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

Attached files

file	filename
8-K - 8-K - VERIZON COMMUNICATIONS INC	d408089d8k.htm

Exhibit 99

LOGO

NEWS RELEASE


FOR IMMEDIATE RELEASE		Media contact:
July 26, 2016		Bob Varettoni
		908.559.6388
		robert.a.varettoni@verizon.com

Verizon reports 2Q results, reflecting continued strong operations

while advancing key strategic and financial initiatives

2Q 2016 highlights

•

Consolidated: 17 cents in earnings per share (EPS); adjusted EPS (non-GAAP) of 94 cents, excluding significant non-operational items related to pension and benefit re-measurements and early debt redemption and tender offers, and a gain on sale of local landline businesses.

•

Wireless: 615,000 retail postpaid net additions; continued low 0.94 percent retail postpaid churn.

•

Wireline: 3.7 percent Fios revenue growth; $500 million in anticipated cash savings over the term of new labor contracts.

NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported second-quarter earnings reflecting strong profitability and customer retention at Verizon Wireless, a repositioning of the wireline network footprint and cost structure, and scaling of new growth markets in mobile video and the Internet of Things (IoT).

Second-quarter 2016 EPS of 17 cents compared with $1.04 per share in second-quarter 2015. Adjusted second-quarter 2016 earnings (non-GAAP) of 94 cents per share excluded significant non-operational items related to mark-to-market pension and benefit re-measurements, early debt redemption and tender offers, and a gain from the sale of local landline businesses. Also, earnings were negatively impacted by about 7 cents per share in second-quarter 2016 by a seven-week work stoppage in wireline.

“Verizon’s second quarter shows that the company continues to deliver strong results while evolving operations and advancing a strategy to sustain network leadership, build new ecosystems and deliver the promise of the digital world to customers,” said Chairman and CEO Lowell McAdam.

In first-half 2016, Verizon Wireless added a net of 1.3 million postpaid connections, while stabilizing wireless service revenue declines, maintaining strong customer retention, densifying networks in major markets and advancing 5G deployment. Verizon also completed the sale of local landline businesses in three states, and it negotiated new labor contracts that will generate approximately $500 million in cash savings over the term of the contracts.

During second-quarter 2016, Verizon converted its go90 application to the AOL platform, supporting the ability to expand and monetize mobile video offerings. In June the company also announced an agreement to acquire Telogis to expand its global telematics offerings.

Yesterday, Verizon announced it had entered into a definitive agreement to acquire Yahoo’s operating business for approximately $4.8 billion, in a transaction expected to close in first-quarter 2017.

McAdam said, “By acquiring Yahoo, we will dramatically accelerate the timetable for scaling up to be a major competitor in mobile media. Yahoo is a complementary business to AOL, giving us market-leading content brands and a valuable portfolio of online properties and mobile applications that attract over 1 billion monthly active consumer views. We expect this acquisition to put us in a great position as a top global mobile media company and give us a significant source of revenue growth for the future.”

Consolidated results

•

Total operating revenues in second-quarter 2016 were $30.5 billion, a 5.3 percent decrease compared with second-quarter 2015. Excluding second-quarter 2015 revenues from divested local landline businesses and second-quarter 2016 revenues from AOL, which was not part of Verizon a year ago, total operating revenues on a comparable basis (non-GAAP) would have declined 3.5 percent year over year. AOL delivered strong revenue growth in second-quarter 2016.

•

New revenue streams from IoT continue to grow, with revenues of approximately $205 million in second-quarter 2016, a year-over-year increase of about 25 percent.

•

Cash flows from operating activities totaled $5.4 billion in second-quarter 2016. The total of $12.8 billion through first-half 2016 is down $6.1 billion from first-half 2015, driven by a one-time $2.4 billion benefit related to a transaction to monetize wireless tower assets in 2015, a change in Verizon’s method of monetizing device payment plan receivables and an increase in cash taxes in 2016.

Page 2

•

In second-quarter 2016, Verizon strengthened its balance sheet by executing tender offers and early redemptions to repay approximately $10.7 billion in debt.

