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
end of the first quarter, representing year-over-year increases of 9.9
percent and 8.7 percent, respectively.
* FiOS Internet penetration (subscribers as a percentage of potential
subscribers) was 39.7 percent at the end of first-quarter 2014, compared
with 38.2 percent at the end of first-quarter 2013. In the same periods,
FiOS Video penetration was 35.0 percent, compared with 34.1 percent. The
FiOS network passed 18.9 million premises by the end of first-quarter 2014.
* By the end of first-quarter 2014, 51 percent of consumer FiOS Internet
customers subscribed to FiOS Quantum, which provides speeds ranging from 50
to 500 megabits per second, up from 46 percent at year-end 2013.
* Broadband connections totaled more than 9.0 million at the end of
first-quarter 2014, a 1.5 percent year-over-year increase. Net broadband
connections increased by 16,000 in first-quarter 2014, as FiOS Internet net
additions more than offset declines in DSL-based High Speed Internet
connections.
* Verizon has been replacing high-maintenance portions of its residential
copper network with fiber optics to provide enhanced services and to reduce
ongoing repair costs. In first-quarter 2014, Verizon migrated an additional
78,000 customers from copper.
* In the first quarter, Verizon Enterprise Solutions began deploying
innovative cloud, security, M2M (machine-to-machine), networking and other
technology solutions for a variety of clients around the globe, including
Kaiser Permanente, Molina Healthcare, Forest Pharmaceuticals, National DCP,
American First Credit Union, Schindler Elevator, Sally Beauty Holdings, TE
Connectivity, National Oceanic and Atmospheric Administration (NOAA),
Mitsuba Corporation, State of Delaware, Alcatel-Lucent and Oracle. In
addition, it added Oracle, SAP, Hitachi Data Systems Corporation and
CloudBees to the growing number of leading technology companies that will
offer services on Verizon's next-generation cloud computing and cloud
storage platform, Verizon Cloud.
Other Guidance and Outlook Items
Verizon continues to target consolidated top-line growth of 4 percent and
adjusted consolidated EBITDA margin expansion in 2014, with positive
contributions to profitable growth from both wireless and wireline.
In wireless, pricing under Verizon Edge - which makes it easy for customers to
buy a new smartphone with a low upfront cost and affordable monthly payments -
had minimal impact on first-quarter 2014 ARPA and EBITDA margin. Continued Edge
adoption will likely have a greater impact on service revenue growth in
subsequent quarters, as service revenues shift to equipment revenues.
Verizon reiterates guidance of increases in wireless and wireline EBITDA and
EBITDA margin in 2014.
NOTE: See the accompanying schedules and www.verizon.com/investor for
reconciliations to generally accepted accounting principles (GAAP) for non-GAAP
financial measures cited in this document.
Verizon Communications Inc. (NYSE, Nasdaq: VZ), headquartered in New York, is a
global leader in delivering broadband and other wireless and wireline
communications services to consumer, business, government and wholesale
customers. Verizon Wireless operates America's most reliable wireless network,
with more than 103 million retail connections nationwide. Verizon also provides
converged communications, information and entertainment services over America's
most advanced fiber-optic network, and delivers integrated business solutions
to customers in more than 150 countries. A Dow 30 company with more than $120
billion in 2013 revenues, Verizon employs a diverse workforce of 176,900. For
more information, visit www.verizon.com.
VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches and
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Forward-Looking Statements
In this communication we have made forward-looking statements. These statements
are based on our estimates and assumptions and are subject to risks and
uncertainties. Forward-looking statements include the information concerning
our possible or assumed future results of operations. Forward-looking
statements also include those preceded or followed by the words "anticipates,"
"believes," "estimates," "hopes" or similar expressions. For those statements,
we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. The
following important factors, along with those discussed in our filings with the
Securities and Exchange Commission (the "SEC"), could affect future results and
could cause those results to differ materially from those expressed in the
forward-looking statements: the ability to realize the expected benefits of our
transaction with Vodafone in the timeframe expected or at all; an adverse
change in the ratings afforded our debt securities by nationally accredited
ratings organizations or adverse conditions in the credit markets affecting the
cost, including interest rates, and/or availability of further financing;
significantly increased levels of indebtedness as a result of the Vodafone
transaction; changes in tax laws or treaties, or in their interpretation;
adverse conditions in the U.S. and international economies; material adverse
changes in labor matters, including labor negotiations, and any resulting
financial and/or operational impact; material changes in technology or
technology substitution; disruption of our key suppliers' provisioning of
products or services; changes in the regulatory environment in which we
operate, including any increase in restrictions on our ability to operate our
networks; breaches of network or information technology security, natural
disasters, terrorist attacks or acts of war or significant litigation and any
resulting financial impact not covered by insurance; the effects of competition
in the markets in which we operate; changes in accounting assumptions that
regulatory agencies, including the SEC, may require or that result from changes
in the accounting rules or their application, which could result in an impact
on earnings; significant increases in benefit plan costs or lower investment
returns on plan assets; and the inability to implement our business strategies.
Verizon Communications Inc.
Condensed Consolidated Statements of Income
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/14 3/31/13 % Change
Operating Revenues $ 30,818 $ 29,420 4.8
Operating Expenses
Cost of services and sales 11,189 10,932 2.4
Selling, general and administrative expense 8,332 8,148 2.3
Depreciation and amortization expense 4,137 4,118 0.5
Total Operating Expenses 23,658 23,198 2.0
Operating Income 7,160 6,222 15.1
Equity in earnings of unconsolidated
businesses 1,902 (5) *
Other income and (expense), net (894) 39 *
Interest expense (1,214) (537) *
Income Before Provision for Income Taxes 6,954 5,719 21.6
Provision for income taxes (968) (864) 12.0
Net Income $ 5,986 $ 4,855 23.3
Net income attributable to
noncontrolling interests $ 2,039 2,903 (29.8)
Net income attributable to Verizon 3,947 1,952 *
Net Income $ 5,986 $ 4,855 23.3
Basic Earnings per Common Share
Net income attributable to Verizon $ 1.15 $ .68 69.1
Weighted average number of common
shares (in millions) 3,425 2,866
Diluted Earnings per Common Share (1)
Net income attributable to Verizon $ 1.15 $ .68 69.1
Weighted average number of common
shares-assuming dilution (in millions) 3,430 2,872
Footnotes:
(1) Diluted Earnings per Common Share includes the dilutive effect of shares
issuable under our stock-based compensation plans, which represents the
only potential dilution.
Certain reclassifications have been made, where appropriate, to reflect
comparable operating results.
* Not meaningful
Verizon Communications Inc.
Condensed Consolidated Balance Sheets
(dollars in millions)
Unaudited 3/31/14 12/31/13 $ Change
Assets
Current assets
Cash and cash equivalents $ 2,907 $ 53,528 $ (50,621)
Short-term investments 637 601 36
Accounts receivable, net 12,131 12,439 (308)
Inventories 881 1,020 (139)
Prepaid expenses and other 6,716 3,406 3,310
Total current assets 23,272 70,994 (47,722)
Plant, property and equipment 223,841 220,865 2,976
