VERIZON COMMUNICATIONS INC | 2013 | FY | 3


Note 13

Segment Information

Reportable Segments

We have two reportable segments, 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, consistent with the chief operating decision maker’s assessment of segment performance.

Corporate, eliminations and other includes unallocated corporate expenses, intersegment eliminations recorded in consolidation, the results of other businesses, such as our investments in unconsolidated businesses, pension and other employee benefit related costs, lease financing, as well as other adjustments and gains and losses that are not allocated in assessing segment performance due to their non-operational nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses that are not individually significant are included in all segment results as these items are included in the chief operating decision maker’s assessment of segment performance.

The reconciliation of segment operating revenues and expenses to consolidated operating revenues and expenses below also includes those items of a non-recurring or non-operational nature. We exclude from segment results the effects of certain items that management does not consider in assessing segment performance, primarily because of their non-recurring or non-operational nature.

We have adjusted prior period consolidated and segment information, where applicable, to conform to current year presentation.

Our segments and their principal activities consist of the following:

 

Segment    Description

Wireless

  

Wireless’ communications products and services include wireless voice and data services and equipment sales, which are provided to consumer, business and government customers across the United States.

Wireline

  

Wireline’s voice, data and video communications products and enhanced services include broadband video and data, corporate networking solutions, data center and cloud services, security and managed network services and local and long distance voice services. We provide these products and services to consumers in the United States, as well as to carriers, businesses and government customers both in the United States and in over 150 other countries around the world.

 

The following table provides operating financial information for our two reportable segments:

 

     (dollars in millions)  
2013    Wireless      Wireline      Total Segments  

External Operating Revenues

        

Retail service

   $ 66,282      $      $ 66,282  

Other service

     2,691               2,691  
  

 

 

 

Service revenue

     68,973               68,973  

Equipment

     8,096               8,096  

Other

     3,851               3,851  

Consumer retail

            14,737        14,737  

Small business

            2,587        2,587  
  

 

 

 

Mass Markets

            17,324        17,324  

Strategic services

            8,410        8,410  

Core

            6,267        6,267  
  

 

 

 

Global Enterprise

            14,677        14,677  

Global Wholesale

            5,703        5,703  

Other

            456        456  

Intersegment revenues

     103        1,063        1,166  
  

 

 

 

Total operating revenues

     81,023        39,223        120,246  

Cost of services and sales

     23,648        21,928        45,576  

Selling, general and administrative expense

     23,176        8,595        31,771  

Depreciation and amortization expense

     8,202        8,327        16,529  
  

 

 

 

Total operating expenses

     55,026        38,850        93,876  
  

 

 

 

Operating income

   $ 25,997      $ 373      $ 26,370  
  

 

 

 

Assets

   $   146,429      $ 84,573      $ 231,002  

Plant, property and equipment, net

     35,932        51,885        87,817  

Capital expenditures

     9,425        6,229        15,654  

 

    

(dollars in millions)

 
2012    Wireless      Wireline      Total Segments  

External Operating Revenues

        

Retail service

   $ 61,383      $      $ 61,383  

Other service

     2,290               2,290  
  

 

 

 

Service revenue

     63,673               63,673  

Equipment

     8,010               8,010  

Other

     4,096               4,096  

Consumer retail

            14,043        14,043  

Small business

            2,648        2,648  
  

 

 

 

Mass Markets

            16,691        16,691  

Strategic services

            8,052        8,052  

Core

            7,240        7,240  
  

 

 

 

Global Enterprise

            15,292        15,292  

Global Wholesale

            6,177        6,177  

Other

            508        508  

Intersegment revenues

     89        1,112        1,201  
  

 

 

 

Total operating revenues

     75,868        39,780        115,648  

Cost of services and sales

     24,490        22,413        46,903  

Selling, general and administrative expense

     21,650        8,883        30,533  

Depreciation and amortization expense

     7,960        8,424        16,384  
  

 

 

 

