EX-99 2 d569459dex99.htm EXHIBIT 99 Exhibit 99

Exhibit 99

NEWS RELEASE

 

  

LOGO

 

FOR IMMEDIATE RELEASE

July 18, 2013

  

Media contacts:

Jim Gerace

212-395-2355

james.gerace@verizon.com

 

Bob Varettoni

908-559-6388

robert.a.varettoni@verizon.com

Verizon Reports Double-Digit Earnings Growth in 2Q 2013

Strategic Investments in 4G LTE, FiOS and Global Networks Continue to

Drive Strong Growth in Revenues, Earnings and Cash Flow

2Q 2013 HIGHLIGHTS

Consolidated

 

 

78 cents in earnings per share (EPS), including a non-operational gain of 5 cents per share related to pensions, compared with 64 cents per share in 2Q 2012.

 

 

73 cents in adjusted EPS (non-GAAP), a 14.1 percent increase compared with 2Q 2012.

Wireless

 

 

8.3 percent year-over-year increase in service revenues in 2Q 2013; 7.8 percent increase in retail service revenues; 32.4 percent operating income margin and 49.8 percent segment EBITDA margin on service revenues (non-GAAP).

 

 

941,000 retail postpaid net additions, up 6 percent year over year; low retail postpaid churn of 0.93 percent; 100.1 million total retail connections, 94.3 million total retail postpaid connections.

 

 

4G LTE service now available to 301 million people in 500 markets across the U.S.


Verizon News Release, page 2

 

Wireline

 

 

4.7 percent year-over-year increase in consumer revenues; consumer ARPU (average revenue per user) up 9.4 percent year over year, to $109.67.

 

 

14.7 percent year-over-year increase in FiOS revenues; 161,000 FiOS Internet and 140,000 FiOS Video net additions, including the addition of the 5 millionth FiOS Video customer, with continued increased sales penetration for both services.

 

 

4.8 percent year-over-year increase in revenues for global enterprise strategic services.

NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported year-over-year double-digit percentage growth in operating income and earnings per share, as second-quarter 2013 results showed continued strong operating performance and customer demand for Verizon Wireless, FiOS and strategic enterprise services.

Verizon reported 78 cents in EPS in second-quarter 2013, compared with 64 cents per share in second-quarter 2012. Second-quarter 2013 results include a non-cash, non-operational gain of 5 cents per share for an interim actuarial remeasurement associated with one of Verizon’s pension plans.

Adjusted second-quarter 2013 earnings of 73 cents per share increased 14.1 percent, compared with 64 cents per share in second-quarter 2012, when there were no adjustments.

“Verizon’s consistent strategic investments in wireless, FiOS and global networks drove strong financial performance in the first half of 2013,” said Lowell McAdam, Verizon chairman and CEO. “Having now posted double-digit earnings growth in five of the last six quarters, we are focused on continuing to provide the best portfolio of products on the most reliable networks; capturing incremental revenue growth in broadband, video and cloud services; and sustaining our earnings and cash-flow momentum.”


Verizon News Release, page 3

 

Consolidated Results Reflect Continued Profitable Growth

In second-quarter 2013, Verizon’s consolidated results were highlighted by continued strong operating performance and profitable growth based on operating efficiencies and customer demand.

Consolidated Highlights

 

   

Total operating revenues in second-quarter 2013 were $29.8 billion, a 4.3 percent increase compared with second-quarter 2012.

 

   

Operating income increased 16.0 percent, to $6.6 billion in second-quarter 2013, compared with $5.7 billion in second-quarter 2012. Operating income margin was 22.0 percent in second-quarter 2013, compared with 19.8 percent in second-quarter 2012.

 

   

Consolidated EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) grew 9.5 percent year over year, totaling $10.7 billion in second-quarter 2013. EBITDA margin (non-GAAP) expanded to 35.9 percent in second-quarter 2013, up 170 basis points year over year.

 

   

Cash flow from operating activities totaled $17.1 billion in first-half 2013, compared with $15.3 billion in first-half 2012. Capital expenditures in first-half 2013 were $7.6 billion, compared with $7.4 billion in first-half 2012. Free cash flow (non-GAAP, cash flow from operations less capital expenditures) in first-half 2013 totaled $9.5 billion, compared with $7.8 billion in first-half 2012.

Verizon is increasing its capital spending guidance from $16.2 billion to between $16.4 billion and $16.6 billion for full-year 2013, as the company anticipates higher demand for wireless data consumption and begins deployment of AWS (advanced wireless services) spectrum in second-half 2013.

Verizon Wireless Delivers Another Strong Quarter

In second-quarter 2013, Verizon Wireless delivered solid growth in retail postpaid net additions and revenues; an increase in smartphone penetration; and a strong segment EBITDA margin on service revenues (non-GAAP).


Verizon News Release, page 4

 

Wireless Financial Highlights

 

   

Total revenues were $20.0 billion in second-quarter 2013, up 7.5 percent year over year. Service revenues in the quarter totaled $17.1 billion, up 8.3 percent year over year. Retail service revenues grew 7.8 percent year over year, to $16.4 billion.

 

   

Retail postpaid ARPA (average revenue per account) increased 6.4 percent over second-quarter 2012, to $152.50 per month.

 

   

In second-quarter 2013, wireless operating income margin was 32.4 percent, compared with 30.8 percent in second-quarter 2012. Segment EBITDA margin on service revenues was 49.8 percent, up 80 basis points over second-quarter 2012.

Wireless Operational Highlights

 

   

Verizon Wireless added 941,000 retail postpaid net connections, out of a total 1.0 million net retail connections, in the second quarter. These additions exclude acquisitions and adjustments. Verizon expects to continue to see increases in quarterly sequential net additions for retail postpaid connections in the second half of 2013.

 

   

At the end of the second quarter, the company had 100.1 million retail connections, a 6.3 percent increase year over year -- including 94.3 million retail postpaid connections.

 

   

With more than 36 percent of retail postpaid accounts now on a Share Everything Plan, which allows customers to share data among multiple devices, Verizon Wireless had 35 million retail postpaid accounts at the end of the second quarter. This is an average of 2.7 connections per account.

 

   

At the end of the second quarter, smartphones accounted for more than 64 percent of the Verizon Wireless retail postpaid customer phone base, up from 61 percent at the end of first-quarter 2013.

 

   

Retail postpaid churn was 0.93 percent in the second quarter, up 9 basis points year over year. Retail churn was 1.23 percent in the second quarter, up 12 basis points year over year.

 

   

As of the end of June, Verizon Wireless has substantially completed deployment of its 4G LTE network, covering more than 99 percent of its current 3G network footprint. In the second quarter, the company activated 4G LTE data service in Alaska, resulting in Verizon Wireless 4G LTE service being available in all 50 states. The Verizon Wireless 4G LTE network is now available in 500 markets to more than 95 percent of the U.S. population and covers about 301 million people, including those in areas served by the company’s LTE in Rural America partners.

 

   

The company continued to enhance its 4G LTE smartphone device lineup. In the second quarter, Verizon Wireless launched the Pantech Perception, the Nokia Lumia 928, the Casio G’zOne Commando 4G LTE, the Blackberry Q10 and the Samsung Galaxy S4. The company has also announced the HTC One would be available later this summer.


Verizon News Release, page 5

 

Wireline Reports Another Quarter of Strong FiOS Customer and Revenue Growth

Verizon’s Wireline segment reported another quarter of FiOS customer, market share and revenue growth, leading to continued growth in consumer revenues. In enterprise and wholesale, sales of global enterprise strategic services continued to increase and constitute a larger percentage of the revenue base.

Wireline Financial Highlights

 

   

Consumer revenues were $3.6 billion, an increase of 4.7 percent compared with second-quarter 2012. Consumer ARPU for wireline services increased to $109.67 in second-quarter 2013, up 9.4 percent compared with second-quarter 2012.

 

   

FiOS revenues grew 14.7 percent, to $2.7 billion in second-quarter 2013, compared with $2.4 billion in second-quarter 2012. ARPU for FiOS customers continued to be more than $150 in second-quarter 2013.

 

   

Sales of strategic services to global enterprise customers increased 4.8 percent compared with second-quarter 2012 and represented 57 percent of total enterprise revenues, compared with 52 percent in second-quarter 2012. Strategic services include cloud and data center services, security and IT solutions, advanced communications, strategic networking and telematics services.

Wireline Operational Highlights

 

   

Verizon added 161,000 net new FiOS Internet connections and 140,000 net new FiOS Video connections in second-quarter 2013. Verizon had a total of 5.8 million FiOS Internet and 5.0 million FiOS Video connections at the end of the quarter, representing year-over-year increases of 12.2 percent and 12.6 percent, respectively.

 

   

FiOS penetration (subscribers as a percentage of potential subscribers) continued to increase. FiOS Internet penetration was 38.6 percent at the end of second-quarter 2013, compared with 36.6 percent at the end of second-quarter 2012. In the same periods, FiOS Video penetration was 34.5 percent, compared with 32.6 percent. The FiOS network passed 18.0 million premises by the end of second-quarter 2013.

 

   

By the end of second-quarter 2013, 35 percent of FiOS Internet customers subscribed to FiOS Quantum, which provides speeds ranging from 50 to 300 megabits per second.

 

   

Broadband connections totaled 8.9 million at the end of second-quarter 2013, a 1.9 percent year-over-year increase. Overall, net broadband customers increased 45,000 in the second quarter, as FiOS Internet net customer additions more than offset a decline in subscribers for DSL-based High Speed Internet services.


Verizon News Release, page 6

 

   

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-half 2013, Verizon migrated 169,000 homes to fiber, toward a target of 300,000 migrations within FiOS markets in 2013.

 

   

Verizon Enterprise Solutions completed agreements with and began deploying innovative business technology solutions for a variety of corporations and organizations around the globe in the quarter, including American Tower, the Australian Federal Police and its client agencies, d’Amico Societa di Navigazione, the District of Columbia, Kohn Pedersen and Fox Associates, Marathon Petroleum Corporation, Panviva and Veolia Environnement.

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 100 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, including all of the Fortune 500. A Dow 30 company with nearly $116 billion in 2012 revenues, Verizon employs a diverse workforce of 180,900. For more information, visit www.verizon.com.

####

VERIZON’S ONLINE NEWS CENTER: Verizon news releases, executive speeches and biographies, media contacts and other information are available at Verizon’s online News Center at newscenter.verizon.com. The news releases are available through an RSS feed. To subscribe, visit newscenter.verizon.com/corporate/feeds.

NOTE: This presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. 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 could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: adverse conditions in the U.S. and international economies; competition in our markets; material changes in available technology or technology substitution; disruption of our key suppliers’ provisioning of products or services; changes in the regulatory environments 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 significant litigation and any resulting financial impact not covered by insurance; 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 financing; changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could affect earnings; material adverse changes in labor matters, including labor negotiations, and any resulting financial and/or operational impact; 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)

 

Unaudited

   3 Mos. Ended
6/30/13
    3 Mos. Ended
6/30/12
    % Change     6 Mos. Ended
6/30/13
    6 Mos. Ended
6/30/12
    % Change  

Operating Revenues

   $     29,786      $     28,552        4.3      $     59,206      $     56,794        4.2   

Operating Expenses

            

Cost of services and sales

     11,033        10,896        1.3        21,965        22,215        (1.1

Selling, general and administrative expense

     8,047        7,877        2.2        16,195        15,577        4.0   

Depreciation and amortization expense

     4,151        4,128        0.6        8,269        8,156        1.4   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     23,231        22,901        1.4        46,429        45,948        1.0   
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

     6,555        5,651        16.0        12,777        10,846        17.8   

Equity in earnings of unconsolidated businesses

     120        72        66.7        115        175        (34.3

Other income, net

     25        34        (26.5     64        53        20.8   

Interest expense

     (514     (679     (24.3     (1,051     (1,364     (22.9
  

 

 

   

 

 

     

 

 

   

 

 

   
Income Before Provision for Income Taxes      6,186        5,078        21.8        11,905        9,710        22.6   

Provision for income taxes

     (988     (793     24.6        (1,852     (1,519     21.9   
  

 

 

   

 

 

     

 

 

   

 

 

   

Net Income

   $       5,198      $       4,285        21.3      $     10,053      $       8,191        22.7   
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income attributable to noncontrolling interests

   $       2,952      $       2,460        20.0      $       5,855      $       4,680        25.1   

Net income attributable to Verizon

     2,246        1,825        23.1        4,198        3,511        19.6   
  

 

 

   

 

 

     

 

 

   

 

 

   
Net Income    $       5,198      $       4,285        21.3      $     10,053      $       8,191        22.7   
  

 

 

   

 

 

     

 

 

   

 

 

   

Basic Earnings per Common Share

            

Net income attributable to Verizon

   $ .78      $           .64        21.9      $ 1.46      $         1.23        18.7   

Weighted average number of common shares (in millions)

     2,865        2,849          2,866        2,846     

Diluted Earnings per Common Share (1)

            

Net income attributable to Verizon

   $ .78      $           .64        21.9      $ 1.46      $         1.23        18.7   

Weighted average number of common
shares-assuming dilution (in millions)

     2,872        2,858          2,873        2,854     

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.