Less accumulated depreciation 134,785 131,909 2,876
89,056 88,956 100
Investments in unconsolidated
businesses 889 3,432 (2,543)
Wireless licenses 72,713 75,747 (3,034)
Goodwill 24,647 24,634 13
Other intangible assets, net 5,839 5,800 39
Other assets 5,146 4,535 611
Total Assets $ 221,562 $ 274,098 $ (52,536)
Liabilities and Equity
Current liabilities
Debt maturing within one year $ 2,152 $ 3,933 $ (1,781)
Accounts payable and accrued
liabilities 14,984 16,453 (1,469)
Other 8,217 6,664 1,553
Total current liabilities 25,353 27,050 (1,697)
Long-term debt 107,617 89,658 17,959
Employee benefit obligations 26,977 27,682 (705)
Deferred income taxes 41,597 28,639 12,958
Other liabilities 6,167 5,653 514
Equity
Common stock 424 297 127
Contributed capital 10,976 37,939 (26,963)
Reinvested earnings 3,534 1,782 1,752
Accumulated other comprehensive
income 1,290 2,358 (1,068)
Common stock in treasury, at cost (3,794) (3,961) 167
Deferred compensation - employee
stock ownership plans and other 281 421 (140)
Noncontrolling interests 1,140 56,580 (55,440)
Total equity 13,851 95,416 (81,565)
Total Liabilities and Equity $ 221,562 $ 274,098 $ (52,536)
Verizon - Selected Financial and Operating Statistics
Unaudited 3/31/14 12/31/13
Total debt (in millions) $ 109,769 $ 93,591
Net debt (in millions) $ 106,862 $ 40,063
Net debt / Adjusted EBITDA (1) 2.5x 1.0x
Common shares outstanding end
of period (in millions) 4,141 2,862
Total employees 176,900 176,800
Quarterly cash dividends
declared per common share $ 0.530 $ 0.530
Footnotes:
(1) Adjusted EBITDA excludes the effects of non-operational items.
The unaudited condensed consolidated balance sheets are based on
preliminary information.
Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/14 3/31/13 $ Change
Cash Flows From Operating Activities
Net Income $ 5,986 $ 4,855 $ 1,131
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and
amortization expense 4,137 4,118 19
Employee retirement benefits 281 295 (14)
Deferred income taxes (155) 878 (1,033)
Provision for uncollectible accounts 231 260 (29)
Equity in earnings of unconsolidated
businesses, net of dividends received (1,894) 14 (1,908)
Changes in current assets and
liabilities, net of effects from
acquisition/disposition of businesses (1,626) (1,491) (135)
Other, net 179 (1,398) 1,577
Net cash provided by operating activities 7,139 7,531 (392)
Cash Flows From Investing Activities
Capital expenditures (including
capitalized software) (4,150) (3,602) (548)
Acquisitions of investments and
businesses, net of cash acquired (157) (21) (136)
Acquisitions of wireless licenses, net (213) (117) (96)
Other, net (11) 141 (152)
Net cash used in investing activities (4,531) (3,599) (932)
Cash Flows From Financing Activities
Proceeds from long-term borrowings 16,952 500 16,452
Repayments of long-term borrowings
and capital lease obligations (7,951) (73) (7,878)
Increase in short-term obligations,
excluding current maturities 252 581 (329)
Dividends paid (1,517) (1,472) (45)
Proceeds from sale of common stock 34 56 (22)
Purchase of common stock for treasury - (153) 153
Acquisition of noncontrolling interest (58,886) - (58,886)
Other, net (2,113) (989) (1,124)
Net cash used in financing activities (53,229) (1,550) (51,679)
Increase (decrease) in cash
and cash equivalents (50,621) 2,382 (53,003)
Cash and cash equivalents, beginning
of period 53,528 3,093 50,435
Cash and cash equivalents, end of period $ 2,907 $ 5,475 $ (2,568)
Verizon Communications Inc.
Wireless - Selected Financial Results
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/14 3/31/13 % Change
Operating Revenues
Retail service $ 17,246 $ 16,169 6.7
Other service 741 559 32.6
Service 17,987 16,728 7.5
Equipment 1,870 1,813 3.1
Other 1,022 982 4.1
Total Operating Revenues 20,879 19,523 6.9
Operating Expenses
Cost of services and sales 5,856 5,651 3.6
Selling, general and administrative expense 5,644 5,448 3.6
Depreciation and amortization expense 2,061 2,006 2.7
Total Operating Expenses 13,561 13,105 3.5
Operating Income $ 7,318 $ 6,418 14.0
Operating Income Margin 35.0% 32.9%
Segment EBITDA $ 9,379 $ 8,424 11.3
Segment EBITDA Service Margin 52.1% 50.4%
Footnotes:
The segment financial results and metrics above are adjusted to exclude the
effects of non-operational items, as the Company's chief operating decision
maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
Certain reclassifications have been made, where appropriate, to reflect
comparable operating results.
Verizon Communications Inc.
Wireless - Selected Operating Statistics
Unaudited 3/31/14 3/31/13 % Change
Connections ('000)
Retail postpaid 97,273 93,186 4.4
Retail prepaid 6,057 5,744 5.4
Retail 103,330 98,930 4.4
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/14 3/31/13 % Change
Net Add Detail ('000)(1)
Retail postpaid 539 677 (20.4)
Retail prepaid 10 43 (76.7)
Retail 549 720 (23.8)
Account Statistics
Retail Postpaid Accounts ('000)(2) 35,061 34,943 0.3
Retail postpaid ARPA $ 159.67 $ 150.27 6.3
Retail postpaid connections per
account (2) 2.77 2.67 3.7
Churn Detail
Retail postpaid 1.07% 1.01%
Retail 1.37% 1.30%
Retail Postpaid Connection Statistics
Total Smartphone postpaid % of
phones activated 90.1% 84.3%
Total Smartphone postpaid
phone base (2) 72.3% 61.4%
Total Internet postpaid base (2) 11.3% 9.6%
Other Operating Statistics
Capital expenditures (in millions) $ 2,554 $ 1,992 28.2
Footnotes:
(1) Connection net additions exclude acquisitions and adjustments.
(2) Statistics presented as of end of period.
The segment financial results and metrics above are adjusted to exclude
the effects of non-operational items, as the Company's chief operating
decision maker excludes these items in assessing business unit
performance.
Intersegment transactions have not been eliminated.
Certain reclassifications have been made, where appropriate, to reflect
comparable operating results.
Verizon Communications Inc.
Wireline - Selected Financial Results
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/14 3/31/13 % Change
Operating Revenues
Consumer retail $ 3,840 $ 3,616 6.2
Small business 624 638 (2.2)
Mass Markets 4,464 4,254 4.9
Strategic services 2,110 2,073 1.8
Core 1,496 1,697 (11.8)
Global Enterprise 3,606 3,770 (4.4)
Global Wholesale 1,591 1,699 (6.4)
Other 129 107 20.6
Total Operating Revenues 9,790 9,830 (0.4)
Operating Expenses
Cost of services and sales 5,459 5,457 -
Selling, general and
administrative expense 2,151 2,265 (5.0)
Depreciation and amortization
expense 2,033 2,095 (3.0)
Total Operating Expenses 9,643 9,817 (1.8)
Operating Income $ 147 $ 13 *
Operating Income Margin 1.5% 0.1%
Segment EBITDA $ 2,180 $ 2,108 3.4
Segment EBITDA Margin 22.3% 21.4%
Footnotes:
The segment financial results and metrics above are adjusted to exclude
the effects of non-operational items, as the Company's chief operating
decision maker excludes these items in assessing business unit
performance.
Intersegment transactions have not been eliminated.
Certain reclassifications have been made, where appropriate, to reflect
comparable operating results.
* Not meaningful
Verizon Communications Inc.
Wireline - Selected Operating Statistics
Unaudited 3/31/14 3/31/13 % Change
Connections ('000)
FiOS Video Subscribers 5,319 4,895 8.7
FiOS Internet Subscribers 6,170 5,612 9.9
FiOS Digital Voice residence connections 4,350 3,531 23.2
FiOS Digital connections 15,839 14,038 12.8
HSI 2,861 3,282 (12.8)
Total Broadband connections 9,031 8,894 1.5
Primary residence switched
access connections 6,224 7,593 (18.0)
Primary residence connections 10,574 11,124 (4.9)
Total retail residence voice connections 11,048 11,725 (5.8)
Total voice connections 20,733 22,191 (6.6)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/14 3/31/13 % Change
Net Add Detail ('000)
FiOS Video Subscribers 57 169 (66.3)
FiOS Internet Subscribers 98 188 (47.9)
FiOS Digital Voice residence connections 102 304 (66.4)
FiOS Digital connections 257 661 (61.1)
HSI (82) (89) (7.9)
Total Broadband connections 16 99 (83.8)
Primary residence switched
access connections (257) (389) (33.9)
Primary residence connections (155) (85) 82.4
Total retail residence voice connections (181) (124) 46.0
Total voice connections (352) (312) 12.8
Revenue and ARPU Statistics
Consumer ARPU $ 120.17 $ 107.95 11.3
FiOS revenues (in millions) $ 3,041 $ 2,633 15.5
Strategic services as a % of
total Enterprise revenues 58.5% 55.0%
Other Operating Statistics
Capital expenditures (in millions) $ 1,385 $ 1,434 (3.4)
Wireline employees ('000) 80.9 85.2
FiOS Video Open for Sale ('000) 15,184 14,374
FiOS Video penetration 35.0% 34.1%
FiOS Internet Open for Sale ('000) 15,530 14,703
FiOS Internet penetration 39.7% 38.2%
Footnotes:
The segment financial results and metrics above are adjusted to exclude the
effects of non-operational items, as the Company's chief operating decision
maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
Certain reclassifications have been made, where appropriate, to reflect
comparable operating results.
Verizon Communications Inc.
Reconciliations - Consolidated Verizon
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/13 3/31/14
Consolidated Operating Revenues $ 29,420 $ 30,818
Adjusted EBITDA
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 3 Mos. Ended 3 Mos. Ended
Unaudited 6/30/12 9/30/12 12/31/12 3/31/13
Verizon Consolidated EBITDA
Consolidated net income (loss) $ 4,285 $ 4,292 $ (1,926) $ 4,855
Add / (Subtract):
Provision (benefit) for income taxes 793 631 (2,810) 864
Interest expense 679 632 575 537
Other (income) and expense, net (34) (10) 1,079 (39)
Equity in earnings of
unconsolidated businesses (72) (62) (87) 5
Operating income (loss) 5,651 5,483 (3,169) 6,222
Add Depreciation and amortization
expense 4,128 4,167 4,137 4,118
Consolidated EBITDA $ 9,779 $ 9,650 $ 968 $ 10,340
Other Items (Before Tax)
Severance, Pension, and Benefit
Charges (Credits) - - 7,186 -
Gain on Spectrum License
Transactions - - - -
Litigation Settlements - 384 - -
Other Non-Operational Costs - - 276 -
- 384 7,462 -
Consolidated Adjusted EBITDA $ 9,779 $ 10,034 $ 8,430 $ 10,340
Consolidated Operating Income Margin 21.1%
Consolidated EBITDA Margin 35.1%
3 Mos. Ended 3 Mos. Ended 3 Mos. Ended 3 Mos. Ended
Unaudited 6/30/13 9/30/13 12/31/13 3/31/14
Verizon Consolidated EBITDA
Consolidated net income (loss) $ 5,198 $ 5,578 $ 7,916 $ 5,986
Add / (Subtract):
Provision (benefit) for income taxes 988 1,034 2,844 968
Interest expense 514 555 1,061 1,214
Other (income) and expense, net (25) (20) 250 894
Equity in earnings of
unconsolidated businesses (120) (19) (8) (1,902)
