Non-operational items lead Verizon to GAAP 4Q14 loss

The impact of "non-operational items" led Verizon Communications Inc. (NYSE, NASDAQ: VZ) to report a GAAP loss of $0.54 per share for the final quarter of fiscal 2014. For the full year, the service provider reported a GAAP earnings per share of $2.42. Both figures reflected declines from 2013. However, on a non-GAAP basis, Verizon's performance looked significantly better.

The $0.54 GAAP net loss for the fourth quarter represented a significant drop from the year-ago quarter, when Verizon reported a GAAP profit of $1.76 per share. The 4Q14 non-operational items responsible for the loss resulted in total charges of $1.25 per share. These charges included $1.12 per share related to the company's year-end mark-to-market adjustment for pension and other post-employment benefits liabilities and severance costs; and $0.13 per share related to the early retirement of debt and other costs. Last year's fiscal fourth quarter included a non-operational gain of $1.29, partially offset by charges of $0.19 per share related to transaction costs for the acquisition of Vodafone's share of Verizon Wireless.

On a non-GAAP basis, Verizon reported earnings per share of $0.71, better than last year's non-GAAP $0.66 per share. A 6.8% jump in revenues year-to-year to $33.2 billion helped account for the improvement. New wireless adds and an 11.6% year-on-year increase in FiOS revenues helped account for the bump.

Total wireline revenues were $9.6 billion in the most recent quarter, down 1.6% versus 4Q13. Consumer revenues were $4.0 billion, up 4.1% compared with 4Q13. FiOS revenues accounted for 77% of all wireline revenues. Verizon said it added 145,000 net new FiOS Internet connections and 116,000 net new FiOS video connections. In fourth quarter of 2013, Verizon added 126,000 net new FiOS Internet connections and 92,000 net new FiOS Video connections.

For full year 2014, the $2.42 in GAAP EPS was significantly less than the $4.00 reported for 2013. However, on an adjusted basis the outlook again improved. Verizon reported $3.35 in non-GAAP EPS for 2014, up 18.0% over the $2.84 in adjusted EPS for 2013. Full-year operating revenues were $127.1 billion in 2014, up 5.4% ($6.5 billion) versus full-year 2013.

FiOS revenues totaled $12.7 billion in 2014, up 13.6% compared with $11.2 billion in 2013. Verizon had totals of 6.6 million FiOS Internet and 5.6 million FiOS Video connections at year-end 2014, which represented year-over-year increases of 9.0% and 7.4%, respectively.

FiOS Internet penetration (subscribers as a percentage of potential subscribers) was 41.1% at the end of 2014, up from year-end 2013's 39.5%. FiOS Video penetration climbed slightly in 2014 to 35.8%, compared with 35.0% at the end of 2013. The FiOS network passed more than 19.8 million premises by year-end 2014, Verizon reports.

"Verizon posted another year of consistently high operating and financial performance in 2014, with strong cash generation and the return of $7.8 billion to our shareowners. I am confident that Verizon's assets and market momentum position us to continue to drive profitable growth in 2015," said Chairman and CEO Lowell McAdam via a press release.

Ahead of a call with analysts, Verizon management stated they expect consolidated revenue growth of at least 4% in 2015, with a consolidated adjusted EBITDA margin similar to 2014. Capex is expected to range between $17.5 billion and $18.0 billion. This total would be a slight increase over the $17.2 billion it spent in 2014.

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