UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: July 27, 2017

(Date of earliest event reported)

 

 

Verizon Communications Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   1-8606   23-2259884

(State or other jurisdiction

of incorporation)

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

1095 Avenue of the Americas

New York, New York

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

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

Not Applicable

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

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

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

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

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

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

[   ] Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period or complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 

 

 


Item 2.02. Results of Operations and Financial Condition

Attached as an exhibit hereto are a press release and financial tables dated July 27, 2017 issued by Verizon Communications Inc. (Verizon).

NON-GAAP MEASURES

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

Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions

Verizon Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating our revenue growth and trends on a comparable basis because it excludes operating revenues from the local landline businesses in California, Florida and Texas divested on April 1, 2016 and the operating revenues from the data center businesses divested on May 1, 2017 which are not reflected in our results following the completion of those transactions (Divested Businesses), and it excludes operating revenues from XO Holdings’ wireline business (XO) (acquired on February 1, 2017), Fleetmatics Group PLC (acquired on November 7, 2016), Telogis, Inc. (acquired on July 29, 2016) and Yahoo!, Inc.’s operating business (acquired on June 13, 2017), (Acquisitions) which are not reflected in our second quarter 2016 results.

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

Consolidated Operating Revenues Excluding Divested Businesses

Verizon Consolidated Operating Revenues Excluding Divested Businesses is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating our revenue growth and trends on a comparable basis because it excludes operating revenues from the local landline businesses in California, Florida and Texas divested on April 1, 2016 and operating revenues from the data center businesses divested on May 1, 2017 which are not reflected in our results following the completion of those transactions (Divested Businesses).

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

IoT Revenues Excluding Acquisitions

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

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

Wireline Operating Revenues Excluding Acquisition

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

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


EBITDA and EBITDA Margin

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

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

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

Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Margin

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

Consolidated Adjusted EBITDA is calculated by excluding from Consolidated EBITDA the effect of the following special items: actuarial gains or losses arising from the re-measurements of pension and other postretirement benefits, severance costs, net gain on sale of Divested Businesses; gain on spectrum license transactions; acquisition and integration related costs and operating results from Divested Businesses. Actuarial gains or losses as a result of the re-measurements of pension and other postretirement benefits are included in our operating expenses and are measured based on projected discount rates and estimated returns on plan assets. Such estimates are updated at least annually at the end of the fiscal year to reflect actual discount rates and returns on plan assets or more frequently if significant events arise which require an interim re-measurement. Acquisition and integration related costs represent transaction expenses related to business acquisitions and incremental expenses, such as personnel costs, incurred to integrate the acquired businesses into our operations. We believe the exclusion of the above-noted special items enables management, investors and other users of our financial information to assess our sequential and year-over-year performance on a more comparable basis and is consistent with management’s own evaluation of performance.

Consolidated Adjusted EBITDA Margin is calculated by dividing Consolidated Adjusted EBITDA by Consolidated Operating Revenues Excluding Divested Businesses.

Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio

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

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

Adjusted Earnings per Common Share

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


Adjusted EPS is calculated by excluding the effect of special items such as actuarial gains or losses arising from the re-measurement of pension and other postretirement benefits, severance costs, early debt redemption costs, net gain on sale of Divested Businesses and acquisition and integration related costs from the calculation of reported EPS.

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

Item 9.01. Financial Statements and Exhibits

 

   (d) Exhibits.
Exhibit
Number
   Description
99    Press release and financial tables, dated July 27, 2017, issued by Verizon Communications Inc.


SIGNATURE

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

 

    Verizon Communications Inc.
    (Registrant)
Date:     July 27, 2017         /s/ Anthony T. Skiadas
         Anthony T. Skiadas
         Senior Vice President and Controller


EXHIBIT INDEX

 

Exhibit
Number
   Description
99    Press release and financial tables, dated July 27, 2017, issued by Verizon Communications Inc.

Exhibit 99

 

LOGO

News Release

 

FOR IMMEDIATE RELEASE    Media contact:
July 27, 2017    Bob Varettoni
   908.559.6388
   robert.a.varettoni@verizon.com

Verizon reports wireless customer gains and strong loyalty in 2Q

2Q 2017 highlights

 

 

$1.07 in earnings per share (EPS), compared with 17 cents in 2Q 2016; adjusted EPS (non-GAAP), excluding special items, of 96 cents in 2Q 2017, compared with 94 cents in 2Q 2016.