Operating income (loss) 6,555 7,128 12,063 7,160
Add Depreciation and
amortization expense 4,151 4,154 4,183 4,137
Consolidated EBITDA $ 10,706 $ 11,282 $ 16,246 $ 11,297
Other Items (Before Tax)
Severance, Pension, and
Benefit Charges (Credits) (237) - (5,995) -
Gain on Spectrum License
Transactions - (278) - -
Litigation Settlements - - - -
Other Non-Operational Costs - - - -
(237) (278) (5,995) -
Consolidated Adjusted EBITDA $ 10,469 $ 11,004 $ 10,251 $ 11,297
Consolidated Operating Income Margin 23.2%
Consolidated EBITDA Margin 36.7%
Net Debt to Adjusted EBITDA Ratio
(dollars in millions)
Unaudited 3/31/13 12/31/13 3/31/14
Verizon Net Debt
Debt maturing within one year $ 10,888 $ 3,933 $ 2,152
Long-term debt 41,993 89,658 107,617
Total Debt 52,881 93,591 109,769
Less Cash and cash equivalents 5,475 53,528 2,907
Net Debt $ 47,406 $ 40,063 $ 106,862
Net Debt to Adjusted EBITDA Ratio 1.2x 1.0x 2.5x
Free Cash Flow
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/13 3/31/14 $ Change
Net cash provided by operating activities $ 7,531 $ 7,139
Less Capital expenditures 3,602 4,150
Free Cash Flow $ 3,929 $ 2,989
Less free cash flow attributable
to noncontrolling interest 2,404 -
Illustrative Free Cash Flow Attributable to Verizon $ 1,525 $ 2,989 $ 1,464
Verizon Communications Inc.
Reconciliations - Consolidated Verizon
Adjusted and Illustrative Net Income - Verizon (dollars in millions)
3 Mos. Ended
Unaudited 3/31/14
Reported Net Income attributable to Verizon $ 3,947
Wireless transaction costs 260
Early debt redemption costs 575
Gain on sale of Omnitel interest (1,888)
Adjusted Net Income 2,894
Income from Vodafone noncontrolling interest 1,183
Wireless transaction costs (267)
Elimination of Omnitel equity income (24)
Illustrative Net Income $ 3,786
Adjusted and Illustrative EPS
3 Mos. Ended 3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/13 12/31/13 3/31/14
Earnings Per Common Share, Reported $ 0.68 $ 1.76 $ 1.15
Severance, pension and benefit credits - (1.29) -
Early debt redemption costs - - 0.17
Wireless transaction costs - 0.19 0.08
Gain on sale of Omnitel interest - - (0.55)
Adjusted EPS $ 0.68 $ 0.66 $ 0.84
Income from Vodafone noncontrolling interest 0.29
Wireless transaction costs (0.06)
Elimination of Omnitel equity income (0.01)
Dilutive effect of share issuance (0.14)
Illustrative EPS $ 0.91
Note: EPS may not add due to rounding.
Verizon Communications Inc.
Reconciliations - Segments
Wireless
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/13 12/31/13 3/31/14
Wireless Segment EBITDA
Operating income $ 6,418 $ 6,229 $ 7,318
Add Depreciation and
amortization expense 2,006 2,089 2,061
Wireless Segment EBITDA $ 8,424 $ 8,318 $ 9,379
Wireless total operating revenues $ 19,523 $ 21,125 $ 20,879
Wireless service revenues $ 16,728 $ 17,711 $ 17,987
Wireless operating income margin 32.9% 29.5% 35.0%
Wireless Segment EBITDA service margin 50.4% 47.0% 52.1%
Wireline
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/13 12/31/13 3/31/14
Wireline Segment EBITDA
Operating income $ 13 $ 131 $ 147
Add Depreciation and
amortization expense 2,095 2,073 2,033
Wireline Segment EBITDA $ 2,108 $ 2,204 $ 2,180
Wireline total operating revenues $ 9,830 $ 9,845 $ 9,790
Wireline operating income margin 0.1% 1.3% 1.5%
Wireline Segment EBITDA margin 21.4% 22.4% 22.3%
SOURCE Verizon Communications, Inc.
CONTACT: Bob Varettoni, 908-559-6388, robert.a.varettoni@verizon.com, or Ray
McConville, 908-559-3504, raymond.mcconville@verizon.com