Verizon Wireless 2012 Annual Report Download - page 38

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COnsOlidated finanCial COnditiOn
(dollars in millions)
Years Ended December 31, 2012 2011 2010
Cash Flows Provided By (Used In)
Operating activities $ 31,486 $ 29,780 $ 33,363
Investing activities (20,502) (17,250) (15,054)
Financingactivities (21,253) (5,836) (13,650)
Increase (Decrease) In Cash and Cash
Equivalents $ (10,269) $ 6,694 $ 4,659
We use the net cash generated from our operations to fund network
expansion and modernization, repay external financing, pay dividends,
repurchase Verizon common stock from time to time and invest in new
businesses. Our sources of funds, primarily from operations and, to the
extent necessary, from external financing arrangements, are sufficient
to meet ongoing operating and investing requirements. We expect
that our capital spending requirements will continue to be financed
primarily through internally generated funds. Debt or equity financing
may be needed to fund additional development activities or to main-
tain an appropriate capital structure to ensure our financial flexibility. Our
cash and cash equivalents are primarily held domestically in diversified
accounts and are invested to maintain principal and liquidity. Accordingly,
we do not have significant exposure to foreign currency fluctuations.
The volatility in world debt and equity markets has not had a significant
impact on our ability to access external financing. Our available external
financing arrangements include the issuance of commercial paper, credit
available under credit facilities and other bank lines of credit, vendor
financing arrangements, issuances of registered debt or equity securities
and privately-placed capital market securities.
OnFebruary7,2012,wefiledanewshelfregistrationstatementforthe
issuance of debt or equity securities with an aggregate offering price of
up to $10 billion. In connection with this filing, the previous shelf regis-
tration statement was terminated. As of December 31, 2012, the shelf
registration had an aggregate offering price of up to $5.5 billion. We may
also issue short-term debt through an active commercial paper program
and have a $6.2 billion credit facility to support such commercial paper
issuances.
Cash Flows Provided By Operating Activities
Our primary source of funds continues to be cash generated from opera-
tions, primarily from Verizon Wireless. Net cash provided by operating
activities during 2012 increased by $1.7 billion compared to 2011 pri-
marily due to higher consolidated earnings, as well as improved working
capital levels, due to timing differences, partially offset by an increase in
pension contributions. Net cash provided by operating activities during
2012 and 2011 included net distributions received from Vodafone
Omnitel of $0.3 billion and $0.4 billion, respectively.
Net cash provided by operating activities during 2011 decreased by $3.6
billion compared to 2010 primarily due to purchases for wireless devices,
cashflowsfromdivestedoperations(see“AcquisitionsandDivestitures”)
and higher pension plan contributions. Net cash provided by operating
activities during 2011 and 2010 included net distributions received from
Vodafone Omnitel of $0.4 billion in each year.
Alltel Divestiture Markets
During the second quarter of 2010, we recorded a tax charge of
approximately $0.2 billion for the taxable gain associated with the Alltel
DivestitureMarkets(see“AcquisitionsandDivestitures”).
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResultsofOperations”)excludestheaccesslinespin-off
andAlltelDivestitureMarketschargespresentedabove.
Medicare Part D Subsidy Charges
UnderthePatientProtectionandAffordableCareActandtheHealthCare
andEducationReconciliationActof2010,bothofwhichbecamelawin
March2010(collectivelytheHealthCareAct),beginningin2013,Verizon
andothercompaniesthatreceiveasubsidyunderMedicarePartDto
provide retiree prescription drug coverage will no longer receive a fed-
eral income tax deduction for the expenses incurred in connection with
providing the subsidized coverage to the extent of the subsidy received.
Because future anticipated retiree prescription drug plan liabilities and
relatedsubsidiesarealreadyreflectedinVerizon’sfinancialstatements,
this change in law required Verizon to reduce the value of the related
tax benefits recognized in its financial statements in the period during
which the Health Care Act was enacted. As a result, Verizon recorded a
one-time, non-cash income tax charge of $1.0 billion in the first quarter
of 2010 to reflect the impact of this change.
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResultsofOperations”)excludestheMedicarePartDsub-
sidy charges presented above.
Deferred Revenue Charges
Corporate, eliminations and other during the periods presented include
a non-cash adjustment of $0.2 billion in 2010, primarily to adjust wire-
less service revenues. This adjustment was recorded to properly defer
previously recognized wireless service revenues that were earned and
recognized in future periods. The adjustment was recorded during 2010,
which reduced Net income attributable to Verizon by approximately $0.1
billion.
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResults ofOperations”)excludesthedeferredrevenue
charges presented above.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued