EX-99 2 d425274dex99.htm PRESS RELEASE Press Release

Exhibit 99

 

NEWS RELEASE   
   LOGO
FOR IMMEDIATE RELEASE    Media contacts:
October 18, 2012    Peter Thonis
   212-395-2355
   peter.thonis@verizon.com
   Bob Varettoni
   908-559-6388
   robert.a.varettoni@verizon.com

Verizon Reports Third Consecutive Quarter of Double-Digit

Earnings Growth, Continued Strong Cash Flow

Verizon Wireless Again Posts Record-High Margin, Supported by Strong Service

Revenues; Wireline Consumer Revenue Growth Continues to Accelerate

3Q 2012 HIGHLIGHTS

Consolidated

 

 

56 cents in diluted earnings per share (EPS), compared with 49 cents per share in 3Q 2011 – a 14.3 percent increase.

 

 

64 cents per share in adjusted EPS (non-GAAP), which excludes 8 cents per share in charges, compared with 56 cents in adjusted EPS in 3Q 2011 – a 14.3 percent increase.

Wireless

 

 

7.5 percent year-over-year increase in service revenues in 3Q 2012; 7.9 percent year-over-year increase in retail service revenues; 31.8 percent operating income margin and 50.0 percent segment EBITDA margin on service revenues (non-GAAP), both record highs.

 

 

1.8 million retail net additions, excluding acquisitions and adjustments, including 1.5 million retail postpaid net connections; low retail postpaid churn of 0.91 percent; 95.9 million total retail connections, 90.4 million total retail postpaid connections.

 

 

4G LTE service now available to more than 250 million people in 419 markets across the U.S.


Verizon News Release, page 2

 

Wireline

 

 

4.6 percent year-over-year increase in consumer revenues, the highest in a decade; consumer ARPU (average revenue per user) up 10.3 percent year over year, to $103.86.

 

 

136,000 FiOS Internet and 119,000 FiOS Video net additions, with continued increased sales penetration for both products; 5.3 million total FiOS Internet, 4.6 million total FiOS Video customers.

NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported a third consecutive quarter of double-digit percentage growth in year-over-year earnings, as Verizon Wireless generated a second consecutive quarter of record-high margins and Verizon’s Wireline segment posted accelerated growth in consumer revenues.

Verizon reported 56 cents in EPS in third-quarter 2012, an increase of 14.3 percent compared with third-quarter 2011 earnings of 49 cents per share.

Adjusted third-quarter 2012 earnings (non-GAAP) of 64 cents per share exclude 8 cents per share for charges related to patent litigation settlements. Comparable adjusted third-quarter 2011 earnings of 56 cents per share excluded 7 cents per share for a non-operational charge related to an actuarial valuation of pension plans.

On Track to Meet 2012 Financial Objectives

“In the third quarter, Verizon continued to deliver double-digit earnings growth and strong cash generation, and we remain solidly on track to meet our financial objectives for the year,” said Lowell McAdam, Verizon chairman and CEO. “With our 4G LTE network advantage, well-received Share Everything Plans and unmatched product portfolio, Verizon Wireless continues to do an outstanding job of balancing growth and profitability. Wireless achieved record profitability in a quarter in which we reported the highest number of retail postpaid gross and net adds in four years.”


Verizon News Release, page 3

 

McAdam added: “Based on the strength of our FiOS fiber-optic network, we reported the highest growth in U.S. consumer wireline revenues in 10 years. Additionally, strategic services growth in our Enterprise business helped offset weaker revenues caused by global economic challenges. We are confident that we have the right plans in place to meet these challenges while improving the long-term profitability in both Consumer and Enterprise.”

Continued Strong Revenue Growth; Year-to-Date Free Cash Flow Up 49.9 Percent

In third-quarter 2012, Verizon’s total operating revenues were $29.0 billion on a consolidated basis, an increase of 3.9 percent compared with third-quarter 2011.

Consolidated operating income was $5.5 billion in third-quarter 2012, compared with $4.6 billion in third-quarter 2011. Consolidated EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled $9.65 billion in third-quarter 2012, compared with $8.8 billion in third-quarter 2011.

Cash flow from operating activities totaled $24.8 billion in the first nine months of 2012, compared with $21.5 billion in the first nine months of 2011.

With capital expenditures of $11.3 billion in the first nine months of 2012, free cash flow (non-GAAP, cash flow from operations less capex) was $13.4 billion through third-quarter 2012, compared with $9.0 billion through third-quarter 2011 – an increase of 49.9 percent.

For full-year 2012, capital expenditures are expected to be lower than 2011 capital expenditures of $16.2 billion.

Verizon Wireless Results: Record Profitability, Strong Customer and Revenue Growth

In third-quarter 2012, Verizon Wireless delivered the highest number of retail postpaid net additions in four years; strong growth in revenues; an increase in smartphone penetration;


Verizon News Release, page 4

 

and the highest segment EBITDA margin on service revenues (non-GAAP) in the company’s history, surpassing last quarter’s previous high.

Wireless Financial Highlights

 

   

Service revenues in the quarter totaled $16.2 billion, up 7.5 percent year over year. Retail service revenues grew 7.9 percent year over year, to $15.5 billion.

 

   

Total revenues were $19.0 billion, up 7.3 percent year over year.

 

   

Retail postpaid ARPA (average revenue per account) grew 6.5 percent over third-quarter 2011, to $145.42 per month. Following the recent introduction of the Share Everything Plan and as customers continue to add multiple devices to accounts, Verizon Wireless now reports ARPA instead of ARPU since customers can share data among multiple devices.

 

   

Wireless operating income margin was 31.8 percent and segment EBITDA margin on service revenues (non-GAAP) was 50.0 percent, setting record highs for the second consecutive quarter.

Wireless Operational Highlights

 

   

Verizon Wireless added 1.8 million retail net connections in the third quarter, including 1.5 million retail postpaid net connections, the highest in four years. These additions exclude acquisitions and adjustments.

 

   

At the end of the third quarter, the company had 95.9 million retail connections, a 5.7 percent increase year over year, including 90.4 million retail postpaid connections.

 

   

Verizon Wireless had 34.8 million retail postpaid accounts at the end of the third quarter, a 1.0 percent increase over the third quarter 2011, and an average of 2.6 connections per account, up 4.0 percent year over year.

 

   

At the end of the third quarter, smartphones constituted more than 53 percent of Verizon Wireless’ retail postpaid customer phone base, up from 50 percent at the end of second-quarter 2012.

 

   

Retail postpaid churn was 0.91 percent in the third quarter, an improvement of 3 basis points year over year. Total retail churn was 1.18 percent in the third quarter, an improvement of 8 basis points year over year.

 

   

Verizon Wireless continued to roll out its 4G LTE mobile broadband network, the largest 4G LTE network in the U.S. As of today (Oct. 18), Verizon Wireless 4G LTE service is available to more than 250 million people in 419 markets across the U.S.


Verizon News Release, page 5

 

   

The company introduced seven 4G LTE smartphones in third-quarter 2012: the DROID Incredible 4G LTE by HTC, Samsung Galaxy S III, Pantech Marauder, Intuition by LG, Samsung Galaxy Stellar, DROID RAZR M by Motorola, Apple iPhone 5; and one 4G LTE tablet, the Samsung Galaxy Tab 2. The company also announced the availability of the DROID RAZR HD and the RAZR MAXX HD by Motorola, which are launching today.

 

   

After receiving FCC approval in late August, Verizon Wireless purchased AWS spectrum from SpectrumCo and Cox Communications, and also completed its spectrum transactions with T-Mobile USA Inc., Leap Wireless and Savary Island Wireless.

Wireline Results: Accelerated Consumer Revenue and ARPU Growth

In third-quarter 2012 in the Wireline segment, FiOS revenue growth led to strong overall revenue growth among U.S. consumer customers. In global enterprise and wholesale, increased sales of strategic services helped mitigate lower revenues resulting from continued secular and global economic impacts.

Wireline Financial Highlights

 

   

Third-quarter 2012 operating revenues were $9.9 billion, a decline of 2.3 percent compared with third-quarter 2011. Wireline operating income margin was 0.4 percent, compared with 0.5 percent in third-quarter 2011. Segment EBITDA margin (non-GAAP) was 21.7 percent in third-quarter 2012, compared with 21.4 percent in third-quarter 2011.

 

   

Consumer revenues grew 4.6 percent compared with third-quarter 2011. This is the highest year-over-year quarterly revenue increase in a decade and compares with a 2.5 percent year-over-year increase in second-quarter 2012.

 

   

Consumer ARPU for wireline services increased to $103.86 in third-quarter 2012, up 10.3 percent compared with third-quarter 2011. This is an acceleration from an 8.5 percent ARPU increase, comparing second-quarter 2012 with second-quarter 2011.

 

   

ARPU for FiOS customers was more than $150 in third-quarter 2012. FiOS services produced 66 percent of consumer wireline revenues in third-quarter 2012. About two-thirds of FiOS consumer customers have purchased a “triple play” of phone, Internet and video services.

 

   

Global enterprise revenues totaled $3.8 billion in the quarter, down 3.6 percent compared with third-quarter 2011. Sales of strategic services increased 4.4 percent compared with third-quarter 2011 and represented 53 percent of global enterprise revenues in third-


Verizon News Release, page 6

 

 

quarter 2012. Strategic services include Verizon Terremark cloud and data center services, security and IT solutions, advanced communications, and strategic networking.

Wireline Operational Highlights

 

   

Verizon added 136,000 net new FiOS Internet connections and 119,000 net new FiOS Video connections in third-quarter 2012. Verizon had a total of 5.3 million FiOS Internet and 4.6 million FiOS Video connections at the end of the quarter, representing year-over-year increases of 14.4 percent and 15.4 percent, respectively.

 

   

FiOS penetration (subscribers as a percentage of potential subscribers) continued to increase. FiOS Internet penetration was 37.0 percent at the end of third-quarter 2012, compared with 34.6 percent at the end of third-quarter 2011. In the same periods, FiOS Video penetration was 32.9 percent, compared with 30.6 percent. The FiOS network now passes 17.4 million premises.

 

   

Broadband connections totaled 8.8 million at the end of third-quarter 2012, a 2.3 percent year-over-year increase.

 

   

During the third quarter, Verizon continued building its network of the future by deploying 100G (gigabits per second) technology throughout the U.S. Cloud applications, video distribution applications and wireless technologies, such as LTE, are driving the need for 100G deployment. On its long-haul network, Verizon has connected major metropolitan areas with this next-generation 100G technology. The company has also deployed 100G on several network routes in Europe.

Verizon Enterprise Solutions Highlights

Verizon Enterprise Solutions – a global sales and marketing organization that harnesses all of Verizon’s cloud, mobility and other platforms to serve the rapidly transforming enterprise market with integrated solutions – continued to expand and enhance its capabilities in the U.S. and abroad in third-quarter 2012. The organization saw new customers leveraging its dynamic cloud, intelligent networks, mobility and machine-to-machine (M2M) platforms, while the organization made significant announcements and won recognition during the quarter. Among highlights, Verizon Enterprise Solutions:


Verizon News Release, page 7

 

   

Initiated work with Palace Sports & Entertainment in Michigan to deliver fans a live high-tech experience, incorporating digital signage and social media, fan-friendly Wi-Fi and digital menu boards;

   

Was selected by Stefanini, a global IT services provider based in Brazil, to provide secure hybrid cloud services to manage business-critical applications and development platforms in 32 world markets;

   

Implemented a key transformative health IT initiative for Gentiva Health Services, the largest provider of home health and hospice services in the U.S. based on revenues;

   

Began leveraging synergies with Verizon-acquired Hughes Telematics Inc. to deliver advanced automotive and fleet telematics and M2M services; and,

   

Won both Gatekeeper accreditation and a Common Criteria product certification from the Australian federal government – the first company to do so – recognizing the company’s expertise in delivering specific Identity Access Management.

Further Verizon Enterprise Solutions third-quarter 2012 highlights are available online at http://www.verizonbusiness.com/go/Q3.

Pension Funding Details

Verizon yesterday announced an agreement to transfer pension assets to The Prudential Insurance Company of America by purchasing a single premium group-annuity contract to settle approximately $7.5 billion of Verizon’s obligations for approximately 41,000 participants under its management pension plan. The closing of the transaction, which is subject to certain conditions, is expected to occur in December 2012.

In connection with the closing, Verizon currently intends to contribute an aggregate of approximately $2.5 billion to the plan, including a $930 million contribution made last month, to provide for the annuity and so that the plan’s funding percentage does not decrease as a result of this transaction.

As a result, Verizon’s revised outlook for pension funding in 2012 is estimated to be $3.4 billion, compared with the $1.3 billion estimated at the beginning of the year. Assuming the


Verizon News Release, page 8

 

closing of the transaction and the additional contribution, Verizon does not expect to have any cash-funding requirement for pensions in 2013.

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 nearly 96 million retail customers 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 $111 billion in 2011 revenues, Verizon employs a diverse workforce of 184,500. For more information, visit www.verizon.com.

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VERIZON’S ONLINE NEWS CENTER: Verizon news releases, executive speeches and biographies, media contacts, high-quality video and images, and other information are available at Verizon’s News Center on the World Wide Web at www.verizon.com/news. To receive news releases by email, visit the News Center and register for customized automatic delivery of Verizon news releases.

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 adverse changes in labor matters, including labor negotiations or additional organizing activity, and any resulting financial and/or operational impact; material changes in available technology; any disruption of our key suppliers’ provisioning of products or services; significant increases in benefit plan costs or lower investment returns on plan assets; breaches of network or information technology security, natural disasters or terrorist attacks or existing or future litigation and any resulting financial impact not covered by insurance; technology substitution; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing; any changes in the regulatory environments in which we operate, including any increase in restrictions on our ability to operate our networks; the timing, scope and financial impact of our deployment of broadband technology; 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 result in an impact on earnings; our ability to complete acquisitions and dispositions; 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
9/30/12
    3 Mos. Ended
9/30/11
    % Change     9 Mos. Ended
9/30/12
    9 Mos. Ended
9/30/11
    % Change  

Operating Revenues

     $    29,007        $    27,913        3.9        $    85,801        $    82,439        4.1   

Operating Expenses

            

Cost of services and sales

     10,991        11,398        (3.6     33,206        33,785        (1.7

Selling, general and administrative expense

     8,366        7,689        8.8        23,943        22,346        7.1   

Depreciation and amortization expense

     4,167        4,179        (0.3     12,323        12,316        0.1   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     23,524        23,266        1.1        69,472        68,447        1.5   
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

     5,483        4,647        18.0        16,329        13,992        16.7   

Equity in earnings of unconsolidated businesses

     62        125        (50.4     237        347        (31.7

Other income and (expense), net

     10        24        (58.3     63        70        (10.0

Interest expense

     (632     (698     (9.5     (1,996     (2,124     (6.0
  

 

 

   

 

 

     

 

 

   

 

 

   

Income Before Provision for Income Taxes

     4,923        4,098        20.1        14,633        12,285        19.1   

Provision for income taxes

     (631     (556     13.5        (2,150     (1,875     14.7   
  

 

 

   

 

 

     

 

 

   

 

 

   

Net Income

     $      4,292        $      3,542        21.2        $    12,483        $    10,410        19.9   
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income attributable to noncontrolling interest

     $      2,699        $      2,163        24.8        $      7,379        $      5,983        23.3   

Net income attributable to Verizon

     1,593        1,379        15.5        5,104        4,427        15.3   
  

 

 

   

 

 

     

 

 

   

 

 

   

Net Income

     $      4,292        $      3,542        21.2        $    12,483        $    10,410        19.9   
  

 

 

   

 

 

     

 

 

   

 

 

   

Basic Earnings per Common Share

            

Net income attributable to Verizon

     $          .56        $          .49        14.3        $        1.79        $        1.56        14.7   

Weighted average number of common shares (in millions)

     2,857        2,834          2,850        2,832     

Diluted Earnings per Common Share (1)

            

Net income attributable to Verizon

     $          .56        $          .49        14.3        $        1.79        $        1.56        14.7   

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

     2,866        2,839          2,859        2,838     

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

   9/30/12     12/31/11     $ Change  

Assets

      

Current assets

      

Cash and cash equivalents

   $       9,714      $     13,362      $     (3,648

Short-term investments

     593        592        1   

Accounts receivable, net

     12,030        11,776        254   

Inventories

     1,223        940        283   

Prepaid expenses and other

     4,103        4,269        (166
  

 

 

   

 

 

   

 

 

 

Total current assets

     27,663        30,939        (3,276
  

 

 

   

 

 

   

 

 

 

Plant, property and equipment

     216,995        215,626        1,369   

Less accumulated depreciation

     129,185        127,192        1,993   
  

 

 

   

 

 

   

 

 

 
     87,810        88,434        (624
  

 

 

   

 

 

   

 

 

 

Investments in unconsolidated businesses

     3,625        3,448        177   

Wireless licenses

     77,591        73,250        4,341   

Goodwill

     24,048        23,357        691   

Other intangible assets, net

     5,830        5,878        (48

Other assets

     4,515        5,155        (640
  

 

 

   

 

 

   

 

 

 

Total Assets

   $   231,082      $   230,461      $        621   
  

 

 

   

 

 

   

 

 

 

Liabilities and Equity

      

Current liabilities

      

Debt maturing within one year

   $       6,335      $       4,849      $      1,486   

Accounts payable and accrued liabilities

     16,003        14,689        1,314   

Other

     6,432        11,223        (4,791
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     28,770        30,761        (1,991
  

 

 

   

 

 

   

 

 

 

Long-term debt

     46,467        50,303        (3,836

Employee benefit obligations

     30,904        32,957        (2,053

Deferred income taxes

     26,474        25,060        1,414   

Other liabilities

     5,839        5,472        367   

Equity

      

Common stock

     297        297          

Contributed capital

     37,959        37,919        40   

Reinvested earnings

     1,968        1,179        789   

Accumulated other comprehensive income

     1,257        1,269        (12

Common stock in treasury, at cost

     (4,247     (5,002     755   

Deferred compensation - employee stock ownership plans and other

     411        308        103   

Noncontrolling interest

     54,983        49,938        5,045   
  

 

 

   

 

 

   

 

 

 

Total equity

     92,628        85,908        6,720   
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

   $   231,082      $   230,461      $        621   
  

 

 

   

 

 

   

 

 

 

 

Verizon – Selected Financial and Operating Statistics

    

Unaudited

   9/30/12     12/31/11  

Total debt (in millions)

   $     52,802      $     55,152   

Net debt (in millions)

   $     43,088      $     41,790   

Net debt / Adjusted EBITDA (1)

     1.1x        1.2x   

Common shares outstanding end of period (in millions)

     2,854        2,834   

Total employees

     184,500        193,900   

Quarterly cash dividends declared per common share

   $       0.515      $ 0.500   

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

   9 Mos. Ended
9/30/12
    9 Mos. Ended
9/30/11
    $ Change  

Cash Flows From Operating Activities

      

Net Income

   $     12,483      $     10,410      $       2,073   

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

      

Depreciation and amortization expense

     12,323        12,316        7   

Employee retirement benefits

     1,126        1,428        (302

Deferred income taxes

     1,665        1,901        (236

Provision for uncollectible accounts

     709        754        (45

Equity in earnings of unconsolidated businesses, net of dividends received

     (197     102        (299

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

     (197     (2,553     2,356   

Other, net

     (3,154     (2,846     (308
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     24,758        21,512        3,246   
  

 

 

   

 

 

   

 

 

 

Cash Flows From Investing Activities

      

Capital expenditures (including capitalized software)

     (11,315     (12,546     1,231   

Acquisitions of investments and businesses, net of cash acquired

     (838     (1,678     840   

Acquisitions of wireless licenses, net

     (3,816     (176     (3,640

Net change in short-term investments

     28        43        (15

Other, net

     516        945        (429
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (15,425     (13,412     (2,013
  

 

 

   

 

 

   

 

 

 

Cash Flows From Financing Activities

      

Proceeds from long-term borrowings

            6,510        (6,510

Repayments of long-term borrowings and capital lease obligations

     (2,878     (7,420     4,542   

Increase in short-term obligations, excluding current maturities

     375        1,817        (1,442

Dividends paid

     (3,887     (4,139     252   

Proceeds from sale of common stock

     278        139        139   

Special distribution to noncontrolling interest

     (4,500            (4,500

Other, net

     (2,369     (1,351     (1,018
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (12,981     (4,444     (8,537
  

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (3,648     3,656        (7,304

Cash and cash equivalents, beginning of period

     13,362        6,668        6,694   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $       9,714      $     10,324      $        (610
  

 

 

   

 

 

   

 

 

 


Verizon Communications Inc.

Verizon Wireless – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
9/30/12
    3 Mos. Ended
9/30/11
    % Change     9 Mos. Ended
9/30/12
    9 Mos. Ended
9/30/11
    % Change  

Operating Revenues

            

Retail service

   $     15,538      $     14,405        7.9      $     45,654      $     42,098        8.4   

Other service

     616        628        (1.9     1,686        1,953        (13.7
  

 

 

   

 

 

     

 

 

   

 

 

   

Service

     16,154        15,033        7.5        47,340        44,051        7.5   

Equipment

     1,858        1,800        3.2        5,464        5,242        4.2   

Other

     1,012        893        13.3        3,070        2,607        17.8   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     19,024        17,726        7.3        55,874        51,900        7.7   
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services and sales

     5,690        5,670        0.4        17,158        17,379        (1.3

Selling, general and administrative expense

     5,250        4,867        7.9        15,773        14,412        9.4   

Depreciation and amortization expense

     2,037        2,040        (0.1     5,966        5,917        0.8   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     12,977        12,577        3.2        38,897        37,708        3.2   
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

   $       6,047      $     5,149        17.4      $     16,977      $     14,192        19.6   

Operating Income Margin

     31.8     29.0       30.4     27.3  

Segment EBITDA

   $       8,084      $       7,189        12.4      $     22,943      $     20,109        14.1   

Segment EBITDA Service Margin

     50.0     47.8       48.5     45.6  

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.

Verizon Wireless – Selected Operating Statistics

 

Unaudited

   9/30/12      9/30/11      % Change  

Connections (’000)

        

Retail postpaid

     90,354         86,175         4.8   

Retail prepaid

     5,545         4,533         22.3   
  

 

 

    

 

 

    

Retail

     95,899         90,708         5.7   

 

Unaudited

   3 Mos. Ended
9/30/12
    3 Mos. Ended
9/30/11
    % Change      9 Mos. Ended
9/30/12
    9 Mos. Ended
9/30/11
    % Change  

Net Add Detail (’000) (1)

             

Retail postpaid

     1,535        882        74.0         2,924        3,045        (4.0

Retail prepaid

     228        86        *         751        120        *   
  

 

 

   

 

 

      

 

 

   

 

 

   

Retail

     1,763        968        82.1         3,675        3,165        16.1   

Account Statistics

             

Retail postpaid accounts (’000) (2)

            34,796        34,444        1.0   

Retail postpaid ARPA

     $  145.42        $  136.57        6.5         $  143.11        $  133.44        7.2   

Retail postpaid connections per account (2)

            2.60        2.50        4.0   

Churn Detail

             

Retail postpaid

     0.91     0.94        0.90     0.95  

Retail

     1.18     1.26        1.18     1.27  

Retail Postpaid Connection Statistics

             

Total Smartphone postpaid % of phones sold

     78.8     59.6        74.8     59.7  

Total Smartphone postpaid phone base (2)

            53.2     39.2  

Total Internet postpaid base (2)

            8.8     7.8  

Other Operating Statistics

             

Capital expenditures (in millions)

     $    2,133        $    1,784        19.6         $    6,066        $    7,186        (15.6

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.

 

* Not meaningful


Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
9/30/12
    3 Mos. Ended
9/30/11
    % Change     9 Mos. Ended
9/30/12
    9 Mos. Ended
9/30/11
    % Change  

Operating Revenues

            

Consumer retail

     $      3,555        $      3,400        4.6        $    10,474        $    10,177        2.9   

Small business

     670        670               1,999        2,047        (2.3
  

 

 

   

 

 

     

 

 

   

 

 

   

Mass Markets

     4,225        4,070        3.8        12,473        12,224        2.0   

Strategic services

     2,010        1,926        4.4        5,962        5,591        6.6   

Core

     1,771        1,995        (11.2     5,491        6,102        (10.0
  

 

 

   

 

 

     

 

 

   

 

 

   

Global Enterprise

     3,781        3,921        (3.6     11,453        11,693        (2.1

Global Wholesale

     1,782        1,963        (9.2     5,470        6,035        (9.4

Other

     126        195        (35.4     394        591        (33.3
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     9,914        10,149        (2.3     29,790        30,543        (2.5
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services and sales

     5,463        5,681        (3.8     16,535        16,647        (0.7

Selling, general and administrative expense

     2,303        2,296        0.3        6,570        6,894        (4.7

Depreciation and amortization expense

     2,107        2,119        (0.6     6,299        6,343        (0.7
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     9,873        10,096        (2.2     29,404        29,884        (1.6
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

     $           41        $           53        (22.6     $         386        $         659        (41.4

Operating Income Margin

     0.4     0.5       1.3     2.2  

Segment EBITDA

     $      2,148        $      2,172        (1.1     $      6,685        $      7,002        (4.5

Segment EBITDA Margin

     21.7     21.4       22.4     22.9  

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

   9/30/12      9/30/11      % Change  

Connections (’000)

        

FiOS Video Subscribers

     4,592         3,979         15.4   

FiOS Internet Subscribers

     5,280         4,616         14.4   

FiOS Digital Voice residence connections

     2,938         1,460         *   
  

 

 

    

 

 

    

FiOS Digital connections

     12,810         10,055         27.4   

HSI

     3,488         3,956         (11.8

Total Broadband connections

     8,768         8,572         2.3   

Primary residence switched access connections

     8,384         10,456         (19.8

Primary residence connections

     11,322         11,916         (5.0

Total retail residence voice connections

     12,005         12,809         (6.3

Total voice connections

     22,847         24,519         (6.8

 

Unaudited

   3 Mos. Ended
9/30/12
    3 Mos. Ended
9/30/11
    % Change     9 Mos. Ended
9/30/12
    9 Mos. Ended
9/30/11
    % Change  

Net Add Detail (’000)

            

FiOS Video Subscribers

     119        131        (9.2     419        507        (17.4

FiOS Internet Subscribers

     136        138        (1.4     463        534        (13.3

FiOS Digital Voice residence connections

     290        265        9.4        1,054        643        63.9   
  

 

 

   

 

 

     

 

 

   

 

 

   

FiOS Digital connections

     545        534        2.1        1,936        1,684        15.0   

HSI

     (144     (118     22.0        (365     (354     3.1   

Total Broadband connections

     (8     20        *        98        180        (45.6

Primary residence switched access connections

     (459     (490     (6.3     (1,522     (1,301     17.0   

Primary residence connections

     (169     (225     (24.9     (468     (658     (28.9

Total retail residence voice connections

     (217     (278     (21.9     (621     (807     (23.0

Total voice connections

     (431     (478     (9.8     (1,290     (1,482     (13.0

Revenue and ARPU Statistics

            

Consumer ARPU

     $  103.86        $    94.20        10.3        $  102.02        $    92.34        10.5   

FiOS revenues (in millions)

     $    2,489        $    2,109        18.0        $    7,157        $    6,077        17.8   

Strategic services as a % of total Enterprise revenues

     53.2     49.1       52.1     47.8  

Other Operating Statistics

            

Capital expenditures (in millions)

     $    1,484        $    1,617        (8.2     $    4,617        $    4,767        (3.1

Wireline employees (’000)

           87.4        92.8     

FiOS Video Open for Sale (’000)

           13,957        13,023     

FiOS Video penetration

           32.9     30.6  

FiOS Internet Open for Sale (’000)

           14,283        13,358     

FiOS Internet penetration

           37.0     34.6  

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

 

Adjusted EBITDA    (dollars in millions)

 

Unaudited

   3 Mos. Ended
3/31/11
    3 Mos. Ended
6/30/11
    3 Mos. Ended
9/30/11
    3 Mos. Ended
12/31/11
    3 Mos. Ended
3/31/12
    3 Mos. Ended
6/30/12
    3 Mos. Ended
9/30/12
 

Verizon Consolidated EBITDA

              

Consolidated net income (loss)

     $    3,264        $    3,604        $    3,542        $    (212     $    3,906        $    4,285        $    4,292   

Add / (Subtract):

              

Provision (benefit) for income taxes

     617        702        556        (1,590     726        793        631   

Interest expense

     709        717        698        703        685        679        632   

Other (income) and expense, net

     (36     (10     (24     84        (19     (34     (10

Equity in earnings of unconsolidated business

     (101     (121     (125     (97     (103     (72     (62
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     4,453        4,892        4,647        (1,112     5,195        5,651        5,483   

Add Depreciation and amortization expense

     4,024        4,113        4,179        4,180        4,028        4,128        4,167   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

     $    8,477        $    9,005        $    8,826        $    3,068        $    9,223        $    9,779        $    9,650   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Items (Before Tax)

              

Severance, Pension, and Benefit Charges

                   329        5,625                        

Litigation Settlements

                                               384   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                   329        5,625                      384   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Adjusted EBITDA

     $    8,477        $    9,005        $    9,155        $    8,693        $    9,223        $    9,779        $  10,034   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Net Debt to Adjusted EBITDA    (dollars in millions)

 

Unaudited

  

12/31/11

  

9/30/12

Verizon Net Debt

     

Debt maturing within one year

   $    4,849    $    6,335

Long-term debt

   50,303    46,467
  

 

  

 

Total Debt

   55,152    52,802

Less Cash and cash equivalents

   13,362    9,714
  

 

  

 

Net Debt

   $  41,790    $  43,088
  

 

  

 

Net Debt to Adjusted EBITDA Ratio

   1.2x    1.1x
  

 

  

 

Adjusted EPS

Unaudited

   3 Mos. Ended
9/30/11
     3 Mos.  Ended
9/30/12
 

Earnings Per Common Share, Reported

   $           0.49       $           0.56   

Severance, Pension, and Benefit Charges

     0.07           

Litigation Settlements

             0.08   
  

 

 

    

 

 

 

Adjusted EPS

   $ 0.56       $ 0.64   
  

 

 

    

 

 

 

 

Free Cash Flow    (dollars in millions)

 

Unaudited

   9 Mos. Ended
9/30/11
     9 Mos.  Ended
9/30/12
 

Net cash provided by operating activities

     $    21,512         $    24,758   

Less Capital expenditures

     12,546         11,315   
  

 

 

    

 

 

 

Free Cash Flow

     $      8,966         $    13,443   
  

 

 

    

 

 

 


Verizon Communications Inc.

Reconciliations – Segments

Verizon Wireless

(dollars in millions)

 

Unaudited

   3 Mos. Ended
9/30/11
    3 Mos. Ended
9/30/12
    9 Mos. Ended
9/30/11
    9 Mos.  Ended
9/30/12
 

Verizon Wireless Segment EBITDA

        

Operating income

     $      5,149        $      6,047        $    14,192        $    16,977   

Add Depreciation and amortization expense

     2,040        2,037        5,917        5,966   
  

 

 

   

 

 

   

 

 

   

 

 

 

Verizon Wireless Segment EBITDA

     $      7,189        $      8,084        $    20,109        $    22,943   
  

 

 

   

 

 

   

 

 

   

 

 

 

Verizon Wireless total operating revenues

     $    17,726        $    19,024        $    51,900        $    55,874   
  

 

 

   

 

 

   

 

 

   

 

 

 

Verizon Wireless service revenues

     $    15,033        $    16,154        $    44,051        $    47,340   
  

 

 

   

 

 

   

 

 

   

 

 

 

Verizon Wireless operating income margin

     29.0     31.8     27.3     30.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Verizon Wireless Segment EBITDA service margin

     47.8     50.0     45.6     48.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline

(dollars in millions)

 

Unaudited

   3 Mos. Ended
9/30/11
    3 Mos. Ended
9/30/12
    9 Mos. Ended
9/30/11
    9 Mos.  Ended
9/30/12
 

Wireline Segment EBITDA

        

Operating income

     $          53        $          41        $        659        $         386   

Add Depreciation and amortization expense

     2,119        2,107        6,343        6,299   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline Segment EBITDA

     $     2,172        $     2,148        $     7,002        $      6,685   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     $   10,149        $     9,914        $   30,543        $    29,790   
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline operating income margin

     0.5     0.4     2.2     1.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Wireline Segment EBITDA margin

     21.4     21.7     22.9     22.4