Company Quick10K Filing
Quick10K
Verizon Communications
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$56.48 4,136 $233,580
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-06-18 Regulation FD, Exhibits
8-K 2019-05-09 Officers
8-K 2019-05-02 Shareholder Vote
8-K 2019-04-23 Earnings, Exhibits
8-K 2019-04-08 Other Events, Exhibits
8-K 2019-02-21 Regulation FD, Exhibits
8-K 2019-02-20 Other Events, Exhibits
8-K 2019-02-08 Other Events, Exhibits
8-K 2019-02-06 Officers, Exhibits
8-K 2019-01-29 Earnings, Exhibits
8-K 2019-01-08 Regulation FD, Exhibits
8-K 2018-12-11 Other Events
8-K 2018-11-01 Amend Bylaw, Exhibits
8-K 2018-10-23 Earnings, Exhibits
8-K 2018-10-01 Officers
8-K 2018-09-06 Officers
8-K 2018-07-24 Earnings, Exhibits
8-K 2018-06-15 Other Events, Exhibits
8-K 2018-06-11 Other Events, Exhibits
8-K 2018-06-07 Officers
8-K 2018-05-03 Shareholder Vote
8-K 2018-04-24 Earnings, Exhibits
8-K 2018-03-05 Officers
8-K 2018-01-23 Earnings, Exhibits
8-K 2018-01-17 Regulation FD, Other Events
BKNG Booking Holdings 76,210
PH Parker Hannifin 22,220
EWBC East West Bancorp 7,300
DCI Donaldson 6,650
RLI RLI 3,700
CCXI Chemocentryx 709
CYTK Cytokinetics 499
DOVA Dova Pharmaceuticals 290
HICKA Hickok 0
ELJ Entergy Louisiana Holdings 0
VZ 2019-03-31
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Note 1. Basis of Presentation
Note 2. Revenues and Contract Costs
Note 3. Acquisitions and Divestitures
Note 4. Wireless Licenses, Goodwill, and Other Intangible Assets
Note 5. Leasing Arrangements
Note 6. Debt
Note 7. Wireless Device Payment Plans
Note 8. Fair Value Measurements
Note 9. Employee Benefits
Note 10. Equity and Accumulated Other Comprehensive Income
Note 11. Segment Information
Note 12. Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.A a2019q110-qxex10a.htm
EX-10.B a2019q110-qxex10b.htm
EX-10.C a2019q110-qxex10c.htm
EX-31.1 a2019q110-qxex311.htm
EX-31.2 a2019q110-qxex312.htm
EX-32.1 a2019q110-qxex321.htm
EX-32.2 a2019q110-qxex322.htm

Verizon Communications Earnings 2019-03-31

VZ 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 31, 2019
 

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the transition period from              to             
 
Commission file number: 1-8606
Verizon Communications Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
23-2259884
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
1095 Avenue of the Americas
New York, New York
 
10036
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (212) 395-1000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒  Yes   ☐  No
 
 
 
 
 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes   ☐  No
 
 
 
 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
 
 
 
 
 
 
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
☐ 
 
Smaller reporting company
 
 
 
 
Emerging growth company
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐
 
 
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ☐  Yes   ☒  No
 
 
 
 
 
 
At March 31, 2019, 4,135,706,646 shares of the registrant’s common stock were outstanding, after deducting 155,727,000 shares held in treasury.



Table of Contents

TABLE OF CONTENTS

Item No.
 
Page
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
Three months ended March 31, 2019 and 2018
 
 
 
 
 
 
Three months ended March 31, 2019 and 2018
 
 
 
 
 
 
At March 31, 2019 and December 31, 2018
 
 
 
 
 
 
Three months ended March 31, 2019 and 2018
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 
 



Table of Contents

Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
Verizon Communications Inc. and Subsidiaries

 
Three Months Ended
 
 
March 31,
 
(dollars in millions, except per share amounts) (unaudited)
2019

 
2018

 
 
 
 
Operating Revenues
 
 
 
Service revenues and other
$
27,197

 
$
26,732

Wireless equipment revenues
4,931

 
5,040

Total Operating Revenues
32,128

 
31,772

 
 
 
 
Operating Expenses
 
 
 
Cost of services (exclusive of items shown below)
7,792

 
7,946

Wireless cost of equipment
5,198

 
5,309

Selling, general and administrative expense
7,198

 
6,844

Depreciation and amortization expense
4,231

 
4,324

Total Operating Expenses
24,419

 
24,423

 
 
 
 
Operating Income
7,709

 
7,349

Equity in losses of unconsolidated businesses
(6
)
 
(19
)
Other income (expense), net
295

 
(75
)
Interest expense
(1,210
)
 
(1,201
)
Income Before Provision For Income Taxes
6,788

 
6,054

Provision for income taxes
(1,628
)
 
(1,388
)
Net Income
$
5,160

 
$
4,666

 
 
 
 
Net income attributable to noncontrolling interests
$
128

 
$
121

Net income attributable to Verizon
5,032

 
4,545

Net Income
$
5,160

 
$
4,666

 
 
 
 
Basic Earnings Per Common Share
 
 
 
Net income attributable to Verizon
$
1.22

 
$
1.11

Weighted-average shares outstanding (in millions)
4,138

 
4,104

 
 
 
 
Diluted Earnings Per Common Share
 
 
 
Net income attributable to Verizon
$
1.22

 
$
1.11

Weighted-average shares outstanding (in millions)
4,140

 
4,107

See Notes to Condensed Consolidated Financial Statements


3

Table of Contents

Condensed Consolidated Statements of Comprehensive Income
Verizon Communications Inc. and Subsidiaries
 
 
Three Months Ended
 
 
March 31,
 
(dollars in millions) (unaudited)
2019

 
2018

 
 
