NEW YORK -- Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported its fifth consecutivequarter of double-digit percentage growth in operating income and earnings per share. First-quarter 2014 results included the impact of February’s close of the $130 billion transaction to acquire full ownership of Verizon Wireless.
Lowell McAdam, Verizon chairman and CEO, said: “Verizon has delivered double-digit earnings growth in eight of the past nine quarters, and in first-quarter 2014 we posted our strongest consolidated revenue growth in five quarters. With the wireless transaction now behind us, we have great confidence in 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 of Verizon Wireless is energizing our efforts to provide customers with product and service innovations and to enable powerful solutions to some of the world’s biggest challenges.”
Verizon reported $1.15 in EPS in first-quarter 2014, compared with 68 cents per share in first-quarter 2013. First-quarter 2014 results included an after-tax gain of approximately $1.9 billion (55 cents per share) related to the sale of Verizon’s minority interest in Vodafone Omnitel as part of the wireless transaction, and charges of $575 million (17 cents per share) related to debt redemption and $260 million (8 cents per share) in interest and financing costs related to the wireless transaction.
On an adjusted basis (non-GAAP), Verizon reported EPS of 84 cents in first-quarter 2014, compared with 68 cents per share in first-quarter 2013 – an increase of 23.5 percent.
With the transaction to acquire full ownership of Verizon Wireless closing on Feb. 21, Verizon’s first-quarter 2014 results only include five weeks of the full results of Verizon Wireless. On a non-GAAP, illustrative basis, adjusted EPS of 84 cents would have been 91 cents per share assuming 100 percent ownership of Verizon Wireless and all shares issued in the transaction were outstanding for the full quarter.
Consolidated Results Highlighted by Top-Line Growth, Margin Expansion
With continued solid operational execution and revenue growth across all strategic areas – Verizon Wireless, FiOS and strategic enterprise services – Verizon delivered consolidated top-line growth and margin expansion in first-quarter 2014.
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.
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