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VERIZON COMMUNICATIONS INC
8-K
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DOCUMENT: d376079d8k.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: April 20, 2017

(Date of earliest event reported)

 

 

Verizon Communications Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   1-8606   23-2259884

(State or other jurisdiction

of incorporation)

  (Commission File Number)   (I.R.S. Employer Identification No.)

1095 Avenue of the Americas

New York, New York

    10036
(Address of principal executive offices)     (Zip Code)

Registrant’s telephone number, including area code: (212) 395-1000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02. Results of Operations and Financial Condition

Attached as an exhibit hereto are a press release and financial tables dated April 20, 2017 issued by Verizon Communications Inc. (Verizon).

NON-GAAP MEASURES

Verizon’s press release and financial tables include financial information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP financial information. It is management’s intent to provide non-GAAP financial information to enhance the understanding of Verizon’s GAAP financial information and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. We believe that non-GAAP measures provide relevant and useful information, which is used by management, investors and other users of our financial information in assessing both consolidated and segment performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.

Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions

Verizon Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating our revenue growth and trends on a comparable basis because it excludes operating revenues from the local landline businesses in California, Florida and Texas divested on April 1, 2016 (Divested Businesses) which are no longer reflected in first quarter 2017 results and it excludes operating revenues from XO Holdings’ wireline business (XO) (acquired on February 1, 2017), Fleetmatics Group PLC (acquired on November 7, 2016) and Telogis, Inc. (acquired on July 29, 2016), (collectively, Acquisitions) which are not reflected in first quarter 2016 results.

Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions is calculated by subtracting operating revenues from Divested Businesses and Acquisitions from consolidated operating revenues.

Operating Revenues from Media Business net of Traffic Acquisition Costs

Operating Revenues from Media Business net of Traffic Acquisition Costs (TAC) is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating the financial performance of our business. TAC consists of costs incurred through arrangements in which we acquire third-party online advertising inventory for resale and arrangements whereby partners direct traffic to our media business. We believe that this measure enhances the comparability of these revenues to those of our competitors. However, comparable activity may be measured differently by other companies and our revenue sources and TAC may be different than those of other companies.

Operating Revenues from Media Business net of TAC is calculated by subtracting TAC from operating revenues from our media business, which includes intersegment revenues.

IoT Revenues Excluding Acquisitions

IoT Revenues Excluding Acquisitions is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating our IoT revenue growth and trends on a comparable basis since it excludes operating revenues from Fleetmatics Group PLC (acquired on November 7, 2016) and Telogis, Inc. (acquired on July 29, 2016) which are not reflected in first quarter 2016 results.

IoT Revenues Excluding Acquisitions is calculated by subtracting operating revenues from Fleetmatics and Telogis from IoT revenues.

Wireline Operating Revenues Excluding Acquisition

Wireline Operating Revenues Excluding Acquisition is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating our Wireline revenue growth and trends on a comparable basis since operating revenues from XO (acquired on February 1, 2017) are not reflected in first quarter 2016 results.

Wireline Operating Revenues Excluding Acquisition is calculated by subtracting operating revenues from XO from Wireline operating revenues.


EBITDA and EBITDA Margin

Verizon consolidated earnings before interest, taxes, depreciation and amortization (Consolidated EBITDA), Consolidated EBITDA Margin, Segment EBITDA, and Segment EBITDA Margin are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as they exclude depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior periods, as well as in evaluating operating performance in relation to Verizon’s competitors.

Consolidated EBITDA is calculated by adding back interest, taxes, depreciation and amortization expense, equity in losses of unconsolidated businesses and other (income) and expense, net to net income. Consolidated EBITDA Margin is calculated by dividing Consolidated EBITDA by consolidated operating revenues.

Segment EBITDA is calculated by adding back depreciation and amortization expense to segment operating income. Segment EBITDA Margin is calculated by dividing Segment EBITDA by segment total operating revenues.

Consolidated Adjusted EBITDA

Verizon consolidated adjusted EBITDA (Consolidated Adjusted EBITDA) is a non-GAAP financial measure that we believe provides relevant and useful information to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. We believe Consolidated Adjusted EBITDA is widely used by investors to compare a company’s operating performance to its competitors by minimizing impacts caused by differences in capital structure, taxes and depreciation policies. Further, the exclusion of non-operational items and impact of Divested Businesses enable comparability to prior period performance and trend analysis. Consolidated Adjusted EBITDA is also used by rating agencies, lenders and other parties to evaluate our creditworthiness.

Consolidated Adjusted EBITDA is calculated by excluding from Consolidated EBITDA the effect of (1) non-operational items such as actuarial gains or losses arising from the re-measurements of pension and other postretirement benefits, severance costs, gain on sale of Divested Businesses and gain on spectrum license transactions; and (2) the impact of Divested Businesses. Actuarial gains or losses as a result of the re-measurements of pension and other postretirement benefits are included in our operating expenses and are measured based on projected discount rates and estimated returns on plan assets. Such estimates are updated at least annually at the end of the fiscal year to reflect actual discount rates and returns on plan assets or more frequently if significant events arise which require an interim re-measurement. We believe the exclusion of these re-measurement gains or losses enables management, investors and other users of our financial information to assess our sequential and year-over-year performance on a more comparable basis and is consistent with management’s own evaluation of performance.

Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio

Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating Verizon’s ability to service its debt.

Net Debt is calculated by subtracting cash and cash equivalents from the sum of debt maturing within one year and long-term debt. For purposes of Net Debt to Consolidated Adjusted EBITDA Ratio, Consolidated Adjusted EBITDA is calculated for the last twelve months.

Adjusted Earnings per Common Share

Adjusted Earnings per Common Share (Adjusted EPS) is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating our operating results and understanding our operating trends without the effect of non-operational items. We believe that excluding non-operational items provides more meaningful comparisons of our financial results from period to period.

Adjusted EPS is calculated by excluding the effect of non-operational items such as actuarial gains or losses arising from the re-measurement of pension and other postretirement benefits and severance costs, early debt redemption costs and gain on spectrum license transactions from the calculation of reported EPS.

See the accompanying schedules for reconciliations of non-GAAP financial measures to GAAP.


Item 9.01. Financial Statements and Exhibits

 

   (d) Exhibits.
Exhibit
Number
   Description
99    Press release and financial tables, dated April 20, 2017, issued by Verizon Communications Inc.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Verizon Communications Inc.
    (Registrant)
Date:     April 20, 2017         /s/ Anthony T. Skiadas
         Anthony T. Skiadas
         Senior Vice President and Controller


EXHIBIT INDEX

 

Exhibit
Number
   Description
99    Press release and financial tables, dated April 20, 2017, issued by Verizon Communications Inc.
DOCUMENT: d376079dex99.htm

Exhibit 99

 

LOGO

News Release

 

FOR IMMEDIATE RELEASE    Media contact:
April 20, 2017    Bob Varettoni
   908.559.6388
   [email protected]

Verizon 1Q results highlighted by strong wireless customer loyalty,

network investment and growth in new markets

1Q 2017 highlights

 

 

Consolidated: 84 cents in earnings per share (EPS) and adjusted EPS (non-GAAP) of 95 cents, excluding non-operational items, compared with EPS of $1.06 in 1Q 2016.

 

 

Wireless: Retail postpaid churn of 1.15 percent, with strong customer loyalty demonstrated by retail postpaid phone churn of less than 0.90 percent for the eighth consecutive quarter; intra-quarter improvement in net additions following the launch of Verizon Unlimited.

 

 

Wireline: Fios total revenue growth of 4.7 percent.

NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported first-quarter 2017 results highlighted by strong wireless profitability and customer loyalty as the company introduced its Verizon Unlimited pricing option, and revenue growth for Fios broadband and Internet of Things (IoT) services.

“Our first-quarter results again demonstrated that customers value a high-quality network experience,” said Chairman and CEO Lowell McAdam. “To build on our loyal customer base and the third-party recognition we have received for network leadership, we extended our wireless and fiber network capabilities, began offering a new unlimited pricing option and expanded our opportunities in new markets. We’re executing on strategies to capture future growth and create long-term shareholder value.”


Verizon reported first-quarter 2017 EPS of 84 cents. Adjusted first-quarter 2017 EPS (non-GAAP) of 95 cents included a net of 11 cents per share in early debt redemption costs and a gain on a spectrum license transaction. This compares with first-quarter 2016 earnings of $1.06 per share on both a reported and adjusted basis.

Consolidated results

Total consolidated operating revenues in first-quarter 2017 were $29.8 billion, a 7.3 percent decrease compared with first-quarter 2016. On a comparable basis excluding divestitures and acquisitions in the period (non-GAAP), consolidated revenue declined approximately 4.5 percent.

Net income was $3.6 billion in first-quarter 2017, and EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled $11.2 billion. Consolidated operating income margin was 24.1 percent. Consolidated EBITDA margin (non-GAAP) was 37.7 percent in first-quarter 2017, compared with 37.2 percent in first-quarter 2016.

Cash flow from operations was $1.7 billion during the quarter, including $3.4 billion in discretionary pension contributions. As a result of the contributions, Verizon’s mandatory pension funding through 2020 is expected to be minimal, which will benefit future cash flows and improve the funded status of qualified pension plans.

Capital expenditures totaled $3.1 billion in first-quarter 2017, as Verizon maintained its network leadership.

In Verizon’s media business, AOL delivered solid seasonal performance in first-quarter 2017. Revenue, net of traffic acquisition costs, decreased about 4 percent, driven by a higher percentage of programmatic advertising.

Total telematics revenues were $214 million in first-quarter 2017. Organically, IoT revenues, which include telematics, increased approximately 17 percent year over year.

Verizon also completed its acquisition of XO Communications’ fiber assets in first-quarter 2017.

Wireless results

 

   

The launch of Verizon Unlimited positively changed the trajectory of customer additions in the quarter. A net decline of 307,000 retail postpaid connections in first-quarter 2017 included 289,000 phone losses. Prior to the launch in mid-February, Verizon had a retail postpaid phone net loss of 398,000; after the launch, Verizon added 109,000 retail postpaid phone connections. For the entire quarter, Verizon added a net of 49,000 smartphones to its retail postpaid phone base.

 

Page 2


   

Verizon’s retail postpaid connections base grew 1.2 percent year over year to 108.5 million, and retail prepaid connections grew 0.5 percent to 5.4 million.

 

   

Retail postpaid churn was 1.15 percent in first-quarter 2017, a year-over-year increase of 19 basis points primarily due to increased churn in tablets. Phone customer loyalty remained high, with retail postpaid phone churn of less than 0.90 percent for the eighth consecutive quarter.

 

   

Total revenues were $20.9 billion in first-quarter 2017, a decline of 5.1 percent compared with first-quarter 2016, due to decreased overage revenue, lower postpaid customers in the quarter and continued promotional activity.

 

   

At the end of first-quarter 2017, approximately 72 percent of postpaid phone customers were on a non-subsidized service pricing plan. The percentage of phone activations on device payment plans remained steady at about 76 percent in first-quarter 2017, compared with about 77 percent in fourth-quarter 2016. Verizon expects this rate to remain consistent in second-quarter 2017. Approximately 48 percent of postpaid phone customers had a device payment plan at the end of first-quarter 2017.

 

   

In first-quarter 2017, overall traffic on LTE increased about 57 percent compared with first-quarter 2016, while Verizon extended its lead in the industry’s third-party network performance studies across the country.

 

   

Segment operating income in first-quarter 2017 was $7.1 billion, and segment operating income margin on total revenues was 33.9 percent. Segment EBITDA (non-GAAP) totaled $9.4 billion in first-quarter 2017, a year-over-year decrease of 7.5 percent. Segment EBITDA margin on total revenues (non-GAAP) was 45.1 percent, compared with 46.2 percent in first-quarter 2016.

 

   

As previously announced, Verizon plans to launch 11 pre-commercial 5G fixed wireless pilots during second-quarter 2017.

Wireline results

 

   

Total wireline revenues declined 0.6 percent, to $7.9 billion, comparing first-quarter 2017 with first-quarter 2016. Consistent with recent trends and on a comparable basis (non-GAAP), this decline was 3.2 percent, excluding revenues from XO Communications in first-quarter 2017.

 

   

Total Fios revenues grew 4.7 percent, to $2.9 billion, comparing first-quarter 2017 with first-quarter 2016. This supported revenue growth of 0.7 percent in consumer markets and 2.3 percent in business markets.

 

   

In first-quarter 2017, Verizon added a net of 35,000 Fios Internet connections and lost a net of 13,000 Fios Video connections. At the end of first-quarter 2017, Verizon had 5.7 million Fios Internet connections and 4.7 million Fios Video connections, year-over-year increases of 3.3 percent and 0.1 percent, respectively.

 

   

During the first quarter, Verizon Enterprise Solutions and Verizon Business Markets entered into new agreements or continued work with a number of clients, including Block Institute, the State of Connecticut, Georgetown University, HRC ManorCare and Xplor.

 

   

Wireline operating income was $293 million in first-quarter 2017, compared with a loss of $67 million in first-quarter 2016. Segment operating income margin was 3.7 percent in first-quarter

 

Page 3


 

2017. Segment EBITDA (non-GAAP) was $1.8 billion in first-quarter 2017, up 18.3 percent from first-quarter 2016. Segment EBITDA margin (non-GAAP) was 22.7 percent in first-quarter 2017, compared with 19.0 percent in first-quarter 2016.

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;

 

   

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

 

   

That it is 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.

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 161,000 and generated nearly $126 billion in 2016 revenues. Verizon operates America’s most reliable wireless network, with 113.9 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.

####

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/.

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

 

Page 4


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 April 10, 2017, Yahoo! Inc. (“Yahoo”) filed with the Securities and Exchange Commission (the “SEC”) Amendment No. 2 to the preliminary proxy statement regarding the proposed sale of Yahoo’s operating business to Verizon Communications Inc. (“Verizon”) and related transactions. Yahoo will file with the SEC a definitive version of the proxy statement, which will be sent or provided to Yahoo stockholders when available. The information contained in the preliminary proxy statement is not complete and may be changed. 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, 2016, 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, 2016 and Verizon’s proxy statement for its 2017 annual meeting of stockholders filed with the SEC on March 20, 2017. 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.

 

Page 5


Verizon Communications Inc.

Condensed Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

Unaudited

   3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
    % Change  

Operating Revenues

      

Service revenues and other

    $   26,050      $   28,217       (7.7

Wireless equipment revenues

     3,764       3,954       (4.8
  

 

 

   

 

 

   

Total Operating Revenues

     29,814       32,171       (7.3
  

 

 

   

 

 

   

Operating Expenses

      

Cost of services

     6,858       7,614       (9.9

Wireless cost of equipment

     4,808       4,998       (3.8

Selling, general and administrative expense

     6,908       7,600       (9.1

Depreciation and amortization expense

     4,059       4,017       1.0  
  

 

 

   

 

 

   

Total Operating Expenses

     22,633       24,229       (6.6
  

 

 

   

 

 

   

Operating Income

     7,181       7,942       (9.6

Equity in losses of unconsolidated businesses

     (21     (20     (5.0

Other income and (expense), net

     (846     32         *  

Interest expense

     (1,132     (1,188     4.7  
  

 

 

   

 

 

   

Income Before Provision for Income Taxes

     5,182       6,766       (23.4

Provision for income taxes

     (1,629     (2,336     30.3  
  

 

 

   

 

 

   

Net Income

    $   3,553      $   4,430       (19.8
  

 

 

   

 

 

   

Net income attributable to noncontrolling interests

    $   103      $   120       (14.2

Net income attributable to Verizon

     3,450       4,310       (20.0
  

 

 

   

 

 

   

Net Income

    $   3,553      $   4,430       (19.8
  

 

 

   

 

 

   

Basic Earnings per Common Share

      

Net income attributable to Verizon

    $ .85      $   1.06       (19.8

Weighted average number of common shares (in millions)

     4,082       4,080    

Diluted Earnings per Common Share (1)

      

Net income attributable to Verizon

    $ .84      $   1.06       (20.8

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

     4,087       4,085    

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

   3/31/17     12/31/16     $ Change  

Assets

      

Current assets

      

