Verizon Wireless 2012 Annual Report Download - page 40

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2010, the Board increased our quarterly dividend payment 2.6% to $.4875
per share from $.475 per share in the same period of 2009.
During 2012, we paid $5.2 billion in dividends compared to $5.6 billion
in 2011 and $5.4 billion in 2010. As in prior periods, dividend payments
were a significant use of capital resources. While the dividends declared
per common share increased, the total amount of cash dividends paid
decreased during 2012 compared with 2011 as a portion of the dividends
was satisfied through the issuance of common shares from Treasury
stock,asnotedbelow(see“CommonStock”).
Credit Facility
As of December 31, 2012, the unused borrowing capacity under a $6.2
billion three-year credit facility with a group of major financial institutions
was approximately $6.1 billion. On August 13, 2012, we amended our
credit facility primarily to reduce fees and borrowing costs and extend
the maturity date to August 12, 2016. The credit facility does not require
us to comply with financial covenants or maintain specified credit ratings,
and it permits us to borrow even if our business has incurred a mate-
rial adverse change. We use the credit facility to support the issuance
of commercial paper, for the issuance of letters of credit and for general
corporate purposes.
Net Debt and the Net Debt to Consolidated Adjusted EBITDA ratio are
non-GAAP financial measures that management believes are useful
to investors and other users of our financial information in evaluating
Verizon's leverage. Net Debt is calculated by subtracting cash and cash
equivalents from the sum of debt maturing within one year and long-
term debt. For purposes of the Net Debt to Adjusted EBITDA Ratio,
AdjustedEBITDA(See“ConsolidatedResultsofOperations”)iscalculated
forthelast12months.Managementbelievesthispresentationassists
investors in understanding trends that are indicative of future operating
results given the non-operational or non-recurring nature of the items
excluded from the calculation.
Verizon’sratioofnetdebttoConsolidatedAdjustedEBITDAwas1.3x
at December 31, 2012 and 1.2x at December 31, 2011. Consolidated
Adjusted EBITDA excludes the effects of non-operational items (see
“OtherItems”).
Common Stock
Common stock has been used from time to time to satisfy some of the
funding requirements of employee and shareowner plans, including 24.6
million common shares issued from Treasury stock during 2012, related
to dividend payments, which had an aggregate value of $1.0 billion. On
February3,2011,theBoardofDirectorsreplacedthepreviouslyautho-
rized share buyback program with a new program for the repurchase of
up to 100 million common shares terminating no later than the close of
businessonFebruary28,2014.TheBoardalsodeterminedthatnoaddi-
tional shares were to be purchased under the prior program. Through
February15,2013,wepurchasedapproximately3.50millionsharesunder
this authorization.
There were no repurchases of common stock during 2012, 2011 or 2010.
Credit Ratings
The debt securities of Verizon Communications and its subsidiaries con-
tinue to be accorded high ratings by the three primary rating agencies.
Although a one-level ratings downgrade would not be expected to sig-
nificantly impact our access to capital, it could increase both the cost
of refinancing existing debt and the cost of financing any new capital
requirements. Securities ratings assigned by rating organizations are
expressions of opinion and are not recommendations to buy, sell, or hold
securities. A securities rating is subject to revision or withdrawal at any
time by the assigning rating organization. Each rating should be evalu-
ated independently of any other rating.
paperandothergeneralcorporatepurposes.See“OtherItems”regarding
the early debt redemption costs incurred in connection with the afore-
mentioned redemptions.
During December 2011, we repaid $0.9 billion upon maturity for the €0.7
billion of 7.625% Verizon Wireless Notes, and the related cross currency
swapwassettled.DuringMay2011,$4.0billionVerizonWirelesstwo-year
fixed and floating rate notes matured and were repaid.
2010
During 2010, Verizon received approximately $3.1 billion in cash in con-
nection with the completion of the spin-off and merger of Spinco (see
“AcquisitionsandDivestitures”).Thisspecialcashpaymentwassubse-
quently used to redeem $2.0 billion of 7.25% Verizon Communications
Notes due December 2010 at a redemption price of 102.7% of the prin-
cipal amount of the notes, plus accrued and unpaid interest to the date
of redemption, as well as other short-term borrowings. During 2010,
$0.3 billion of 6.125% and $0.2 billion of 8.625% Verizon New York Inc.
Debentures, $0.2 billion of 6.375% Verizon North Inc. Debentures and
$0.2 billion of 6.3% Verizon Northwest Inc. Debentures matured and were
repaid. In addition, during 2010 Verizon repaid $0.2 billion of floating rate
vendor financing debt.
In 2010, Verizon Wireless exercised its right to redeem the outstanding
$1.0billionofaggregatefloatingratenotesdueJune2011ataredemp-
tion price of 100% of the principal amount of the notes, plus accrued
and unpaid interest to the date of redemption. In addition, during 2010,
Verizon Wireless repaid the remaining $4.0 billion of borrowings that were
outstandingundera$4.4billionThree-YearTermLoanFacilityAgreement
withamaturitydateofSeptember2011(Three-YearTermLoanFacility).
As there were no borrowings outstanding under this facility, it was can-
celled.
Special Distributions
In November2012, the Boardof RepresentativesofVerizonWireless
declared a distribution to its owners, which was paid in the fourth quarter
of 2012 in proportion to their partnership interests on the payment date,
in the aggregate amount of $8.5 billion. As a result, Vodafone received a
cash payment of $3.8 billion and the remainder of the distribution was
received by Verizon.
InJuly2011,theBoardofRepresentativesofVerizonWirelessdeclared
a distribution to its owners, which was paid in the first quarter of 2012
in proportion to their partnership interests on the payment date, in
the aggregate amount of $10 billion. As a result, Vodafone received a
cash payment of $4.5 billion and the remainder of the distribution was
received by Verizon.
Other, net
The change in Other, net financing activities during 2012 compared to
the prior year was primarily driven by higher distributions to Vodafone,
which owns a 45% noncontrolling interest in Verizon Wireless and higher
earlydebtredemptioncosts(see“OtherItems”).ThechangeinOther,net
financing activities during 2011 compared to 2010 was primarily driven
by lower distributions to Vodafone.
Dividends
The Verizon Board of Directors determines the appropriateness of the
level of our dividend payments on a periodic basis by considering such
factors as long-term growth opportunities, internal cash requirements
and the expectations of our shareowners. During the third quarter of
2012, the Board increased our quarterly dividend payment 3.0% to $.515
per share from $.50 per share in the same period of 2011. This is the
sixthconsecutiveyearthatVerizon’sBoardofDirectorshasapproveda
quarterly dividend increase. During the third quarter of 2011, the Board
increased our quarterly dividend payment 2.6% to $.50 per share from
$.4875 per share in the same period of 2010. During the third quarter of
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued