26th July 2016
NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported second-quarter earnings reflecting strong profitability and customer retention at Verizon Wireless, a repositioning of the wireline network footprint and cost structure, and scaling of new growth markets in mobile video and the Internet of Things (IoT).
Second-quarter 2016 EPS of 17 cents compared with $1.04 per share in second-quarter 2015. Adjusted second-quarter 2016 earnings (non-GAAP) of 94 cents per share excluded significant non-operational items related to mark-to-market pension and benefit re-measurements, early debt redemption and tender offers, and a gain from the sale of local landline businesses. Also, earnings were negatively impacted by about 7 cents per share in second-quarter 2016 by a seven-week work stoppage in wireline.
“Verizon’s second quarter shows that the company continues to deliver strong results while evolving operations and advancing a strategy to sustain network leadership, build new ecosystems and deliver the promise of the digital world to customers”
Chairman and CEO Lowell McAdam
In first-half 2016, Verizon Wireless added a net of 1.3 million postpaid connections, while stabilizing wireless service revenue declines, maintaining strong customer retention, densifying networks in major markets and advancing 5G deployment. Verizon also completed the sale of local landline businesses in three states, and it negotiated new labor contracts that will generate approximately $500 million in cash savings over the term of the contracts.
During second-quarter 2016, Verizon converted its go90 application to the AOL platform, supporting the ability to expand and monetize mobile video offerings. In June the company also announced an agreement to acquire Telogis to expand its global telematics offerings.
Yesterday, Verizon announced it had entered into a definitive agreement to acquire Yahoo’s operating business for approximately $4.8 billion, in a transaction expected to close in first-quarter 2017.
McAdam said, “By acquiring Yahoo, we are scaling up to be a major competitor in mobile media. Yahoo is a complementary business to AOL, giving us market-leading content brands and a valuable portfolio of online properties and mobile applications that attract over 1 billion monthly active consumer views. We expect this acquisition to put us in a great position as a top global mobile media company and give us a significant source of revenue growth for the future.”
Verizon’s second-quarter 2016 earnings of 17 cents per share included a non-cash after-tax loss of $2.2 billion, or 54 cents per share, generated by pension and other post-employment retirement benefits, primarily associated with a re-measurement triggered by the new labor contracts, the sale of local landline businesses to Frontier and settlement accounting.
On Verizon’s balance sheet, pension and employee benefit obligations were reduced by a net of $1.6 billion, driven primarily by actuarial valuations associated with new labor contracts and the Frontier transaction, which were partially offset by the mark-to-market re-measurements and assets transferred to Frontier. Year-to-date unfunded employee benefit obligations have been reduced by $1.9 billion.
Second-quarter 2016 EPS also includes non-operational expenses of $1.1 billion after taxes, or 27 cents per share, in connection with early debt redemption and tender offers. Additionally, Verizon recognized an after-tax gain of $139 million, or 3 cents per share, on the Frontier transaction.
There were no adjustments to second-quarter 2015 earnings.
Verizon expects the following: