EX-99 2 d323479dex99.htm EX-99 EX-99

Exhibit 99

LOGO 1

News Release

 

FOR IMMEDIATE RELEASE    Media contact:
January 24, 2017    Bob Varettoni
   908.559.6388
   robert.a.varettoni@verizon.com

Verizon grows its strong customer base profitably in 4Q

4Q 2016 highlights

 

 

Consolidated: $1.10 in earnings per share (EPS); adjusted EPS (non-GAAP) of 86 cents, excluding non-operational items related to mark-to-market pension and benefits adjustments and severance-related costs.

 

 

Wireless: 591,000 retail postpaid net additions, including 552,000 new 4G LTE smartphones; retail postpaid churn at 1.10 percent, with strong customer loyalty demonstrated by retail postpaid phone churn of less than 0.90 percent for the seventh consecutive quarter.

 

 

Wireline: 68,000 Fios Internet net additions, 21,000 Fios Video net additions; Fios total revenue growth of 4.4 percent.

NEW YORK – As Verizon Communications Inc. (NYSE, Nasdaq: VZ) continues to transform its business and enter new markets, the company today reported another strong quarter of wireless profitability and customer loyalty, and customer and revenue growth for Fios fiber-optic services.

Verizon reported fourth-quarter 2016 EPS of $1.10, and full-year EPS of $3.21. Adjusted fourth-quarter 2016 EPS (non-GAAP) of 86 cents excluded 24 cents in net gains related to mark-to-market pension and OPEB (other post-employment benefits) adjustments and severance-related costs. This compares with adjusted fourth-quarter 2015 earnings of 89 cents per share, which primarily excluded pension and OPEB adjustments and severance-related costs.

“We are positioning Verizon for future growth and continued sustainable shareholder value,” said Chairman and CEO Lowell McAdam. “In the fourth quarter we expanded our customer base in highly


competitive wireless and broadband markets. This capped a year in which we delivered solid results and returned value to shareholders, including $9.3 billion in dividends. We enter 2017 with confidence, based on our investments in next-generation networks and the new capabilities we have acquired. Our goal is to continue to earn our customers’ loyalty every day in a rapidly expanding mobile-first digital world.”

Consolidated results

Total consolidated operating revenues in fourth-quarter 2016 were $32.3 billion, a 5.6 percent decrease compared with fourth-quarter 2015. Full-year 2016 revenues were nearly $126.0 billion, a 4.3 percent decline. Excluding revenues from since-divested local landline businesses and AOL, adjusted full-year total operating revenues on a comparable basis (non-GAAP) would have declined approximately 2.4 percent.

Net income was $4.6 billion in fourth-quarter 2016, and net income margin was 14.2 percent. EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled $12.0 billion, and the consolidated EBITDA margin (non-GAAP) was 37.1 percent in fourth-quarter 2016.

During 2016, Verizon invested in its networks with $17.1 billion in capital expenditures, completed wireline divestitures of three markets, negotiated new labor contracts, executed successful technical trials of 5G wireless service and expanded its new growth businesses.

In these new markets the digital media business, led by AOL, generated $532 million in revenues net of traffic acquisition costs (non-GAAP) in fourth-quarter 2016. This declined about 5 percent year-over-year due to a revenue lift in fourth-quarter 2015 related to AOL’s Microsoft deal, but increased around 10 percent compared with third-quarter 2016.

IoT (Internet of Things) revenues, led by telematics, increased 21 percent on a comparable basis to fourth-quarter 2015, to $243 million. Verizon expects to sustain this trend in strong IoT revenue growth. Including acquisitions, IoT revenues increased more than 60 percent in fourth-quarter 2016.

Verizon Wireless highlights

 

   

Verizon reported 591,000 retail postpaid net additions in fourth-quarter 2016. These net additions exclude wholesale device and wholesale IoT connections. At year-end 2016, Verizon had 114.2 million retail connections, a 1.9 percent year-over-year increase. Verizon’s industry-leading retail postpaid connections base grew 2.1 percent to 108.8 million, and retail prepaid connections totaled 5.4 million. Full-year postpaid net additions of 2.3 million included 1.8 million 4G smartphones and 1.4 million 4G tablets, offset primarily by declines in basic phones and 3G smartphones.

