VERIZON COMMUNICATIONS INC - FORM 8-K - EX-99

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8-K - 8-K - VERIZON COMMUNICATIONS INC	d183632d8k.htm

Exhibit 99

LOGO

NEWS RELEASE


FOR IMMEDIATE RELEASE		Media contact:
April 21, 2016		Bob Varettoni
		908.559.6388
		robert.a.varettoni@verizon.com

Verizon delivers continued earnings and operational growth in 1Q

Strong results demonstrate ability to compete effectively as company remains

focused on network leadership and developing new markets

1Q 2016 highlights

•

Consolidated: $1.06 in earnings per share (EPS), compared with $1.02 per share in 1Q 2015.

•

Wireless: 640,000 retail postpaid net additions; continued low 0.96 percent retail postpaid churn.

•

Wireline: 5.0 percent Fios revenue growth; 98,000 Fios internet and 36,000 Fios video net additions.

NEW YORK – As Verizon Communications Inc. (NYSE, Nasdaq: VZ) continues to grow its customer base and gain revenues in new markets, the company today reported first-quarter 2016 earnings of $1.06 per share, an increase of 3.9 percent compared with first-quarter 2015.

“Verizon’s strong first-quarter results demonstrate our capacity to compete effectively, while executing on our plan of continued network leadership and seeding new growth markets in mobile video and the Internet of Things,” said Chairman and CEO Lowell McAdam.

Since the beginning of the year, Verizon has moved to strengthen America’s best networks by announcing its intention to acquire XO Communications’ fiber-optic network business and an agreement to deploy a new fiber platform in Boston. Both will support a mix of new technologies, including 5G wireless services.

Verizon also completed its sale of local landline businesses in California, Florida and Texas on April 1. The company used the proceeds to pay down debt in second-quarter 2016. In addition, Verizon recently announced plans to expand its video platform by adding unique content from Hearst and AwesomenessTV, and through a joint venture with Hearst to acquire Complex Media.

Consolidated results

•

Total operating revenues in first-quarter 2016 were $32.2 billion, a 0.6 percent increase compared with first-quarter 2015. Excluding AOL (non-GAAP), which was not part of Verizon a year ago, total operating revenues declined 1.5 percent. AOL had its highest first-quarter revenues in the last five years.

•

New revenue streams from IoT (Internet of Things) are growing, with revenues of approximately $195 million in first-quarter 2016, a year-over-year increase of about 25 percent.

•

Cash flows from operating activities totaled $7.4 billion in first-quarter 2016. This compares with $10.2 billion in last year’s first quarter, which included $2.4 billion related to a one-time transaction to monetize wireless tower assets. With capital expenditures totaling $3.4 billion in first-quarter 2016, free cash flow (non-GAAP, cash flow from operations less capital expenditures) totaled $4.0 billion. Verizon continues to anticipate consolidated capital expenditures of between $17.2 billion and $17.7 billion in 2016.

•

Operating income was $7.9 billion, and operating income margin was 24.7 percent. Consistent with last year’s first quarter, EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled $12.0 billion and the consolidated EBITDA margin (non-GAAP) was 37.2 percent in first-quarter 2016.

Verizon Wireless posts another quarter of profitable growth

In first-quarter 2016, Verizon Wireless posted a balance of quality connections growth and margin expansion.

Wireless highlights

•

Verizon reported 640,000 retail postpaid net additions in first-quarter 2016, a seasonally low-volume quarter. These net adds exclude all wholesale connections, including IoT. At the end of first-quarter 2016, Verizon had 112.6 million retail connections, a 3.7 percent year-over-year increase, and 107.2 million retail postpaid connections, a 4.4 percent year-over-year increase.

•

Customer retention remained high, with retail postpaid churn at a low 0.96 percent in first-quarter 2016, a year-over-year improvement of 7 basis points.

•

Segment operating income was $7.9 billion, and segment operating income margin was 35.8 percent. In first-quarter 2016, Verizon Wireless generated $10.2 billion in EBITDA (non-GAAP), a year-over-year increase of 1.7 percent. Segment EBITDA margin (non-GAAP) was 46.2 percent, compared with 44.8 percent in first-quarter 2015.

Page 2

•

Total revenues were $22.0 billion in first-quarter 2016, a decline of 1.5 percent compared with first-quarter 2015 as more customers continued to choose unsubsidized device payment plans. Service revenues plus installment billings increased 1.6 percent, comparing first-quarter 2016 with first-quarter 2015.

•

The percentage of phone activations on installment plans grew to 68 percent in first-quarter 2016, compared with 67 percent in fourth-quarter 2015. The company expects this percentage to grow to 70 percent in second-quarter 2016. About 48 percent of postpaid phone customers are on an unsubsidized pricing plan, and service revenue declines are expected to flatten when this base exceeds 50 percent. Verizon expects the decline in service revenues to slow throughout the year and ultimately turn positive by the end of 2017.

•

The composition of the 640,000 retail postpaid net adds was strong: Verizon added 452,000 4G smartphones to its postpaid base in first-quarter 2016. Due to declines in 3G and basic phones, postpaid phone net adds were a negative 8,000. Tablet net adds totaled 507,000 in the quarter.

•

Verizon ended first-quarter 2016 with a total of 73.8 million smartphones. This is 85 percent of the total phone base, with 4G devices more than 81 percent of the retail postpaid connections base.

•

Growth in 4G device adoption is driving increased data and video usage. Approximately 92 percent of Verizon’s total data traffic is on the LTE network. Overall data traffic on LTE has increased by approximately 50 percent year over year.

•

Wireless capital expenditures totaled $2.2 billion in first-quarter 2016 and are expected to ramp up throughout the year.

Fios remains the growth driver in wireline segment

In the wireline segment, Fios fiber-optic-based services remain the driver of revenue growth and now represent about 81 percent of consumer revenues.

Wireline highlights

•

Verizon added 98,000 net new Fios internet connections and 36,000 net new Fios video connections in first-quarter 2016. Total Fios revenues grew 5.0 percent, to $3.5 billion, comparing first-quarter 2016 with first-quarter 2015, including consumer Fios revenue growth of 4.7 percent.

•

In first-quarter 2016, consumer revenues were $4.0 billion, an increase of 0.8 percent compared with first-quarter 2015.

•

Segment operating income was $0.6 billion, and segment operating income margin was 6.3 percent. In first-quarter 2016, wireline generated $2.2 billion in EBITDA (non-GAAP), a year-over-year increase of 1.2 percent. Segment EBITDA margin (non-GAAP) was 23.4 percent, compared with 22.7 percent in first-quarter 2015.

•

By the end of first-quarter 2016, about 78 percent of consumer Fios internet customers subscribed to data speeds of 50 megabits per second or higher. Customer demand remained strong for Custom TV, which represented about 38 percent of Fios video sales in the quarter.

•

During the first quarter, Verizon Enterprise Solutions entered into new agreements with or began servicing a number of clients, including 1-800-Flowers, the Commonwealth of Virginia, Dana Holding Corporation, the Florida Sheriffs Association, Promeditec, PSE&G, South Australia Health & Medical Research Institute, and Wyndham Worldwide.

Page 3

Details of non-operational items and other impacts

Verizon’s first-quarter 2016 earnings of $1.06 per share included a non-cash pre-tax loss of $165 million for a pension mark-to-market adjustment. Verizon expects settlement accounting to impact each of the remaining quarters in 2016. Additionally, the company recognized a pre-tax gain of $142 million on a spectrum license transaction.

On an after-tax basis, the loss on settlement accounting and the gain on the spectrum transaction each amounted to approximately 2 cents per share, effectively offsetting each other in first-quarter 2016. For comparability, there were no special items of a non-operational nature in first-quarter 2015.

Wireline results for first-quarter 2016 included the operations sold to Frontier on April 1. Verizon recognized a full-quarter benefit of about 3 cents per share due to these assets being classified as held for sale in first-quarter 2016, compared with 2 cents per share recognized in first-quarter 2015.

For illustrative purposes on a preliminary basis, excluding operations sold to Frontier, recast total wireline revenues (non-GAAP) were approximately $8.0 billion in first-quarter 2016. This is comparable to first-quarter 2015. Recast wireline segment EBITDA margin (non-GAAP) for first-quarter 2016 was approximately 19 percent without these operations, which were more profitable than the remaining properties.

Verizon will provide nine quarters of historical financials for the wireline segment, excluding these properties, later in second-quarter 2016.

In early April 2016, Verizon used proceeds from the Frontier transaction together with cash on hand to complete tender offers and early redemptions for $10.7 billion in debt, which enabled the company to retire higher-cost debt and achieve lower borrowing costs. Verizon reiterates that by 2018-2019 the company expects to return to its credit-rating profile prior to the acquisition of Vodafone’s indirect 45 percent interest in Verizon Wireless in early 2014.

Earnings outlook

Verizon continues to expect full-year 2016 adjusted earnings to be at a level comparable to the company’s strong full-year 2015 adjusted earnings. However, given the status of labor contract negotiations, there will be pressure on second-quarter earnings due to the timing of cost reductions.

Page 4

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, generated nearly $132 billion in 2015 revenues. Verizon operates America’s most reliable wireless network, with 112.6 million retail connections nationwide. The company also provides communications and entertainment services over America’s most advanced fiber-optic network, and delivers integrated business solutions to customers worldwide.

####

VERIZON’S ONLINE NEWS CENTER: News releases, feature stories, executive biographies and media contacts are available at Verizon’s online News Center at www.verizon.com/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 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; and the inability to implement our business strategies.

Page 5

Verizon Communications Inc.

Condensed Consolidated Statements of Income

(dollars in millions, except per share amounts)


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

Operating Revenues
Service revenues and other		$ 28,217			$ 28,611			(1.4	)
Wireless equipment revenues		3,954			3,373			17.2

Total Operating Revenues		32,171			31,984			0.6


Operating Expenses
Cost of services		7,614			6,988			9.0
Wireless cost of equipment		4,998			5,108			(2.2	)
Selling, general and administrative expense		7,600			7,939			(4.3	)
Depreciation and amortization expense		4,017			3,989			0.7

Total Operating Expenses		24,229			24,024			0.9


Operating Income		7,942			7,960			(0.2	)
Equity in losses of unconsolidated businesses		(20	)		(34	)		(41.2	)
Other income, net		32			75			(57.3	)
Interest expense		(1,188	)		(1,332	)		(10.8	)

Income Before Provision for Income Taxes		6,766			6,669			1.5
Provision for income taxes		(2,336	)		(2,331	)		0.2

Net Income		$ 4,430			$ 4,338			2.1


Net income attributable to noncontrolling interests		$ 120			$ 119			0.8
Net income attributable to Verizon		4,310			4,219			2.2

Net income		$ 4,430			$ 4,338			2.1


Basic Earnings per Common Share
Net income attributable to Verizon		$ 1.06			$ 1.03			2.9

Weighted average number of common shares (in millions)		4,080			4,116

Diluted Earnings per Common Share ⁽¹⁾
Net income attributable to Verizon		$ 1.06			$ 1.02			3.9

Weighted average number of common shares-assuming dilution (in millions)		4,085			4,121

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	3/31/16			12/31/15			$ Change

Assets
Current assets
Cash and cash equivalents		$ 5,846			$ 4,470			$ 1,376
Short-term investments		—			350			(350	)
Accounts receivable, net		12,485			13,457			(972	)
Inventories		1,142			1,252			(110	)
Assets held for sale		720			792			(72	)
Prepaid expenses and other		3,422			1,959			1,463

Total current assets		23,615			22,280			1,335

Plant, property and equipment		222,669			220,163			2,506
Less accumulated depreciation		139,658			136,622			3,036

		83,011			83,541			(530	)

Investments in unconsolidated businesses		821			796			25
Wireless licenses		86,830			86,575			255
Goodwill		25,364			25,331			33
Other intangible assets, net		8,216			8,338			(122	)
Non-current assets held for sale		10,432			10,267			165
Other assets		6,298			7,047			(749	)

Total Assets		$ 244,587			$ 244,175			$ 412


Liabilities and Equity
Current liabilities
Debt maturing within one year		$ 6,265			$ 6,489			$ (224	)
Accounts payable and accrued liabilities		18,118			19,362			(1,244	)
Liabilities related to assets held for sale		452			463			(11	)
Other		8,477			8,738			(261	)

Total current liabilities		33,312			35,052			(1,740	)

Long-term debt		103,615			103,240			375
Employee benefit obligations		29,665			29,957			(292	)
Deferred income taxes		45,568			45,484			84
Non-current liabilities related to assets held for sale		974			959			15
Other liabilities		11,350			11,641			(291	)

Equity
Common stock		424			424			—
Contributed capital		11,191			11,196			(5	)
Reinvested earnings		13,253			11,246			2,007
Accumulated other comprehensive income		459			550			(91	)
Common stock in treasury, at cost		(7,279	)		(7,416	)		137
Deferred compensation – employee stock ownership plans and other		593			428			165
Noncontrolling interests		1,462			1,414			48

Total equity		20,103			17,842			2,261

Total Liabilities and Equity		$ 244,587			$ 244,175			$ 412

Verizon – Selected Financial and Operating Statistics


Unaudited	3/31/16		12/31/15

Total debt (in millions)		$ 109,880		$ 109,729
Net debt (in millions)		$ 104,034		$ 105,259
Net debt / Adjusted EBITDA⁽¹⁾		2.2x		2.3x
Common shares outstanding end of period (in millions)		4,076		4,073
Total employees		173,300		177,700
Quarterly cash dividends declared per common share		$ 0.565		$ 0.565

Footnotes:

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

Certain reclassifications have been made, where appropriate, to conform to the current period’s presentation.

Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)


Unaudited	3 Mos. Ended 3/31/16			3 Mos. Ended 3/31/15			$ Change

Cash Flows from Operating Activities
Net Income		$ 4,430			$ 4,338			$ 92
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		4,017			3,989			28
Employee retirement benefits		356			284			72
Deferred income taxes		167			823			(656	)
Provision for uncollectible accounts		353			383			(30	)
Equity in losses of unconsolidated businesses, net of dividends received		29			44			(15	)
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses		(1,162	)		(888	)		(274	)
Other, net		(771	)		1,196			(1,967	)

Net cash provided by operating activities		7,419			10,169			(2,750	)


Cash Flows from Investing Activities
Capital expenditures (including capitalized software)		(3,387	)		(3,665	)		278
Acquisitions of investments and businesses, net of cash acquired		(161	)		(2	)		(159	)
Acquisitions of wireless licenses		(131	)		(9,555	)		9,424
Other, net		243			46			197

Net cash used in investing activities		(3,436	)		(13,176	)		9,740


Cash Flows from Financing Activities
Proceeds from long-term borrowings		—			6,497			(6,497	)
Repayments of long-term borrowings and capital lease obligations		(376	)		(5,576	)		5,200
Increase (decrease) in short-term obligations, excluding current maturities		(40	)		482			(522	)
Dividends paid		(2,302	)		(2,153	)		(149	)
Proceeds from sale of common stock		3			—			3
Purchase of common stock for treasury		—			(5,000	)		5,000
Other, net		108			2,545			(2,437	)

Net cash used in financing activities		(2,607	)		(3,205	)		598


Increase (decrease) in cash and cash equivalents		1,376			(6,212	)		7,588
Cash and cash equivalents, beginning of period		4,470			10,598			(6,128	)

Cash and cash equivalents, end of period		$ 5,846			$ 4,386			$ 1,460

Verizon Communications Inc.

Wireless – Selected Financial Results

(dollars in millions)


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

Operating Revenues
Service		$ 16,809			$ 17,914			(6.2	)
Equipment		3,954			3,373			17.2
Other		1,241			1,041			19.2

Total Operating Revenues		22,004			22,328			(1.5	)


Operating Expenses
Cost of services		1,942			1,851			4.9
Cost of equipment		4,998			5,108			(2.2	)
Selling, general and administrative expense		4,891			5,369			(8.9	)
Depreciation and amortization expense		2,293			2,190			4.7

Total Operating Expenses		14,124			14,518			(2.7	)


Operating Income		$ 7,880			$ 7,810			0.9
Operating Income Margin		35.8	%		35.0	%

Segment EBITDA		$ 10,173			$ 10,000			1.7
Segment EBITDA Margin		46.2	%		44.8	%

Footnotes:

The segment financial results and metrics above are adjusted to exclude the effects of non-operational items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.

Intersegment transactions have not been eliminated.

Certain reclassifications have been made, where appropriate, to reflect comparable operating results.

Verizon Communications Inc.

