Verizon Wireless 2014 Annual Report Download - page 30

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
Dividends
During the third quarter of 2012, the Board increased our quarterly divi-
dend payment 3.0% to $.515 per share from $.50 per share in the same
period of 2011. As in prior periods, dividend payments were a signicant
use of capital resources.
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 rst 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.
Credit Facilities
On July 31, 2014, we amended our $6.2 billion credit facility to increase
the availability to $8.0 billion and extend the maturity to July 31, 2018. At
the same time, we terminated our $2.0 billion 364-day revolving credit
agreement. As of December 31, 2014, the unused borrowing capacity
under this credit facility was approximately $7.9 billion. The credit facility
does not require us to comply with nancial covenants or maintain speci-
ed credit ratings, and it permits us to borrow even if our business has
incurred a material adverse change. We use the credit facility for the issu-
ance of letters of credit and for general corporate purposes.
Common Stock
Common stock has been used from time to time to satisfy some of the
funding requirements of employee and shareowner plans, including 18.2
million, 6.9 million and 24.6 million common shares issued from Treasury
stock during 2014, 2013 and 2012, respectively, which had aggregate
values of $0.7 billion, $0.3 billion and $1.0 billion, respectively.
AsaresultoftheWirelessTransaction,inFebruary2014,Verizonissued
approximately 1.27 billion shares.
OnMarch7,2014,theVerizonBoardofDirectorsapprovedasharebuy-
back program, which authorizes the repurchase of up to 100 million
shares of Verizon common stock terminating no later than the close of
businessonFebruary28,2017.TheprogrampermitsVerizontorepur-
chase shares over time, with the amount and timing of repurchases
depending on market conditions and corporate needs. The Board also
determined that no additional shares were to be purchased under the
prior program. During 2013, we repurchased $0.2 billion of our common
stock under our previous share buyback program. There were no repur-
chases of common stock during 2014 or 2012.
In addition to the previously authorized three-year share buyback pro-
gram,inFebruary2015,theVerizonBoardofDirectorsauthorizedVerizon
toenterintoanacceleratedsharerepurchase(ASR)agreementtorepur-
chase$5.0billionoftheCompany’scommonstock.Thetotalnumber
ofsharesthatVerizonwillrepurchaseunder the ASR agreementwill
be based generally upon the volume-weighted average share price of
Verizon’scommonstockduringthetermofthetransaction.OnFebruary
10, 2015, in exchange for an up-front payment totaling $5.0 billion,
Verizon received an initial delivery of 86.2 million shares having a value of
approximately$4.25billion.Finalsettlementofthetransactionunderthe
ASRagreement,includingdeliveryoftheremainingshares,ifany,that
Verizon is entitled to receive, is scheduled to occur in the second quarter
of 2015.
Credit Ratings
Verizon’screditratingsdidnotchangein2014.
Duringthethirdquarterof2013,Verizon’screditratingsweredown-
graded by Moody’s Investors Service (Moody’s), Standard & Poor’s
RatingsServices(Standard&Poor’s)andFitchRatings(Fitch)asaresult
ofVerizon’sannouncementoftheagreementtoacquireVodafone’s45%
noncontrolling interest in Verizon Wireless for approximately $130 bil-
lion including the incurrence of third-party indebtedness to fund the
cashportionofthepurchasepricefortheWirelessTransaction.Moody’s
downgradedVerizon’slong-termdebtratingsonenotchfromA3toBaa1,
whileStandard&Poor’slowereditscorporatecreditratingandsenior
unsecureddebtratingonenotchfromA-toBBB+andFitchloweredits
long-term issuer default rating and senior unsecured debt rating one
notch from A to A-.
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 evaluated indepen-
dently of any other rating.
Covenants
Our credit agreements contain covenants that are typical for large, invest-
ment grade companies. These covenants include requirements to pay
interest and principal in a timely fashion, pay taxes, maintain insurance
with responsible and reputable insurance companies, preserve our
corporate existence, keep appropriate books and records of nancial
transactions, maintain our properties, provide nancial and other reports
to our lenders, limit pledging and disposition of assets and mergers and
consolidations, and other similar covenants. Additionally, our term loan
credit agreements require us to maintain a leverage ratio (as such term
is dened in those agreements) not in excess of 3.50:1.00 until our credit
ratings are equal to or higher than A3 and A-. See Note 8 to the consoli-
dated nancial statements for additional details related to our term loan
credit agreement.
We and our consolidated subsidiaries are in compliance with all
debt covenants.