 

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Total revenues were $23.4 billion in fourth-quarter 2016, a decline of 1.5 percent compared with fourth-quarter 2015, as more customers continued to choose unsubsidized device payment plans. For the full year, revenues totaled $89.2 billion, a decline of 2.7 percent. Service revenues plus device payment plan billings increased 1.7 percent in fourth-quarter 2016, compared with fourth-quarter 2015.

 

   

Retail postpaid churn was 1.10 percent in fourth-quarter 2016, a year-over-year increase of 14 basis points, as strong retention in the phone base was offset by increased churn in tablets. Phone customer loyalty remained high. In fourth-quarter 2016, retail postpaid phone churn remained below 0.90 percent for the seventh consecutive quarter.

 

   

At year-end 2016, approximately 67 percent of postpaid phone customers were on a non-subsidized service pricing plan, ahead of target due to high volumes in fourth-quarter 2016.

 

   

The percentage of phone activations on device payment plans increased to about 77 percent in fourth-quarter 2016, compared with about 70 percent in third-quarter 2016 and 67 percent in fourth-quarter 2015. Verizon expects the first-quarter 2017 take rate for device payment plans to be similar to fourth-quarter 2016. At year-end, approximately 46 percent of postpaid phone customers had a device payment plan.

 

   

The 591,000 retail postpaid net additions in fourth-quarter 2016 included 552,000 4G LTE smartphones. With declines in basic and 3G phones, net phone additions were 167,000 in fourth-quarter 2016, compared to a net decrease of 36,000 in third-quarter 2016. Tablet net additions totaled 196,000 in fourth-quarter 2016.

 

   

Segment operating income in fourth-quarter 2016 was $6.3 billion, and segment operating income margin was 27.0 percent. In fourth-quarter 2016, Verizon Wireless generated $8.6 billion in segment EBITDA (non-GAAP), a year-over-year decrease of 5.2 percent. Segment EBITDA margin on total revenues (non-GAAP) was 36.9 percent, compared with 38.4 percent in fourth-quarter 2015.

 

   

In fourth-quarter 2016, overall traffic on LTE increased by approximately 49 percent compared with fourth-quarter 2015, while Verizon extended its lead in the industry’s third-party network performance studies across the country.

Wireline highlights

 

   

Total wireline revenues decreased 3.1 percent, to $7.8 billion, comparing fourth-quarter 2016 with fourth-quarter 2015. Retail consumer revenues grew 0.2 percent, to $3.2 billion, supported by consumer Fios revenue growth.

 

   

Total Fios revenues grew 4.4 percent, to $2.9 billion, comparing fourth-quarter 2016 with fourth-quarter 2015. Full-year Fios revenues were $11.2 billion in 2016, a 4.6 percent increase compared with 2015.

 

   

In fourth-quarter 2016, Verizon added a net of 68,000 Fios Internet connections and 21,000 Fios Video connections. Customer demand for Custom TV continues to remain strong. At year-end, Verizon had 5.7 million Fios Internet connections and 4.7 million Fios Video connections.

 

   

In the fourth quarter, Verizon began offering consumer and business fiber-based services to customers in Boston, as part of the company’s One Fiber initiative.

 

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Wireline operating income was $414 million in fourth-quarter 2016, compared with $7 million in fourth-quarter 2015. Segment operating income margin was 5.3 percent in fourth-quarter 2016. Segment EBITDA (non-GAAP) was $1.9 billion in fourth-quarter 2016, up 17.7 percent from fourth-quarter 2015. Segment EBITDA margin (non-GAAP) was 24.1 percent in fourth-quarter 2016, compared with 19.8 percent in fourth-quarter 2015.

 

   

During the fourth quarter, Verizon Enterprise Solutions entered into new agreements, continued or completed work with a number of clients, including AECOM, ICICI Bank, LBC Tank Terminals Group, Nanyang Technological University and Target Corporation.

Outlook and forward-looking items

Verizon expects the following:

 

   

Full-year 2017 consolidated revenues, on an organic basis, to be fairly consistent with 2016, with improvement in wireless service revenue and equipment revenue trends; also, full-year 2017 consolidated adjusted EPS trends to be similar to consolidated revenue trends;

 

   

Consolidated capital spending for 2017 in the range of $16.8 billion to $17.5 billion;

 

   

Minimum pension funding requirements of approximately $600 million in 2017;

 

   

The 2017 effective tax rate to be in the range of 34 percent to 36 percent, excluding impacts from potential tax reform;

 

   

On track for a return by the 2018-2019 timeframe to the company’s credit-rating profile prior to the acquisition of Vodafone’s indirect 45 percent interest in Verizon Wireless in early 2014.

Regarding pending transactions, Verizon expects its acquisition of XO Communications to close in first-quarter 2017 and its sale of data centers to Equinix to close in second-quarter 2017. Regarding the Yahoo acquisition, Verizon continues to work with Yahoo to assess the impact of data breaches.

NOTE: See the accompanying schedules and www.verizon.com/about/investors 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 City, has a diverse workforce of 160,900 and generated nearly $126 billion in 2016 revenues. Verizon operates America’s most reliable wireless network, with 114.2 million retail connections nationwide. The company also provides communications and entertainment services over mobile broadband and the nation’s premier all-fiber network, and delivers integrated business solutions to customers worldwide.

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VERIZON’S ONLINE MEDIA CENTER: News releases, media contacts and other resources are available at www.verizon.com/about/news/. News releases are also available through an RSS feed. To subscribe, visit www.verizon.com/about/rss-feeds/.

 

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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: adverse conditions in the U.S. and international economies; the effects of competition in the markets in which we operate; 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; our high level of indebtedness; 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; 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; changes in tax laws or treaties, or in their interpretation; 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; the inability to implement our business strategies; and the inability to realize the expected benefits of strategic transactions.

Important additional information and where to find it

On September 9, 2016, Yahoo! Inc. (“Yahoo”) filed with the Securities and Exchange Commission (the “SEC”) a preliminary proxy statement regarding the proposed sale of Yahoo’s operating business to Verizon Communications Inc. (“Verizon”) and related transactions, and the definitive version of which will be sent or provided to Yahoo stockholders. BEFORE MAKING ANY VOTING DECISION, YAHOO’S STOCKHOLDERS ARE STRONGLY ADVISED TO READ YAHOO’S PROXY STATEMENT IN ITS ENTIRETY (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO WHEN THEY BECOME AVAILABLE) AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTIONS OR INCORPORATED BY REFERENCE THEREIN BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. Investors and stockholders can obtain a free copy of Yahoo’s proxy statement, any amendments or supplements to the proxy statement, and other documents filed by Yahoo with the SEC in connection with the proposed transactions for no charge at the SEC’s website at www.sec.gov, on the Investor Relations page of Yahoo’s website investor.yahoo.net or by writing to Investor Relations, Yahoo! Inc., 701 First Avenue, Sunnyvale, CA 94089. Yahoo and its directors and executive officers, as well as Verizon and its directors and executive officers, may be deemed participants in the solicitation of proxies from Yahoo’s investors and stockholders in connection with the proposed transactions. Information concerning the ownership of Yahoo securities by Yahoo’s directors and executive officers is included in their SEC filings on Forms 3, 4 and 5, and additional information is also available in Yahoo’s annual report on Form 10-K for the year ended December 31, 2015, as amended, and Yahoo’s proxy statement for its 2016 annual meeting of stockholders filed with the SEC on May 23, 2016. Information about Verizon’s directors and executive officers is set forth in Verizon’s annual report on Form 10-K for the year ended December 31, 2015 and Verizon’s proxy statement for its 2016 annual meeting of stockholders filed with the SEC on March 21, 2016. Information regarding Yahoo’s directors, executive officers and other persons who may, under the rules of the SEC, be considered participants in the solicitation of proxies in connection with the proposed transactions, including their respective interests by security holdings or otherwise, also will be set forth in the definitive proxy statement relating to the proposed transactions when it is filed with the SEC. These documents may be obtained free of charge from the sources indicated above.

 

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Verizon Communications Inc.

Condensed Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
12/31/15
    % Change     12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
    % Change  

Operating Revenues

            

Service revenues and other

    $   26,610       $   28,856        (7.8    $   108,468       $   114,696        (5.4

Wireless equipment revenues

     5,730        5,398        6.2        17,512        16,924        3.5   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     32,340        34,254        (5.6     125,980        131,620        (4.3
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services

     7,006        7,867        (10.9     29,186        29,438        (0.9

Wireless cost of equipment

     7,356        6,840        7.5        22,238        23,119        (3.8

Selling, general and administrative expense

     5,968        5,764        3.5        31,569        29,986        5.3   

Depreciation and amortization expense

     3,987        4,039        (1.3     15,928        16,017        (0.6
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     24,317        24,510        (0.8     98,921        98,560        0.4   
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

     8,023        9,744        (17.7     27,059        33,060        (18.2

Equity in losses of unconsolidated businesses

     (35     (16     *        (98     (86     14.0   

Other income and (expense), net

     98        28        *        (1,599     186        *   

Interest expense

     (1,137     (1,178     (3.5     (4,376     (4,920     (11.1
  

 

 

   

 

 

     

 

 

   

 

 

   

Income Before Provision for Income Taxes

     6,949        8,578        (19.0     20,986        28,240        (25.7

Provision for income taxes

     (2,349     (3,065     (23.4     (7,378     (9,865     (25.2
  

 

 

   

 

 

     

 

 

   

 

 

   

Net Income

    $   4,600       $   5,513        (16.6    $   13,608       $   18,375        (25.9
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income attributable to noncontrolling interests

    $   105       $   122        (13.9    $   481       $   496        (3.0

Net income attributable to Verizon

     4,495        5,391        (16.6     13,127        17,879        (26.6
  

 

 

   

 

 

     

 

 

   

 

 

   

Net Income

    $   4,600       $   5,513        (16.6    $   13,608       $   18,375        (25.9
  

 

 

   

 

 

     

 

 

   

 

 

   

Basic Earnings per Common Share

            

Net income attributable to Verizon

    $ 1.10       $   1.32        (16.7    $ 3.22       $   4.38        (26.5

Weighted average number of common shares (in millions)

     4,081        4,076          4,080        4,085     

Diluted Earnings per Common Share (1)

            

Net income attributable to Verizon

    $ 1.10       $   1.32        (16.7    $ 3.21       $   4.37        (26.5

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

     4,087        4,083          4,086        4,093     

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.

 

* Not meaningful


Verizon Communications Inc.

Condensed Consolidated Balance Sheets

(dollars in millions)

 

Unaudited

   12/31/16     12/31/15     $ Change  

Assets

      

Current assets

      

Cash and cash equivalents

    $   2,880       $   4,470       $   (1,590

Short-term investments

            350        (350

Accounts receivable, net

     17,513        13,457        4,056   

Inventories

     1,202        1,252        (50

Assets held for sale

     882        792        90   

Prepaid expenses and other

     3,918        2,034        1,884   
  

 

 

   

 

 

   

 

 

 

Total current assets

     26,395        22,355        4,040   
  

 

 

   

 

 

   

 

 

 

Plant, property and equipment

     232,215        220,163        12,052   

Less accumulated depreciation

     147,464        136,622        10,842   
  

 

 

   

 

 

   

 

 

 
     84,751        83,541        1,210   
  

 

 

   

 

 

   

 

 

 

Investments in unconsolidated businesses

     1,110        796        314   

Wireless licenses

     86,673        86,575        98   

Goodwill

     27,205        25,331        1,874   

Other intangible assets, net

     8,897        7,592        1,305   

Non-current assets held for sale

     613        10,267        (9,654

Other assets

     8,536        7,718        818   
  

 

 

   

 

 

   

 

 

 

Total Assets

    $   244,180       $   244,175       $   5   
  

 

 

   

 

 

   

 

 

 

Liabilities and Equity

      

Current liabilities

      

Debt maturing within one year

    $   2,645       $   6,489       $   (3,844

Accounts payable and accrued liabilities

     19,593        19,362        231   

Liabilities related to assets held for sale

     24        463        (439

Other

     8,078        8,738        (660
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     30,340        35,052        (4,712
  

 

 

   

 

 

   

 