 

 

Wireless: 614,000 retail postpaid net additions, including 590,000 postpaid smartphone net adds; retail postpaid churn of 0.94 percent, with strong customer loyalty demonstrated by retail postpaid phone churn of 0.70 percent — less than 0.90 percent for the ninth consecutive quarter.

 

 

Wireline: Fios total revenue growth of 4.4 percent.

NEW YORK – Strong operating results at Verizon Wireless highlighted second-quarter 2017 performance at Verizon Communications Inc. (NYSE, Nasdaq: VZ), which today reported EPS of $1.07 in the quarter.

This compares with 17 cents per share in second-quarter 2016. Second-quarter 2017 EPS was 96 cents on an adjusted basis (non-GAAP), excluding a net gain from the sale of certain data centers and severance charges and acquisition and integration-related charges primarily associated with Verizon’s acquisition of Yahoo’s operating business.

This compares with 94 cents per share in second-quarter 2016 adjusted earnings (non-GAAP), which included impacts from a work stoppage and excluded special items related to pension and benefit re-measurement, a gain on the sale of local landline businesses, early debt redemption and tender offers.

“Verizon reignited its growth engine in the quarter, both adding and retaining wireless customers while scaling our media business and continuing to invest in our superior networks,” said Chairman and CEO Lowell McAdam. “With record customer loyalty and a clean sweep of third-party network quality results, we’re leading the way to provide customers with next-generation broadband, smart cities, telematics, media and Internet of Things services.”


Consolidated results

Total consolidated operating revenues in second-quarter 2017 were $30.5 billion, in line with second-quarter 2016. On a comparable basis excluding divestitures and acquisitions (non-GAAP), consolidated revenues declined 2.0 percent.

Net income was $4.5 billion in second-quarter 2017. EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled $12.4 billion. Consolidated operating income margin was 26.9 percent. Consolidated EBITDA margin (non-GAAP) was 40.6 percent — 37.2 percent, excluding special items (non-GAAP) — in second-quarter 2017, compared with 28.0 percent in second-quarter 2016.

Cash flow from operations totaled $9.9 billion during first-half 2017, including a net after-tax impact of $2.1 billion in discretionary pension contributions.

Capital expenditures totaled $7.0 billion through first-half 2017, in line with first-half 2016.

In Verizon’s media business, AOL’s revenues net of traffic acquisition costs were consistent with last year’s second-quarter results. Verizon’s Oath subsidiary, launched at the June 13 close of the company’s acquisition of Yahoo’s operating business, houses AOL and Yahoo brands serving about 1 billion unique monthly users globally and representing about $7 billion in annual revenues. Oath expects to realize more than $1 billion in cumulative operating expense synergies through 2020.

Total telematics revenues were approximately $220 million in second-quarter 2017. Organically, IoT revenues (non-GAAP), which include telematics, increased approximately 20 percent year over year.

Wireless results

 

   

Building on momentum since the launch of Verizon Unlimited in mid-February, Verizon reported a net increase of 614,000 retail postpaid connections in second-quarter 2017. Net phone additions of 358,000 included 590,000 smartphones in the quarter, compared with 86,000 net phone additions, including 336,000 smartphones, in second-quarter 2016.

 

   

Verizon’s retail postpaid connections base grew 1.2 percent year over year to 109.1 million, and retail prepaid connections grew 1.4 percent to 5.4 million.

 

   

Total retail postpaid churn was 0.94 percent in second-quarter 2017, consistent year over year despite increased churn in tablets. Retail postpaid phone churn was not only less than 0.90 percent for the ninth consecutive quarter, but it also established a new low in the LTE era at 0.70 percent.

 

Page 2


   

Total revenues were $21.3 billion in second-quarter 2017, a decline of 1.9 percent compared with second-quarter 2016.

 

   

Verizon’s unsubsidized service pricing now penetrates roughly 75 percent of its postpaid base. As the company adds new accounts and customers step up to unlimited plans, mitigating lost overage revenues, Verizon believes its service-revenue trend has flattened and expects an improving trend in the second half.

 

   

The percentage of phone activations on device payment plans was about 77 percent in second-quarter 2017, compared with about 76 percent in first-quarter 2017. Verizon expects this rate to remain consistent in third-quarter 2017. Approximately 49 percent of postpaid phone customers had a device payment plan at the end of second-quarter 2017.

 

   

Verizon swept the lead of third-party network performance surveys for 4G in the quarter. As expected, the introduction of Verizon Unlimited increased LTE network usage year over year.

 

   

Segment operating income in second-quarter 2017 was $7.4 billion, and segment operating income margin on total revenues was 34.8 percent. Segment EBITDA (non-GAAP) totaled $9.8 billion in second-quarter 2017, a year-over-year decrease of 5.3 percent. Segment EBITDA margin on total revenues (non-GAAP) was 45.8 percent, compared with 47.5 percent in second-quarter 2016.

Wireline results

 

   

Total wireline revenues increased 1.2 percent, to $7.8 billion, comparing second-quarter 2017 with second-quarter 2016. On a comparable basis, excluding revenues from newly acquired XO Communications and from newly divested data centers (non-GAAP), total wireline revenues declined 2.8 percent year over year.

 

   

Total Fios revenues grew 4.4 percent, to $2.9 billion, comparing second-quarter 2017 with second-quarter 2016. There’s a growing shift in wireline revenues attributed to fiber-based products. Organic revenues from fiber-based products grew more than 3 percent.

 

   

In second-quarter 2017, Verizon added a net of 49,000 Fios Internet connections and lost a net of 15,000 Fios Video connections. At the end of the quarter, Verizon had 5.7 million Fios Internet connections and 4.7 million Fios Video connections, year-over-year increases of 4.4 percent and 0.6 percent, respectively.

 

   

Verizon’s emphasis on delivering value to all business customers was recognized in a leading third-party study, as the company won the large enterprise business award for the second consecutive year. In the second quarter, Verizon Enterprise Solutions (VES) released its 10th annual Data Breach Investigations Report, which combines analysis of the biggest cybersecurity issues with key industry-specific insights. VES also introduced Visual Interactive Calling and Software Defined Perimeter products. Supporting the public safety community, VES convened 40 technology companies at Operation Convergent Response, demonstrating new tech capabilities for first responders through live crisis simulations.

 

   

Wireline operating income was $68 million in second-quarter 2017, compared with a loss of $524 million in second-quarter 2016 (impacted by a work stoppage). Segment operating income margin was 0.9 percent in second-quarter 2017. Segment EBITDA (non-GAAP) was $1.6 billion in second-quarter 2017. Segment EBITDA margin (non-GAAP) was 20.8 percent in second-quarter 2017, compared with 13.3 percent in second-quarter 2016, and down from 22.0 percent in first-quarter 2017 due to the impact of the data center transaction.

 

Page 3


   

During second-quarter 2017, Verizon announced fiber purchase agreements with Corning and Prysmian to extend the company’s network lead and position the company to deliver new multiuse fiber services, including 5G, while complementing small-cell deployment. In June, Verizon and the city of Sacramento, Calif., announced a partnership to develop and deploy smart-city services. Verizon has begun previously announced pre-commercial 5G fixed-wireless broadband trials in 8 of 11 cities.

Outlook and forward-looking items

Verizon expects the following:

 

   

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

 

   

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

 

   

The 2017 effective tax rate to be at the low end of the range of 34 percent to 36 percent, excluding impacts from potential tax reform.

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 163,400 and generated nearly $126 billion in 2016 revenues. Verizon operates America’s most reliable wireless network and the nation’s premier all-fiber network, and delivers integrated solutions to businesses worldwide. Its Oath subsidiary houses more than 50 media and technology brands that engage about 1 billion people around the world.

####

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

Forward-looking statements

In this communication we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words “anticipates,” “believes,” “estimates,” “hopes” or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors, along with those discussed in our filings with the Securities and Exchange Commission (the “SEC”), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: adverse conditions in the U.S. and international economies; the effects of competition in the markets in which we operate; material changes in technology or technology substitution; disruption of our key suppliers’ provisioning of products or services; changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks; breaches of network or information technology security, natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial impact not covered by insurance; our high level of indebtedness; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interest rates, and/or availability of further financing; material adverse changes in labor matters, including labor negotiations, and any resulting financial and/or operational impact; significant increases in benefit plan costs or lower investment returns on plan assets; changes in tax laws or treaties, or in their interpretation; changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; the inability to implement our business strategies; and the inability to realize the expected benefits of strategic transactions.