 
 
Net Income
$
5,160

 
$
4,666

Other Comprehensive Income (Loss), Net of Tax (Expense) Benefit
 
 
 
Foreign currency translation adjustments, net of tax of $(5) and $(6)
24

 
93

Unrealized gain (loss) on cash flow hedges, net of tax of $5 and $(180)
(13
)
 
501

Unrealized gain (loss) on marketable securities, net of tax of $(2) and $1
4

 
(5
)
Defined benefit pension and postretirement plans, net of tax of $56 and $60
(169
)
 
(173
)
Other comprehensive income (loss) attributable to Verizon
(154
)
 
416

Total Comprehensive Income
$
5,006

 
$
5,082

 
 
 
 
Comprehensive income attributable to noncontrolling interests
$
128

 
$
121

Comprehensive income attributable to Verizon
4,878

 
4,961

Total Comprehensive Income
$
5,006

 
$
5,082

See Notes to Condensed Consolidated Financial Statements

4

Table of Contents

Condensed Consolidated Balance Sheets
Verizon Communications Inc. and Subsidiaries

 
At March 31,

 
At December 31,

(dollars in millions, except per share amounts) (unaudited)
2019

 
2018

 
 
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
2,322

 
$
2,745

Accounts receivable, net of allowances of $744 and $765
24,469

 
25,102

Inventories
1,417

 
1,336

Prepaid expenses and other
5,189

 
5,453

Total current assets
33,397

 
34,636

 
 
 
 
Property, plant and equipment
254,457

 
252,835

Less accumulated depreciation
166,608

 
163,549

Property, plant and equipment, net
87,849

 
89,286

 
 
 
 
Investments in unconsolidated businesses
674

 
671

Wireless licenses
94,237

 
94,130

Goodwill
24,635

 
24,614

Other intangible assets, net
9,608

 
9,775

Operating lease right-of-use assets
23,105

 

Other assets
10,442

 
11,717

Total assets
$
283,947

 
$
264,829

 
 
 
 
Liabilities and Equity
 
 
 
Current liabilities
 
 
 
Debt maturing within one year
$
8,614

 
$
7,190

Accounts payable and accrued liabilities
18,664

 
22,501

Current operating lease liabilities
2,997

 

Other current liabilities
8,332

 
8,239

Total current liabilities
38,607

 
37,930

 
 
 
 
Long-term debt
105,045

 
105,873

Employee benefit obligations
17,888

 
18,599

Deferred income taxes
34,344

 
33,795

Non-current operating lease liabilities
18,971

 

Other liabilities
11,632

 
13,922

Total long-term liabilities
187,880

 
172,189

 
 
 
 
Commitments and Contingencies (Note 12)

 

 
 
 
 
Equity
 
 
 
Series preferred stock ($0.10 par value; 250,000,000 shares authorized; none issued)

 

Common stock ($0.10 par value; 6,250,000,000 shares authorized in each period; 4,291,433,646 issued in each period)
429

 
429

Additional paid in capital
13,418

 
13,437

Retained earnings
46,493

 
43,542

Accumulated other comprehensive income
2,216

 
2,370

Common stock in treasury, at cost (155,727,000 and 159,400,267 shares outstanding)
(6,825
)
 
(6,986
)
Deferred compensation – employee stock ownership plans and other
125

 
353

Noncontrolling interests
1,604

 
1,565

Total equity
57,460

 
54,710

Total liabilities and equity
$
283,947

 
$
264,829

See Notes to Condensed Consolidated Financial Statements

5

Table of Contents

Condensed Consolidated Statements of Cash Flows
Verizon Communications Inc. and Subsidiaries
 
 
Three Months Ended
 
 
March 31,
 
(dollars in millions) (unaudited)
2019

 
2018

 
 
 
 
Cash Flows from Operating Activities
 
 
 
Net Income
$
5,160

 
$
4,666

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
4,231

 
4,324

Employee retirement benefits
(195
)
 
(151
)
Deferred income taxes
459

 
702

Provision for uncollectible accounts
319

 
239

Equity in losses of unconsolidated businesses, net of dividends received
21

 
30

Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses
(2,702
)
 
(2,033
)
Discretionary employee benefits contributions
(300
)
 
(1,000
)
Other, net
88

 
(129
)
Net cash provided by operating activities
7,081

 
6,648

 
 
 
 
Cash Flows from Investing Activities
 
 
 
Capital expenditures (including capitalized software)
(4,268
)
 
(4,552
)
Acquisitions of businesses, net of cash acquired
(25
)
 
(32
)
Acquisitions of wireless licenses
(104
)
 
(970
)
Other, net
(406
)
 
269

Net cash used in investing activities
(4,803
)
 
(5,285
)
 
 
 
 
Cash Flows from Financing Activities
 
 
 
Proceeds from long-term borrowings
2,131

 
1,956

Proceeds from asset-backed long-term borrowings
1,117

 
1,178

Repayments of long-term borrowings and finance lease obligations
(2,963
)
 
(2,984
)
Repayments of asset-backed long-term borrowings
(813
)
 

Dividends paid
(2,489
)
 
(2,407
)
Other, net
360

 
941

Net cash used in financing activities
(2,657
)
 
(1,316
)
 
 
 
 
Increase (decrease) in cash, cash equivalents and restricted cash
(379
)
 
47

Cash, cash equivalents and restricted cash, beginning of period
3,916

 
2,888

Cash, cash equivalents and restricted cash, end of period (Note 1)
$
3,537

 
$
2,935

See Notes to Condensed Consolidated Financial Statements


6

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)
Verizon Communications Inc. and Subsidiaries
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States (U.S.) and based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements for the year ended December 31, 2018 of Verizon Communications Inc. (Verizon or the Company). These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. We have reclassified certain prior period amounts to conform to the current period presentation.

Earnings Per Common Share
There were a total of approximately 2 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three months ended March 31, 2019. There were a total of approximately 3 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three months ended March 31, 2018.

Cash, Cash Equivalents and Restricted Cash
Cash collections on the device payment plan agreement receivables collateralizing our asset-backed debt are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our condensed consolidated balance sheets.

Cash, cash equivalents and restricted cash are included in the following line items on the condensed consolidated balance sheets:
 
At March 31,

 
At December 31,

 
Increase / (Decrease)

(dollars in millions)
2019

 
2018

 
Cash and cash equivalents
$
2,322

 
$
2,745

 
$
(423
)
Restricted cash:
 
 
 
 
 
Prepaid expenses and other
1,091

 
1,047

 
44

Other assets
124

 
124

 

Cash, cash equivalents and restricted cash
$
3,537

 
$
3,916

 
$
(379
)


Goodwill
Goodwill is the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. Impairment testing for goodwill is performed annually in the fourth quarter or more frequently if impairment indicators are present. In November 2018, we announced a strategic reorganization of our business which resulted in certain changes to our operating segments and reporting units. We transitioned to the new segment reporting structure effective April 1, 2019, in connection with which we are reassigning goodwill to each of our new reporting units.

We performed an impairment assessment of the impacted reporting units, specifically our Wireless, Wireline and Connect reporting units at March 31, 2019, immediately before our strategic reorganization became effective. Our impairment assessments indicated that the fair value for each of our Wireless, Wireline and Connect reporting units exceeded their respective carrying value and therefore, did not result in a goodwill impairment. Our Media reporting unit was not impacted by the strategic reorganization and there were no indicators of impairment during the quarter ended March 31, 2019.


7

Table of Contents

Recently Adopted Accounting Standard
The following Accounting Standard Updates (ASUs) were issued by Financial Accounting Standards Board (FASB), and have been recently adopted by Verizon.
 
Description
Date of Adoption
Effect on Financial Statements
 
ASU 2016-02, ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01, Leases (Topic 842)
 
The FASB issued Topic 842 requiring entities to recognize assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition, Topic 842 will enable users of financial statements to further understand the amount, timing and uncertainty of cash flows arising from leases. Topic 842 allows for a modified retrospective application and is effective as of the first quarter of 2019. Entities are allowed to apply the modified retrospective approach: (1) retrospectively to each prior reporting period presented in the financial statements with the cumulative-effect adjustment recognized at the beginning of the earliest comparative period presented; or (2) retrospectively at the beginning of the period of adoption (January 1, 2019) through a cumulative-effect adjustment. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply.
1/1/2019
We adopted Topic 842 beginning on January 1, 2019, using the modified retrospective approach with a cumulative-effect adjustment to opening retained earnings recorded at the beginning of the period of adoption. Therefore, upon adoption, we have recognized and measured leases without revising comparative period information or disclosure. We recorded an increase of $410 million (net of tax) to retained earnings on January 1, 2019 which related to deferred sale leaseback gains recognized from prior transactions. Additionally, the adoption of the standard had a significant impact in our condensed consolidated balance sheet due to the recognition of $22.1 billion of operating lease liabilities, along with $23.2 billion of operating lease right-of-use-assets.
 

The cumulative after-tax effect of the changes made to our condensed consolidated balance sheet for the adoption of Topic 842 were as follows:
(dollars in millions)
At December 31, 2018

 
Adjustments due to
Topic 842

 
At January 1, 2019

Prepaid expenses and other
$
5,453

 
$
(329
)
 
$
5,124

Operating lease right-of-use assets

 
23,241

 
23,241

Other assets
11,717

 
(2,048
)
 
9,669

Accounts payable and accrued liabilities
22,501

 
(3
)
 
22,498

Other current liabilities
8,239

 
(2
)
 
8,237

Current operating lease liabilities

 
2,931

 
2,931

Deferred income taxes
33,795

 
139

 
33,934

Non-current operating lease liabilities

 
19,203

 
19,203

Other liabilities
13,922

 
(1,815
)
 
12,107

Retained earnings
43,542

 
410

 
43,952

Noncontrolling interests
1,565

 
1

 
1,566



In addition to the increase to the operating lease liabilities and right-of-use assets and the derecognition of deferred sale leaseback gains through opening retained earnings, Topic 842 also resulted in reclassifying the presentation of prepaid and deferred rent to operating lease right-of-use assets. The operating lease right-of-use assets amount also includes the balance of any prepaid lease payments, unamortized initial direct costs, and lease incentives.

We elected the package of practical expedients permitted under the transition guidance within the new standard. Accordingly, we have adopted these practical expedients and did not reassess: (1) whether an expired or existing contract is a lease or contains an embedded lease; (2) lease classification of an expired or existing lease; (3) capitalization of initial direct costs for an expired or existing lease. In addition, we have elected the land easement transition practical expedient, and did not reassess whether an existing or expired land easement is a lease or contains a lease if it has not historically been accounted for as a lease.

We lease network equipment including towers, distributed antenna systems, small cells, real estate, connectivity mediums which include dark fiber, equipment leases, and other various types of assets for use in our operations under both operating and finance leases. We assess whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, we determine the classification and initial measurement of the right-of-use asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use.

For both operating and finance leases, we recognize a right-of-use asset, which represents our right to use the underlying asset for the lease term, and a lease liability, which represents the present value of our obligation to make payments arising over the lease term. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Management uses the unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate, which will be updated on a quarterly basis for measurement of new lease liabilities.


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In those circumstances where the Company is the lessee, we have elected to account for non-lease components associated with our leases (e.g., common area maintenance costs) and lease components as a single lease component for substantially all of our asset classes. Additionally, in arrangements where we are the lessor, we have customer premise equipment for which we apply the lease and non-lease component practical expedient and account for non-lease components (e.g., service revenue) and lease components as combined components under the revenue recognition guidance in ASU 2014-09, "Revenue from Contracts with Customers" (Topic 606) as the service revenues are the predominant components in the arrangements.

Rent expense for operating leases is recognized on a straight-line basis over the term of the lease and is included in either Cost of services or Selling, general and administrative expense in our condensed consolidated statements of income, based on the use of the facility on which rent is being paid. Variable rent payments related to both operating and finance leases are expensed in the period incurred. Our variable lease payments consist of payments dependent on various external indicators, including real estate taxes, common area maintenance charges and utility usage.

Operating leases with a term of 12 months or less are not recorded on the balance sheet; we recognize a rent expense for these leases on a straight-line basis over the lease term.

We recognize the amortization of the right-of-use asset for our finance leases on a straight-line basis over the shorter of the term of the lease or the useful life of the right-of-use asset in Depreciation and amortization expense in our condensed consolidated statements of income. The interest expense related to finance leases is recognized using the effective interest method based on the discount rate determined at lease commencement and is included within Interest expense in our condensed consolidated statements of income.

See Note 5 for additional information related to leases, including disclosure required under Topic 842.

Recently Issued Accounting Standards
The following ASUs have been recently issued by the FASB.
 
Description
Date of Adoption
Effect on Financial Statements
 
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326)
 
In June 2016, the FASB issued this standard update which requires certain financial assets be measured at amortized cost net of an allowance for estimated credit losses such that the net receivable represents the present value of expected cash collection. In addition, this standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be based on all relevant information including historical information, current conditions and reasonable and supportable forecasts that affect the collectability of the amounts. An entity will apply the update through a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (January 1, 2020). A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. Early adoption of this standard is permitted.
1/1/2020
We are currently evaluating the impacts that this standard update will have on our various financial assets, which we expect to include, but is not limited to, our device payment plan agreement receivables, service receivables and contract assets. We have established a cross-functional coordinated team to address the potential impacts to our systems, processes and internal controls in order to meet the standard update's accounting and reporting requirements.

 
 


Note 2. Revenues and Contract Costs
We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services and through the sale of wireless equipment.

Revenue by Category
We operate and manage our business in two reportable segments, Wireless and Wireline. Revenue is disaggregated by products and services, and customer groups, respectively, which we view as the relevant categorization of revenues for these businesses. See Note 11 for additional information on revenue by segment.

Corporate and other includes the results of our Media business, Verizon Media, which operated in 2018 under the "Oath" brand, and our telematics business, branded Verizon Connect. Verizon Media generated revenues from contracts with customers under Topic 606 of approximately $1.8 billion and $1.9 billion, during the three months ended March 31, 2019 and 2018, respectively. Verizon Connect generated revenues from contracts with customers under Topic 606 of approximately $242 million and $234 million, during the three months ended March 31, 2019 and 2018, respectively.

We also earn revenues, that are not accounted for under Topic 606, from leasing arrangements (such as towers), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed on a device payment plan agreement when sold to the

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customer by an authorized agent. As allowed by the practical expedient within Topic 842, we have elected to combine the lease and non-lease components for those arrangements of customer premise equipment where we are the lessor as components accounted for under Topic 606. During the three months ended March 31, 2019 and 2018, revenues from arrangements that were not accounted for under Topic 606 were approximately $787 million and $1.2 billion, respectively.

Remaining Performance Obligations
When allocating the total contract transaction price to identified performance obligations, a portion of the total transaction price may relate to service performance obligations that were not satisfied or were partially satisfied as of the end of the reporting period. Below we disclose information relating to these unsatisfied performance obligations. In the prior year, we have elected to apply the practical expedient available under Topic 606, which provides the option to exclude the expected revenues arising from unsatisfied performance obligations related to contracts that have an original expected duration of one year or less. This situation primarily arises with respect to certain month-to-month service contracts. At March 31, 2019, month-to-month service contracts represented approximately 86% of Wireless postpaid contracts and approximately 55% of Wireline consumer and small business contracts, compared to March 31, 2018, for which month-to-month service contracts represented approximately 82% of Wireless postpaid contracts and 57% of Wireline consumer and small business contracts.

Additionally, certain Wireless and Wireline contracts provide customers the option to purchase additional services. The fee related to the additional services is recognized when the customer exercises the option (typically on a month-to-month basis).

Wireless customer contracts are generally either month-to-month and cancellable at any time (typically under a device payment plan) or contain terms greater than one month (typically under a fixed-term plan). Additionally, customers may incur charges based on usage or may purchase additional optional services in conjunction with entering into a contract which can be cancelled at any time and therefore are not included in the transaction price. When a service contract is longer than one month, the service contract term will generally be two years or less. The transaction price allocated to service performance obligations, which are not satisfied or are partially satisfied as of the end of the reporting period, are generally related to our fixed-term plans.

Our wireless customers also include other companies who utilize Verizon's network to resell wireless service to their respective end customers. Reseller arrangements generally include a stated contract term, which typically extend longer than two years. These arrangements generally include an annual minimum revenue commitment over the term of the contract for which revenues will be recognized in future periods.

At March 31, 2019, the transaction price related to Wireless unsatisfied performance obligations expected to be recognized for the remainder of 2019, 2020 and thereafter was $8.3 billion, $6.7 billion and $2.3 billion, respectively.

Wireline customer contracts are either month-to-month, include a specified term with fixed monthly fees, or contain revenue commitments, and may also contain usage based services. Consumer Markets customers under contract generally have a service term of two years; however, this term may be month-to-month. Certain Enterprise Solutions, Partner Solutions and Business Markets service contracts with customers extend into future periods, contain fixed monthly fees and usage-based fees, and can include annual commitments per each year of the contract or commitments over the entire specified contract term. A significant number of contracts within these businesses have a contract term that is twelve months or less.

At March 31, 2019, the transaction price relating to Wireline unsatisfied performance obligations expected to be recognized for the remainder of 2019, 2020 and thereafter was $5.9 billion, $4.0 billion and $1.1 billion, respectively.

In certain Enterprise Solutions, Partner Solutions and Business Markets service contracts within Wireline and certain telematics service contracts within Corporate and other, there are customer contracts that have a contractual minimum fee over the total contract term. We cannot predict the time period when revenue will be recognized related to those contracts; thus they are excluded from the time bands discussed above. These contracts have varying terms spanning over four years ending in January 2024 and have aggregate contract minimum payments totaling $3.8 billion.

Accounts Receivable and Contract Balances
The timing of revenue recognition may differ from the time of billing to our customers. Receivables presented in our consolidated balance sheet represent an unconditional right to consideration. Contract balances represent amounts from an arrangement when either Verizon has performed, by transferring goods or services to the customer in advance of receiving all or partial consideration for such goods and services from the customer, or the customer has made payment to Verizon in advance of obtaining control of the goods and/or services promised to the customer in the contract.

Contract assets primarily relate to our rights to consideration for goods or services provided to the customers but for which we do not have an unconditional right at the reporting date. Under a fixed-term plan, the total contract revenue is allocated between wireless services and equipment revenues. In conjunction with these arrangements, a contract asset is created, which represents the difference between the amount of equipment revenue recognized upon sale and the amount of consideration received from the customer. The contract asset is reclassified as accounts receivable as wireless services are provided and billed. We have the right to bill the customer as service is provided over time, which results in our right to the payment being unconditional. The contract asset balances are presented in our consolidated balance sheet as Prepaid expenses and other and Other assets. We assess our contract assets for impairment on a quarterly basis and will recognize an impairment charge to the extent their carrying amount is not recoverable.


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Contract liabilities arise when we bill our customers and receive consideration in advance of providing the goods or services promised in the contract. We typically bill service one month in advance, which is the primary component of the contract liability balance. Contract liabilities are recognized as revenue when services are provided to the customer. The contract liability balances are presented in our condensed consolidated balance sheet as Other current liabilities and Other liabilities.

The following table presents information about receivables from contracts with customers:
 
At January 1,

 
At March 31,

 
At January 1,

 
At March 31,

(dollars in millions)
2019

 
2019

 
2018

 
2018

Receivables(1)
$
12,104

 
$
11,601

 
$
12,073

 
$
11,028

Device payment plan agreement receivables(2)
8,940

 
9,687

 
1,461

 
3,630

(1) 
Balances do not include receivables related to the following contracts: leasing arrangements (such as towers), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed on a device payment plan agreement when sold to the customer by an authorized agent.
(2) 
Included in device payment plan agreement receivables presented in Note 7. Balances do not include receivables related to contracts completed prior to January 1, 2018 and receivables derived from the sale of equipment on a device payment plan through an authorized agent.

The following table presents information about contract balances:


At January 1,

 
At March 31,

 
At January 1,

 
At March 31,

(dollars in millions)
2019

 
2019

 
2018

 
2018

Contract asset
$
1,003

 
$
1,021

 
$
1,170

 
$
1,106

Contract liability (1)
4,943

 
4,973

 
4,452

 
4,571


(1) Revenue recognized related to contract liabilities existing at January 1, 2019 and January 1, 2018 were $3.7 billion and $3.5 billion for the three months ended March 31, 2019 and March 31, 2018, respectively.

The balance of contract assets and contract liabilities recorded in our condensed consolidated balance sheet were as follows:


At March 31,

 
At December 31,

(dollars in millions)
2019

 
2018

Assets
 
 
 
Prepaid expenses and other
$
770

 
$
757

Other assets
251

 
246

Total
$
1,021

 
$
1,003

 
 
 
 
Liabilities
 
 
 
Other current liabilities
$
4,255

 
$
4,207

Other liabilities
718

 
736

Total
$
4,973

 
$
4,943



Contract Costs
Topic 606 requires the recognition of an asset for incremental costs to obtain a customer contract, which are then amortized to expense, over the respective periods of expected benefit. We recognize an asset for incremental commission expenses paid to internal sales personnel and agents in conjunction with obtaining customer contracts. We only defer these costs when we have determined the commissions are, in fact, incremental and would not have been incurred absent the customer contract. Costs to obtain a contract are amortized and recorded ratably as commission expense over the period representing the transfer of goods or services to which the assets relate. These costs are recorded in Selling, general and administrative expense. Wireless costs to obtain contracts are amortized over our customers' estimated device upgrade cycles, as such costs are typically incurred each time a customer upgrades. Wireline costs to obtain contracts are amortized as expense over the estimated customer relationship period for our Consumer Markets customers. Incremental costs to obtain contracts for our Enterprise Solutions, Partner Solutions and Business Markets are insignificant.

We also defer costs incurred to fulfill contracts that: (1) relate directly to the contract; (2) are expected to generate resources that will be used to satisfy our performance obligation under the contract; and (3) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are expensed to Cost of services as we satisfy our performance obligations. These costs principally relate to direct costs that enhance our Wireline business resources, such as costs incurred to install circuits.

We determine the amortization periods for our costs incurred to obtain or fulfill a customer contract at a portfolio level due to the similarities within these customer contract portfolios.

Other costs, such as general costs or costs related to past performance obligations, are expensed as incurred.


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Collectively, costs to obtain a contract and costs to fulfill a contract are referred to as Deferred contract costs, which were as follows:
 
 
At March 31,

 
At December 31,

(dollars in millions)
Amortization Period
2019

 
2018

Wireless
2 to 3 years
$
3,084

 
$
2,989

Wireline
2 to 5 years
868

 
850

Corporate
2 to 3 years
69

 
56

Total
 
$
4,021

 
$
3,895


Deferred contract costs are classified as current or non-current within Prepaid expenses and other and Other assets, respectively. The balances of Deferred contract costs included in our condensed consolidated balance sheet were as follows:


At March 31,

 
At December 31,

(dollars in millions)
2019

 
2018

Assets
 
 
 
Prepaid expenses and other
$
2,230

 
$
2,083

Other assets
1,791

 
1,812

Total
$
4,021

 
$
3,895



For the three months ended March 31, 2019 and 2018, we recognized expense of $615 million and $405 million, respectively, associated with the amortization of Deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income.

We assess our Deferred contract costs for impairment on a quarterly basis. We recognize an impairment charge to the extent the carrying amount of a deferred cost exceeds the remaining amount of consideration we expect to receive in exchange for the goods and services related to the cost, less the expected costs related directly to providing those goods and services that have not yet been recognized as expenses. There have been no impairment charges recognized for the three months ended March 31, 2019 or March 31, 2018.

Note 3. Acquisitions and Divestitures
Spectrum License Transactions
During the three months ended March 31, 2019, we entered into and completed various wireless license transactions for an insignificant amount of cash consideration.

Other
During the three months ended March 31, 2019, we completed various other acquisitions for an insignificant amount of cash consideration.

Note 4. Wireless Licenses, Goodwill, and Other Intangible Assets
Wireless Licenses
The carrying amount of Wireless licenses are as follows:
 
At March 31,

At December 31,

(dollars in millions)
2019

2018

Wireless licenses
$
94,237

$
94,130



At March 31, 2019 and 2018, approximately $7.2 billion and $13.6 billion, respectively, of wireless licenses were under development for commercial service for which we were capitalizing interest costs. We recorded approximately $88 million and $124 million of capitalized interest on wireless licenses for the three months ended March 31, 2019 and 2018, respectively.

The average remaining renewal period for our wireless licenses portfolio was 4.4 years as of March 31, 2019.


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Goodwill
Changes in the carrying amount of Goodwill are as follows:
(dollars in millions)
Wireless

 
Wireline

 
Other

 
Total

Balance at January 1, 2019 (1)
$
18,397

 
$
3,871

 
$
2,346

 
$
24,614

Acquisitions (Note 3)

 
20

 

 
20

Reclassifications, adjustments and other

 
1

 

 
1

Balance at March 31, 2019 (1)
$
18,397

 
$
3,892

 
$
2,346

 
$
24,635


(1) Goodwill is net of accumulated impairment charge of $4.6 billion, related to our Media reporting unit (included within Other in the table above), which was recorded in the fourth quarter of 2018.

Other Intangible Assets
The following table displays the composition of Other intangible assets, net:
 
At March 31, 2019
 
 
At December 31, 2018
 
(dollars in millions)
Gross
Amount

 
Accumulated
Amortization

 
Net
Amount

 
Gross
Amount

 
Accumulated
Amortization

 
Net
Amount

Customer lists (8 to 13 years)
$
3,953

 
$
(1,213
)
 
$
2,740

 
$
3,951

 
$
(1,121
)
 
$
2,830

Non-network internal-use software (3 to 7 years)
18,958

 
(13,192
)
 
5,766

 
18,603

 
(12,785
)
 
5,818

Other (2 to 25 years)
1,999

 
(897
)
 
1,102

 
1,988

 
(861
)
 
1,127

Total
$
24,910

 
$
(15,302
)
 
$
9,608

 
$
24,542

 
$
(14,767
)
 
$
9,775



The amortization expense for Other intangible assets was as follows: 
 
Three Months Ended

(dollars in millions)
March 31,

2019
$
555

2018
534



The estimated future amortization expense for Other intangible assets for the remainder of the current year and next 5 years is as follows:
Years
(dollars in millions)

Remainder of 2019
$
1,603

2020
1,837

2021
1,544

2022
1,276

2023
1,004

2024
749



Note 5. Leasing Arrangements
We enter into various lease arrangements for network equipment including towers, distributed antenna systems, small cells, real estate, connectivity mediums including dark fiber, equipment leases, and other various types of assets for use in our operations. Our leases have remaining lease terms ranging from 1 year to 24 years, some of which include options to extend the leases term for up to 25 years, and some of which include options to terminate the leases. For the majority of leases entered into during the current period, we have concluded it is not reasonably certain that we would exercise the options to extend the lease or terminate the lease. Therefore, as of the lease commencement date, our lease terms generally do not include these options. We include options to extend the lease when it is reasonably certain that we will exercise that option.

During March 2015, we completed a transaction with American Tower Corporation (American Tower) pursuant to which American Tower acquired the exclusive rights to lease and operate approximately 11,300 of our wireless towers for an upfront payment of $5.0 billion. We have subleased capacity on the towers from American Tower for a minimum of 10 years at current market rates in 2015, with options to renew. We continue to include the towers in Property, plant and equipment, net in our condensed consolidated balance sheets and depreciate them accordingly. In addition to the rights to lease and operate the towers, American Tower assumed the interest in the underlying ground leases related to these towers. While American Tower can renegotiate the terms of and is responsible for paying the ground leases, we are still the primary obligor for these leases and accordingly, the present value of these ground leases are included in our operating lease right-of-use assets and operating lease liabilities. We do not expect to be required to make ground lease payments unless American Tower defaults, which we determined to be remote.
 

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The components of net lease cost were as follows:
 
 
Three Months Ended

 
 
March 31,

(dollars in millions)
Classification
2019

Operating lease cost (1)
Cost of services
Selling, general and administrative expense
$
1,170

Finance lease cost:
 
 
Amortization of right-of-use assets
Depreciation and amortization expense
86

Interest on lease liabilities
Interest expense
9

Short-term lease cost (1)
Cost of services
Selling, general and administrative expense
16

Variable lease cost (1)
Cost of services
Selling, general and administrative expense
57

Sublease income
Service revenues and other
(67
)
Total net lease cost
 
$
1,271

(1) All operating lease costs, including short-term and variable lease costs, are split between Cost of services and Selling, general and administrative expense in the condensed consolidated statements of income based on the use of the facility that the rent is being paid on. See Note 1 for additional information. Variable lease costs represent payments that are dependent on a rate or index, or on usage of the asset.
 
Supplemental disclosure for the statement of cash flows related to operating and finance leases were as follows:
 
Three Months Ended

 
March 31,

(dollars in millions)
2019

Cash Flows from Operating Activities
 
Cash paid for amounts included in the measurement of lease liabilities
 
Operating cash flows for operating leases
$
(1,058
)
Operating cash flows for finance leases
(9
)
Cash Flows from Financing Activities
 
Financing cash flows for finance leases
(86
)
Supplemental lease cash flow disclosures
 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities
668

Right-of-use assets obtained in exchange for new finance lease liabilities
115



Supplemental disclosure for the balance sheet related to finance leases were as follows:
 
At March 31,

(dollars in millions)
2019

Assets
 
Property, plant and equipment, net
$
742

 
 
Liabilities
 
Debt maturing within one year
$
323

Long-term debt
611

Total Finance lease liabilities
$
934



The weighted-average remaining lease term and the weighted-average discount rate of our leases were as follows:
 
At March 31,

 
2019

Weighted-average remaining lease term (years)
 
Operating Leases
9

Finance Leases
4

Weighted-average discount rate
 
Operating Leases
4.2
%
Finance Leases
3.6
%



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The Company's maturity analysis of operating and finance lease liabilities as of March 31, 2019 were as follows:
(dollars in millions)
Operating Leases

 
Finance Leases

Remainder of 2019
$
3,051

 
$
279

2020
3,805

 
270

2021
3,462

 
173

2022
3,045

 
122

2023
2,689

 
75

Thereafter
10,792

 
105

Total lease payments
26,844

 
1,024

Less interest
(4,876
)
 
(90
)
Present value of lease liabilities
21,968

 
934

Less current obligation
(2,997
)
 
(323
)
Long-term obligation at March 31, 2019
$
18,971

 
$
611



As of March 31, 2019, we have contractually obligated lease payments amounting to $477 million for an office facility operating lease that has not yet commenced. We have legally obligated lease payments for various other operating leases that have not yet commenced for which the total obligation was not significant. We have certain rights and obligations for these leases, but have not recognized an operating lease right-of-use asset or an operating lease liability since they have not yet commenced.

Note 6. Debt

Significant Debt Transactions
Exchange Offers
The following table shows the transactions that occurred in the first quarter of 2019.
(dollars in millions)
Principal Amount Exchanged

Principal Amount Issued

Verizon 1.750% - 5.150% notes and floating rate notes, due 2021 - 2025
$
3,892

$

GTE LLC 8.750% debentures, due 2021
21


Verizon 4.016% notes due 2029 (1)

4,000

Total
$
3,913

$
4,000

(1) Total exchange amount issued in consideration does not include an insignificant amount of cash used to settle.

Debt Redemptions, Repurchases and Repayments
The following table shows the transactions that occurred in the first quarter of 2019.
(dollars in millions)
Principal Redeemed / Repaid

Amount Paid as % of Principal (1)

Verizon 5.900% notes due 2054
$
500

100.000
%
Verizon 1.375% notes due 2019
206

100.000
%
Verizon 1.750% notes due 2021
621

100.000
%
Verizon 3.000% notes due 2021
930

101.061
%
Verizon 3.500% notes due 2021
315

102.180
%
Open market repurchases of various Verizon notes
163

Various

Total
$
2,735

 
(1) Percentages represent price paid to redeem, repurchase and repay.

In April 2019, we notified investors of our intention to redeem in May 2019 in whole $831 million aggregate principal amount of 2.625% Notes due 2020 and $736 million aggregate principal amount of 3.500% Notes due 2021.


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Debt Issuances
The following table shows the transactions that occurred in the first quarter of 2019.
(dollars in millions)
Principal Amount Issued

Net Proceeds (1)

Verizon 3.875% notes due 2029 (2)
$
1,000

$
994

Verizon 5.000% notes due 2051
510

506

Total
$
1,510

$
1,500

(1) Net proceeds were net of discount and issuance costs.
(2) An amount equal to the net proceeds from this green bond will be used to fund, in whole or in part, "Eligible Green Investments." "Eligible Green Investments" include new and existing investments made by us during the period from two years prior to the issuance of the green bond through the maturity date of the green bond, in the following categories: (1) renewable energy; (2) energy efficiency; (3) green buildings; (4) sustainable water management; and (5) biodiversity and conservation. "Eligible Green Investments" include operating expenditures as well as capital investments.

In April 2019, we issued 2.5 billion of notes with interest rates of 0.875% and 1.250% per year due on 2027 and 2030 respectively, and £500 million of notes with an interest rate of 2.500% per year due on 2031.

