Verizon Wireless 2014 Annual Report Download - page 19

17
Net Income Attributable to Noncontrolling Interests (dollars in millions)
Increase/(Decrease)
Years Ended December 31, 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Net income attributable to noncontrolling
interests $ 2,331 $ 12,050 $ 9,682 $ (9,719) (80.7)% $ 2,368 24.5 %
SEGMENT RESULTS OF OPERATIONS
We have two reportable segments, Wireless and Wireline, which we operate and manage as strategic business units and organize by products and
services. We measure and evaluate our reportable segments based on segment operating income. The use of segment operating income is consis-
tentwiththechiefoperatingdecisionmaker’sassessmentofsegmentperformance.
Segment earnings before interest, taxes, depreciation and amortization (Segment EBITDA), which is presented below, is a non-GAAP measure and
doesnotpurporttobeanalternativetooperatingincomeasameasureofoperatingperformance.Managementbelievesthatthismeasureis
useful to investors and other users of our nancial information in evaluating operating protability on a more variable cost basis as it excludes the
depreciation and amortization expenses related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating
operating performance in relation to our competitors. Segment EBITDA is calculated by adding back depreciation and amortization expense to seg-
ment operating income.
Wireless EBITDA margin is calculated by dividing Wireless EBITDA by total Wireless revenues. Wireless Segment EBITDA service margin, also presented
below, is calculated by dividing Wireless Segment EBITDA by Wireless service revenues. Wireless Segment EBITDA service margin utilizes service rev-
enues rather than total revenues. Service revenues primarily exclude equipment revenues in order to reect the impact of providing service to the
wireless customer base on an ongoing basis. Wireline EBITDA margin is calculated by dividing Wireline EBITDA by total Wireline revenues. You can nd
additional information about our segments in Note 14 to the consolidated nancial statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
The eective income tax rate for 2013 was 19.6% compared to (6.7)%
for 2012. The increase in the eective income tax rate and provision for
income taxes was primarily due to higher income before income taxes
as a result of severance, pension and benet credits recorded during
2013 compared to lower income before income taxes as a result of sever-
ance, pension and benet charges as well as early debt redemption costs
recorded during 2012.
Our eective income tax rate diered signicantly from the statutory fed-
eral income tax rate for 2013 and 2012 due to the inclusion of income
attributabletoVodafone’snoncontrollinginterestintheVerizonWireless
partnership for the full year within our income before the provision for
income taxes. In 2013, we recorded a tax provision on income before the
provision for income taxes and when we included the income attributable
The decrease in Net income attributable to noncontrolling interests
during 2014 compared to 2013 was primarily due to the completion of the
WirelessTransactiononFebruary21,2014.Asaresult,ourresultsreect
our 55% ownership interest of Verizon Wireless through the closing of the
Wireless Transaction and reect our full ownership of Verizon Wireless for
the remainder of the year. The noncontrolling interests that remained
after the completion of the Wireless Transaction primarily relate to wireless
partnership entities.
toVodafone’snoncontrollinginterestintheVerizonWirelesspartnership
in our income before the provision for income taxes it resulted in our
eective income tax rate being 13.7 percentage points lower during
2013. In 2012, we recorded a tax benet on income before the provision
for income taxes, which resulted in a negative eective income tax rate.
Inthiscircumstance,includingtheincomeattributabletoVodafone’s
noncontrolling interest in the Verizon Wireless partnership in our income
before the provision for income taxes resulted in our negative eective
tax rate being 300.3 percentage points higher during 2012.
A reconciliation of the statutory federal income tax rate to the eective
income tax rate for each period is included in Note 13 to the consoli-
dated nancial statements.
The increase in Net income attributable to noncontrolling interests during
2013 compared to 2012 was due to higher earnings in our Verizon Wireless
segment, which had a 45% noncontrolling partnership interest attribut-
able to Vodafone as of December 31, 2013.