 

Page 4


Verizon Communications Inc.

Condensed Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
    % Change     6 Mos. Ended
6/30/17
    6 Mos. Ended
6/30/16
    % Change  

Operating Revenues

            

Service revenues and other

    $   26,250      $   26,828       (2.2    $   52,300      $   55,045       (5.0

Wireless equipment revenues

     4,298       3,704       16.0       8,062       7,658       5.3  
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     30,548       30,532       0.1       60,362       62,703       (3.7
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services

     7,075       7,577       (6.6     13,933       15,191       (8.3

Wireless cost of equipment

     5,035       4,644       8.4       9,843       9,642       2.1  

Selling, general and administrative expense

     6,039       9,775       (38.2     12,947       17,375       (25.5

Depreciation and amortization expense

     4,167       3,982       4.6       8,226       7,999       2.8  
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     22,316       25,978       (14.1     44,949       50,207       (10.5
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

     8,232       4,554       80.8       15,413       12,496       23.3  

Equity in losses of unconsolidated businesses

     (28     (20     (40.0     (49     (40     (22.5

Other expense, net

     (19     (1,826     99.0       (865     (1,794     51.8  

Interest expense

     (1,218     (1,013     (20.2     (2,350     (2,201     (6.8
  

 

 

   

 

 

     

 

 

   

 

 

   

Income Before Provision for Income Taxes

     6,967       1,695       *       12,149       8,461       43.6  

Provision for income taxes

     (2,489     (864     *       (4,118     (3,200     (28.7
  

 

 

   

 

 

     

 

 

   

 

 

   

Net Income

    $   4,478      $   831       *      $   8,031      $   5,261       52.7  
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income attributable to noncontrolling interests

    $   116      $   129       (10.1    $   219      $   249       (12.0

Net income attributable to Verizon

     4,362       702       *       7,812       5,012       55.9  
  

 

 

   

 

 

     

 

 

   

 

 

   

Net Income

    $   4,478      $   831       *      $   8,031      $   5,261       52.7  
  

 

 

   

 

 

     

 

 

   

 

 

   

Basic Earnings per Common Share

            

Net income attributable to Verizon

    $ 1.07      $   .17       *      $ 1.91      $   1.23        55.3  

Weighted average number of common shares (in millions)

      4,082       4,079          4,082       4,080    

Diluted Earnings per Common Share (1)

            

Net income attributable to Verizon

    $ 1.07      $   .17       *      $ 1.91      $   1.23        55.3  

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

      4,087       4,085          4,088       4,085    

Footnotes:

 

(1)  Diluted Earnings per Common Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution.

 

* Not meaningful


Verizon Communications Inc.

Condensed Consolidated Balance Sheets

(dollars in millions)

 

Unaudited

   6/30/17     12/31/16     $ Change  

Assets

      

Current assets

      

Cash and cash equivalents

    $   4,583      $   2,880      $   1,703  

Accounts receivable, net

     19,771       17,513       2,258  

Inventories

     1,116       1,202       (86

Assets held for sale

           882       (882

Prepaid expenses and other

     3,353       3,918       (565
  

 

 

   

 

 

   

 

 

 

Total current assets

     28,823       26,395       2,428  
  

 

 

   

 

 

   

 

 

 

Plant, property and equipment

     239,226       232,215       7,011  

Less accumulated depreciation

     152,705       147,464       5,241  
  

 

 

   

 

 

   

 

 

 
     86,521       84,751       1,770  
  

 

 

   

 

 

   

 

 

 

Investments in unconsolidated businesses

     1,075       1,110       (35

Wireless licenses

     88,004       86,673       1,331  

Goodwill

     28,527       27,205       1,322  

Other intangible assets, net

     11,143       8,897       2,246  

Non-current assets held for sale

     90       613       (523

Other assets

     8,795       8,536       259  
  

 

 

   

 

 

   

 

 

 

Total Assets

    $   252,978      $   244,180      $   8,798  
  

 

 

   

 

 

   

 

 

 

Liabilities and Equity

      

Current liabilities

      