 

 

Long-term debt

     105,433        103,240        2,193   

Employee benefit obligations

     26,166        29,957        (3,791

Deferred income taxes

     45,964        45,484        480   

Non-current liabilities related to assets held for sale

     6        959        (953

Other liabilities

     12,239        11,641        598   

Equity

      

Common stock

     424        424          

Contributed capital

     11,182        11,196        (14

Reinvested earnings

     15,059        11,246        3,813   

Accumulated other comprehensive income

     2,673        550        2,123   

Common stock in treasury, at cost

     (7,263     (7,416     153   

Deferred compensation - employee stock ownership plans and other

     449        428        21   

Noncontrolling interests

     1,508        1,414        94   
  

 

 

   

 

 

   

 

 

 

Total equity

     24,032        17,842        6,190   
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

    $   244,180       $   244,175       $   5   
  

 

 

   

 

 

   

 

 

 

Verizon – Selected Financial and Operating Statistics

  

Unaudited

    12/31/16     12/31/15  

Total debt (in millions)

      $   108,078       $   109,729   

Net debt (in millions)

      $   105,198       $   105,259   

Net debt / Adjusted EBITDA(1)

       2.4x        2.4x   

Common shares outstanding end of period (in millions)

       4,077        4,073   

Total employees (‘000)

       160.9        177.7   

Quarterly cash dividends declared per common share

      $   0.5775       $   0.5650   

Footnotes:

 

(1) Adjusted EBITDA excludes the effects of non-operational items and Divested Businesses.


Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)

 

Unaudited

   12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
    $ Change  

Cash Flows from Operating Activities

      

Net Income

    $   13,608       $   18,375       $   (4,767

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

      

Depreciation and amortization expense

     15,928        16,017        (89

Employee retirement benefits

     2,705        (1,747     4,452   

Deferred income taxes

     (1,063     3,516        (4,579

Provision for uncollectible accounts

     1,420        1,610        (190

Equity in losses of unconsolidated businesses, net of dividends received

     138        127        11   

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

     (5,636     2,443        (8,079

Other, net

     (4,385     (1,411     (2,974
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     22,715        38,930        (16,215
  

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities

      

Capital expenditures (including capitalized software)

     (17,059     (17,775     716   

Acquisitions of businesses, net of cash acquired

     (3,765     (3,545     (220

Acquisitions of wireless licenses

     (534     (9,942     9,408   

Proceeds from dispositions of businesses

     9,882        48        9,834   

Other, net

     493        1,171        (678
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (10,983     (30,043     19,060   
  

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities

      

Proceeds from long-term borrowings

     12,964        6,667        6,297   

Proceeds from asset-backed long-term borrowings

     4,986               4,986   

Repayments of long-term borrowings and capital lease obligations

     (19,159     (9,340     (9,819

Decrease in short-term obligations, excluding current maturities

     (149     (344     195   

Dividends paid

     (9,262     (8,538     (724

Proceeds from sale of common stock

     3        40        (37

Purchase of common stock for treasury

            (5,134     5,134   

Other, net

     (2,705     1,634        (4,339
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (13,322     (15,015     1,693   
  

 

 

   

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (1,590     (6,128     4,538   

Cash and cash equivalents, beginning of period

     4,470        10,598        (6,128
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

    $   2,880       $   4,470       $   (1,590
  

 

 

   

 

 

   

 

 

 


Verizon Communications Inc.

Wireless – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
12/31/15
    % Change     12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
    % Change  

Operating Revenues

            

Service

    $   16,346       $   17,195        (4.9    $   66,580       $   70,396        (5.4

Equipment

     5,733        5,398        6.2        17,515        16,924        3.5   

Other

     1,298        1,141        13.8        5,091        4,360        16.8   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     23,377        23,734        (1.5     89,186        91,680        (2.7
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services

     2,056        1,994        3.1        7,988        7,803        2.4   

Cost of equipment

     7,356        6,840        7.5        22,238        23,119        (3.8

Selling, general and administrative expense

     5,335        5,796        (8.0     19,924        21,805        (8.6

Depreciation and amortization expense

     2,321        2,305        0.7        9,183        8,980        2.3   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     17,068        16,935        0.8        59,333        61,707        (3.8
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

    $   6,309       $   6,799        (7.2    $   29,853       $   29,973        (0.4

Operating Income Margin

     27.0     28.6       33.5     32.7  

Segment EBITDA

    $   8,630       $   9,104        (5.2    $   39,036       $   38,953        0.2   

Segment EBITDA Margin

     36.9     38.4       43.8     42.5  

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.


Verizon Communications Inc.

Wireless – Selected Operating Statistics

 

Unaudited

    12/31/16     12/31/15     % Change  

Connections (‘000)

            

Retail postpaid

           108,796        106,528        2.1   

Retail prepaid

           5,447        5,580        (2.4
        

 

 

   

 

 

   

Total retail

           114,243        112,108        1.9   

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
12/31/15
    % Change     12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
    % Change  

Net Add Detail (‘000) (1)

            

Retail postpaid

     591        1,519        (61.1     2,288        4,507        (49.2

Retail prepaid

     (9     (157     (94.3     (133     (551     (75.9
  

 

 

   

 

 

     

 

 

   

 

 

   

Total retail

     582        1,362        (57.3     2,155        3,956        (45.5

Account Statistics

            

Retail Postpaid Accounts (‘000) (2)

           35,410        35,736        (0.9

Retail postpaid connections per account (2)

           3.07        2.98        3.0   

Retail Postpaid ARPA (3)

     141.89        148.30        (4.3     144.32        152.63        (5.4

Retail Postpaid I-ARPA (4)

     169.10        164.40        2.9        167.70        163.63        2.5   

Churn Detail

            

Retail postpaid

     1.10     0.96       1.01     0.96  

Retail

     1.34     1.23       1.26     1.24  

Retail Postpaid Connection Statistics

            

Total Smartphone postpaid % of phones activated

     95.2     93.7       93.4     92.1  

Total Smartphone postpaid phone base (2)

           87.3     83.7  

Total Internet postpaid base (2)

           18.3     16.8  

4G LTE devices as % of retails postpaid connections

           85.0     79.2  

Other Operating Statistics

            

Capital expenditures (in millions)

    $   3,464       $   3,259        6.3       $   11,240       $   11,725        (4.1

Footnotes:

 

(1) Connection net additions exclude acquisitions and adjustments.

 

(2) Statistics presented as of end of period.

 

(3) Retail postpaid ARPA - average service revenue per account from retail postpaid accounts.

 

(4) Retail postpaid I-ARPA - average service revenue per account from retail postpaid account plus recurring device installment billings.

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.

 

* Not meaningful


Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
12/31/15
    % Change     12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
    % Change  

Operating Revenues

            

Consumer retail

    $   3,232       $   3,226        0.2       $   12,751       $   12,696        0.4   

Small business

     410        424        (3.3     1,651        1,744        (5.3
  

 

 

   

 

 

     

 

 

   

 

 

   

Mass Markets

     3,642        3,650        (0.2     14,402        14,440        (0.3

Global Enterprise

     2,872        3,008        (4.5     11,621        12,050        (3.6

Global Wholesale

     1,225        1,325        (7.5     5,003        5,263        (4.9

Other

     73        81        (9.9     319        341        (6.5
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     7,812        8,064        (3.1     31,345        32,094        (2.3
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services

     4,428        4,632        (4.4     18,619        18,816        (1.0

Selling, general and administrative expense

     1,505        1,835        (18.0     6,585        7,256        (9.2

Depreciation and amortization expense

     1,465        1,590        (7.9     6,101        6,543        (6.8
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     7,398        8,057        (8.2     31,305        32,615        (4.0
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income (Loss)

    $   414       $   7        *       $   40       $   (521     *   

Operating Income (Loss) Margin

     5.3     0.1       0.1     (1.6 )%   

Segment EBITDA

    $   1,879       $   1,597        17.7       $   6,141       $   6,022        2.0   

Segment EBITDA Margin

     24.1     19.8       19.6     18.8  

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 to prior period to reflect comparable operating results in the current period.

 

* Not meaningful


Verizon Communications Inc.

