1st Quarter Results

Verizon Reports Fifth Consecutive Quarter of Double-Digit Operating Income and Earnings Growth NEW YORK, April 24, 2014 -- 1Q 2014 HIGHLIGHTS Consolidated * $1.15 in earnings per share (EPS) and 84 cents in adjusted EPS (non-GAAP), excluding net non-operational gains and losses - compared with 68 cents in both reported and adjusted EPS in 1Q 2013. Wireless * 7.5 percent year-over-year increase in service revenues; 6.7 percent year-over-year increase in retail service revenues; 35.0 percent operating income margin; 52.1 percent segment EBITDA margin on service revenues (non-GAAP). * Added 549,000 net retail connections, including 539,000 net retail postpaid connections; low retail postpaid churn of 1.07 percent; 103.3 million total retail connections; 97.3 million total retail postpaid connections. Wireline * 6.2 percent year-over-year increase in consumer revenues; consumer ARPU (average revenue per user) up 11.3 percent year over year. * 15.5 percent year-over-year increase in FiOS revenues; 98,000 FiOS Internet and 57,000 FiOS Video net additions. Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported its fifthconsecutive quarter of double-digit percentage growth in operating income andearnings per share. First-quarter 2014 results included the impact ofFebruary's close of the $130 billion transaction to acquire full ownership ofVerizon Wireless. Lowell McAdam, Verizon chairman and CEO, said: "Verizon has delivereddouble-digit earnings growth in eight of the past nine quarters, and infirst-quarter 2014 we posted our strongest consolidated revenue growth in fivequarters. With the wireless transaction now behind us, we have great confidencein our ability to sustain these strong results. "We are already seeing the expected earnings accretion from the transaction,"McAdam added. "The full access we now have to the significant cash flows ofVerizon Wireless is energizing our efforts to provide customers with productand service innovations and to enable powerful solutions to some of the world'sbiggest challenges." Verizon reported $1.15 in EPS in first-quarter 2014, compared with 68 cents pershare in first-quarter 2013. First-quarter 2014 results included an after-taxgain of approximately $1.9 billion (55 cents per share) related to the sale ofVerizon's minority interest in Vodafone Omnitel as part of the wirelesstransaction, and charges of $575 million (17 cents per share) related to debtredemption and $260 million (8 cents per share) in interest and financing costsrelated to the wireless transaction. On an adjusted basis (non-GAAP), Verizon reported EPS of 84 cents infirst-quarter 2014, compared with 68 cents per share in first-quarter 2013 - anincrease of 23.5 percent. With the transaction to acquire full ownership of Verizon Wireless closing onFeb. 21, Verizon's first-quarter 2014 results only include five weeks of thefull results of Verizon Wireless. On a non-GAAP, illustrative basis, adjustedEPS of 84 cents would have been 91 cents per share assuming 100 percentownership of Verizon Wireless and all shares issued in the transaction wereoutstanding for the full quarter. Consolidated Results Highlighted by Top-Line Growth, Margin Expansion With continued solid operational execution and revenue growth across allstrategic areas - Verizon Wireless, FiOS and strategic enterprise services -Verizon delivered consolidated top-line growth and margin expansion infirst-quarter 2014. Consolidated Highlights * Driven by wireless and FiOS services, total operating revenues in first-quarter 2014 were $30.8 billion, a 4.8 percent increase compared with first-quarter 2013 and the company's highest quarterly growth rate in the past five quarters. * Continued effective cost management drove first-quarter 2014 operating income to $7.2 billion, a 15.1 percent increase compared with first-quarter 2013. * Consolidated operating income margin was 23.2 percent for first-quarter 2014, compared with 21.1 percent for first-quarter 2013. Consolidated EBITDA margin (non-GAAP, based on earnings before interest, taxes, depreciation and amortization) was 36.7 percent for first-quarter 2014, compared with 35.1 percent for first-quarter 2013. * Cash flow from operating activities totaled $7.1 billion in the quarter, compared with $7.5 billion in first-quarter 2013. First-quarter 2014 cash flow included an incremental $1.3 billion in interest payments and $200 million in pension funding that the company did not have in first-quarter 2013. Capital expenditures totaled $4.15 billion in first-quarter 2014, and the company continues to target full-year investments in the range of $16.5 billion to $17 billion, with a decrease in capital spending as a percentage of total revenues. * Free cash flow (non-GAAP, cash flow from operations less capital expenditures) totaled $3.0 billion in first-quarter 2014, compared with $3.9 billion in first-quarter 2013. With full ownership of Verizon Wireless, Verizon retains 100 percent - rather than 55 percent - of the Verizon Wireless free cash flow. On a comparable basis, free cash flow available to Verizon Communications was approximately $1.4 billion higher in first-quarter 2014 than in first-quarter 2013, assuming all free cash flow at Verizon Wireless had been distributed to the partners. Verizon Wireless Delivers Strong Profitability and Customer, Revenue Growth In first-quarter 2014, Verizon Wireless delivered strong growth in retailpostpaid net additions and revenues, an increase in smartphone penetration, andcontinued high segment EBITDA margin on service revenues (non-GAAP). Wireless Financial Highlights * Total revenues were $20.9 billion in first-quarter 2014, up 6.9 percent year over year. Service revenues in the quarter totaled $18.0 billion, up 7.5 percent year over year. Retail service revenues grew 6.7 percent year over year, to $17.2 billion. * Retail postpaid ARPA (average revenue per account) increased 6.3 percent over first-quarter 2013, to $159.67 per month. * In first-quarter 2014, wireless operating income margin was 35.0 percent and segment EBITDA margin on service revenues was 52.1 percent. This compares with 32.9 percent and 50.4 percent, respectively, in first-quarter 2013. Wireless Operational Highlights * Verizon Wireless added 549,000 retail net connections, including 539,000 retail postpaid net connections, in the first quarter. These additions exclude acquisitions and adjustments. * At the end of the first quarter, the company had 103.3 million retail connections, including 97.3 million retail postpaid connections, a 4.4 percent increase year over year. * Verizon Wireless had 35.1 million retail postpaid accounts at the end of the first quarter, a 0.3 percent increase over first-quarter 2013, and 2.77 connections per account, up 3.7 percent year over year. * At the end of the first quarter, smartphones accounted for more than 72 percent of the Verizon Wireless retail postpaid customer phone base, up from 70 percent at year-end 2013. * Retail postpaid churn was 1.07 percent in the first quarter, up 6 basis points year over year. Retail churn was 1.37 percent in the first quarter, up 7 basis points year over year. * The company continued to enhance its 4G LTE smartphone lineup. In the first quarter, Verizon Wireless launched the Nokia Lumia Icon and the HTC One (M8). The company also launched the following tablets: the Nexus 7, the LG G Pad 8.3 LTE, the Samsung Galaxy Note Pro and the Samsung Galaxy Note 10.1 2014 edition. Earlier this month, Verizon Wireless launched the Samsung Galaxy S 5 and ATIV SE, the Lucid 3 by LG and the DROID MAXX by Motorola 16GB. * Verizon Wireless was the network performance leader in the rankings of wireless providers in the United States in the first Root Metrics National RootScore Report, issued in March. Verizon Wireless was the leader in the state rankings with wins or ties for first place for overall performance in 45 states. Wireline Consumer Revenue Growth Remains Strong Verizon's wireline segment reported continued strong results for consumerservices, where year-over-year quarterly revenues now have grown by more than 4percent for seven consecutive quarters. Wireline Financial Highlights * In first-quarter 2014, consumer revenues were $3.8 billion, an increase of 6.2 percent compared with first-quarter 2013. Consumer ARPU for wireline services increased to $120.17 in first-quarter 2014, up 11.3 percent compared with first-quarter 2013. * Representing 74 percent of total consumer revenues, FiOS consumer revenues grew 14.6 percent year over year, and total FiOS revenues grew 15.5 percent over the same periods. For the first time, total quarterly FiOS revenues surpassed $3 billion in first-quarter 2014. * Wireline operating income margin was 1.5 percent in first-quarter 2014, up from 0.1 percent in first-quarter 2013. Segment EBITDA margin (non-GAAP) was 22.3 percent in first-quarter 2014, compared with 21.4 percent in first-quarter 2013. * Sales of strategic services to global enterprise customers increased 1.8 percent compared with first-quarter 2013. Strategic services include private IP, Ethernet, data center, cloud, security and managed services. Wireline Operational Highlights * In first-quarter 2014, Verizon added 98,000 net new FiOS Internet connections and 57,000 net new FiOS Video connections. Verizon had totals of 6.2 million FiOS Internet and 5.3 million FiOS Video connections at the end of the first quarter, representing year-over-year increases of 9.9 percent and 8.7 percent, respectively. * FiOS Internet penetration (subscribers as a percentage of potential subscribers) was 39.7 percent at the end of first-quarter 2014, compared with 38.2 percent at the end of first-quarter 2013. In the same periods, FiOS Video penetration was 35.0 percent, compared with 34.1 percent. The FiOS network passed 18.9 million premises by the end of first-quarter 2014. * By the end of first-quarter 2014, 51 percent of consumer FiOS Internet customers subscribed to FiOS Quantum, which provides speeds ranging from 50 to 500 megabits per second, up from 46 percent at year-end 2013. * Broadband connections totaled more than 9.0 million at the end of first-quarter 2014, a 1.5 percent year-over-year increase. Net broadband connections increased by 16,000 in first-quarter 2014, as FiOS Internet net additions more than offset declines in DSL-based High Speed Internet connections. * Verizon has been replacing high-maintenance portions of its residential copper network with fiber optics to provide enhanced services and to reduce ongoing repair costs. In first-quarter 2014, Verizon migrated an additional 78,000 customers from copper. * In the first quarter, Verizon Enterprise Solutions began deploying innovative cloud, security, M2M (machine-to-machine), networking and other technology solutions for a variety of clients around the globe, including Kaiser Permanente, Molina Healthcare, Forest Pharmaceuticals, National DCP, American First Credit Union, Schindler Elevator, Sally Beauty Holdings, TE Connectivity, National Oceanic and Atmospheric Administration (NOAA), Mitsuba Corporation, State of Delaware, Alcatel-Lucent and Oracle. In addition, it added Oracle, SAP, Hitachi Data Systems Corporation and CloudBees to the growing number of leading technology companies that will offer services on Verizon's next-generation cloud computing and cloud storage platform, Verizon Cloud. Other Guidance and Outlook Items Verizon continues to target consolidated top-line growth of 4 percent andadjusted consolidated EBITDA margin expansion in 2014, with positivecontributions to profitable growth from both wireless and wireline. In