Summary
Verizon Communications Inc. (VZ) reported its financial results for the quarter and six months ended June 30, 2016. The company experienced a notable decrease in net income for the three months ended June 30, 2016, largely impacted by significant one-time charges related to early debt redemption costs and pension/benefit remeasurement. Operating revenues saw a decline of 5.3% for the quarter, primarily driven by decreased service and equipment revenues in the Wireless segment and lower revenues in Global Enterprise and Wholesale within the Wireline segment. Despite revenue headwinds, the company continued to invest in its networks and strategic initiatives, including the pending acquisition of Yahoo!'s operating business. Key financial events for the period include the completion of the sale of Verizon's local exchange business in California, Florida, and Texas to Frontier Communications for approximately $10.5 billion, which resulted in a significant gain and reduction in debt. The company also recorded substantial pension and benefit remeasurement charges due to changes in discount rates and healthcare cost assumptions. Management highlighted the ongoing transition in the Wireless segment towards unsubsidized service pricing, evidenced by the increasing adoption of the device payment program and a growing percentage of customers on these plans. Investors should monitor the impact of these strategic shifts and the successful integration of future acquisitions on profitability and revenue growth.
Financial Highlights
49 data points| Revenue | $30.53B |
| Cost of Revenue | $4.64B |
| Gross Profit | $25.89B |
| SG&A Expenses | $9.78B |
| Operating Expenses | $25.98B |
| Operating Income | $4.55B |
| Interest Expense | $1.01B |
| Net Income | $702.00M |
| EPS (Basic) | $0.17 |
| EPS (Diluted) | $0.17 |
| Shares Outstanding (Basic) | 4.08B |
| Shares Outstanding (Diluted) | 4.08B |
Key Highlights
- 1Net income for the three months ended June 30, 2016, was $831 million, a significant decrease from $4,353 million in the prior year period, largely due to $1.8 billion in early debt redemption costs and substantial pension and benefit remeasurement charges.
- 2Total operating revenues for the quarter decreased by 5.3% to $30.5 billion, primarily due to lower service and equipment revenues in the Wireless segment.
- 3The company completed the sale of its local exchange business in California, Florida, and Texas to Frontier Communications for approximately $10.5 billion, recognizing a pre-tax gain of $1.0 billion.
- 4Wireless segment revenues declined 4.0% year-over-year for the quarter, influenced by a shift to unsubsidized service pricing and lower equipment sales, though retail postpaid connections grew.
- 5Wireline segment revenues decreased 2.4% for the quarter, impacted by declines in Global Enterprise and Global Wholesale, and a temporary increase in Fios order backlog due to a union work stoppage.
- 6Verizon announced its agreement to acquire Yahoo! Inc.'s operating business for approximately $4.83 billion, expected to close in Q1 2017.
- 7Capital expenditures for the six months ended June 30, 2016, were $7.3 billion, down from $8.15 billion in the prior year, reflecting a decrease in Wireless and Wireline investments.