Wireline – Selected Operating Statistics

 

Unaudited

    12/31/16     12/31/15     % Change  

Connections (‘000)

            

Fios Video Subscribers

           4,694        4,635        1.3   

Fios Internet Subscribers

           5,653        5,418        4.3   

Fios Digital voice residence connections

           3,895        3,872        0.6   
        

 

 

   

 

 

   

Fios Digital connections

           14,242        13,925        2.3   

HSI

           1,385        1,667        (16.9

Total Broadband connections

           7,038        7,085        (0.7

Primary residence switched access connections

           3,230        3,799        (15.0

Primary residence connections

           7,125        7,671        (7.1

Total retail residence voice connections

           7,355        7,949        (7.5

Total voice connections

           13,939        15,035        (7.3

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
12/31/15
    % Change     12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
    % Change  

Net Add Detail (‘000)

            

Fios Video Subscribers

     21        25        (16.0     59        182        (67.6

Fios Internet Subscribers

     68        82        (17.1     235        350        (32.9

Fios Digital voice residence connections

     13        43        (69.8     23        145        (84.1
  

 

 

   

 

 

     

 

 

   

 

 

   

Fios Digital connections

     102        150        (32.0     317        677        (53.2

HSI

     (68     (71     (4.2     (282     (289     (2.4

Total Broadband connections

            11        *        (47     61        *   

Primary residence switched access connections

     (129     (152     (15.1     (569     (616     (7.6

Primary residence connections

     (116     (109     6.4        (546     (471     15.9   

Total retail residence voice connections

     (127     (123     3.3        (594     (526     12.9   

Total voice connections

     (255     (289     (11.8     (1,096     (1,105     (0.8

Revenue Statistics

            

Fios revenues (in millions)

    $   2,892       $   2,770        4.4       $   11,236       $   10,739        4.6   

Other Operating Statistics

            

Capital expenditures (in millions)

    $   1,648       $   1,636        0.7       $   4,504       $   5,049        (10.8

Wireline employees (‘000)

           58.9        61.0     

Fios Video Open for Sale (‘000)

           13,693        13,196     

Fios Video penetration

           34.3     35.1  

Fios Internet Open for Sale (‘000)

           13,982        13,491     

Fios Internet penetration

           40.4     40.2  

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.

 

* Not meaningful


Verizon Communications Inc.

Non-GAAP Reconciliations – Consolidated

Consolidated Operating Revenues Excluding Divested Businesses and AOL

(dollars in millions)

 

Unaudited

   12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
 

Consolidated Operating Revenues

    $   125,980       $   131,620   

Less Operating revenues from Divested Businesses

     1,280        5,280   

Less Operating revenues from AOL

     2,880        1,471   
  

 

 

   

 

 

 

Consolidated Operating Revenues Excluding Divested Businesses and AOL

    $   121,820       $   124,869   
  

 

 

   

 

 

 

Year over Year Change

     (2.4 )%   

Operating Revenues from Digital Media Business net of Traffic Acquisition Costs

(dollars in millions)

 

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
9/30/16
    3 Mos. Ended
12/31/15
 

Operating Revenues from Digital Media Business

    $   886       $   790       $   949   

Less TAC

     354        304        390   
  

 

 

   

 

 

   

 

 

 

Operating Revenues from Digital Media Business net of TAC

    $   532       $   486       $   559   
  

 

 

   

 

 

   

 

 

 

Year over Year change

     (4.8 )%     

Sequential change

     9.5    

Consolidated EBITDA, Consolidated EBITDA Margin and Consolidated Adjusted EBITDA

(dollars in millions)

 

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
9/30/16
    3 Mos. Ended
6/30/16
    3 Mos. Ended
3/31/16
    3 Mos. Ended
12/31/15
    3 Mos. Ended
9/30/15
    3 Mos. Ended
6/30/15
    3 Mos. Ended
3/31/15
 

Consolidated Net Income

    $   4,600       $   3,747       $   831       $   4,430       $   5,513       $   4,171       $   4,353       $   4,338   

Add/subtract:

                

Provision for income taxes

     2,349        1,829        864        2,336        3,065        2,195        2,274        2,331   

Interest expense

     1,137        1,038        1,013        1,188        1,178        1,202        1,208        1,332   