•

Operating income was $4.6 billion in second-quarter 2016, and operating income margin was 14.9 percent. Net income was $0.9 billion in second-quarter 2016. EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled $8.5 billion and the consolidated EBITDA margin (non-GAAP) was 28.0 percent in second-quarter 2016.

Verizon Wireless highlights

•

Verizon reported 615,000 retail postpaid net additions in second-quarter 2016. These net adds exclude wholesale device and wholesale IoT connections. At the end of second-quarter 2016, Verizon had 113.2 million retail connections, a 3.3 percent year-over-year increase. Verizon’s industry-leading retail postpaid connections base grew 3.9 percent to 107.8 million, and prepaid connections totaled 5.4 million.

•

Customer retention remained at industry-leading levels, with retail postpaid churn at a low 0.94 percent in second-quarter 2016, a year-over-year increase of 4 basis points, as strong retention in the phone base was offset by increased churn in tablets.

•

Segment operating income was $8.0 billion, and segment operating income margin was 36.9 percent. In second-quarter 2016, Verizon Wireless generated $10.3 billion in segment EBITDA (non-GAAP), a year-over-year increase of 3.8 percent. Segment EBITDA margin (non-GAAP) was 47.5 percent, compared with 43.9 percent in second-quarter 2015.

•

Total revenues were $21.7 billion in second-quarter 2016, a decline of 4.0 percent compared with second-quarter 2015, as more customers continued to choose unsubsidized device payment plans. Service revenues plus device payment plan billings increased 2.3 percent, to $19.1 billion, comparing second-quarter 2016 with second-quarter 2015.

•

The percentage of phone activations on device payment plans was 67 percent in second-quarter 2016, compared with 68 percent in first-quarter 2016. The company expects this percentage to remain consistent with recent experience. About 53 percent of postpaid phone customers are on an unsubsidized pricing plan, compared with 48 percent in first-quarter 2016, which has flattened service revenue declines. Verizon Wireless is on track to exit 2017 with positive growth in service revenue.

•

At the end of second-quarter 2016, Verizon Wireless had a total of about 31.8 million device payment plan phone connections, representing about 37 percent of the postpaid phone base.

•

The composition of the 615,000 retail postpaid net adds was strong: Verizon added 462,000 4G smartphones to its postpaid base in second-quarter 2016. Net phone additions increased sequentially to 86,000, as the net gain in 4G phones was offset by a net decline in basic and 3G phones. Tablet net adds totaled 356,000 in the quarter. Net prepaid devices declined by 30,000, a significant improvement sequentially and year over year, primarily due to new prepaid pricing plans.

•

Verizon ended second-quarter 2016 with a total of 74.6 million smartphone connections. This is about 86 percent of the total phone base, with 4G devices at 82.5 percent of the retail postpaid connections base.

•

Growth in 4G device adoption continues to drive increased data and video usage. Approximately 93 percent of Verizon’s total data traffic is on the LTE network. Overall data traffic on LTE has increased by about 44 percent year over year.

Page 3

Wireline highlights

•

Total revenues for Fios fiber-optic-based services grew 3.7 percent, to $2.8 billion, comparing second-quarter 2016 with second-quarter 2015. The work stoppage impacted Fios connection growth, resulting in net declines of 13,000 Fios internet connections and 41,000 Fios video connections in second-quarter 2016. Verizon made significant progress in working through a backlog of Fios installations in June and has since returned to its normal run rate of Fios connection growth.

•

Fios revenue growth has been driven by a larger customer base and consumer demand for higher internet speeds. Approximately 11 percent of the company’s Fios internet base has opted for speeds of 100 megabits per second or higher. Customer demand remains strong for Custom TV, which represented nearly 40 percent of Fios video sales in second-quarter 2016.

•

The work stoppage negatively impacted wireline operating income. The segment reported an operating loss of $463 million in second-quarter 2016 and operating margin of negative 5.9 percent, while generating $1.1 billion in segment EBITDA (non-GAAP), a year-over-year decrease of 26.5 percent. Segment EBITDA margin (non-GAAP) was 14.0 percent, compared with 18.7 percent in second-quarter 2015.

•

Related to improving margins, Verizon made changes in its cost structure and expects benefits from the new labor contracts to be realized during the remainder of 2016 and into the future.

•

During the second quarter, Verizon Enterprise Solutions entered into new agreements or began work with a number of clients, including American Automobile Association, Anthem, Bencom B.V., Catalent Pharma Solutions, Cisco, Ingles Markets, Inc., Kinder Morgan, L.L. Bean, McDermott Will & Emery, McGraw-Hill Global Education Holdings, LLC, SunSource, TeleTech and Tetra Tech.

Details of non-operational items and other impacts

Verizon’s second-quarter 2016 earnings of 17 cents per share included a non-cash after-tax loss of $2.2 billion, or 54 cents per share, generated by pension and other post-employment retirement benefits, primarily associated with a re-measurement triggered by the new labor contracts, the sale of local landline businesses to Frontier and settlement accounting.

On Verizon’s balance sheet, pension and employee benefit obligations were reduced by a net of $1.6 billion, driven primarily by actuarial valuations associated with new labor contracts and the Frontier transaction, which were partially offset by the mark-to-market re-measurements and assets transferred to Frontier. Year-to-date unfunded employee benefit obligations have been reduced by $1.9 billion.

Second-quarter 2016 EPS also includes non-operational expenses of $1.1 billion after taxes, or 27 cents per share, in connection with early debt redemption and tender offers. Additionally, Verizon recognized an after-tax gain of $139 million, or 3 cents per share, on the Frontier transaction.

Page 4

There were no adjustments to second-quarter 2015 earnings.

Earnings outlook and forward-looking items

Verizon expects the following:

•

2016 adjusted earnings to be at a level comparable to 2015, excluding the 7-cent-per-share impact of the 2016 work stoppage;

•

Consolidated adjusted EBITDA margin consistent with full-year 2015;

•

Consolidated capital spending between $17.2 billion and $17.7 billion;

•

A minimum pension funding requirement of approximately $550 million in 2016;

•

An effective tax rate for financial reporting purposes in the range of 35 percent to 36 percent;

•

Growth in consolidated revenue for full-year 2017 consistent with GDP growth for that year; and

•

A return, by 2018-2019, 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 nearly 162,700 and generated nearly $132 billion in 2015 revenues. Verizon operates America’s most reliable wireless network, with 113.2 million retail connections nationwide. The company also provides communications and entertainment services over mobile broadband and the nation’s premiere all-fiber 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

Page 5

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.

Important Additional Information and Where to Find It

Yahoo! Inc. (“Yahoo”) will be filing with the Securities and Exchange Commission (the “SEC”) a proxy statement regarding the proposed sale of Yahoo’s operating business to Verizon Communications Inc. (“Verizon”) and related transactions, the definitive version of which will be sent or provided to Yahoo stockholders. BEFORE MAKING ANY VOTING DECISION, YAHOO’S STOCKHOLDERS ARE STRONGLY ADVISED TO READ YAHOO’S PROXY STATEMENT IN ITS ENTIRETY (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTIONS OR INCORPORATED BY REFERENCE THEREIN BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. Investors and stockholders will be able to obtain (when available) 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 (when available) in connection with the proposed transactions for no charge at the SEC’s website at www.sec.gov, on the Investor Relations page of Yahoo’s website investor.yahoo.net or by writing to Investor Relations, Yahoo! Inc., 701 First Avenue, Sunnyvale, CA 94089.

Yahoo and its directors and executive officers, as well as Verizon and its directors and executive officers, may be deemed participants in the solicitation of proxies from Yahoo’s investors and stockholders in connection with the proposed transactions. Information concerning the ownership of Yahoo securities by Yahoo’s directors and executive officers is included in their SEC filings on Forms 3, 4 and 5, and additional information is also available in Yahoo’s annual report on Form 10-K for the year ended December 31, 2015, as amended, and Yahoo’s proxy statement for its 2016 annual meeting of stockholders filed with the SEC on May 23, 2016. Information about Verizon’s directors and executive officers is set forth in Verizon’s annual report on Form 10-K for the year ended December 31, 2015 and Verizon’s proxy statement for its 2016 annual meeting of stockholders filed with the SEC on March 21, 2016. Information regarding Yahoo’s directors, executive officers and other persons who may, under the rules of the SEC, be considered participants in the solicitation of proxies in connection with the proposed transactions, including their respective interests by security holdings or otherwise, also will be set forth in the definitive proxy statement relating to the proposed transactions when it is filed with the SEC. These documents may be obtained free of charge from the sources indicated above.

Page 6

Exhibit 99

Verizon Communications Inc.

Condensed Consolidated Statements of Income

(dollars in millions, except per share amounts)


Unaudited	3 Mos. Ended 6/30/16			3 Mos. Ended 6/30/15			% Change			6 Mos. Ended 6/30/16			6 Mos. Ended 6/30/15			% Change

Operating Revenues
Service revenues and other		$ 26,828			$ 28,363			(5.4	)		$ 55,045			$ 56,974			(3.4	)
Wireless equipment revenues		3,704			3,861			(4.1	)		7,658			7,234			5.9

Total Operating Revenues		30,532			32,224			(5.3	)		62,703			64,208			(2.3	)


Operating Expenses
Cost of services		7,577			6,994			8.3			15,191			13,982			8.6
Wireless cost of equipment		4,644			5,455			(14.9	)		9,642			10,563			(8.7	)
Selling, general and administrative expense		9,775			7,974			22.6			17,375			15,913			9.2
Depreciation and amortization expense		3,982			3,980			0.1			7,999			7,969			0.4

Total Operating Expenses		25,978			24,403			6.5			50,207			48,427			3.7


Operating Income		4,554			7,821			(41.8	)		12,496			15,781			(20.8	)
Equity in losses of unconsolidated businesses		(20	)		(18	)		11.1			(40	)		(52	)		(23.1	)
Other income and (expense), net		(1,826	)		32			*			(1,794	)		107			*
Interest expense		(1,013	)		(1,208	)		(16.1	)		(2,201	)		(2,540	)		(13.3	)

Income Before Provision for Income Taxes		1,695			6,627			(74.4	)		8,461			13,296			(36.4	)
Provision for income taxes		(864	)		(2,274	)		(62.0	)		(3,200	)		(4,605	)		(30.5	)

Net Income		$ 831			$ 4,353			(80.9	)		$ 5,261			$ 8,691			(39.5	)


Net income attributable to noncontrolling interests		$ 129			$ 122			5.7			$ 249			$ 241			3.3
Net income attributable to Verizon		702			4,231			(83.4	)		5,012			8,450			(40.7	)

Net Income		$ 831			$ 4,353			(80.9	)		$ 5,261			$ 8,691			(39.5	)


Basic Earnings per Common Share
Net income attributable to Verizon		$ .17			$ 1.04			(83.7	)		$ 1.23			$ 2.06			(40.3	)

Weighted average number of common shares (in millions)		4,079			4,079						4,080			4,097

Diluted Earnings per Common Share ⁽¹⁾
Net income attributable to Verizon		$ .17			$ 1.04			(83.7	)		$ 1.23			$ 2.06			(40.3	)

Weighted average number of common shares-assuming dilution (in millions)		4,085			4,085						4,085			4,103

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	6/30/16			12/31/15			$ Change

Assets
Current assets
Cash and cash equivalents		$ 2,857			$ 4,470			$ (1,613	)
Short-term investments		—			350			(350	)
Accounts receivable, net		13,294			13,457			(163	)
Inventories		931			1,252			(321	)
Assets held for sale		317			792			(475	)
Prepaid expenses and other		3,445			2,034			1,411

Total current assets		20,844			22,355			(1,511	)

Plant, property and equipment		225,756			220,163			5,593
Less accumulated depreciation		142,584			136,622			5,962

		83,172			83,541			(369	)

Investments in unconsolidated businesses		822			796			26
Wireless licenses		86,981			86,575			406
Goodwill		25,417			25,331			86
Other intangible assets, net		7,399			7,592			(193	)
Non-current assets held for sale		—			10,267			(10,267	)
Other assets		7,235			7,718			(483	)

Total Assets		$ 231,870			$ 244,175			$ (12,305	)


Liabilities and Equity
Current liabilities
Debt maturing within one year		$ 6,803			$ 6,489			$ 314
Accounts payable and accrued liabilities		19,090			19,362			(272	)
Liabilities related to assets held for sale		—			463			(463	)
Other		8,515			8,738			(223	)

Total current liabilities		34,408			35,052			(644	)

Long-term debt		92,922			103,240			(10,318	)
Employee benefit obligations		28,059			29,957			(1,898	)
Deferred income taxes		43,825			45,484			(1,659	)
Non-current liabilities related to assets held for sale		—			959			(959	)
Other liabilities		11,912			11,641			271

Equity
Common stock		424			424			—
Contributed capital		11,192			11,196			(4	)
Reinvested earnings		11,652			11,246			406
Accumulated other comprehensive income		2,847			550			2,297
Common stock in treasury, at cost		(7,279	)		(7,416	)		137
Deferred compensation - employee stock ownership plans and other		408			428			(20	)
Noncontrolling interests		1,500			1,414			86

Total equity		20,744			17,842			2,902

Total Liabilities and Equity		$ 231,870			$ 244,175			$ (12,305	)

Verizon – Selected Financial and Operating Statistics


Unaudited	6/30/16		12/31/15

Total debt (in millions)		$ 99,725		$ 109,729
Net debt (in millions)		$ 96,868		$ 105,259
Net debt / Adjusted EBITDA⁽¹⁾		2.2x		2.4x
Common shares outstanding end of period (in millions)		4,076		4,073
Total employees (‘000)		162.7		177.7
Quarterly cash dividends declared per common share		$ 0.565		$ 0.565

Footnotes:

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

Certain reclassifications have been made to prior period balances to conform to the current period presentation.

Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)


Unaudited	6 Mos. Ended 6/30/16			6 Mos. Ended 6/30/15			$ Change

Cash Flows from Operating Activities
Net Income		$ 5,261			$ 8,691			$ (3,430	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		7,999			7,969			30
Employee retirement benefits		4,021			561			3,460
Deferred income taxes		(3,085	)		826			(3,911	)
Provision for uncollectible accounts		651			744			(93	)
Equity in losses of unconsolidated businesses, net of dividends received		58			72			(14	)
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses		(1,067	)		416			(1,483	)
Other, net		(1,008	)		(373	)		(635	)

Net cash provided by operating activities		12,830			18,906			(6,076	)


Cash Flows from Investing Activities
Capital expenditures (including capitalized software)		(7,273	)		(8,153	)		880
Acquisitions of investments and businesses, net of cash acquired		(178	)		(3,225	)		3,047
Acquisitions of wireless licenses		(282	)		(9,677	)		9,395
Proceeds from dispositions of businesses		9,882			—			9,882
Other, net		504			884			(380	)

Net cash provided by (used in) investing activities		2,653			(20,171	)		22,824


Cash Flows from Financing Activities
Proceeds from long-term borrowings		—			6,497			(6,497	)
Repayments of long-term borrowings and capital lease obligations		(11,300	)		(5,797	)		(5,503	)
Decrease in short-term obligations, excluding current maturities		610			(106	)		716
Dividends paid		(4,605	)		(4,266	)		(339	)
Proceeds from sale of common stock		3			—			3
Purchase of common stock for treasury		—			(5,074	)		5,074
Other, net		(1,804	)		2,421			(4,225	)

Net cash used in financing activities		(17,096	)		(6,325	)		(10,771	)


Decrease in cash and cash equivalents		(1,613	)		(7,590	)		5,977
Cash and cash equivalents, beginning of period		4,470			10,598			(6,128	)

Cash and cash equivalents, end of period		$ 2,857			$ 3,008			$ (151	)

Verizon Communications Inc.

Wireless – Selected Financial Results

(dollars in millions)


Unaudited	3 Mos. Ended 6/30/16			3 Mos. Ended 6/30/15			% Change			6 Mos. Ended 6/30/16			6 Mos. Ended 6/30/15			% Change

Operating Revenues
Service		$ 16,741			$ 17,689			(5.4	)		$ 33,550			$ 35,603			(5.8	)
Equipment		3,704			3,861			(4.1	)		7,658			7,234			5.9
Other		1,259			1,063			18.4			2,500			2,104			18.8

Total Operating Revenues		21,704			22,613			(4.0	)		43,708			44,941			(2.7	)