wireless, pricing under Verizon Edge - which makes it easy for customers tobuy a new smartphone with a low upfront cost and affordable monthly payments -had minimal impact on first-quarter 2014 ARPA and EBITDA margin. Continued Edgeadoption will likely have a greater impact on service revenue growth insubsequent quarters, as service revenues shift to equipment revenues. Verizon reiterates guidance of increases in wireless and wireline EBITDA andEBITDA margin in 2014. NOTE: See the accompanying schedules and www.verizon.com/investor forreconciliations to generally accepted accounting principles (GAAP) for non-GAAPfinancial measures cited in this document. Verizon Communications Inc. (NYSE, Nasdaq: VZ), headquartered in New York, is aglobal leader in delivering broadband and other wireless and wirelinecommunications services to consumer, business, government and wholesalecustomers. Verizon Wireless operates America's most reliable wireless network,with more than 103 million retail connections nationwide. Verizon also providesconverged communications, information and entertainment services over America'smost advanced fiber-optic network, and delivers integrated business solutionsto customers in more than 150 countries. A Dow 30 company with more than $120billion in 2013 revenues, Verizon employs a diverse workforce of 176,900. Formore information, visit www.verizon.com. VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches andbiographies, media contacts and other information are available at Verizon'sonline News Center at newscenter.verizon.com. The news releases are availablethrough an RSS feed. To subscribe, visit newscenter.verizon.com/corporate/feeds. Forward-Looking Statements In this communication we have made forward-looking statements. These statementsare based on our estimates and assumptions and are subject to risks anduncertainties. Forward-looking statements include the information concerningour possible or assumed future results of operations. Forward-lookingstatements 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 statementscontained in the Private Securities Litigation Reform Act of 1995. Thefollowing important factors, along with those discussed in our filings with theSecurities and Exchange Commission (the "SEC"), could affect future results andcould cause those results to differ materially from those expressed in theforward-looking statements: the ability to realize the expected benefits of ourtransaction with Vodafone in the timeframe expected or at all; an adversechange in the ratings afforded our debt securities by nationally accreditedratings organizations or adverse conditions in the credit markets affecting thecost, including interest rates, and/or availability of further financing;significantly increased levels of indebtedness as a result of the Vodafonetransaction; changes in tax laws or treaties, or in their interpretation;adverse conditions in the U.S. and international economies; material adversechanges in labor matters, including labor negotiations, and any resultingfinancial and/or operational impact; material changes in technology ortechnology substitution; disruption of our key suppliers' provisioning ofproducts or services; changes in the regulatory environment in which weoperate, including any increase in restrictions on our ability to operate ournetworks; breaches of network or information technology security, naturaldisasters, terrorist attacks or acts of war or significant litigation and anyresulting financial impact not covered by insurance; the effects of competitionin the markets in which we operate; changes in accounting assumptions thatregulatory agencies, including the SEC, may require or that result from changesin the accounting rules or their application, which could result in an impacton earnings; significant increases in benefit plan costs or lower investmentreturns on plan assets; and