Other (income) and expense, net

     (98     (97     1,826        (32     (28     (51     (32     (75

Equity in losses of unconsolidated businesses

     35        23        20        20        16        18        18        34   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     8,023        6,540        4,554        7,942        9,744        7,535        7,821        7,960   

Add Depreciation and amortization expense

     3,987        3,942        3,982        4,017        4,039        4,009        3,980        3,989   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

    $   12,010       $   10,482       $   8,536       $   11,959       $   13,783       $   11,544       $   11,801       $   11,949   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Add/subtract non-operational items (before tax):

                

Severance, pension and benefit charges/(credits)

     (1,589     797        3,550        165        (2,598     342                 

Gain on spectrum license transactions

                          (142     (254                     

Gain on sale of Divested Businesses

                   (1,007                                   

Divested Businesses

                          (661     (709     (717     (741     (739
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (1,589     797        2,543        (638     (3,561     (375     (741     (739
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Adjusted EBITDA

    $   10,421       $   11,279       $   11,079         $ 11,321       $   10,222       $   11,169       $   11,060       $   11,210   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Operating Revenues

    $   32,340                 

Consolidated Net Income Margin

     14.2              

Consolidated EBITDA Margin

     37.1              


Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio

(dollars in millions)

 

Unaudited

   12/31/16     12/31/15  

Net Debt

    

Debt maturing within one year

    $   2,645       $   6,489   

Long-term debt

     105,433        103,240   
  

 

 

   

 

 

 

Total Debt

     108,078        109,729   

Less Cash and cash equivalents

     2,880        4,470   
  

 

 

   

 

 

 

Net Debt

    $   105,198       $   105,259   
  

 

 

   

 

 

 

Net Debt to Consolidated Adjusted EBITDA Ratio

     2.4x        2.4x   
  

 

 

   

 

 

 

Adjusted Earnings per Common Share (Adjusted EPS)

(dollars in millions except EPS)

 

Unaudited

  

 

    3 Mos. Ended
12/31/16
   

 

    3 Mos. Ended
12/31/15
 
.    Pre-tax     Tax     After-Tax           Pre-tax     Tax     After-Tax        

EPS

         $ 1.10             $   1.32   

Pension and benefit (credits)

    $   (1,772    $   672       $   (1,100     (0.27    $   (3,154    $   1,191       $   (1,963     (0.48

Severance costs

     183        (68     115        0.03        556        (209     347        0.08   

Gain on spectrum license transaction

                                 (254     96        (158     (0.04
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    $ (1,589    $   604       $   (985     (0.24    $   (2,852    $   1,078       $   (1,774     (0.43
        

 

 

         

 

 

 

Adjusted EPS (1)

         $ 0.86             $   0.89   
        

 

 

         

 

 

 

 

(1) EPS may not add due to rounding.


Verizon Communications Inc.

Non-GAAP Reconciliations - Segments

Wireless

(dollars in millions)

 

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
12/31/15
    12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
 

Segment EBITDA and Segment EBITDA Margin

        

Operating Income

    $   6,309       $   6,799       $   29,853       $   29,973   

Add Depreciation and amortization expense

     2,321        2,305        9,183        8,980   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment EBITDA

    $   8,630       $   9,104       $   39,036       $   38,953   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

    $   23,377       $   23,734       $   89,186       $   91,680   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income Margin

     27.0     28.6     33.5     32.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment EBITDA Margin

     36.9     38.4     43.8     42.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline

(dollars in millions)

 

Unaudited

   3 Mos. Ended
12/31/16
    3 Mos. Ended
12/31/15
    12 Mos. Ended
12/31/16
    12 Mos. Ended
12/31/15
 

Segment EBITDA and Segment EBITDA Margin

        

Operating Income (Loss)

    $   414       $   7       $   40       $   (521

Add Depreciation and amortization expense

     1,465        1,590        6,101        6,543   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment EBITDA

    $   1,879       $   1,597       $   6,141       $   6,022   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

    $   7,812       $   8,064       $   31,345       $   32,094   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (Loss) Margin

     5.3     0.1     0.1     (1.6 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment EBITDA Margin

     24.1     19.8     19.6     18.8