Verizon Communications Inc.

Condensed Consolidated Balance Sheets

(dollars in millions)

 

Unaudited

   6/30/13     12/31/12     $ Change  

Assets

      

Current assets

      

Cash and cash equivalents

     $      1,788        $      3,093        $    (1,305

Short-term investments

     618        470        148   

Accounts receivable, net

     12,216        12,576        (360

Inventories

     1,040        1,075        (35

Prepaid expenses and other

     6,295        4,021        2,274   
  

 

 

   

 

 

   

 

 

 

Total current assets

     21,957        21,235        722   
  

 

 

   

 

 

   

 

 

 

Plant, property and equipment

     215,224        209,575        5,649   

Less accumulated depreciation

     126,892        120,933        5,959   
  

 

 

   

 

 

   

 

 

 
     88,332        88,642        (310
  

 

 

   

 

 

   

 

 

 

Investments in unconsolidated businesses

     3,319        3,401        (82

Wireless licenses

     75,825        77,744        (1,919

Goodwill

     24,336        24,139        197   

Other intangible assets, net

     5,776        5,933        (157

Other assets

     3,801        4,128        (327
  

 

 

   

 

 

   

 

 

 

Total Assets

     $  223,346        $  225,222        $    (1,876
  

 

 

   

 

 

   

 

 

 

Liabilities and Equity

      

Current liabilities

      

Debt maturing within one year

     $      7,961        $      4,369        $      3,592   

Accounts payable and accrued liabilities

     14,671        16,182        (1,511

Other

     6,559        6,405        154   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     29,191        26,956        2,235   
  

 

 

   

 

 

   

 

 

 

Long-term debt

     41,791        47,618        (5,827

Employee benefit obligations

     33,835        34,346        (511

Deferred income taxes

     25,696        24,677        1,019   

Other liabilities

     5,677        6,092        (415

Equity

      

Common stock

     297        297        —     

Contributed capital

     37,895        37,990        (95

Accumulated deficit

     (2,483     (3,734     1,251   

Accumulated other comprehensive income

     1,994        2,235        (241

Common stock in treasury, at cost

     (3,974     (4,071     97   

Deferred compensation - employee stock ownership plans and other

     332        440        (108

Noncontrolling interests

     53,095        52,376        719   
  

 

 

   

 

 

   

 

 

 

Total equity

     87,156        85,533        1,623   
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

     $  223,346        $  225,222        $    (1,876
  

 

 

   

 

 

   

 

 

 

Verizon – Selected Financial and Operating Statistics

 

Unaudited

   6/30/13      12/31/12  

Total debt (in millions)

     $    49,752         $    51,987   

Net debt (in millions)

     $    47,964         $    48,894   

Net debt / Adjusted EBITDA (1)

     1.2x         1.3x   

Common shares outstanding end of period (in millions)

     2,862         2,859   

Total employees

     180,900         183,400   

Quarterly cash dividends declared per common share

     $    0.5150         $    0.5150   

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)

 

Unaudited

   6 Mos. Ended
6/30/13
    6 Mos. Ended
6/30/12
    $ Change  

Cash Flows From Operating Activities

      

Net Income

     $   10,053        $     8,191        $     1,862   

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation and amortization expense

     8,269        8,156        113   

Employee retirement benefits

     354        751        (397

Deferred income taxes

     1,812        1,237        575   

Provision for uncollectible accounts

     507        521        (14

Equity in earnings of unconsolidated businesses, net of dividends received

     (95     (149     54   

Changes in current assets and liabilities, net of effects from
acquisition/disposition of businesses

     (1,660     (1,136     (524

Other, net

     (2,092     (2,300     208   
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     17,148        15,271        1,877   
  

 

 

   

 

 

   

 

 

 

Cash Flows From Investing Activities

      

Capital expenditures (including capitalized software)

     (7,616     (7,430     (186

Acquisitions of investments and businesses, net of cash acquired

     (76     (203     127   

Acquisitions of wireless licenses, net

     (264     (33     (231

Net change in short-term investments

     (21     21        (42

Other, net

     142        61        81   
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (7,835     (7,584     (251
  

 

 

   

 

 

   

 

 

 

Cash Flows From Financing Activities

      

Proceeds from long-term borrowings

     499        —          499   

Repayments of long-term borrowings and capital lease obligations

     (2,330     (1,891     (439

Decrease in short-term obligations, excluding current maturities

     (432     (887     455   

Dividends paid

     (2,946     (2,587     (359

Proceeds from sale of common stock

     74        210        (136

Purchase of common stock for treasury

     (153     —          (153

Special distribution to noncontrolling interests

     (3,150     (4,500     1,350   

Other, net

     (2,180     (1,393     (787
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (10,618     (11,048     430   
  

 

 

   

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (1,305     (3,361     2,056   

Cash and cash equivalents, beginning of period

     3,093        13,362        (10,269
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

     $     1,788        $   10,001        $    (8,213
  

 

 

   

 

 

   

 

 

 


Verizon Communications Inc.

Wireless – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/13
    3 Mos. Ended
6/30/12
    % Change     6 Mos. Ended
6/30/13
    6 Mos. Ended
6/30/12
    % Change  

Operating Revenues

            

Retail service

     $  16,422        $  15,230        7.8        $  32,591        $  30,116        8.2   

Other service

     656        546        20.1        1,215        1,070        13.6   
  

 

 

   

 

 

     

 

 

   

 

 

   

Service

     17,078        15,776        8.3        33,806        31,186        8.4   

Equipment

     1,953        1,768        10.5        3,766        3,606        4.4   

Other

     945        1,033        (8.5     1,927        2,058        (6.4
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     19,976        18,577        7.5        39,499        36,850        7.2   
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services and sales

     5,799        5,558        4.3        11,450        11,468        (0.2

Selling, general and administrative expense

     5,666        5,295        7.0        11,114        10,523        5.6   

Depreciation and amortization expense

     2,047        2,011        1.8        4,053        3,929        3.2   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     13,512        12,864        5.0        26,617        25,920        2.7   
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

     $    6,464        $    5,713        13.1        $  12,882        $  10,930        17.9   

Operating Income Margin

     32.4     30.8       32.6     29.7  

Segment EBITDA

     $    8,511        $    7,724        10.2        $  16,935        $  14,859        14.0   

Segment EBITDA Service Margin

     49.8     49.0       50.1     47.6  

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

   6/30/13      6/30/12      % Change  

Connections (‘000)

        

Retail postpaid

     94,271         88,838         6.1   

Retail prepaid

     5,853         5,316         10.1   
  

 

 

    

 

 

    

Retail

     100,124         94,154         6.3   

 

Unaudited

   3 Mos. Ended
6/30/13
    3 Mos. Ended
6/30/12
    % Change     6 Mos. Ended
6/30/13
    6 Mos. Ended
6/30/12
    % Change  

Net Add Detail (‘000) (1)

            

Retail postpaid

     941        888        6.0        1,618        1,389        16.5   

Retail prepaid

     97        290        (66.6     140        523        (73.2
  

 

 

   

 

 

     

 

 

   

 

 

   

Retail

     1,038        1,178        (11.9     1,758        1,912        (8.1

Account Statistics

            

Retail Postpaid Accounts (‘000) (2)

           34,958        34,646        0.9   

Retail postpaid ARPA

     $  152.50        $  143.32        6.4        $  151.39        $  141.95        6.7   

Retail postpaid connections per account (2)

           2.70        2.56        5.5   

Churn Detail

            

Retail postpaid

     0.93     0.84       0.97     0.90  

Retail

     1.23     1.11       1.27     1.18  

Retail Postpaid Connection Statistics

            

Total Smartphone postpaid % of phones activated

     84.4     71.6       84.3     71.3  

Total Smartphone postpaid phone base (2)

           64.4     49.7  

Total Internet postpaid base (2)

           9.9     8.5  

Other Operating Statistics

            

Capital expenditures (in millions)

     $    2,278        $    2,048        11.2        $    4,270        $    3,933        8.6   

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)

 

Unaudited

   3 Mos. Ended
6/30/13
    3 Mos. Ended
6/30/12
    % Change     6 Mos. Ended
6/30/13
    6 Mos. Ended
6/30/12
    % Change  

Operating Revenues

            

Consumer retail

     $    3,643        $    3,478        4.7        $    7,232        $    6,919        4.5   

Small business

     648        667        (2.8     1,299        1,329        (2.3
  

 

 

   

 

 

     

 

 

   

 

 

   

Mass Markets

     4,291        4,145        3.5        8,531        8,248        3.4   

Strategic services

     2,079        1,983        4.8        4,166        3,952        5.4   

Core

     1,557        1,837        (15.2     3,223        3,720        (13.4
  

 

 

   

 

 

     

 

 

   

 

 

   

Global Enterprise

     3,636        3,820        (4.8     7,389        7,672        (3.7

Global Wholesale

     1,686        1,827        (7.7     3,413        3,688        (7.5

Other

     121        139        (12.9     231        268        (13.8
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     9,734        9,931        (2.0     19,564        19,876        (1.6
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services and sales

     5,407        5,500        (1.7     10,864        11,072        (1.9

Selling, general and administrative expense

     2,168        2,141        1.3        4,433        4,267        3.9   

Depreciation and amortization expense

     2,085        2,102        (0.8     4,180        4,192        (0.3
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     9,660        9,743        (0.9     19,477        19,531        (0.3
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

     $         74        $       188        (60.6     $         87        $       345        (74.8

Operating Income Margin

     0.8     1.9       0.4     1.7  

Segment EBITDA

     $    2,159        $    2,290        (5.7     $    4,267        $    4,537        (6.0
Segment EBITDA Margin      22.2     23.1       21.8     22.8  

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.

Wireline – Selected Operating Statistics

 

Unaudited

   6/30/13      6/30/12      % Change  

Connections (‘000)

        

FiOS Video Subscribers

     5,035         4,473         12.6   

FiOS Internet Subscribers

     5,773         5,144         12.2   

FiOS Digital Voice residence connections

     3,817         2,648         44.1   
  

 

 

    

 

 

    

FiOS Digital connections

     14,625         12,265         19.2   

HSI

     3,166         3,632         (12.8

Total Broadband connections

     8,939         8,776         1.9   

Primary residence switched access connections

     7,200         8,843         (18.6

Primary residence connections

     11,017         11,491         (4.1

Total retail residence voice connections

     11,583         12,222         (5.2

Total voice connections

     21,828         23,278         (6.2

 

Unaudited

   3 Mos. Ended
6/30/13
    3 Mos. Ended
6/30/12
    % Change     6 Mos. Ended
6/30/13
    6 Mos. Ended
6/30/12
    % Change  

Net Add Detail (‘000)

            

FiOS Video Subscribers

     140        120        16.7        309        300        3.0   

FiOS Internet Subscribers

     161        134        20.1        349        327        6.7   

FiOS Digital Voice residence connections

     286        350        (18.3     590        764        (22.8
  

 

 

   

 

 

     

 

 

   

 

 

   

FiOS Digital connections

     587        604        (2.8     1,248        1,391        (10.3

HSI

     (116     (132     (12.1     (205     (221     (7.2

Total Broadband connections

     45        2        *        144        106        35.8   

Primary residence switched access connections

     (393     (501     (21.6     (782     (1,063     (26.4

Primary residence connections

     (107     (151     (29.1     (192     (299     (35.8

Total retail residence voice connections

     (142     (199     (28.6     (266     (404     (34.2

Total voice connections

     (363     (422     (14.0     (675     (859     (21.4

Revenue and ARPU Statistics

            

Consumer ARPU

     $  109.67        $  100.26        9.4        $  108.46        $    99.70        8.8   

FiOS revenues (in millions)

     $    2,731        $    2,380        14.7        $    5,364        $    4,668        14.9   

Strategic services as a % of total Enterprise revenues

     57.2     51.9       56.4     51.5  

Other Operating Statistics

            

Capital expenditures (in millions)

     $    1,515        $    1,596        (5.1     $    2,949        $    3,133        (5.9

Wireline employees (‘000)

           84.7        88.6     

FiOS Video Open for Sale (‘000)

           14,607        13,721     

FiOS Video penetration

           34.5     32.6  

FiOS Internet Open for Sale (‘000)

           14,943        14,044     

FiOS Internet penetration

           38.6     36.6  

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.