Cash and cash equivalents

    $   4,307      $   2,880      $   1,427  

Accounts receivable, net

     16,863       17,513       (650

Inventories

     1,194       1,202       (8

Assets held for sale

     149       882       (733

Prepaid expenses and other

     4,645       3,918       727  
  

 

 

   

 

 

   

 

 

 

Total current assets

     27,158       26,395       763  
  

 

 

   

 

 

   

 

 

 

Plant, property and equipment

     235,550       232,215       3,335  

Less accumulated depreciation

     150,337       147,464       2,873  
  

 

 

   

 

 

   

 

 

 
     85,213       84,751       462  
  

 

 

   

 

 

   

 

 

 

Investments in unconsolidated businesses

     1,080       1,110       (30

Wireless licenses

     87,754       86,673       1,081  

Goodwill

     27,630       27,205       425  

Other intangible assets, net

     8,912       8,897       15  

Non-current assets held for sale

     762       613       149  

Other assets

     8,222       8,536       (314
  

 

 

   

 

 

   

 

 

 

Total Assets

    $   246,731      $   244,180      $   2,551  
  

 

 

   

 

 

   

 

 

 

Liabilities and Equity

      

Current liabilities

      

Debt maturing within one year

    $   3,707      $   2,645      $   1,062  

Accounts payable and accrued liabilities

     14,826       19,593       (4,767

Other

     8,131       8,102       29  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     26,664       30,340       (3,676
  

 

 

   

 

 

   

 

 

 

Long-term debt

     112,839       105,433       7,406  

Employee benefit obligations

     22,079       26,166       (4,087

Deferred income taxes

     47,847       45,964       1,883  

Other liabilities

     12,265       12,245       20  

Equity

      

Common stock

     424       424        

Contributed capital

     11,161       11,182       (21

Reinvested earnings

     16,153       15,059       1,094  

Accumulated other comprehensive income

     2,609       2,673       (64

Common stock in treasury, at cost

     (7,144     (7,263     119  

Deferred compensation - employee stock ownership plans and other

     290       449       (159

Noncontrolling interests

     1,544       1,508       36  
  

 

 

   

 

 

   

 

 

 

Total equity

     25,037       24,032       1,005  
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

    $ 246,731      $   244,180      $   2,551  
  

 

 

   

 

 

   

 

 

 

Verizon – Selected Financial and Operating Statistics

 

Unaudited

    3/31/17     12/31/16  

Total debt (in millions)

      $   116,546      $   108,078  

Net debt (in millions)

      $   112,239      $   105,198  

Net debt / Adjusted EBITDA(1)

       2.6x       2.4x  

Common shares outstanding end of period (in millions)

       4,079       4,077  

Total employees (‘000)

       161.0       160.9  

Quarterly cash dividends declared per common share

      $   0.5775      $   0.5775  

Footnotes:

 

(1) Adjusted EBITDA excludes the effects of non-operational items and impact of divested businesses.

Certain reclassifications of prior period amounts have been made, where appropriate, to conform to current period presentation.


Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)

 

Unaudited

   3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
    $ Change  

Cash Flows from Operating Activities

      

Net Income

    $   3,553      $   4,430      $   (877)  

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

      

Depreciation and amortization expense

     4,059       4,017       42  

Employee retirement benefits

     (111     356       (467

Deferred income taxes

     2,025       167       1,858  

Provision for uncollectible accounts

     330       353       (23

Equity in losses of unconsolidated businesses, net of dividends received

     28       29       (1

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

     (4,694     (1,162     (3,532

Discretionary contributions to qualified pension plans

     (3,411           (3,411

Other, net

     (98     (693     595  
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     1,681       7,497       (5,816
  

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities

      

Capital expenditures (including capitalized software)

     (3,067     (3,387     320  

Acquisitions of businesses, net of cash acquired

     (1,746     (161     (1,585

Acquisitions of wireless licenses

     (196     (131     (65

Other, net

     176       243       (67
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (4,833     (3,436     (1,397
  

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities

      

Proceeds from long-term borrowings

     13,054             13,054  

Proceeds from asset-backed long-term borrowings

     1,283             1,283  

Repayments of long-term borrowings and capital lease obligations

     (5,592     (376     (5,216

Decrease in short-term obligations, excluding current maturities

     (52     (40     (12

Dividends paid

     (2,354     (2,302     (52

Other, net

     (1,760     33       (1,793
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     4,579       (2,685     7,264  
  

 

 

   

 

 

   

 

 

 

Increase in cash and cash equivalents

     1,427       1,376       51  

Cash and cash equivalents, beginning of period

     2,880       4,470       (1,590
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

    $   4,307      $   5,846      $   (1,539
  

 

 

   

 

 

   

 

 

 

Footnotes:

Certain reclassifications of prior period amounts have been made, where appropriate, to conform to current period presentation.


Verizon Communications Inc.

Wireless – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
    % Change  

Operating Revenues

      

Service

    $   15,778      $   16,809       (6.1

Equipment

     3,764       3,954       (4.8

Other

     1,336       1,241       7.7  
  

 

 

   

 

 

   

Total Operating Revenues

     20,878       22,004       (5.1
  

 

 

   

 

 

   

Operating Expenses

      

Cost of services

     1,958       1,942       0.8  

Cost of equipment

     4,808       4,998       (3.8

Selling, general and administrative expense

     4,698       4,891       (3.9

Depreciation and amortization expense

     2,338       2,293       2.0  
  

 

 

   

 

 

   

Total Operating Expenses

     13,802       14,124       (2.3
  

 

 

   

 

 

   

Operating Income

    $   7,076      $   7,880       (10.2

Operating Income Margin

     33.9     35.8  

Segment EBITDA

    $   9,414      $   10,173       (7.5

Segment EBITDA Margin

     45.1     46.2  

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.


Verizon Communications Inc.

Wireless – Selected Operating Statistics

 

Unaudited

  3/31/17     3/31/16     % Change  

Connections (‘000)

     

Retail postpaid

    108,483       107,171       1.2  

Retail prepaid

    5,430       5,402       0.5  
 

 

 

   

 

 

   

Total retail

    113,913       112,573       1.2  

Unaudited

  3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
    % Change  

Net Add Detail (‘000) (1)

     

Retail postpaid

    (307     640       *  

Retail prepaid

    (17     (177     90.4  
 

 

 

   

 

 

   

Total retail

    (324     463       *  

Account Statistics

     

Retail Postpaid Accounts (‘000) (2)

    35,270       35,720       (1.3

Retail postpaid connections per account (2)

    3.08       3.00       2.7  

Retail postpaid ARPA (3)

    136.98       145.34       (5.8

Retail postpaid I-ARPA (4)

    166.01       165.03       0.6  

Churn Detail

     

Retail postpaid

    1.15     0.96  

Retail

    1.39     1.23  

Retail Postpaid Connection Statistics

     

Total Smartphone postpaid % of phones activated

    94.5     92.5  

Total Smartphone postpaid phone base (2)

    88.1     84.7  

Total Internet postpaid base (2)

    18.3     17.3  

4G LTE devices as % of retails postpaid connections

    85.9     81.1  

Other Operating Statistics

     

Capital expenditures (in millions)

   $   1,831      $   2,190       (16.4

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
3/31/17
    3 Mos. Ended
3/31/16
    % Change  

Operating Revenues

     

Consumer Markets

   $   3,201      $   3,180       0.7  

Enterprise Solutions

    2,466       2,501       (1.4

Partner Solutions

    1,256       1,292       (2.8

Business Markets

    890       870       2.3  

Other

    63       80       (21.3
 

 

 

   

 

 

   

Total Operating Revenues

    7,876       7,923       (0.6
 

 

 

   

 

 

   

Operating Expenses

     

Cost of services

    4,480       4,644       (3.5

Selling, general and administrative expense

    1,611       1,770       (9.0

Depreciation and amortization expense

    1,492       1,576       (5.3
 

 

 

   

 

 

   

Total Operating Expenses

    7,583       7,990       (5.1
 

 

 

   

 

 

   

Operating Income (Loss)

   $   293      $   (67     *  

Operating Income (Loss) Margin

    3.7     (0.8 )%   

Segment EBITDA

   $   1,785      $   1,509       18.3  

Segment EBITDA Margin

    22.7     19.0  

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.