the inability to implement our business strategies. Verizon Communications Inc.Condensed Consolidated Statements of Income (dollars in millions, except per share amounts) 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/14 3/31/13 % Change Operating Revenues $ 30,818 $ 29,420 4.8 Operating ExpensesCost of services and sales 11,189 10,932 2.4Selling, general and administrative expense 8,332 8,148 2.3Depreciation and amortization expense 4,137 4,118 0.5Total Operating Expenses 23,658 23,198 2.0 Operating Income 7,160 6,222 15.1Equity in earnings of unconsolidatedbusinesses 1,902 (5) *Other income and (expense), net (894) 39 *Interest expense (1,214) (537) *Income Before Provision for Income Taxes 6,954 5,719 21.6Provision for income taxes (968) (864) 12.0Net Income $ 5,986 $ 4,855 23.3 Net income attributable tononcontrolling interests $ 2,039 2,903 (29.8)Net income attributable to Verizon 3,947 1,952 *Net Income $ 5,986 $ 4,855 23.3 Basic Earnings per Common ShareNet income attributable to Verizon $ 1.15 $ .68 69.1 Weighted average number of commonshares (in millions) 3,425 2,866 Diluted Earnings per Common Share (1)Net income attributable to Verizon $ 1.15 $ .68 69.1 Weighted average number of commonshares-assuming dilution (in millions) 3,430 2,872 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. * Not meaningful Verizon Communications Inc.Condensed Consolidated Balance Sheets (dollars in millions) Unaudited 3/31/14 12/31/13 $ ChangeAssetsCurrent assetsCash and cash equivalents $ 2,907 $ 53,528 $ (50,621)Short-term investments 637 601 36Accounts receivable, net 12,131 12,439 (308)Inventories 881 1,020 (139)Prepaid expenses and other 6,716 3,406 3,310Total current assets 23,272 70,994 (47,722)Plant, property and equipment 223,841 220,865 2,976Less accumulated depreciation 134,785 131,909 2,876 89,056 88,956 100 Investments in unconsolidatedbusinesses 889 3,432 (2,543)Wireless licenses 72,713 75,747 (3,034)Goodwill 24,647 24,634 13Other intangible assets, net 5,839 5,800 39Other assets 5,146 4,535 611Total Assets $ 221,562 $ 274,098 $ (52,536) Liabilities and EquityCurrent liabilitiesDebt maturing within one year $ 2,152 $ 3,933 $ (1,781)Accounts payable and accruedliabilities 14,984 16,453 (1,469)Other 8,217 6,664 1,553Total current liabilities 25,353 27,050 (1,697)Long-term debt 107,617 89,658 17,959Employee benefit obligations 26,977 27,682 (705)Deferred income taxes 41,597 28,639 12,958Other liabilities 6,167 5,653 514 EquityCommon stock 424 297 127Contributed capital 10,976 37,939 (26,963)Reinvested earnings 3,534 1,782 1,752Accumulated other comprehensiveincome 1,290 2,358 (1,068)Common stock in treasury, at cost (3,794) (3,961) 167Deferred compensation - employeestock ownership plans and other 281 421 (140)Noncontrolling interests 1,140 56,580 (55,440)Total equity 13,851 95,416 (81,565)Total Liabilities and Equity $ 221,562 $ 274,098 $ (52,536) Verizon - Selected Financial and Operating Statistics Unaudited 3/31/14 12/31/13 Total debt (in millions) $ 109,769 $ 93,591Net debt (in millions) $ 106,862 $ 40,063Net debt / Adjusted EBITDA (1) 2.5x 1.0xCommon shares outstanding endof period (in millions) 4,141 2,862Total employees 176,900 176,800Quarterly cash dividendsdeclared per common share $ 0.530 $ 0.530 Footnotes: (1) Adjusted EBITDA excludes the effects of non-operational items. The unaudited condensed consolidated balance sheets are based on preliminary information. Verizon Communications Inc.Condensed Consolidated Statements of Cash Flows (dollars in millions) 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/14 3/31/13 $ ChangeCash Flows From Operating ActivitiesNet Income $ 5,986 $ 4,855 $ 1,131Adjustments to reconcile net incometo net cash provided byoperating activities:Depreciation andamortization expense 4,137 4,118 19Employee retirement benefits 281 295 (14)Deferred income taxes (155) 878 (1,033)Provision for uncollectible accounts 231 260 (29)Equity in earnings of unconsolidatedbusinesses, net of dividends received (1,894) 14 (1,908)Changes in current assets andliabilities, net of effects fromacquisition/disposition of businesses (1,626) (1,491) (135)Other, net 179 (1,398) 1,577Net cash provided by operating activities 7,139 7,531 (392) Cash Flows From Investing ActivitiesCapital expenditures (includingcapitalized software) (4,150) (3,602) (548)Acquisitions of investments andbusinesses, net of cash acquired (157) (21) (136)Acquisitions of wireless licenses, net (213) (117) (96)Other, net (11) 141 (152)Net cash used in investing activities (4,531) (3,599) (932) Cash Flows From Financing ActivitiesProceeds from long-term borrowings 16,952 500 16,452Repayments of long-term borrowingsand capital lease obligations (7,951) (73) (7,878)Increase in short-term obligations,excluding current maturities 252 581 (329)Dividends paid (1,517) (1,472) (45)Proceeds from sale of common stock 34 56 (22)Purchase of common stock for treasury - (153) 153Acquisition of noncontrolling interest (58,886) - (58,886)Other, net (2,113) (989) (1,124)Net cash used in financing activities (53,229) (1,550) (51,679) Increase (decrease) in cashand cash equivalents (50,621) 2,382 (53,003)Cash and cash equivalents, beginningof period 53,528 3,093 50,435Cash and cash equivalents, end of period $ 2,907 $ 5,475 $ (2,568) Verizon Communications Inc.Wireless - Selected Financial Results (dollars in millions) 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/14 3/31/13 % ChangeOperating RevenuesRetail service $ 17,246 $ 16,169 6.7Other service 741 559 32.6Service 17,987 16,728 7.5 Equipment 1,870 1,813 3.1Other 1,022 982 4.1Total Operating Revenues 20,879 19,523 6.9 Operating ExpensesCost of services and sales 5,856 5,651 3.6Selling, general and administrative expense 5,644 5,448 3.6Depreciation and amortization expense 2,061 2,006 2.7Total Operating Expenses 13,561 13,105 3.5 Operating Income $ 7,318 $ 6,418 14.0Operating Income Margin 35.0% 32.9% Segment EBITDA $ 9,379 $ 8,424 11.3Segment EBITDA Service Margin 52.1% 50.4% 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 3/31/14 3/31/13 % Change Connections ('000)Retail postpaid 97,273 93,186 4.4Retail prepaid 6,057 5,744 5.4Retail 103,330 98,930 4.4 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/14 3/31/13 % Change Net Add Detail ('000)(1)Retail postpaid 539 677 (20.4)Retail prepaid 10 43 (76.7)Retail 549 720 (23.8) Account StatisticsRetail Postpaid Accounts ('000)(2) 35,061 34,943 0.3Retail postpaid ARPA $ 159.67 $ 150.27 6.3Retail postpaid connections peraccount (2) 2.77 2.67 3.7 Churn DetailRetail postpaid 1.07% 1.01%Retail 1.37% 1.30% Retail Postpaid Connection StatisticsTotal Smartphone postpaid % ofphones activated 90.1% 84.3%Total Smartphone postpaidphone base (2) 72.3% 61.4%Total Internet postpaid base (2) 11.3% 9.6% Other Operating StatisticsCapital expenditures (in millions) $ 2,554 $ 1,992 28.2 Footnotes:(1) Connection net additions exclude acquisitions and adjustments. (2) Statistics presented as of end of period. The segment financial results and metrics above are adjusted to exclude the effects of non-operational items, as the Company's chief operating decision maker excludes these items in assessing business unit performance. Intersegment transactions have not been eliminated. Certain reclassifications have been made, where appropriate, to reflect comparable operating results. Verizon Communications Inc.Wireline - Selected Financial Results (dollars in millions) 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/14 3/31/13 % Change Operating RevenuesConsumer retail $ 3,840 $ 3,616 6.2Small business 624 638 (2.2)Mass Markets 4,464 4,254 4.9 Strategic services 2,110 2,073 1.8 Core 1,496 1,697 (11.8)Global Enterprise 3,606 3,770 (4.4)Global Wholesale 1,591 1,699 (6.4)Other 129 107 20.6Total Operating Revenues 9,790 9,830 (0.4) Operating ExpensesCost of services and sales 5,459 5,457 -Selling, general andadministrative expense 2,151 2,265 (5.0)Depreciation and amortizationexpense 2,033 2,095 (3.0)Total Operating Expenses 9,643 9,817 (1.8) Operating Income $ 147 $ 13 *Operating Income Margin 1.5% 0.1% Segment EBITDA $ 2,180 $ 2,108 3.4Segment EBITDA Margin 22.3% 21.4% Footnotes: The segment financial results and metrics above are adjusted to exclude the effects of non-operational items, as the Company's chief operating decision maker excludes these items in assessing business unit performance. Intersegment transactions have not been eliminated. Certain reclassifications have been made, where appropriate, to reflect comparable operating results. * Not meaningful Verizon Communications Inc.Wireline - Selected Operating Statistics Unaudited 3/31/14 3/31/13 % Change Connections ('000)FiOS Video Subscribers 5,319 4,895 8.7FiOS Internet Subscribers 6,170 5,612 9.9FiOS Digital Voice residence connections 4,350 3,531 23.2FiOS Digital connections 15,839 14,038 12.8 HSI 2,861 3,282 (12.8)Total Broadband connections 9,031 8,894 1.5Primary residence switchedaccess connections 6,224 7,593 (18.0)Primary residence connections 10,574 11,124 (4.9) Total retail residence voice connections 11,048 11,725 (5.8)Total voice connections 20,733 22,191 (6.6) 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/14 3/31/13 % Change Net Add Detail ('000)FiOS Video Subscribers 57 169 (66.3)FiOS Internet Subscribers 98 188 (47.9)FiOS Digital Voice residence connections 102 304 (66.4)FiOS Digital connections 257 661 (61.1) HSI (82) (89) (7.9)Total Broadband connections 16 99 (83.8)Primary residence switchedaccess connections (257) (389) (33.9)Primary residence connections (155) (85) 82.4 Total retail residence voice connections (181) (124) 46.0Total voice connections (352) (312) 12.8 Revenue and ARPU StatisticsConsumer ARPU $ 120.17 $ 107.95 11.3FiOS revenues (in millions) $ 3,041 $ 2,633 15.5Strategic services as a % oftotal Enterprise revenues 58.5% 55.0% Other Operating StatisticsCapital expenditures (in millions) $ 1,385 $ 1,434 (3.4) Wireline employees ('000) 80.9 85.2FiOS Video Open for Sale ('000) 15,184 14,374FiOS Video penetration 35.0% 34.1%FiOS Internet Open for Sale ('000) 15,530 14,703FiOS Internet penetration 39.7% 38.2% Footnotes: The segment financial results and metrics above are adjusted to exclude the effects of non-operational items, as the Company's chief operating decision maker excludes these items in assessing business unit performance. Intersegment transactions have not been eliminated. Certain reclassifications have been made, where appropriate, to reflect comparable operating results. Verizon Communications Inc.Reconciliations - Consolidated Verizon (dollars in millions) 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/13 3/31/14 Consolidated Operating Revenues $ 29,420 $ 30,818 Adjusted EBITDA (dollars in millions) 3 Mos. Ended 3 Mos. Ended 3 Mos. Ended 3 Mos. EndedUnaudited 6/30/12 9/30/12 12/31/12 3/31/13Verizon Consolidated EBITDAConsolidated net income (loss) $ 4,285 $ 4,292 $ (1,926) $ 4,855Add / (Subtract):Provision (benefit) for income taxes 793 631 (2,810) 864Interest expense 679 632 575 537Other (income) and expense, net (34) (10) 1,079 (39)Equity in earnings ofunconsolidated businesses (72) (62) (87) 5Operating income (loss) 5,651 5,483 (3,169) 6,222Add Depreciation and amortizationexpense 4,128 4,167 4,137 4,118Consolidated EBITDA $ 9,779 $ 9,650 $ 968 $ 10,340 Other Items (Before Tax)Severance, Pension, and BenefitCharges (Credits) - - 7,186 -Gain on Spectrum LicenseTransactions - - - -Litigation Settlements - 384 - -Other Non-Operational Costs - - 276 - - 384 7,462 -Consolidated Adjusted EBITDA $ 9,779 $ 10,034 $ 8,430 $ 10,340 Consolidated Operating Income Margin 21.1%Consolidated EBITDA Margin 