Reconciliations – Verizon

(dollars in millions)

 

Unaudited

   

3 Mos. Ended
6/30/12

   

 

    3 Mos. Ended
6/30/13
 

Consolidated Operating Revenues

       $  28,552              $  29,786   
Adjusted EBITDA             
             (dollars in millions)   

Unaudited

   3  Mos.
Ended
3/31/12
    3  Mos.
Ended
6/30/12
    3  Mos.
Ended
9/30/12
    3  Mos.
Ended
12/31/12
    3  Mos.
Ended
3/31/13
    3  Mos.
Ended
6/30/13
 

Verizon Consolidated EBITDA

            

Consolidated net income (loss)

     $    3,906        $    4,285        $    4,292        $    (1,926     $      4,855        $      5,198   

Add / (Subtract):

            

Provision (benefit) for income taxes

     726        793        631        (2,810     864        988   

Interest expense

     685        679        632        575        537        514   

Other (income) and expense, net

     (19     (34     (10     1,079        (39     (25

Equity in earnings of unconsolidated businesses

     (103     (72     (62     (87     5        (120
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     5,195        5,651        5,483        (3,169     6,222        6,555   

Add Depreciation and amortization expense

     4,028        4,128        4,167        4,137        4,118        4,151   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Consolidated EBITDA      $    9,223        $    9,779        $    9,650        $        968        $    10,340        $    10,706   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Items (Before Tax)

            

Severance, Pension, and Benefit Charges/(Credits)

     —          —          —          7,186        —          (237

Litigation Settlements

     —          —          384        —          —          —     

Other Non-Operational Costs

     —          —          —          276        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          —          384        7,462        —          (237
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Adjusted EBITDA

     $    9,223        $    9,779        $  10,034        $      8,430        $    10,340        $    10,469   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Operating Income Margin

       19.8           22.0

Consolidated EBITDA Margin

       34.2           35.9

Net Debt to Adjusted EBITDA Ratio

(dollars in millions)

 

Unaudited

   12/31/12      6/30/13  

Verizon Net Debt

     

Debt maturing within one year

     $    4,369         $    7,961   

Long-term debt

     47,618         41,791   
  

 

 

    

 

 

 
Total Debt      51,987         49,752   

Less Cash and cash equivalents

     3,093         1,788   
  

 

 

    

 

 

 
Net Debt      $  48,894         $  47,964   
  

 

 

    

 

 

 

Net Debt to Adjusted EBITDA Ratio

     1.3x         1.2x   
  

 

 

    

 

 

 


Adjusted EPS

 

Unaudited

  3 Mos. Ended
6/30/2013
 

Earnings Per Common Share, Reported

      $    0.78   

Severance, Pension, and Benefit Credits

      (0.05
   

 

 

 
Adjusted EPS       $    0.73   
   

 

 

 

Free Cash Flow

(dollars in millions)

 

Unaudited

   6 Mos. Ended
6/30/12
     6 Mos. Ended
6/30/13
 

Net cash provided by operating activities

        $    15,271         $    17,148   

Less Capital expenditures

        7,430         7,616   
  

 

  

 

 

    

 

 

 

Free Cash Flow

        $      7,841         $      9,532   
  

 

  

 

 

    

 

 

 

Verizon Communications Inc.

Reconciliations – Segments

Wireless

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/12
    3 Mos. Ended
6/30/13
    6 Mos. Ended
6/30/12
    6 Mos. Ended
6/30/13
 

Wireless Segment EBITDA

        

Operating income

     $      5,713        $      6,464        $    10,930        $    12,882   

Add Depreciation and amortization expense

     2,011        2,047        3,929        4,053   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireless Segment EBITDA

     $      7,724        $      8,511        $    14,859        $    16,935   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireless total operating revenues

     $    18,577        $    19,976        $    36,850        $    39,499   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireless service revenues

     $    15,776        $    17,078        $    31,186        $    33,806   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireless operating income margin

     30.8     32.4     29.7     32.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireless Segment EBITDA service margin

     49.0     49.8     47.6     50.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/12
    3 Mos. Ended
6/30/13
    6 Mos. Ended
6/30/12
    6 Mos. Ended
6/30/13
 

Wireline Segment EBITDA

        

Operating income

     $       188        $         74        $         345        $           87   

Add Depreciation and amortization expense

     2,102        2,085        4,192        4,180   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline Segment EBITDA

     $    2,290        $    2,159        $      4,537        $      4,267   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline total operating revenues

     $    9,931        $    9,734        $    19,876        $    19,564   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline operating income margin

     1.9     0.8     1.7     0.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline Segment EBITDA margin

     23.1     22.2     22.8     21.8