 

* Not meaningful


Verizon Communications Inc.

Wireline – Selected Operating Statistics

 

Unaudited

   3/31/17     3/31/16     % Change  

Connections (‘000)

      

Fios Video Subscribers

     4,681       4,678       0.1  

Fios Internet Subscribers

     5,688       5,508       3.3  

Fios Digital voice residence connections

     3,887       3,917       (0.8
  

 

 

   

 

 

   

Fios Digital connections

     14,256       14,103       1.1  

HSI

     1,323       1,589       (16.7

Total Broadband connections

     7,011       7,097       (1.2

Primary residence switched access connections

     3,095       3,643       (15.0

Primary residence connections

     6,982       7,560       (7.6

Total retail residence voice connections

     7,200       7,824       (8.0

Total voice connections

     13,634       14,781       (7.8

Unaudited

   3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
    % Change  

Net Add Detail (‘000)

      

Fios Video Subscribers

     (13     43       *  

Fios Internet Subscribers

     35       90       (61.1

Fios Digital voice residence connections

     (8     45       *  
  

 

 

   

 

 

   

Fios Digital connections

     14       178       (92.1

HSI

     (62     (78     20.5  

Total Broadband connections

     (27     12       *  

Primary residence switched access connections

     (135     (156     13.5  

Primary residence connections

     (143     (111     (28.8

Total retail residence voice connections

     (155     (125     (24.0

Total voice connections

     (305     (254     (20.1

Revenue Statistics

      

Fios revenues (in millions)

    $   2,891      $   2,761       4.7  

Other Operating Statistics

      

Capital expenditures (in millions)

    $   960      $   1,006       (4.6

Wireline employees (‘000)

     60.8       59.5    

Fios Video Open for Sale (‘000)

     13,829       13,366    

Fios Video penetration

     33.8     35.0  

Fios Internet Open for Sale (‘000)

     14,120       13,661    

Fios Internet penetration

     40.3     40.3  

Footnotes:

The segment financial results and metrics above are adjusted to exclude the effects of non-operational items and impact of divested businesses, 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.

Non-GAAP Reconciliations – Consolidated Verizon

Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions

(dollars in millions)

 

Unaudited

   3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
 

Consolidated Operating Revenues

    $   29,814       $  32,171  

Less operating revenues from Divested Businesses

           1,280  

Less operating revenues from Acquisitions

     318        
  

 

 

   

 

 

 

Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions

    $   29,496       $  30,891  
  

 

 

   

 

 

 

Year over Year Change

     (4.5 )%   

Operating Revenues from Media Business net of Traffic Acquisition Costs

(dollars in millions)

 

Unaudited

   3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
 

Operating Revenues from Media Business

    $   737      $   726  

Less TAC

     280       249  
  

 

 

   

 

 

 

Operating Revenues from Media Business net of TAC

    $   457      $   477  
  

 

 

   

 

 

 

Year over Year Change

     (4.2 )%   

IoT Revenues Excluding Acquisitions

(dollars in millions)

 

Unaudited

   3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
 

IoT Revenues

    $   343      $   195  

Less IoT revenues from Acquisitions

     114        
  

 

 

   

 

 

 

IoT Revenues Excluding Acquisitions

    $   229      $   195  
  

 

 

   

 

 

 

Year over Year Change

     17.4  

Consolidated EBITDA, Consolidated EBITDA Margin and Consolidated Adjusted EBITDA

(dollars in millions)

 

Unaudited

   3 Mos. Ended
3/31/17
    3 Mos. Ended
12/31/16
    3 Mos. Ended
9/30/16
    3 Mos. Ended
6/30/16
    3 Mos. Ended
3/31/16
 

Consolidated Net Income

    $   3,553      $   4,600      $   3,747      $   831      $   4,430  

Add/(subtract):

          

Provision for income taxes

     1,629       2,349       1,829       864       2,336  

Interest expense

     1,132       1,137       1,038       1,013       1,188  

Other (income) and expense, net

     846       (98     (97     1,826       (32

Equity in losses of unconsolidated businesses

     21       35       23       20       20  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     7,181       8,023       6,540       4,554       7,942  