35.1% 3 Mos. Ended 3 Mos. Ended 3 Mos. Ended 3 Mos. EndedUnaudited 6/30/13 9/30/13 12/31/13 3/31/14Verizon Consolidated EBITDAConsolidated net income (loss) $ 5,198 $ 5,578 $ 7,916 $ 5,986Add / (Subtract):Provision (benefit) for income taxes 988 1,034 2,844 968Interest expense 514 555 1,061 1,214Other (income) and expense, net (25) (20) 250 894Equity in earnings ofunconsolidated businesses (120) (19) (8) (1,902)Operating income (loss) 6,555 7,128 12,063 7,160Add Depreciation andamortization expense 4,151 4,154 4,183 4,137Consolidated EBITDA $ 10,706 $ 11,282 $ 16,246 $ 11,297 Other Items (Before Tax)Severance, Pension, andBenefit Charges (Credits) (237) - (5,995) -Gain on Spectrum LicenseTransactions - (278) - -Litigation Settlements - - - -Other Non-Operational Costs - - - - (237) (278) (5,995) - Consolidated Adjusted EBITDA $ 10,469 $ 11,004 $ 10,251 $ 11,297 Consolidated Operating Income Margin 23.2%Consolidated EBITDA Margin 36.7% Net Debt to Adjusted EBITDA Ratio (dollars in millions)Unaudited 3/31/13 12/31/13 3/31/14 Verizon Net DebtDebt maturing within one year $ 10,888 $ 3,933 $ 2,152Long-term debt 41,993 89,658 107,617Total Debt 52,881 93,591 109,769Less Cash and cash equivalents 5,475 53,528 2,907Net Debt $ 47,406 $ 40,063 $ 106,862Net Debt to Adjusted EBITDA Ratio 1.2x 1.0x 2.5x Free Cash Flow (dollars in millions) 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/13 3/31/14 $ Change Net cash provided by operating activities $ 7,531 $ 7,139Less Capital expenditures 3,602 4,150Free Cash Flow $ 3,929 $ 2,989Less free cash flow attributableto noncontrolling interest 2,404 -Illustrative Free Cash Flow Attributable to Verizon $ 1,525 $ 2,989 $ 1,464 Verizon Communications Inc.Reconciliations - Consolidated Verizon Adjusted and Illustrative Net Income - Verizon (dollars in millions) 3 Mos. EndedUnaudited 3/31/14 Reported Net Income attributable to Verizon $ 3,947Wireless transaction costs 260Early debt redemption costs 575Gain on sale of Omnitel interest (1,888)Adjusted Net Income 2,894Income from Vodafone noncontrolling interest 1,183Wireless transaction costs (267)Elimination of Omnitel equity income (24)Illustrative Net Income $ 3,786 Adjusted and Illustrative EPS 3 Mos. Ended 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/13 12/31/13 3/31/14 Earnings Per Common Share, Reported $ 0.68 $ 1.76 $ 1.15Severance, pension and benefit credits - (1.29) -Early debt redemption costs - - 0.17Wireless transaction costs - 0.19 0.08Gain on sale of Omnitel interest - - (0.55)Adjusted EPS $ 0.68 $ 0.66 $ 0.84 Income from Vodafone noncontrolling interest 0.29Wireless transaction costs (0.06)Elimination of Omnitel equity income (0.01)Dilutive effect of share issuance (0.14)Illustrative EPS $ 0.91 Note: EPS may not add due to rounding. Verizon Communications Inc.Reconciliations - Segments Wireless (dollars in millions) 3 Mos. Ended 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/13 12/31/13 3/31/14 Wireless Segment EBITDAOperating income $ 6,418 $ 6,229 $ 7,318Add Depreciation andamortization expense 2,006 2,089 2,061Wireless Segment EBITDA $ 8,424 $ 8,318 $ 9,379Wireless total operating revenues $ 19,523 $ 21,125 $ 20,879Wireless service revenues $ 16,728 $ 17,711 $ 17,987 Wireless operating income margin 32.9% 29.5% 35.0%Wireless Segment EBITDA service margin 50.4% 47.0% 52.1% Wireline (dollars in millions) 3 Mos. Ended 3 Mos. Ended 3 Mos. EndedUnaudited 3/31/13 12/31/13 3/31/14 Wireline Segment EBITDAOperating income $ 13 $ 131 $ 147Add Depreciation andamortization expense 2,095 2,073 2,033Wireline Segment EBITDA $ 2,108 $ 2,204 $ 2,180Wireline total operating revenues $ 9,830 $ 9,845 $ 9,790Wireline operating income margin 0.1% 1.3% 1.5%Wireline Segment EBITDA margin 21.4% 22.4% 22.3% SOURCE Verizon Communications, Inc. CONTACT: Bob Varettoni, 908-559-6388, [email protected], or RayMcConville, 908-559-3504, [email protected]