10-QPeriod: Q2 FY2012

VERIZON COMMUNICATIONS INC Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 30, 2012For Securities:VZ

Summary

Verizon Communications Inc. (VZ) reported a solid second quarter in 2012, demonstrating revenue growth driven by its robust wireless segment. Total operating revenues increased by 3.7% to $28.6 billion, with Verizon Wireless revenues climbing 7.4% to $18.6 billion, fueled by strong demand for smartphones and data services. The company saw a significant rise in data revenue, which now constitutes over 43% of wireless service revenue, highlighting the shift towards data-centric offerings. While the Wireline segment experienced a slight revenue decline, this was largely offset by growth in FiOS services and strategic offerings. Financially, Verizon reported a net income of $4.3 billion for the quarter, a notable increase from $3.6 billion in the prior year, with earnings per share rising to $0.64. The company also generated strong operating cash flow of $15.3 billion year-to-date, enabling continued investment in its 4G LTE network expansion, which now covers approximately 75% of the U.S. population. Significant spectrum acquisitions and strategic partnerships, including a potential T-Mobile spectrum exchange, are positioned to enhance future capacity and efficiency.

Financial Highlights

50 data points
Beta

Revenue

$28.55B

61.8% Gross Margin

Net Income

$1.82B

6.4% Net Margin

EPS (Diluted)

$0.64

Total Assets

$226.07B

Cash & Equivalents

$10.00B

Free Cash Flow

$9.31B

Financial Statements
Beta
Revenue$28.55B
Cost of Revenue$10.90B
Gross Profit$17.66B
SG&A Expenses$7.88B
Operating Expenses$22.90B
Operating Income$5.65B
Interest Expense$679.00M
Net Income$1.82B
EPS (Basic)$0.64
EPS (Diluted)$0.64
Shares Outstanding (Basic)2.85B
Shares Outstanding (Diluted)2.86B

Key Highlights

  • 1Total operating revenues increased by 3.7% to $28.55 billion for the three months ended June 30, 2012, compared to $27.54 billion in the prior year.
  • 2Verizon Wireless revenues grew by 7.4% to $18.58 billion, driven by strong demand for smartphones and data services, with data revenue accounting for 43.6% of wireless service revenue.
  • 3Net income rose to $4.29 billion ($1.82 billion attributable to Verizon) for the quarter, up from $3.60 billion ($1.61 billion attributable to Verizon) in the same period last year.
  • 4Diluted Earnings Per Common Share increased to $0.64 from $0.57 in the prior year's second quarter.
  • 5Capital expenditures for the first six months of 2012 were $7.43 billion, focused on network expansion, including the ongoing deployment of the 4G LTE mobile broadband network.
  • 6The company is actively engaged in significant spectrum acquisition activities, including agreements to acquire AWS spectrum licenses and an exchange agreement with T-Mobile.
  • 7Free cash flow for the first six months of 2012 was $7.84 billion, a substantial increase from $3.87 billion in the prior year, reflecting improved operating cash flow and lower capital expenditures.

Frequently Asked Questions

Verizon's strategy centers on capitalizing on the growing demand for data services, particularly from smartphones. The company is investing heavily in its 4G LTE network to provide faster speeds and greater capacity, which drives data revenue. They are also focusing on expanding their smartphone and data device customer base and optimizing data plan utilization.

Verizon maintains a healthy liquidity position with significant cash and cash equivalents and an available credit facility. The company is actively managing its debt through maturities and repayments. While operating liabilities exceed current assets, the company's strong operating cash flow and access to financing are expected to be sufficient to meet ongoing requirements. They also utilize interest rate swaps to manage interest rate exposure.

The Wireline segment faces challenges from declining traditional voice services, impacting 'Core' and 'Global Wholesale' revenues. However, growth in FiOS services (Internet, Video) within 'Mass Markets' and increased revenue from 'Strategic Services' in 'Global Enterprise' are positive drivers. Verizon is focusing on expanding its high-speed data and IP-based services to offset declines in legacy offerings.

Verizon is actively pursuing significant spectrum acquisitions to enhance its wireless network capacity and coverage. They have entered into agreements to acquire AWS spectrum licenses and have a pending license exchange agreement with T-Mobile. These initiatives are crucial for supporting the ongoing expansion and improvement of their 4G LTE network and future services.