Operating Expenses
Cost of services		1,984			1,948			1.8			3,926			3,799			3.3
Cost of equipment		4,644			5,455			(14.9	)		9,642			10,563			(8.7	)
Selling, general and administrative expense		4,777			5,289			(9.7	)		9,668			10,658			(9.3	)
Depreciation and amortization expense		2,282			2,225			2.6			4,575			4,415			3.6

Total Operating Expenses		13,687			14,917			(8.2	)		27,811			29,435			(5.5	)


Operating Income		$ 8,017			$ 7,696			4.2			$ 15,897			$ 15,506			2.5
Operating Income Margin		36.9	%		34.0	%					36.4	%		34.5	%

Segment EBITDA		$ 10,299			$ 9,921			3.8			$ 20,472			$ 19,921			2.8
Segment EBITDA Margin		47.5	%		43.9	%					46.8	%		44.3	%

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	6/30/16		6/30/15		% Change

Connections (‘000)
Retail postpaid		107,780		103,731		3.9
Retail prepaid		5,374		5,817		(7.6	)

Total retail		113,154		109,548		3.3


Unaudited	3 Mos. Ended 6/30/16			3 Mos. Ended 6/30/15			% Change			6 Mos. Ended 6/30/16			6 Mos. Ended 6/30/15			% Change

Net Add Detail (‘000) ⁽¹⁾
Retail postpaid		615			1,134			(45.8	)		1,255			1,699			(26.1	)
Retail prepaid		(30	)		(126	)		(76.2	)		(207	)		(314	)		(34.1	)

Total retail		585			1,008			(42.0	)		1,048			1,385			(24.3	)

Account Statistics
Retail Postpaid Accounts (‘000) ⁽²⁾											35,637			35,560			0.2
Retail postpaid connections per account ⁽²⁾											3.02			2.92			3.4
Retail postpaid ARPA⁽³⁾		145.09			153.73			(5.6	)		145.22			154.93			(6.3	)
Retail postpaid I-ARPA⁽⁴⁾		167.18			163.01			2.6			166.11			162.90			2.0

Churn Detail
Retail postpaid		0.94	%		0.90	%					0.95	%		0.97	%
Retail		1.19	%		1.18	%					1.21	%		1.26	%

Retail Postpaid Connection Statistics
Total Smartphone postpaid % of phones activated		92.1	%		91.7	%					92.4	%		91.6	%
Total Smartphone postpaid phone base ⁽²⁾											85.5	%		81.2	%
Total Internet postpaid base ⁽²⁾											17.7	%		15.4	%
4G LTE devices as % of retail postpaid connections											82.5	%		73.3	%

Other Operating Statistics
Capital expenditures (in millions)		$ 2,815			$ 3,126			(9.9	)		$ 5,005			$ 5,545			(9.7	)

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.

Intersegment transactions have not been eliminated.

Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)


Unaudited	3 Mos. Ended 6/30/16			3 Mos. Ended 6/30/15			% Change			6 Mos. Ended 6/30/16			6 Mos. Ended 6/30/15			% Change

Operating Revenues
Consumer retail		$ 3,165			$ 3,174			(0.3	)		$ 6,345			$ 6,302			0.7
Small business		408			441			(7.5	)		830			886			(6.3	)

Mass Markets		3,573			3,615			(1.2	)		7,175			7,188			(0.2	)
Global Enterprise		2,907			3,007			(3.3	)		5,863			6,054			(3.2	)

Global Wholesale		1,256			1,310			(4.1	)		2,539			2,649			(4.2	)
Other		87			81			7.4			169			172			(1.7	)

Total Operating Revenues		7,823			8,013			(2.4	)		15,746			16,063			(2.0	)


Operating Expenses
Cost of services		5,107			4,704			8.6			9,751			9,489			2.8
Selling, general and administrative expense		1,617			1,813			(10.8	)		3,387			3,651			(7.2	)
Depreciation and amortization expense		1,562			1,695			(7.8	)		3,138			3,342			(6.1	)

Total Operating Expenses		8,286			8,212			0.9			16,276			16,482			(1.2	)


Operating Loss		$ (463	)		$ (199	)		*			$ (530	)		$ (419	)		26.5
Operating Loss Margin		(5.9	)%		(2.5	)%					(3.4	)%		(2.6	)%

Segment EBITDA		$ 1,099			$ 1,496			(26.5	)		$ 2,608			$ 2,923			(10.8	)
Segment EBITDA Margin		14.0	%		18.7	%					16.6	%		18.2	%

Footnotes:

Intersegment transactions have not been eliminated.

Certain reclassifications have been made to prior period to reflect comparable operating results in the current period.

*	Not meaningful

Verizon Communications Inc.

Wireline – Selected Operating Statistics


Unaudited	6/30/16		6/30/15		% Change

Connections (‘000)
Fios Video Subscribers		4,637		4,565		1.6
Fios Internet Subscribers		5,495		5,240		4.9
Fios Digital voice residence connections		3,879		3,788		2.4

Fios Digital connections		14,011		13,593		3.1

HSI		1,519		1,820		(16.5	)
Total Broadband connections		7,014		7,060		(0.7	)
Primary residence switched access connections		3,501		4,113		(14.9	)
Primary residence connections		7,380		7,901		(6.6	)

Total retail residence voice connections		7,634		8,209		(7.0	)
Total voice connections		14,476		15,586		(7.1	)


Unaudited	3 Mos. Ended 6/30/16			3 Mos. Ended 6/30/15			% Change			6 Mos. Ended 6/30/16			6 Mos. Ended 6/30/15			% Change

Net Add Detail (‘000)
Fios Video Subscribers		(41	)		30			*			2			112			(98.2	)
Fios Internet Subscribers		(13	)		62			*			77			172			(55.2	)
Fios Digital voice residence connections		(38	)		4			*			7			61			(88.5	)

Fios Digital connections		(92	)		96			*			86			345			(75.1	)

HSI		(70	)		(71	)		(1.4	)		(148	)		(136	)		8.8
Total Broadband connections		(83	)		(9	)		*			(71	)		36			*
Primary residence switched access connections		(142	)		(151	)		(6.0	)		(298	)		(302	)		(1.3	)
Primary residence connections		(180	)		(147	)		22.4			(291	)		(241	)		20.7

Total retail residence voice connections		(190	)		(159	)		19.5			(315	)		(266	)		18.4
Total voice connections		(305	)		(311	)		(1.9	)		(559	)		(554	)		0.9

Revenue Statistics
Fios revenues (in millions)		$ 2,776			$ 2,678			3.7			$ 5,537			$ 5,280			4.9

Other Operating Statistics
Capital expenditures (in millions)		$ 814			$ 1,134			(28.2	)		$ 1,820			$ 2,211			(17.7	)

Wireline employees (‘000)											59.3			62.8
Fios Video Open for Sale (‘000)											13,400			12,863
Fios Video penetration											34.6	%		35.5	%
Fios Internet Open for Sale (‘000)											13,696			13,154
Fios Internet penetration											40.1	%		39.8	%

Footnotes:

Intersegment transactions have not been eliminated.

Certain reclassifications have been made to prior period to reflect comparable operating results in the current period.

*	Not meaningful

Verizon Communications Inc.

Non-GAAP Reconciliations – Consolidated Verizon

Consolidated Operating Revenues Excluding AOL and Divested Businesses

(dollars in millions)


Unaudited	3 Mos. Ended 6/30/16			3 Mos. Ended 6/30/15

Consolidated Operating Revenues		$ 30,532			$ 32,224
Less: Operating revenues from Divested Businesses		—			1,327
Less: Operating revenues from AOL		713			—

Consolidated Operating Revenues Excluding AOL and Divested Businesses		$ 29,819			$ 30,897

Year over Year Change		(3.5	)%

Consolidated EBITDA, Consolidated EBITDA Margin and Consolidated Adjusted EBITDA

(dollars in millions)


Unaudited	3 Mos. Ended 6/30/16			3 Mos. Ended 3/31/16			3 Mos. Ended 12/31/15			3 Mos. Ended 9/30/15			3 Mos. Ended 6/30/15			3 Mos. Ended 3/31/15
Verizon Consolidated EBITDA
Consolidated net income		$ 831			$ 4,430			$ 5,513			$ 4,171			$ 4,353			$ 4,338
Add/(Subtract):
Provision for income taxes		864			2,336			3,065			2,195			2,274			2,331
Interest expense		1,013			1,188			1,178			1,202			1,208			1,332
Other income and (expense), net		1,826			(32	)		(28	)		(51	)		(32	)		(75	)
Equity in losses of unconsolidated businesses		20			20			16			18			18			34

Operating income		4,554			7,942			9,744			7,535			7,821			7,960
Add Depreciation and amortization expense		3,982			4,017			4,039			4,009			3,980			3,989

Consolidated EBITDA		$ 8,536			$ 11,959			$ 13,783			$ 11,544			$ 11,801			$ 11,949


Other Items (Before Tax)
Severance, pension, and benefit remeasurements		3,550			165			(2,598	)		342			—			—
Gain on spectrum license transactions		—			(142	)		(254	)		—			—			—
Divested Businesses		—			(661	)		(709	)		(717	)		(741	)		(739	)
Gain on sale of Divested Businesses		(1,007	)		—			—			—			—			—

		2,543			(638	)		(3,561	)		(375	)		(741	)		(739	)

Consolidated Adjusted EBITDA		$ 11,079			$ 11,321			$ 10,222			$ 11,169			$ 11,060			$ 11,210

Consolidated Operating Income Margin		14.9	%											24.3	%
Consolidated EBITDA Margin		28.0	%											36.6	%

Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio

(dollars in millions)


Unaudited	6/30/16		12/31/15

Verizon Net Debt
Debt maturing within one year		$ 6,803		$ 6,489
Long-term debt		92,922		103,240

Total Debt		99,725		109,729
Less: Cash and cash equivalents		2,857		4,470

Net Debt		$ 96,868		$ 105,259

Net Debt to Consolidated Adjusted EBITDA Ratio		2.2x		2.4x

Adjusted Earnings per Common Share (Adjusted EPS)

(dollars in millions except EPS)


Unaudited										3 Mos. Ended 6/30/16			3 Mos. Ended 6/30/15
	Pre-tax			Tax			After-Tax

EPS											$ 0.17			$ 1.04
Pension and benefit remeasurements		$ 3,550			$ (1,361	)		$ 2,189			0.54			—
Gain on sale of Divested Businesses		(1,007	)		868			(139	)		(0.03	)		—
Early debt redemption costs ⁽¹⁾		1,822			(718	)		1,104			0.27			—

		$ 4,365			$ (1,211	)		$ 3,154			0.77			—

Adjusted EPS⁽²⁾											$ 0.94			$ 1.04

(1)	includes costs related to debt tender offers

(2)	EPS may not add due to rounding

Verizon Communications Inc.

Non-GAAP Reconciliations - Segments

Wireless

(dollars in millions)


Unaudited	3 Mos. Ended 6/30/16			3 Mos. Ended 6/30/15			6 Mos. Ended 6/30/16			6 Mos. Ended 6/30/15

Segment EBITDA and EBITDA Margin
Operating Income		$ 8,017			$ 7,696			$ 15,897			$ 15,506
Add Depreciation and amortization expense		2,282			2,225			4,575			4,415

Segment EBITDA		$ 10,299			$ 9,921			$ 20,472			$ 19,921

Total operating revenues		$ 21,704			$ 22,613			$ 43,708			$ 44,941

Operating Income Margin		36.9	%		34.0	%		36.4	%		34.5	%

Segment EBITDA Margin		47.5	%		43.9	%		46.8	%		44.3	%

Wireline

(dollars in millions)


Unaudited	3 Mos. Ended 3/31/16			3 Mos. Ended 3/31/15			6 Mos. Ended 6/30/16			6 Mos. Ended 6/30/15

Segment EBITDA and EBITDA Margin
Operating loss		$ (463	)		$ (199	)		$ (530	)		$ (419	)
Add Depreciation and amortization expense		1,562			1,695			3,138			3,342

Segment EBITDA		$ 1,099			$ 1,496			$ 2,608			$ 2,923

Total operating revenues		$ 7,823			$ 8,013			$ 15,746			$ 16,063

Operating Income Margin		(5.9	)%		(2.5	)%		(3.4	)%		(2.6	)%

Segment EBITDA Margin		14.0	%		18.7	%		16.6	%		18.2	%

Attached files

Stock widget

Investing forum

VERIZON COMMUNICATIONS INC Reports