Add Depreciation and amortization expense

     4,059       3,987       3,942       3,982       4,017  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

    $   11,240      $   12,010      $   10,482      $   8,536      $   11,959  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

          

Severance, pension, and benefit charges/(credits)

           (1,589     797       3,550       165  

Gain on spectrum license transactions

     (126                       (142

Gain on sale of Divested Businesses

                       (1,007      

Divested Businesses

                             (661
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (126     (1,589     797       2,543       (638
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Adjusted EBITDA

    $   11,114      $   10,421      $   11,279      $   11,079      $   11,321  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Operating Revenues

    $   29,814            $   32,171  

Consolidated Operating Income Margin

     24.1        

Consolidated EBITDA Margin

     37.7           37.2


Verizon Communications Inc.

Non-GAAP Reconciliations – Consolidated Verizon

Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio

(dollars in millions)

 

Unaudited

   3/31/17      12/31/16  

Verizon Net Debt

     

Debt maturing within one year

    $   3,707       $   2,645  

Long-term debt

     112,839        105,433  
  

 

 

    

 

 

 

Total Debt

     116,546        108,078  

Less Cash and cash equivalents

     4,307        2,880  
  

 

 

    

 

 

 

Net Debt

    $   112,239       $   105,198  
  

 

 

    

 

 

 

Net Debt to Consolidated Adjusted EBITDA Ratio

     2.6x        2.4x  
  

 

 

    

 

 

 

Adjusted Earnings per Common Share (Adjusted EPS)

 

Unaudited

  

 

    3 Mos. Ended
3/31/17
   

 

    3 Mos. Ended
3/31/16
 
.    Pre-tax     Tax     After-Tax           Pre-tax     Tax     After-Tax        

EPS

         $ 0.84           $ 1.06  

Severance, pension, and benefit charges

    $   —      $   —      $   —            $   165       $   (63    $   102       0.02  

Early debt redemption costs

     848       (336     512       0.13                          

Gain on spectrum license transactions

        (126        49          (77     (0.02        (142        54          (88     (0.02
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    $   722      $   (287    $   435       0.11      $ 23      $   (9    $   14        
        

 

 

         

 

 

 

Adjusted EPS

         $ 0.95           $ 1.06  
        

 

 

         

 

 

 


Verizon Communications Inc.

Non-GAAP Reconciliations – Segments

Segment EBITDA and Segment EBITDA Margin

Wireless

(dollars in millions)

 

Unaudited

  3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
 
Operating Income    $   7,076      $   7,880  

Add Depreciation and amortization expense

    2,338       2,293  
 

 

 

   

 

 

 
Segment EBITDA    $   9,414      $   10,173  
 

 

 

   

 

 

 
Year over Year Change     (7.5 )%   
Total operating revenues    $   20,878      $   22,004  
 

 

 

   

 

 

 
Operating Income Margin     33.9     35.8
 

 

 

   

 

 

 
Segment EBITDA Margin     45.1     46.2
 

 

 

   

 

 

 

Wireline

(dollars in millions)

 

Unaudited

  3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
 
Operating Income (Loss)    $   293      $   (67

Add Depreciation and amortization expense

    1,492       1,576  
 

 

 

   

 

 

 
Segment EBITDA    $   1,785      $   1,509  
 

 

 

   

 

 

 
Year over Year Change     18.3  
Total operating revenues    $   7,876      $   7,923  
 

 

 

   

 

 

 
Operating Income (Loss) Margin     3.7     (0.8 )% 
 

 

 

   

 

 

 
Segment EBITDA Margin     22.7     19.0
 

 

 

   

 

 

 

Wireline Operating Revenues Excluding Acquisition

(dollars in millions)

 

Unaudited

  3 Mos. Ended
3/31/17
    3 Mos. Ended
3/31/16
 
Wireline Operating Revenues    $   7,876      $   7,923  

Less Wireline operating revenues from Acquisition

    207        
 

 

 

   

 

 

 
Wireline Operating Revenues Excluding Acquisition    $   7,669      $   7,923  
 

 

 

   

 

 

 
Year over Year Change     (3.2 )%   
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