Debt maturing within one year

    $   1,153      $   2,645     $ (1,492

Accounts payable and accrued liabilities

     17,825       19,593       (1,768

Other

     8,780       8,102       678  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     27,758       30,340       (2,582
  

 

 

   

 

 

   

 

 

 

Long-term debt

     116,390       105,433       10,957  

Employee benefit obligations

     21,775       26,166       (4,391

Deferred income taxes

     47,506       45,964       1,542  

Other liabilities

     12,788       12,245       543  

Equity

      

Common stock

     424       424        

Contributed capital

     11,099       11,182       (83

Reinvested earnings

     18,159       15,059       3,100  

Accumulated other comprehensive income

     2,284       2,673       (389

Common stock in treasury, at cost

     (7,142     (7,263     121  

Deferred compensation – employee stock ownership plans and other

     365       449       (84

Noncontrolling interests

     1,572       1,508       64  
  

 

 

   

 

 

   

 

 

 

Total equity

     26,761       24,032       2,729  
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

    $   252,978      $   244,180      $   8,798  
  

 

 

   

 

 

   

 

 

 
Verizon – Selected Financial and Operating Statistics  

Unaudited

    6/30/17     12/31/16  

Total debt (in millions)

      $   117,543      $   108,078  

Net debt (in millions)

      $   112,960      $   105,198  

Net debt / Adjusted EBITDA(1)

       2.6x       2.4x  

Common shares outstanding end of period (in millions)

        4,079       4,077  

Total employees (‘000)

       163.4       160.9  

Quarterly cash dividends declared per common share

     $   0.5775     $ 0.5775  

Footnotes:

 

(1)  Adjusted EBITDA excludes the effects of special items and operating results of Divested Businesses, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.


Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)

 

Unaudited

   6 Mos. Ended
6/30/17
    6 Mos. Ended
6/30/16
    $ Change  

Cash Flows from Operating Activities

      

Net Income

    $   8,031      $   5,261       $   2,770  

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

      

Depreciation and amortization expense

     8,226       7,999       227  

Employee retirement benefits

     (223     4,021       (4,244

Deferred income taxes

     1,880       (3,085     4,965  

Provision for uncollectible accounts

     632       651       (19

Equity in losses of unconsolidated businesses, net of dividends received

     67       58       9  

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

     (3,094     (1,067     (2,027

Discretionary contribution to qualified pension plans

     (3,411           (3,411

Net gain on sale of Divested Businesses

     (1,774     (1,007     (767

Other, net

     (416     77       (493
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     9,918       12,908       (2,990
  

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities

      

Capital expenditures (including capitalized software)

     (7,011     (7,273     262  

Acquisitions of businesses, net of cash acquired

     (6,280     (178     (6,102

Acquisitions of wireless licenses

     (315     (282     (33

Proceeds from dispositions of businesses

     3,512       9,882       (6,370

Other, net

     211       504       (293
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (9,883     2,653       (12,536
  

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities

      

Proceeds from long-term borrowings

     16,009             16,009  

Proceeds from asset-backed long-term borrowings

     2,878             2,878  

Repayments of long-term borrowings and capital lease obligations

     (10,294     (11,300     1,006  

Increase (decrease) in short-term obligations, excluding current maturities

     (152     610       (762

Dividends paid

     (4,710     (4,605     (105

Other, net

     (2,063     (1,879     (184
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,668       (17,174     18,842  
  

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     1,703       (1,613     3,316  

Cash and cash equivalents, beginning of period

     2,880       4,470       (1,590
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 4,583     $ 2,857     $ 1,726  
  

 

 

   

 

 

   

 

 

 

Footnotes:

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


Verizon Communications Inc.

Wireless – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
    % Change     6 Mos. Ended
6/30/17
    6 Mos. Ended
6/30/16
    % Change  

Operating Revenues

            

Service

    $   15,622      $   16,741       (6.7    $   31,400      $   33,550       (6.4

Equipment

     4,298       3,704       16.0       8,062       7,658       5.3  

Other

     1,362       1,259       8.2       2,698       2,500       7.9  
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     21,282       21,704       (1.9     42,160       43,708       (3.5
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services

     1,997       1,984       0.7       3,955       3,926       0.7  

Cost of equipment

     5,035       4,644       8.4       9,843       9,642       2.1  

Selling, general and administrative expense

     4,493       4,777       (5.9     9,191       9,668       (4.9

Depreciation and amortization expense

     2,347       2,282       2.8       4,685       4,575       2.4  
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     13,872       13,687       1.4       27,674       27,811       (0.5
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income

    $   7,410      $   8,017       (7.6    $   14,486      $   15,897       (8.9

Operating Income Margin

     34.8     36.9       34.4     36.4  

Segment EBITDA

    $   9,757      $   10,299       (5.3    $   19,171      $   20,472       (6.4

Segment EBITDA Margin

     45.8     47.5       45.5     46.8  

Footnotes:

The segment financial results and metrics above are adjusted to exclude the effects of special 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

    6/30/17     6/30/16     % Change  

Connections (‘000)

            

Retail postpaid

           109,088       107,780       1.2  

Retail prepaid

           5,448       5,374       1.4  
        

 

 

   

 

 

   

Total retail

           114,536       113,154       1.2  

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
    % Change     6 Mos. Ended
6/30/17
    6 Mos. Ended
6/30/16
    % Change  

Net Add Detail (‘000) (1)

            

Retail postpaid

     614       615       (0.2     307       1,255       (75.5

Retail prepaid

     19       (30     *       2       (207     *  
  

 

 

   

 

 

     

 

 

   

 

 

   

Total retail

     633       585       8.2       309       1,048       (70.5

Account Statistics

            

Retail Postpaid Accounts (‘000) (2)

           35,334       35,637       (0.9

Retail postpaid connections per account (2)

           3.09       3.02       2.3  

Retail postpaid ARPA (3)

     134.89       145.09       (7.0     135.93       145.22       (6.4

Retail postpaid I-ARPA (4)

     164.94       167.18       (1.3     165.47       166.11       (0.4

Churn Detail

            

Retail postpaid

     0.94     0.94       1.04     0.95  

Retail

     1.18     1.19       1.28     1.21  

Retail Postpaid Connection Statistics

            

Total Smartphone postpaid % of phones activated

     95.2     92.1       94.9     92.4  

Total Smartphone postpaid phone base (2)

           88.8     85.5  

Total Internet postpaid base (2)

           18.4     17.7  

4G LTE devices as % of retail postpaid connections

           86.7     82.5  

Other Operating Statistics

            

Capital expenditures (in millions)

    $   2,444      $   2,815       (13.2    $   4,275      $   5,005       (14.6

Footnotes:

 

(1)  Connection net additions exclude acquisitions and adjustments.

 

(2)  Statistics presented as of end of period.

 

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

 

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

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

Intersegment transactions have not been eliminated.

 

* Not meaningful


Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
    % Change     6 Mos. Ended
6/30/17
    6 Mos. Ended
6/30/16
    % Change  

Operating Revenues

            

Consumer Markets

    $   3,184      $   3,165       0.6      $   6,385      $   6,345       0.6  

Enterprise Solutions

     2,388       2,378       0.4       4,780       4,802       (0.5

Partner Solutions

     1,236       1,241       (0.4     2,467       2,509       (1.7

Business Markets

     921       845       9.0       1,803       1,707       5.6  

Other

     73       84       (13.1     135       164       (17.7
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Revenues

     7,802       7,713       1.2       15,570       15,527       0.3  
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Expenses

            

Cost of services

     4,576       5,079       (9.9     9,027       9,696       (6.9

Selling, general and administrative expense

     1,606       1,612       (0.4     3,214       3,379       (4.9

Depreciation and amortization expense

     1,552       1,546       0.4       3,042       3,105       (2.0
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Operating Expenses

     7,734       8,237       (6.1     15,283       16,180       (5.5
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating Income (Loss)

    $   68      $   (524     *      $   287      $   (653     *  

Operating Income (Loss) Margin

     0.9     (6.8 )%        1.8     (4.2 )%   

Segment EBITDA

    $   1,620      $   1,022       58.5      $   3,329      $   2,452       35.8  

Segment EBITDA Margin

     20.8     13.3       21.4     15.8  

Footnotes:

The segment financial results and metrics above are adjusted to exclude the effects of special 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 Operating Statistics

 

Unaudited

    6/30/17     6/30/16     % Change  

Connections (‘000)