Total operating expenses

     54,100        39,720        93,820  
  

 

 

 

Operating income

   $ 21,768      $ 60      $ 21,828  
  

 

 

 

Assets

   $   142,485      $ 84,815      $ 227,300  

Plant, property and equipment, net

     34,545        52,911        87,456  

Capital expenditures

     8,857        6,342        15,199  

 

     (dollars in millions)  
2011    Wireless      Wireline      Total Segments  

External Operating Revenues

        

Retail service

   $ 56,601      $      $ 56,601  

Other service

     2,497               2,497  
  

 

 

 

Service revenue

     59,098               59,098  

Equipment

     7,446               7,446  

Other

     3,517               3,517  

Consumer retail

            13,605        13,605  

Small business

            2,720        2,720  
  

 

 

 

Mass Markets

            16,325        16,325  

Strategic services

            7,607        7,607  

Core

            8,014        8,014  
  

 

 

 

Global Enterprise

            15,621        15,621  

Global Wholesale

            6,795        6,795  

Other

            704        704  

Intersegment revenues

     93        1,237        1,330  
  

 

 

 

Total operating revenues

     70,154        40,682        110,836  

Cost of services and sales

     24,086        22,158        46,244  

Selling, general and administrative expense

     19,579        9,107        28,686  

Depreciation and amortization expense

     7,962        8,458        16,420  
  

 

 

 

Total operating expenses

     51,627        39,723        91,350  
  

 

 

 

Operating income

   $ 18,527      $ 959      $ 19,486  
  

 

 

 

Assets

   $   147,378      $ 86,185      $ 233,563  

Plant, property and equipment, net

     33,451        54,149        87,600  

Capital expenditures

     8,973        6,399        15,372  

 

Reconciliation to Consolidated Financial Information

A reconciliation of the segment operating revenues to consolidated operating revenues is as follows:

 

     (dollars in millions)  
Years Ended December 31,    2013      2012      2011  

Operating Revenues

        

Total reportable segments

   $   120,246      $   115,648      $   110,836  

Reconciling items:

        

Corporate, eliminations and other

     304        198        39  
  

 

 

 

Consolidated operating revenues

   $ 120,550      $ 115,846      $ 110,875  
  

 

 

 

A reconciliation of the total of the reportable segments’ operating income to consolidated Income before (provision) benefit for income taxes is as follows:

 

     (dollars in millions)  
Years Ended December 31,    2013     2012     2011  

Operating Income

      

Total segment operating income

   $   26,370     $   21,828     $   19,486  

Severance, pension and benefit credits (charges) (Note 11)

     6,232       (7,186     (5,954

Gain on spectrum license transaction (Note 2)

     278              

Litigation settlements (Note 16)

           (384      

Other costs (Note 8)

           (276      

Corporate, eliminations and other

     (912     (822     (652
  

 

 

 

Consolidated operating income

     31,968       13,160       12,880  

Equity in earnings of unconsolidated businesses

     142       324       444  

Other income and (expense), net

     (166     (1,016     (14

Interest expense

     (2,667     (2,571     (2,827
  

 

 

 

Income Before (Provision) Benefit for Income Taxes

   $ 29,277     $ 9,897     $ 10,483  
  

 

 

 

A reconciliation of the total of the reportable segments’ assets to consolidated assets is as follows:

 

     (dollars in millions)  
At December 31,    2013      2012  

Assets

     

Total reportable segments

   $   231,002      $   227,300  

Corporate, eliminations and other

     43,096        (2,078
  

 

 

 

Total consolidated

   $ 274,098      $ 225,222  
  

 

 

 

Corporate, eliminations and other at December 31, 2013 is primarily comprised of cash and cash equivalents which were used to complete the Wireless Transaction on February 21, 2014.

We generally account for intersegment sales of products and services and asset transfers at current market prices. No single customer accounted for more than 10% of our total operating revenues during the years ended December 31, 2013, 2012 and 2011. International operating revenues and long-lived assets are not significant.


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