Verizon Wireless 2012 Annual Report Download - page 29

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
Consolidated Operating Income and EBITDA
Consolidated earnings before interest, taxes, depreciation and amortiza-
tion expenses (Consolidated EBITDA) and Consolidated Adjusted EBITDA,
which are presented below, are non-GAAP measures and do not purport
to be alternatives to operating income as a measure of operating perfor-
mance.Managementbelievesthatthesemeasuresareusefultoinvestors
and other users of our financial information in evaluating operating prof-
itability on a more variable cost basis as they exclude the depreciation
and amortization expense related primarily to capital expenditures and
acquisitions that occurred in prior years, as well as in evaluating oper-
ating performance in relation to our competitors. Consolidated EBITDA
is calculated by adding back interest, taxes, depreciation and amortiza-
tion expense, equity in earnings of unconsolidated businesses and other
income and (expense), net to net income.
Consolidated Adjusted EBITDA is calculated by excluding the effect of
non-operational items and the impact of divested operations from the
calculationofConsolidatedEBITDA.Managementbelievesthatthismea-
sure provides additional relevant and useful information to investors and
other users of our financial data in evaluating the effectiveness of our
operations and underlying business trends in a manner that is consis-
tentwithmanagement’sevaluationofbusinessperformance.See“Other
Items”foradditionaldetailsregardingthesenon-operationalitemsand
the impact of divested operations.
Operating expenses include pension and benefit related charges based
on actuarial assumptions, including projected discount rates and an esti-
mated return on plan assets. These estimates are updated in the fourth
quarter to reflect actual return on plan assets and updated actuarial
assumptions. The adjustment has been recognized in the income state-
ment during the fourth quarter or upon a remeasurement event pursuant
to our accounting policy for the recognition of actuarial gains/losses.
Itismanagement’sintenttoprovidenon-GAAPfinancialinformationto
enhancetheunderstandingofVerizon’sGAAPfinancialinformation,and
it should be considered by the reader in addition to, but not instead of,
the financial statements prepared in accordance with GAAP. Each non-
GAAP financial measure is presented along with the corresponding GAAP
measure so as not to imply that more emphasis should be placed on the
non-GAAP measure. The non-GAAP financial information presented may
be determined or calculated differently by other companies.
(dollars in millions)
Years Ended December 31, 2012 2011 2010
Consolidated Operating Income $ 13,160 $ 12,880 $ 14,645
Add Depreciation and amortization
expense 16,460 16,496 16,405
Consolidated EBITDA 29,620 29,376 31,050
Add Non-operating charges included in
operating expenses(1) 7,846 5,954 4,226
Add Deferred revenue adjustment – – 268
Less Impact of divested operations(1) – – (1,168)
Consolidated Adjusted EBITDA $ 37,466 $ 35,330 $ 34,376
(1) Excludes non-operating charges included in Depreciation and amortization expense.
The changes in Consolidated Operating Income, Consolidated EBITDA
and Consolidated Adjusted EBITDA in the table above were primarily a
result of the factors described in connection with operating revenues
and operating expenses above.
Other Consolidated Results
Equity in Earnings of Unconsolidated Businesses
Equity in earnings of unconsolidated businesses decreased $120 million, or 27.0%, in 2012 compared to 2011 and $64 million, or 12.6%, in 2011 com-
pared to 2010 primarily due to lower earnings from operations at Vodafone Omnitel N.V. and, to a lesser extent, the devaluation of the Euro against
theU.S.dollar.
Other Income and (Expense), Net
Additional information relating to Other income and (expense), net is as follows:
(dollars in millions)
Increase/(Decrease)
Years Ended December 31, 2012 2011 2010 2012 vs. 2011 2011 vs. 2010
Interest income $ 57 $ 68 $ 92 $ (11) (16.2)% $ (24) (26.1)%
Foreignexchangegains(losses),net (1) (9) 5 8 (88.9) (14) nm
Other, net (1,072) (73) (43) (999) nm (30) 69.8
Total $ (1,016) $ (14) $ 54 $ (1,002) nm $ (68) nm
nm - not meaningful
Other income and (expense), net decreased during 2012 compared to
2011 primarily driven by higher fees of $1.1 billion related to the early
redemptionofdebt(see“OtherItems”).
Other income and (expense), net decreased during 2011 compared to
2010 primarily driven by higher fees related to the early redemption of
debt(see“OtherItems”)andforeignexchangelossesatourinternational
wireline operations, partially offset by gains on sales of short-term
investments.