            

Fios Video Subscribers

           4,666       4,637       0.6  

Fios Internet Subscribers

           5,737       5,495       4.4  

Fios Digital voice residence connections

           3,909       3,879       0.8  
        

 

 

   

 

 

   

Fios Digital connections

           14,312       14,011       2.1  

HSI

           1,251       1,519       (17.6

Total Broadband connections

           6,988       7,014       (0.4

Primary residence switched access connections

           2,962       3,501       (15.4

Primary residence connections

           6,871       7,380       (6.9

Total retail residence voice connections

           7,079       7,634       (7.3

Total voice connections

           13,352       14,476       (7.8

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
    % Change     6 Mos. Ended
6/30/17
    6 Mos. Ended
6/30/16
    % Change  

Net Add Detail (‘000)

            

Fios Video Subscribers

     (15     (41     63.4       (28     2       *  

Fios Internet Subscribers

     49       (13     *       84       77       9.1  

Fios Digital voice residence connections

     22       (38     *       14       7       100.0  
  

 

 

   

 

 

     

 

 

   

 

 

   

Fios Digital connections

     56       (92     *       70       86       (18.6

HSI

     (72     (70     (2.9     (134     (148     9.5  

Total Broadband connections

     (23     (83     72.3       (50     (71     29.6  

Primary residence switched access connections

     (133     (142     6.3       (268     (298     10.1  

Primary residence connections

     (111     (180     38.3       (254     (291     12.7  

Total retail residence voice connections

     (121     (190     36.3       (276     (315     12.4  

Total voice connections

     (282     (305     7.5       (587     (559     (5.0

Revenue Statistics

            

Fios revenues (in millions)

    $   2,899      $   2,776       4.4      $   5,790      $   5,537       4.6  

Other Operating Statistics

            

Capital expenditures (in millions)

    $   1,190      $   814       46.2      $   2,150      $   1,820       18.1  

Wireline employees (‘000)

           59.7       59.0    

Fios Video Open for Sale (‘000)

           13,978       13,400    

Fios Video penetration

           33.4     34.6  

Fios Internet Open for Sale (‘000)

           14,271       13,696    

Fios Internet penetration

           40.2     40.1  

Footnotes:

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

Intersegment transactions have not been eliminated.

 

* Not meaningful


Verizon Communications Inc.

Non-GAAP Reconciliations - Consolidated Verizon

Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
 

Consolidated Operating Revenues

    $   30,548      $   30,532  

Less operating revenues from Divested Businesses

     37       110  
  

 

 

   

 

 

 

Consolidated Operating Revenues Excluding Divested Businesses

     30,511       30,422  

Less operating revenues from Acquisitions

     693        
  

 

 

   

 

 

 

Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions

    $   29,818      $   30,422  
  

 

 

   

 

 

 

Year over Year Change

     (2.0 )%   

IoT Revenues Excluding Acquisitions

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
 
    

IoT Revenues

    $   365      $   207  

Less IoT revenues from Acquisitions

     117        
  

 

 

   

 

 

 

IoT Revenues Excluding Acquisitions

    $   248      $   207  
  

 

 

   

 

 

 

Year over Year Change

     19.8  

Consolidated EBITDA, Consolidated EBITDA Margin, Consolidated Adjusted EBITDA and

Consolidated Adjusted EBITDA Margin

(dollars in millions)

 

Unaudited

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

Consolidated Net Income

    $   4,478      $   3,553      $   4,600      $   3,747      $   831      $   4,430  

Add/(subtract):

            

Provision for income taxes

     2,489       1,629       2,349       1,829       864       2,336  

Interest expense

     1,218       1,132       1,137       1,038       1,013       1,188  

Other (income) and expense, net

     19       846       (98     (97     1,826       (32

Equity in losses of unconsolidated businesses

     28       21       35       23       20       20  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     8,232       7,181       8,023       6,540       4,554       7,942  

Add Depreciation and amortization expense

     4,167       4,059       3,987       3,942       3,982       4,017  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

    $   12,399      $   11,240      $   12,010      $   10,482      $   8,536      $   11,959  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Add/subtract special items (before tax):

            

Severance, pension, and benefit charges/(credits)

     607             (1,589     797       3,550       165  

Gain on spectrum license transactions

           (126                       (142

Net gain on sale of Divested Businesses

     (1,774                       (1,007      

Operating results from Divested Businesses (1)

     (25     (76     (84     (80     (77     (740

Acquisition and integration related costs (1)

     147            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (1,045     (202     (1,673     717       2,466       (717
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Adjusted EBITDA

   $ 11,354     $ 11,038     $ 10,337     $ 11,199     $ 11,002     $ 11,242  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Operating Revenues

   $ 30,548           $ 30,532    

Consolidated Operating Income Margin

     26.9           14.9  

Consolidated EBITDA Margin

     40.6           28.0  

Consolidated Operating Revenues Excluding Divested Businesses

   $ 30,511            

Consolidated Adjusted EBITDA Margin

     37.2          

 

(1) Excludes depreciation and amortization expense


Verizon Communications Inc.    

Non-GAAP Reconciliations — Consolidated Verizon    

Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio

(dollars in millions)

 

Unaudited

   6/30/17     12/31/16  

Net Debt

    

Debt maturing within one year

    $   1,153      $   2,645  

Long-term debt

     116,390       105,433  
  

 

 

   

 

 

 

Total Debt

     117,543       108,078  

Less Cash and cash equivalents

     4,583       2,880  
  

 

 

   

 

 

 

Net Debt

    $   112,960      $   105,198  
  

 

 

   

 

 

 

Net Debt to Consolidated Adjusted EBITDA Ratio

     2.6x       2.4x  
  

 

 

   

 

 

 

Adjusted Earnings per Common Share (Adjusted EPS) (1)

 

Unaudited

  

 

    3 Mos. Ended
6/30/17
   

 

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

EPS

           $1.07             $0.17  

Net gain on sale of Divested Businesses

   $ (1,774   $ 843     $ (931     (0.23   $ (1,007   $ 868     $ (139     (0.03

Severance, pension, and benefit charges

     607       (230     377       0.09       3,550       (1,364     2,186       0.54  

Acquisition and integration related costs

     152       (56     96       0.02                          

Early debt redemption costs(2)

                             1,822       (718     1,104       0.27  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ (1,015   $ 557       (458     (0.11   $ 4,365     $ (1,214   $ 3,151       0.77  
        

 

 

         

 

 

 

Adjusted EPS

         $ 0.96           $ 0.94  
        

 

 

         

 

 

 

 

(1) Adjusted EPS may not add due to rounding

 

(2) Includes costs related to debt tender offers


Verizon Communications Inc.

Non-GAAP Reconciliations—Segments

Segment EBITDA and Segment EBITDA Margin

Wireless

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
 
    

Operating Income

    $   7,410      $   8,017  

Add Depreciation and amortization expense

     2,347       2,282  
  

 

 

   

 

 

 
Segment EBITDA     $   9,757      $   10,299  
  

 

 

   

 

 

 
Year over Year Change      (5.3 )%   
Total operating revenues     $   21,282      $   21,704  
  

 

 

   

 

 

 
Operating Income Margin      34.8     36.9
  

 

 

   

 

 

 
Segment EBITDA Margin      45.8     47.5
  

 

 

   

 

 

 

Wireline

(dollars in millions)

 

Unaudited

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

Operating Income (Loss)

    $   68      $   (524)      $   219  

Add Depreciation and amortization expense

     1,552       1,546       1,490  
  

 

 

   

 

 

   

 

 

 
Segment EBITDA     $   1,620      $   1,022      $   1,709  
  

 

 

   

 

 

   

 

 

 
Total operating revenues     $   7,802      $   7,713      $   7,768  
  

 

 

   

 

 

   

 

 

 
Operating Income (Loss) Margin      0.9     (6.8 )%      2.8
  

 

 

   

 

 

   

 

 

 
Segment EBITDA Margin      20.8     13.3     22.0
  

 

 

   

 

 

   

 

 

 

Wireline Operating Revenues Excluding Acquisition

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/17
    3 Mos. Ended
6/30/16
 
    
    

Wireline Operating Revenues

    $   7,802      $   7,713  

Less operating revenues from Acquisition

     304        
  

 

 

   

 

 

 

Wireline Operating Revenues Excluding Acquisition

    $   7,498      $   7,713  
  

 

 

   

 

 

 

Year over Year Change

     (2.8 )%