Wireless – Selected Operating Statistics


Unaudited	3/31/16			3/31/15			% Change

Connections (‘000)
Retail postpaid		107,171			102,637			4.4
Retail prepaid		5,402			5,945			(9.1	)

Retail		112,573			108,582			3.7

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

Net Add Detail (‘000) ⁽¹⁾
Retail postpaid		640			565			13.3
Retail prepaid		(177	)		(188	)		(5.9	)

Retail		463			377			22.8

Account Statistics
Retail Postpaid Accounts (‘000) ⁽²⁾		35,720			35,516			0.6
Retail postpaid connections per account ⁽²⁾		3.00			2.89			3.8

Churn Detail
Retail postpaid		0.96	%		1.03	%
Retail		1.23	%		1.33	%

Retail Postpaid Connection Statistics
Total Smartphone postpaid % of phones activated		92.5	%		91.4	%
Total Smartphone postpaid phone base ⁽²⁾		84.7	%		79.9	%
Total Internet postpaid base ⁽²⁾		17.3	%		14.8	%
4G LTE devices as % of retail postpaid connections		81.1	%		69.9	%

Other Operating Statistics
Capital expenditures (in millions)		$ 2,190			$ 2,419			(9.5	)

Footnotes:

(1)	Connection net additions exclude acquisitions and adjustments.

(2)	Statistics presented as of end of period.

Intersegment transactions have not been eliminated.

Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)


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

Operating Revenues
Consumer retail		$ 4,022			$ 3,992			0.8
Small business		568			600			(5.3	)

Mass Markets		4,590			4,592			—
Global Enterprise		3,161			3,263			(3.1	)

Global Wholesale		1,463			1,524			(4.0	)
Other		76			90			(15.6	)

Total Operating Revenues		9,290			9,469			(1.9	)


Operating Expenses
Cost of services		5,163			5,287			(2.3	)
Selling, general and administrative expense		1,950			2,031			(4.0	)
Depreciation and amortization expense		1,588			1,746			(9.0	)

Total Operating Expenses		8,701			9,064			(4.0	)


Operating Income		$ 589			$ 405			45.4
Operating Income Margin		6.3	%		4.3	%

Segment EBITDA		$ 2,177			$ 2,151			1.2
Segment EBITDA Margin		23.4	%		22.7	%

Footnotes:

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	3/31/16		3/31/15		% Change

Connections (‘000)
Fios Video Subscribers		5,863		5,739		2.2
Fios Internet Subscribers		7,132		6,749		5.7
Fios Digital voice residence connections		4,800		4,661		3.0

Fios Digital connections		17,795		17,149		3.8

HSI		2,086		2,497		(16.5	)
Total Broadband connections		9,218		9,246		(0.3	)
Primary residence switched access connections		4,573		5,397		(15.3	)
Primary residence connections		9,373		10,058		(6.8	)

Total retail residence voice connections		9,702		10,457		(7.2	)
Total voice connections		18,037		19,475		(7.4	)


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

Net Add Detail (‘000)
Fios Video Subscribers		36			90			(60.0	)
Fios Internet Subscribers		98			133			(26.3	)
Fios Digital voice residence connections		46			59			(22.0	)

Fios Digital connections		180			282			(36.2	)

HSI		(108	)		(92	)		17.4
Total Broadband connections		(10	)		41			*
Primary residence switched access connections		(211	)		(199	)		6.0
Primary residence connections		(165	)		(140	)		17.9

Total retail residence voice connections		(183	)		(158	)		15.8
Total voice connections		(350	)		(320	)		9.4

Revenue Statistics
Fios revenues (in millions)		$ 3,521			$ 3,352			5.0

Other Operating Statistics
Capital expenditures (in millions)		$ 1,006			$ 1,077			(6.6	)

Wireline employees (‘000)		69.2			75.5
Fios Video Open for Sale (‘000)		16,677			15,931
Fios Video penetration		35.2	%		36.0	%
Fios Internet Open for Sale (‘000)		17,018			16,264
Fios Internet penetration		41.9	%		41.5	%

Footnotes:

Intersegment transactions have not been eliminated.

*	Not meaningful

Verizon Communications Inc.

Non-GAAP Reconciliations – Consolidated Verizon

Consolidated Operating Revenues Excluding AOL

(dollars in millions)


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

Consolidated Operating Revenues		$ 32,171		$ 31,984
Less: AOL operating revenues		669		—

Consolidated Operating Revenues Excluding AOL		$ 31,502		$ 31,984

Consolidated EBITDA, EBITDA Margin and Adjusted EBITDA

(dollars in millions)


Unaudited	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
Verizon Consolidated EBITDA
Consolidated net income		$ 4,430			$ 5,513			$ 4,171			$ 4,353			$ 4,338
Add/(Subtract):
Provision for income taxes		2,336			3,065			2,195			2,274			2,331
Interest expense		1,188			1,178			1,202			1,208			1,332
Other income, net		(32	)		(28	)		(51	)		(32	)		(75	)
Equity in losses of unconsolidated businesses		20			16			18			18			34

Operating income		7,942			9,744			7,535			7,821			7,960
Add Depreciation and amortization expense		4,017			4,039			4,009			3,980			3,989

Consolidated EBITDA		$ 11,959			$ 13,783			$ 11,544			$ 11,801			$ 11,949


Other Items (Before Tax)
Severance, Pension, and Benefit (Credits)/Charges		165			(2,598	)		342			—			—
Gain on Spectrum License Transactions		(142	)		(254	)		—			—			—

		23			(2,852	)		342			—			—

Consolidated Adjusted EBITDA		$ 11,982			$ 10,931			$ 11,886			$ 11,801			$ 11,949

Consolidated Operating Income Margin		24.7	%											24.9	%
Consolidated EBITDA Margin		37.2	%											37.4	%

Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio

(dollars in millions)


Unaudited	3/31/16		12/31/15

Verizon Net Debt
Debt maturing within one year		$ 6,265		$ 6,489
Long-term debt		103,615		103,240

Total Debt		109,880		109,729
Less Cash and cash equivalents		5,846		4,470

Net Debt		$ 104,034		$ 105,259

Net Debt to Consolidated Adjusted EBITDA Ratio		2.2x		2.3x

Verizon Communications Inc.

Non-GAAP Reconciliations – Consolidated Verizon

Adjusted Earnings per Common Share (Adjusted EPS)


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

EPS		$ 1.06			$ 1.02
Pension remeasurement		0.02			—
Gain on spectrum license transaction		(0.02	)		—

Adjusted EPS		$ 1.06			$ 1.02

Free Cash Flow

(dollars in millions)


Unaudited	3 Mos. Ended 3/31/16
Net cash provided by operating activities		$ 7,419
Less Capital expenditures		3,387

Free Cash Flow		$ 4,032

Verizon Communications Inc.

Non-GAAP Reconciliations – Segments

Wireless

(dollars in millions)


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

Wireless Segment EBITDA and EBITDA Margin
Operating Income		$ 7,880			$ 7,810
Add Depreciation and amortization expense		2,293			2,190

Wireless Segment EBITDA		$ 10,173			10,000

Wireless total operating revenues		$ 22,004			22,328

Wireless Operating Income Margin		35.8	%		35.0	%

Wireless Segment EBITDA Margin		46.2	%		44.8	%

Wireline

(dollars in millions)


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

Wireline Segment EBITDA and EBITDA Margin
Operating Income		$ 589			$ 405
Add Depreciation and amortization expense		1,588			1,746

Wireline Segment EBITDA		$ 2,177			2,151

Wireline total operating revenues		$ 9,290			$ 9,469

Wireline Operating Income Margin		6.3	%		4.3	%

Wireline Segment EBITDA Margin		23.4	%		22.7	%

(dollars in billions)


Unaudited and preliminary	3 Mos. Ended 3/31/16			3 Mos. Ended 3/31/15

Recast Wireline Segment Total Operating Revenues and EBITDA Margin
Total operating revenues		$ 9.3			$ 9.5
Less Excluded Businesses		1.3			1.4

Recast Wireline Segment Total Operating Revenues		$ 8.0			$ 8.1


Operating Income		$ 0.6
Add Depreciation and amortization expense		1.6

Wireline Segment EBITDA		$ 2.2
Less Excluded Businesses		0.7

Recast Wireline Segment EBITDA		$ 1.5

Recast Wireline Segment EBITDA Margin		19	%

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VERIZON COMMUNICATIONS INC Reports