Final Results

Verizon Reports High-Quality Customer Additions in 4Q, Caps Year in Position to Drive Continued Profitable Growth 4Q 2014 Earnings Impacted by Non-Operational Items NEW YORK, Jan. 22, 2015 -- 4Q 2014 HIGHLIGHTS Consolidated * A loss of 54 cents per share, compared with earnings per share (EPS) of $1.76 in 4Q 2013, including significant non-operational items in both quarters, primarily related to the annual actuarial valuation of benefit plans and mark-to-market pension adjustments. * 71 cents in adjusted EPS (non-GAAP), a 7.6 percent increase compared with adjusted EPS of 66 cents per share in 4Q 2013. Wireless * 2.1 million net retail connections; 2.0 million net retail postpaid connections, including net additions of 672,000 postpaid phones; retail postpaid churn of 1.14 percent; 108.2 million total retail connections and 102.1 million total retail postpaid connections. * 11.0 percent increase in total operating revenues in 4Q 2014, bringing full-year total revenues to $87.6 billion, up 8.2 percent compared with full-year 2013. * 23.5 percent operating income margin and 42.0 percent segment EBITDA margin on service revenues (non-GAAP) in 4Q; 30.5 percent and 48.5 percent, respectively, for the full year. Wireline * 4.1 percent year-over-year quarterly increase in consumer revenues, the 10th consecutive quarter of more than 4 percent growth. * 11.6 percent year-over-year quarterly increase in FiOS revenues; 145,000 FiOS Internet and 116,000 FiOS Video net additions; 59,000 increase in net broadband connections. Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported a healthy quarterof high-quality wireless connections growth, and customer and revenue growthfor fiber-optic broadband services. Chairman and CEO Lowell McAdam said: "Verizon posted another year ofconsistently high operating and financial performance in 2014, with strong cashgeneration and the return of $7.8 billion to our shareowners. I am confidentthat Verizon's assets and market momentum position us to continue to driveprofitable growth in 2015." Due to the impact of non-operational items, Verizon reported a loss of 54 centsper share in fourth-quarter 2014, compared with a gain of $1.76 in EPS infourth-quarter 2013. On an adjusted basis (non-GAAP), Verizon reported a gain of 71 cents per sharein fourth-quarter 2014, a 7.6 percent increase compared with adjusted earningsof 66 cents per share in fourth-quarter 2013. Fourth-quarter 2014 charges totaled $1.25 per share: $1.12 per share related tothe company's year-end mark-to-market adjustment for pension and OtherPost-Employment Benefits liabilities, as well as severance costs; and 13 centsper share related to the early retirement of debt and other costs. Fourth-quarter 2013 charges included a non-operational gain of $1.29 per sharerelated to the annual actuarial valuation of benefit plans and mark-to-marketpension adjustments. This was partially offset by non-operational charges of 19cents per share for transaction costs related to the acquisition of VodafoneGroup PLC's indirect 45 percent interest in Verizon Wireless (completed inFebruary 2014). For the full year, Verizon reported $2.42 in EPS in 2014, compared with $4.00in 2013. On an adjusted basis (non-GAAP), Verizon reported $3.35 in EPS in2014, an increase of 18.0 percent compared with $2.84 in adjusted EPS in 2013. Following are highlights of fourth-quarter and full-year 2014 consolidatedresults and outlook items for 2015: Consolidated Highlights * Total operating revenues in fourth-quarter 2014 were $33.2 billion, a 6.8 percent increase compared with fourth-quarter 2013. Full-year 2014 operating revenues were $127.1 billion, up 5.4 percent or $6.5 billion, compared with full-year 2013. * Excluding 2013 revenues of the public sector business Verizon divested at the beginning of third-quarter 2014, the comparable revenue growth rates (non-GAAP) would have been 7.3 percent for fourth-quarter 2014 and 5.7 percent for the full year. * New revenue streams from the Internet of Things and telematics totaled approximately $585 million in 2014, with an annual growth rate of more than 45 percent. The company recently launched Verizon Vehicle, a connected-vehicle service for consumers, with an addressable market of more than 200 million vehicles. * In 2014, cash flows from operations totaled $30.6 billion, and free cash flow (non-GAAP, cash from operations less capital expenditures) totaled $13.4 billion. Capital expenditures totaled $17.2 billion for 2014, up 3.5 percent year over year. 2015 Outlook For 2015, Verizon expects: * Consolidated revenue growth of at least 4 percent. * Sustained profitability with a consolidated adjusted EBITDA margin at a level consistent with full-year 2014 performance. * Strong free cash flow generation with consolidated capital spending of between $17.5 billion and $18.0 billion. * A minimum pension-funding requirement of approximately $700 million. * An increase in total cash income taxes, with an expected effective tax rate for book purposes in the range of 34 to 36 percent. Verizon Wireless Delivers Another Quarter of Strong Connections Growth In fourth-quarter 2014, Verizon activated an unprecedented number of newwireless devices, driven by demand from the company's high-quality retailpostpaid customer base. Verizon Wireless delivered strong growth in retailpostpaid net connections, a high number of tablet additions and an increase insmartphone penetration. Wireless Financial Highlights * Total revenues were $23.4 billion in fourth-quarter 2014, up 11.0 percent year over year. Service revenues in the quarter totaled $18.2 billion, up 2.8 percent year over year. Retail service revenues grew 2.6 percent year over year, to $17.4 billion. * Verizon Wireless full-year total revenues were $87.6 billion, an increase of 8.2 percent compared with full-year 2013 revenues of $81.0 billion. * Verizon Edge installment billings totaled $443 million in fourth-quarter 2014 and $976 million for the full year. Service revenues plus Edge installment billings grew 5.2 percent in fourth-quarter 2014 and 6.6 percent for the full year compared with 2013. * Retail postpaid ARPA (average revenue per account) increased 1.0 percent over fourth-quarter 2013 to $158.82 per month, and 3.9 percent over the full year. Adding Edge installment billings, these growth rates increase to 3.5 percent for the quarter and 5.3 percent for the full year. * In fourth-quarter 2014, wireless operating income margin was 23.5 percent and segment EBITDA margin on service revenues (non-GAAP, based on earnings before interest, taxes, depreciation and amortization) was 42.0 percent. This compares with 29.5 percent and 47.0 percent, respectively, in fourth-quarter 2013. * For full-year 2014, wireless operating income margin was 30.5 percent and segment EBITDA margin on service revenues was 48.5 percent, compared with 32.1 percent and 49.5 percent, respectively, in 2013. Wireless Operational Highlights * Verizon Wireless added 2.1 million retail net connections, including 2.0 million retail postpaid connections, in the fourth quarter. These additions exclude acquisitions and adjustments. * At the end of the year, the company had 108.2 million retail connections. This includes 102.1 million retail postpaid connections, a 5.5 percent increase year over year. * Verizon Wireless had 35.6 million retail postpaid accounts at the end of the fourth quarter, up 1.5 percent compared with fourth-quarter 2013, and 2.87 connections per account, up 4.0 percent year over year. * During fourth-quarter 2014, retail postpaid device activations were up nearly 34 percent over the same period in 2013. About three-quarters of phone activations in the quarter were customer upgrades. Approximately 9.8 percent of the retail postpaid base upgraded devices, and 93 percent of these upgrades were 4G smartphones. * The company added a net of 672,000 postpaid phones, as 4G smartphone additions of 1.5 million were offset by net declines in basic and 3G smartphones. In terms of Internet devices, the company added 1.4 million new 4G LTE tablets. * At the end of 2014, smartphones accounted for 78.6 percent of the Verizon Wireless retail postpaid customer phone base, up from 70.0 percent at the end of 2013. * Retail postpaid churn was 1.14 percent in the fourth quarter, an increase of 14 basis points sequentially and 18 basis points year over year. Retail churn was 1.39 percent in the fourth quarter, up 10 basis points sequentially and 12 basis points year over year. * In the fourth quarter, Verizon Wireless added new devices to its lineup, including: DROID Turbo by Motorola; Sony Xperia Z3v; iPad Air 2 with Wi-Fi + Cellular and iPad mini 3 with Wi-Fi + Cellular; the LG G Pad 7.0 LTE and 10.1 LTE; the Ellipsis Jetpack; and the connected wearable devices GizmoPal by LG and Samsung Gear S. 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 10 consecutive quarters. Wireline Financial Highlights * Total revenues were $9.6 billion in fourth-quarter 2014, down 1.6 percent year over year. Consumer revenues were $4.0 billion, up 4.1 percent compared with fourth-quarter 2013, with FiOS revenues representing 77 percent of the total. * Total FiOS revenues grew 11.6 percent, to $3.3 billion, comparing fourth-quarter 2014 with fourth-quarter 2013. For the full year, FiOS revenues totaled $12.7 billion in 2014, up 13.6 percent compared with $11.2 billion in 2013. * Wireline operating income margin was 4.4 percent in fourth-quarter 2014, up from 1.2 percent in fourth-quarter 2013. Segment EBITDA margin (non-GAAP) was 23.9 percent in fourth-quarter 2014, compared with 22.5 percent in fourth-quarter 2013. For the full year, wireline operating income margin expanded to 2.7 percent and segment EBITDA margin expanded to 23.2 percent, compared with 0.9 percent and 22.4 percent, respectively, in 2013. * Sales of strategic services to enterprise customers increased 1.5 percent, to $2.1 billion, compared with fourth-quarter 2013. Strategic services include private IP, Ethernet, data center, cloud, security and managed services. Wireline Operational Highlights * In fourth-quarter 2014, Verizon added 145,000 net new FiOS Internet connections and 116,000 net new FiOS Video connections. Verizon had totals of 6.6 million FiOS Internet and 5.6 million FiOS Video connections at year-end 2014, representing year-over-year increases of 9.0 percent and 7.4 percent, respectively. * FiOS Internet penetration (subscribers as a percentage of potential subscribers) was 41.1 percent at the end of 2014, compared with 39.5 percent at the end of 2013. In the same periods, FiOS Video penetration was 35.8 percent, compared with 35.0 percent. The FiOS network passed more than 19.8 million premises by year-end 2014. * By year-end 2014, 59 percent of consumer FiOS Internet customers subscribed to FiOS Quantum, which provides speeds ranging from 50 to 500 megabits per second, up from 57 percent at the end of third-quarter 2014. * In November, the company began selling the FiOS Quantum Gateway Router, capable of delivering speeds up to 800 megabits per second over Wi-Fi. The device separates high-bandwidth activities (HD video streaming and online gaming) from regular data consumption (Web browsing and email). It will receive seamless updates regularly to provide increased functionality, such as guest Wi-Fi and enhanced parental controls. * Broadband connections totaled 9.2 million at year-end 2014, a 2.1 percent year-over-year increase. Net broadband connections increased by 59,000 in fourth-quarter 2014 and 190,000 for the full year, 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 customers with a more resilient infrastructure, which improves customer satisfaction and reduces repair costs. In fourth-quarter 2014, Verizon migrated an additional 52,000 customers who had been using copper connections, bringing the full-year total to around 255,000. Verizon has converted more than 800,000 customers to fiber since starting this initiative in 2011. * In the fourth quarter, Verizon Enterprise Solutions began deploying innovative enterprise-grade network, cloud, security, mobility and other business solutions for some of the world's strongest brands, including Allstate, Benihana, JetBlue, Kronos Incorporated, Marriott International, Pitney Bowes, Spirax Sarco, Warner Bros. Entertainment Inc. and WoundMatrix, and critical public sector organizations such as Boston City Public Schools, Centers for Medicare and Medicaid Services, Defense Information Systems Agency, GOV.UK and the U.S. General Services Administration. NOTE: See the accompanying schedules and www.verizon.com/about/investors 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 108 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 worldwide. A Dow 30 company with more than $127 billion in 2014revenues, Verizon employs a diverse workforce of 177,300. For more information,visit www.verizon.com/news/. VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches andbiographies, media contacts and other information are available at Verizon'sonline News Center at www.verizon.com/news/. The news releases are availablethrough 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 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: adverse conditions in the U.S. and internationaleconomies; the effects of competition in the markets in which we operate;material changes in technology or technology substitution; disruption of ourkey suppliers' provisioning of products or services; changes in the regulatoryenvironment in which we operate, including any increase in restrictions on ourability to operate our networks; breaches of network or information technologysecurity, natural disasters, terrorist attacks or acts of war or significantlitigation and any resulting financial impact not covered by insurance; ourhigh level of indebtedness; an adverse change in the ratings afforded our debtsecurities by nationally accredited ratings organizations or adverse conditionsin the credit markets affecting the cost, including interest rates, and/oravailability of further financing; material adverse changes in labor matters,including labor negotiations, and any resulting financial and/or operationalimpact; significant increases in benefit plan costs or lower investment returnson 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 theirapplication, which could result in an impact on earnings; and the inability toimplement our business strategies. Verizon Communications Inc.Condensed Consolidated Statements of Income (dollars in millions, except per share amounts) 3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. EndedUnaudited 12/31/14 12/31/13 % Change 12/31/14 12/31/13 % ChangeOperating Revenues $ 33,192 $ 31,065 6.8 $ 127,079 $ 120,550 5.4 Operating ExpensesCost of services and sales 14,403 11,962 20.4 49,931 44,887 11.2Selling, general and administrative expense 16,857 2,857 * 41,016 27,089 51.4Depreciation and amortization expense 4,068 4,183 (2.7) 16,533 16,606 (0.4)Total Operating Expenses 35,328 19,002 85.9 107,480 88,582 21.3 Operating Income (Loss) (2,136) 12,063 * 19,599 31,968 (38.7)Equity in earnings (losses) of unconsolidated businesses (31) 8 * 1,780 142 *Other income and (expense), net (437) (250) 74.8 (1,194) (166) *Interest expense (1,282) (1,061) 20.8 (4,915) (2,667) 84.3Income (Loss) Before (Provision) Benefit for Income Taxes (3,886) 10,760 * 15,270 29,277 (47.8)(Provision) Benefit for income taxes 1,738 (2,844) * (3,314) (5,730) (42.2)Net Income (Loss) $ (2,148) $ 7,916 * $ 11,956 $ 23,547 (49.2) Net income attributable to noncontrolling interests $ 83 $ 2,849 (97.1) $ 2,331 $ 12,050 (80.7)Net income (loss) attributable to Verizon (2,231) 5,067 * 9,625 11,497 (16.3)Net Income (Loss) $ (2,148) $ 7,916 * $ 11,956 $ 23,547 (49.2) Basic Earnings (Loss) per Common ShareNet income (loss) attributable to Verizon $ (.54) $ 1.77 * $ 2.42 $ 4.01 (39.7) Weighted average number of common shares (in millions) 4,157 2,867 3,974 2,866 Diluted Earnings (Loss) per Common Share (1)Net income (loss) attributable to Verizon $ (.54) $ 1.76 * $ 2.42 $ 4.00 (39.5) Weighted average number of common shares-assuming dilution (in millions) 4,157 2,875 3,981 2,874 Footnotes: (1) If there is a net loss, diluted EPS is the same as basic EPS. 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 12/31/14 12/31/13 $ Change AssetsCurrent assets Cash and cash equivalents $ 10,598 $ 53,528 $ (42,930) Short-term investments 555 601 (46) Accounts receivable, net 13,993 12,439 1,554 Inventories 1,153 1,020 133 Prepaid expenses and other 3,324 3,406 (82)Total current assets 29,623 70,994 (41,371)Plant, property and equipment 230,508 220,865 9,643 Less accumulated depreciation 140,561 131,909 8,652 89,947 88,956 991Investments in unconsolidated businesses 802 3,432 (2,630)Wireless licenses 75,341 75,747 (406)Goodwill 24,639 24,634 5Other intangible assets, net 5,728 5,800 (72)Other assets 6,628 4,535 2,093Total Assets $ 232,708 $ 274,098 $ (41,390) Liabilities and EquityCurrent liabilities Debt maturing within one year $ 2,735 $ 3,933 $ (1,198) Accounts payable and accrued liabilities 16,680 16,453 227 Other 8,649 6,664 1,985Total current liabilities 28,064 27,050 1,014Long-term debt 110,536 89,658 20,878Employee benefit obligations 33,280 27,682 5,598Deferred income taxes 41,578 28,639 12,939Other liabilities 5,574 5,653 (79) Equity Common stock 424 297 127 Contributed capital 11,155 37,939 (26,784) Reinvested earnings 2,447 1,782 665 Accumulated other comprehensive income 1,111 2,358 (1,247) Common stock in treasury, at cost (3,263) (3,961) 698 Deferred compensation - employee stock ownership plans and other 424 421 3 Noncontrolling interests 1,378 56,580 (55,202)Total equity 13,676 95,416 (81,740)Total Liabilities and Equity $ 232,708 $ 274,098 $ (41,390) Verizon - Selected Financial and Operating Statistics Unaudited 12/31/14 12/31/13 Total debt (in millions) $ 113,271 $ 93,591Net debt (in millions) $ 102,673 $ 40,063Net debt / Adjusted EBITDA(1) 2.4x 1.0xCommon shares outstanding end of period (in millions) 4,155 2,862Total employees 177,300 176,800Quarterly cash dividends declared per common share $ 0.550 $ 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) 12 Mos. Ended 12 Mos. EndedUnaudited 12/31/14 12/31/13 $ Change Cash Flows from Operating ActivitiesNet Income $ 11,956 $ 23,547 $ (11,591) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 16,533 16,606 (73) Employee retirement benefits 8,130 (5,052) 13,182 Deferred income taxes (92) 5,785 (5,877) Provision for uncollectible accounts 1,095 993 102 Equity in earnings of unconsolidated businesses, net of dividends received (1,743) (102) (1,641) Changes in current assets and liabilities, net of effects from acquisition/ disposition of businesses (2,160) (5) (2,155) Other, net (3,088) (2,954) (134)Net cash provided by operating activities 30,631 38,818 (8,187) Cash Flows from Investing ActivitiesCapital expenditures (including capitalized software) (17,191) (16,604) (587)Acquisitions of investments and businesses, net of cash acquired (182) (494) 312Acquisitions of wireless licenses (354) (580) 226Proceeds from dispositions of wireless licenses 2,367 2,111 256Proceeds from dispositions of businesses 120 - 120Other, net (616) 734 (1,350)Net cash used in investing activities (15,856) (14,833) (1,023) Cash Flows from Financing ActivitiesProceeds from long-term borrowings 30,967 49,166 (18,199)Repayments of long-term borrowings and capital lease obligations (17,669) (8,163) (9,506)Decrease in short-term obligations, excluding current maturities (475) (142) (333)Dividends paid (7,803) (5,936) (1,867)Proceeds from sale of common stock 34 85 (51)Purchase of common stock for treasury - (153) 153Special distribution to noncontrolling interest - (3,150) 3,150Acquisition of noncontrolling interest (58,886) - (58,886)Other, net (3,873) (5,257) 1,384Net cash provided by (used in) financing activities (57,705) 26,450 (84,155) Increase (decrease) in cash and cash equivalents (42,930) 50,435 (93,365)Cash and cash equivalents, beginning of period 53,528 3,093 50,435Cash and cash equivalents, end of period $ 10,598 $ 53,528 $ (42,930) Footnotes:Certain reclassifications of prior period amounts have been made, whereappropriate, to reflect comparable operating results. Verizon Communications Inc.Wireless - Selected Financial Results (dollars in millions) 3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. EndedUnaudited 12/31/14 12/31/13 % Change 12/31/14 12/31/13 % Change Operating Revenues Retail service $ 17,411 $ 16,967 2.6 $ 69,501 $ 66,334 4.8 Other service 798 744 7.3 3,129 2,699 15.9Service 18,209 17,711 2.8 72,630 69,033 5.2 Equipment 4,222 2,421 74.4 10,959 8,111 35.1Other 1,018 993 2.5 4,057 3,879 4.6Total Operating Revenues 23,449 21,125 11.0 87,646 81,023 8.2 Operating Expenses Cost of services and sales 9,184 6,546 40.3 28,825 23,648 21.9 Selling, general and administrative expense 6,611 6,261 5.6 23,602 23,176 1.8 Depreciation and amortization expense 2,152 2,089 3.0 8,459 8,202 3.1Total Operating Expenses 17,947 14,896 20.5 60,886 55,026 10.6 Operating Income $ 5,502 $ 6,229 (11.7) $ 26,760 $ 25,997 2.9Operating Income Margin 23.5% 29.5% 30.5% 32.1% Segment EBITDA $ 7,654 $ 8,318 (8.0) $ 35,219 $ 34,199 3.0Segment EBITDA Margin 32.6% 39.4% 40.2% 42.2%Segment EBITDA ServiceMargin 42.0% 47.0% 48.5% 49.5% 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 12/31/14 12/31/13 % Change Connections ('000) Retail postpaid 102,079 96,752 5.5 Retail prepaid 6,132 6,047 1.4Retail 108,211 102,799 5.3 3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. EndedUnaudited 12/31/14 12/31/13 % Change 12/31/14 12/31/13 % Change Net Add Detail ('000) (1) Retail postpaid 1,986 1,573 26.3 5,482 4,118 33.1 Retail prepaid 81 80 1.3 86 354 (75.7)Retail 2,067 1,653 25.0 5,568 4,472 24.5 Account StatisticsRetail PostpaidAccounts ('000) (2) 35,616 35,083 1.5Retail postpaid ARPA $ 158.82 $ 157.21 1.0 $ 159.86 $ 153.93 3.9Retail postpaidconnections peraccount (2) 2.87 2.76 4.0 Churn DetailRetail postpaid 1.14% 0.96% 1.04% 0.97%Retail 1.39% 1.27% 1.33% 1.27% Retail Postpaid ConnectionStatisticsTotal Smartphone postpaid% of phones activated 93.6% 88.9% 91.6% 85.7%Total Smartphone postpaidphone base (2) 78.6% 70.0%Total Internet postpaidbase (2) 14.1% 10.7% Other Operating StatisticsCapital expenditures(in millions) $ 2,707 $ 2,705 0.1 $ 10,515 $ 9,425 11.6 Footnotes: (1) Connection net additions exclude acquisitions and adjustments. (2) Statistics presented as of end of period. The segment financial results and metrics above are adjusted to exclude the effects of non-operational items, as the Company's chief operating decision maker excludes these items in assessing business unit performance. Intersegment transactions have not been eliminated. Certain reclassifications have been made, where appropriate, to reflect comparable operating results. Verizon Communications Inc.Wireline - Selected Financial Results (dollars in millions) 3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. EndedUnaudited 12/31/14 12/31/13 % Change 12/31/14 12/31/13 % Change Operating Revenues Consumer retail $ 3,977 $ 3,822 4.1 $ 15,583 $ 14,842 5.0 Small business 606 629 (3.7) 2,464 2,541 (3.0)Mass Markets 4,583 4,451 3.0 18,047 17,383 3.8 Strategic services 2,112 2,081 1.5 8,326 8,140 2.3 Core 1,259 1,452 (13.3) 5,358 6,042 (11.3)Global Enterprise 3,371 3,533 (4.6) 13,684 14,182 (3.5) Global Wholesale 1,509 1,602 (5.8) 6,222 6,594 (5.6)Other 97 126 (23.0) 476 465 2.4Total Operating Revenues 9,560 9,712 (1.6) 38,429 38,624 (0.5) Operating ExpensesCost of services and sales 5,326 5,471 (2.7) 21,332 21,396 (0.3)Selling, general andadministrative expense 1,952 2,054 (5.0) 8,180 8,571 (4.6)Depreciation andamortization expense 1,866 2,073 (10.0) 7,882 8,327 (5.3)Total Operating Expenses 9,144 9,598 (4.7) 37,394 38,294 (2.4) Operating Income $ 416 $ 114 * $ 1,035 $ 330 *Operating Income Margin 4.4% 1.2% 2.7% 0.9% Segment EBITDA $ 2,282 $ 2,187 4.3 $ 8,917 $ 8,657 3.0Segment EBITDA Margin 23.9% 22.5% 23.2% 22.4% 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 12/31/14 12/31/13 % Change Connections ('000) FiOS Video Subscribers 5,649 5,262 7.4 FiOS Internet Subscribers 6,616 6,072 9.0 FiOS Digital Voice residence connections 4,602 4,248 8.3FiOS Digital connections 16,867 15,582 8.2 HSI 2,589 2,943 (12.0)Total Broadband connections 9,205 9,015 2.1 Primary residence switched access connections 5,596 6,481 (13.7)Primary residence connections 10,198 10,729 (4.9) Total retail residence voice connections 10,615 11,229 (5.5)Total voice connections 19,795 21,085 (6.1) 3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. EndedUnaudited 12/31/14 12/31/13 % Change 12/31/14 12/31/13 % Change Net Add Detail ('000) FiOS Video Subscribers 116 92 26.1 387 536 (27.8) FiOS Internet Subscribers 145 126 15.1 544 648 (16.0) FiOS Digital Voice residence connections 88 179 (50.8) 354 1,021 (65.3)FiOS Digital connections 349 397 (12.1) 1,285 2,205 (41.7) HSI (86) (106) (18.9) (354) (428) (17.3)Total Broadband connections 59 20 * 190 220 (13.6) Primary residence switched access connections (198) (340) (41.8) (885) (1,501) (41.0)Primary residence connections (110) (161) (31.7) (531) (480) 10.6 Total retail residencevoice connections (128) (192) (33.3) (614) (620) (1.0) Total voice connections (294) (372) (21.0) (1,290) (1,418) (9.0) Revenue and ARPU StatisticsConsumer ARPU $ 129.29 $ 117.88 9.7 $ 124.11 $ 112.77 10.1FiOS revenues (in millions) $ 3,308 $ 2,965 11.6 $ 12,674 $ 11,152 13.6Strategic services as a% of total Enterprise revenues 62.7% 58.9% 60.8% 57.4% Other Operating StatisticsCapital expenditures(in millions) $ 1,556 $ 1,762 (11.7) $ 5,750 $ 6,229 (7.7) Wireline employees ('000) 76.8 81.9FiOS Video Open for Sale ('000) 15,776 15,022FiOS Video penetration 35.8% 35.0%FiOS Internet Open for Sale ('000) 16,109 15,368FiOS Internet penetration 41.1% 39.5% 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 SOURCE Verizon Communications Inc. CONTACT: Bob Varettoni, 908-559-6388, [email protected]; or RayMcConville, 908-559-3504, [email protected]