1Q 2013. 
 
Wireless 
 
  * 7.5 percent year-over-year increase in service revenues; 6.7 percent 
    year-over-year increase in retail service revenues; 35.0 percent operating 
    income margin; 52.1 percent segment EBITDA margin on service revenues 
    (non-GAAP). 
  * Added 549,000 net retail connections, including 539,000 net retail postpaid 
    connections; low retail postpaid churn of 1.07 percent; 103.3 million total 
    retail connections; 97.3 million total retail postpaid connections. 
 
Wireline 
 
  * 6.2 percent year-over-year increase in consumer revenues; consumer ARPU 
    (average revenue per user) up 11.3 percent year over year. 
  * 15.5 percent year-over-year increase in FiOS revenues; 98,000 FiOS Internet 
    and 57,000 FiOS Video net additions. 
 
Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported its fifth 
consecutive quarter of double-digit percentage growth in operating income and 
earnings per share. First-quarter 2014 results included the impact of 
February's close of the $130 billion transaction to acquire full ownership of 
Verizon Wireless. 
 
Lowell McAdam, Verizon chairman and CEO, said: "Verizon has delivered 
double-digit earnings growth in eight of the past nine quarters, and in 
first-quarter 2014 we posted our strongest consolidated revenue growth in five 
quarters. With the wireless transaction now behind us, we have great confidence 
in our ability to sustain these strong results. 
 
"We are already seeing the expected earnings accretion from the transaction," 
McAdam added. "The full access we now have to the significant cash flows of 
Verizon Wireless is energizing our efforts to provide customers with product 
and service innovations and to enable powerful solutions to some of the world's 
biggest challenges." 
 
Verizon reported $1.15 in EPS in first-quarter 2014, compared with 68 cents per 
share in first-quarter 2013. First-quarter 2014 results included an after-tax 
gain of approximately $1.9 billion (55 cents per share) related to the sale of 
Verizon's minority interest in Vodafone Omnitel as part of the wireless 
transaction, and charges of $575 million (17 cents per share) related to debt 
redemption and $260 million (8 cents per share) in interest and financing costs 
related to the wireless transaction. 
 
On an adjusted basis (non-GAAP), Verizon reported EPS of 84 cents in 
first-quarter 2014, compared with 68 cents per share in first-quarter 2013 - an 
increase of 23.5 percent. 
 
With the transaction to acquire full ownership of Verizon Wireless closing on 
Feb. 21, Verizon's first-quarter 2014 results only include five weeks of the 
full results of Verizon Wireless. On a non-GAAP, illustrative basis, adjusted 
EPS of 84 cents would have been 91 cents per share assuming 100 percent 
ownership of Verizon Wireless and all shares issued in the transaction were 
outstanding for the full quarter. 
 
    Consolidated Results Highlighted by Top-Line Growth, Margin Expansion 
 
With continued solid operational execution and revenue growth across all 
strategic areas - Verizon Wireless, FiOS and strategic enterprise services - 
Verizon delivered consolidated top-line growth and margin expansion in 
first-quarter 2014. 
 
Consolidated Highlights 
 
  * Driven by wireless and FiOS services, total operating revenues in 
    first-quarter 2014 were $30.8 billion, a 4.8 percent increase compared with 
    first-quarter 2013 and the company's highest quarterly growth rate in the 
    past five quarters. 
  * Continued effective cost management drove first-quarter 2014 operating 
    income to $7.2 billion, a 15.1 percent increase compared with first-quarter 
    2013. 
  * Consolidated operating income margin was 23.2 percent for first-quarter 
    2014, compared with 21.1 percent for first-quarter 2013. Consolidated 
    EBITDA margin (non-GAAP, based on earnings before interest, taxes, 
    depreciation and amortization) was 36.7 percent for first-quarter 2014, 
    compared with 35.1 percent for first-quarter 2013. 
  * Cash flow from operating activities totaled $7.1 billion in the quarter, 
    compared with $7.5 billion in first-quarter 2013. First-quarter 2014 cash 
    flow included an incremental $1.3 billion in interest payments and $200 
    million in pension funding that the company did not have in first-quarter 
    2013. Capital expenditures totaled $4.15 billion in first-quarter 2014, and 
    the company continues to target full-year investments in the range of $16.5 
    billion to $17 billion, with a decrease in capital spending as a percentage 
    of total revenues. 
  * Free cash flow (non-GAAP, cash flow from operations less capital 
    expenditures) totaled $3.0 billion in first-quarter 2014, compared with 
    $3.9 billion in first-quarter 2013. With full ownership of Verizon 
    Wireless, Verizon retains 100 percent - rather than 55 percent - of the 
    Verizon Wireless free cash flow. On a comparable basis, free cash flow 
    available to Verizon Communications was approximately $1.4 billion higher 
    in first-quarter 2014 than in first-quarter 2013, assuming all free cash 
    flow at Verizon Wireless had been distributed to the partners. 
 
    Verizon Wireless Delivers Strong Profitability and Customer, Revenue Growth 
 
In first-quarter 2014, Verizon Wireless delivered strong growth in retail 
postpaid net additions and revenues, an increase in smartphone penetration, and 
continued high segment EBITDA margin on service revenues (non-GAAP). 
 
Wireless Financial Highlights 
 
  * Total revenues were $20.9 billion in first-quarter 2014, up 6.9 percent 
    year over year. Service revenues in the quarter totaled $18.0 billion, up 
    7.5 percent year over year. Retail service revenues grew 6.7 percent year 
    over year, to $17.2 billion. 
  * Retail postpaid ARPA (average revenue per account) increased 6.3 percent 
    over first-quarter 2013, to $159.67 per month. 
  * In first-quarter 2014, wireless operating income margin was 35.0 percent 
    and segment EBITDA margin on service revenues was 52.1 percent. This 
    compares with 32.9 percent and 50.4 percent, respectively, in first-quarter 
    2013. 
 
Wireless Operational Highlights 
 
  * Verizon Wireless added 549,000 retail net connections, including 539,000 
    retail postpaid net connections, in the first quarter. These additions 
    exclude acquisitions and adjustments. 
  * At the end of the first quarter, the company had 103.3 million retail 
    connections, including 97.3 million retail postpaid connections, a 4.4 
    percent increase year over year. 
  * Verizon Wireless had 35.1 million retail postpaid accounts at the end of 
    the first quarter, a 0.3 percent increase over first-quarter 2013, and 2.77 
    connections per account, up 3.7 percent year over year. 
  * At the end of the first quarter, smartphones accounted for more than 72 
    percent of the Verizon Wireless retail postpaid customer phone base, up 
    from 70 percent at year-end 2013. 
  * Retail postpaid churn was 1.07 percent in the first quarter, up 6 basis 
    points year over year. Retail churn was 1.37 percent in the first quarter, 
    up 7 basis points year over year. 
  * The company continued to enhance its 4G LTE smartphone lineup. In the first 
    quarter, Verizon Wireless launched the Nokia Lumia Icon and the HTC One 
    (M8). The company also launched the following tablets: the Nexus 7, the LG 
    G Pad 8.3 LTE, the Samsung Galaxy Note Pro and the Samsung Galaxy Note 10.1 
    2014 edition. Earlier this month, Verizon Wireless launched the Samsung 
    Galaxy S 5 and ATIV SE, the Lucid 3 by LG and the DROID MAXX by Motorola 
    16GB. 
  * Verizon Wireless was the network performance leader in the rankings of 
    wireless providers in the United States in the first Root Metrics National 
    RootScore Report, issued in March. Verizon Wireless was the leader in the 
    state rankings with wins or ties for first place for overall performance in 
    45 states. 
 
                    Wireline Consumer Revenue Growth Remains Strong 
 
Verizon's wireline segment reported continued strong results for consumer 
services, where year-over-year quarterly revenues now have grown by more than 4 
percent for seven consecutive quarters. 
 
Wireline Financial Highlights 
 
  * In first-quarter 2014, consumer revenues were $3.8 billion, an increase of 
    6.2 percent compared with first-quarter 2013. Consumer ARPU for wireline 
    services increased to $120.17 in first-quarter 2014, up 11.3 percent 
    compared with first-quarter 2013. 
  * Representing 74 percent of total consumer revenues, FiOS consumer revenues 
    grew 14.6 percent year over year, and total FiOS revenues grew 15.5 percent 
    over the same periods. For the first time, total quarterly FiOS revenues 
    surpassed $3 billion in first-quarter 2014. 
  * Wireline operating income margin was 1.5 percent in first-quarter 2014, up 
    from 0.1 percent in first-quarter 2013. Segment EBITDA margin (non-GAAP) 
    was 22.3 percent in first-quarter 2014, compared with 21.4 percent in 
    first-quarter 2013. 
  * Sales of strategic services to global enterprise customers increased 1.8 
    percent compared with first-quarter 2013. Strategic services include 
    private IP, Ethernet, data center, cloud, security and managed services. 
 
Wireline Operational Highlights 
 
  * In first-quarter 2014, Verizon added 98,000 net new FiOS Internet 
    connections and 57,000 net new FiOS Video connections. Verizon had totals 
    of 6.2 million FiOS Internet and 5.3 million FiOS Video connections at the 

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