Short Term Borrowing and Commercial Paper Program
In July 2018, we entered into a short term uncommitted credit facility with the ability to borrow up to $700 million. During the three months ended March 31, 2019, we drew $600 million from the facility.

As of March 31, 2019, we had no commercial paper outstanding.

Asset-Backed Debt
As of March 31, 2019, the carrying value of our asset-backed debt was $10.4 billion. Our asset-backed debt includes Asset-Backed Notes (ABS Notes) issued to third-party investors (Investors) and loans (ABS Financing Facilities) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed debt bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, Cellco Partnership (Cellco) and certain other affiliates of Verizon (collectively, the Originators) transfer device payment plan agreement receivables to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.

Our asset-backed debt is secured by the transferred device payment plan agreement receivables and future collections on such receivables. The device payment plan agreement receivables transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of device payment plan agreement receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt, but do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, Verizon has agreed to guarantee certain of the payment obligations of Cellco and the Originators to the ABS Entities.

Cash collections on the device payment plan agreement receivables collateralizing our asset-backed debt are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included in our condensed consolidated balance sheets.


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ABS Notes
During the three months ended March 31, 2019, we completed the following ABS Notes transactions:
(dollars in millions)
Interest Rates %

 
Expected Weighted-average Life to Maturity
Principal Amount Issued

A-1a Senior class notes
2.930

 
2.50
$
900

A-1b Senior floating rate class notes
 LIBOR + 0.330

(1) 
2.50
100

B Junior class notes
3.020

 
3.22
69

C Junior class notes
3.220

 
3.40
53

Total ABS notes
 
 
 
$
1,122

(1) The one-month London Interbank Offered Rate (LIBOR) rate at March 31, 2019 was 2.495%.

Under the terms of each series of ABS Notes, there is a two year revolving period during which we may transfer additional receivables to the ABS Entity. The two year revolving period of the ABS Notes we issued in July 2016 and November 2016 ended in July 2018 and November 2018 respectively, and we began to repay principal on the 2016-1 Class A senior ABS Notes and the 2016-2 Class A senior ABS Notes in August 2018 and December 2018, respectively. During the three months ended March 31, 2019, we made aggregate repayments of $559 million.

ABS Financing Facilities
In May 2018, we entered into a device payment plan agreement financing facility with a number of financial institutions (2018 ABS Financing Facility). Under the terms of the 2018 ABS Financing Facility, the financial institutions made advances under asset-backed loans backed by device payment plan agreement receivables of business customers for proceeds of $540 million. The loan agreement entered into in connection with the 2018 ABS Financing Facility has a final maturity date in December 2021 and bears interest at a floating rate. There is a one year revolving period beginning from May 2018 during which we may transfer additional receivables to the ABS Entity. Subject to certain conditions, we may also remove receivables from the ABS Entity. Under the loan agreement, we have the right to prepay all or a portion of the advances at any time without penalty, but in certain cases, with breakage costs. If we choose to prepay, the amount prepaid shall be available for further drawdowns until May 2019, except in certain circumstances. As of March 31, 2019, the 2018 ABS Financing Facility is fully drawn and the outstanding borrowing under the 2018 ABS Financing Facility was $540 million.

We entered into an ABS Financing Facility in September 2016 with a number of financing institutions (2016 ABS Financing Facility). Under the terms of the 2016 ABS Financing Facility, the financial institutions made advances under asset-backed loans backed by device payment plan agreement receivables of consumer customers. Two loan agreements were entered into in connection with the 2016 ABS Financing Facility in September 2016 and May 2017. The loan agreements have a final maturity date in March 2021 and bear interest at floating rates. The two year revolving period of the two loan agreements ended in September 2018. Under the loan agreements, we have the right to prepay all or a portion of the advances at any time without penalty, but in certain cases, with breakage costs. Subject to certain conditions, we may also remove receivables from the ABS Entity. During the three months ended March 31, 2019, we made an aggregate of $253 million in repayments. The aggregate outstanding borrowings under the two loans were $671 million as of March 31, 2019.

Variable Interest Entities (VIEs)
The ABS Entities meet the definition of a VIE for which we have determined that we are the primary beneficiary as we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore, the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.

The assets and liabilities related to our asset-backed debt arrangements included in our condensed consolidated balance sheets were as follows:
 
At March 31,

 
At December 31,

(dollars in millions)
2019

 
2018

Assets
 
 
 
Account receivable, net
$
9,535

 
$
8,861

Prepaid expenses and other
1,045

 
989

Other assets
3,263

 
2,725

 
 
 
 
Liabilities
 
 
 
Accounts payable and accrued liabilities
10

 
7

Short-term portion of long-term debt
5,494

 
5,352

Long-term debt
4,892

 
4,724



See Note 7 for additional information on device payment plan agreement receivables used to secure asset-backed debt.


17

Table of Contents

Credit Facilities
As of March 31, 2019, the unused borrowing capacity under our $9.5 billion credit facility was approximately $9.4 billion. 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 material adverse change. We use the credit facility for the issuance of letters of credit and for general corporate purposes.

In March 2016, we entered into a $1.0 billion credit facility insured by Eksportkreditnamnden Stockholm, Sweden, the Swedish export credit agency. As of March 31, 2019, the outstanding balance was $706 million. We used this credit facility to finance network equipment-related purchases.

In July 2017, we entered into credit facilities insured by various export credit agencies providing us with the ability to borrow up to $4.0 billion to finance equipment-related purchases. The facilities have borrowings available, portions of which extend through October 2019, contingent upon the amount of eligible equipment-related purchases that we make. During the three months ended March 31, 2019, we drew $424 million from these facilities. As of March 31, 2019, we had an outstanding balance of $3.1 billion.

Non-Cash Transaction
During the three months ended March 31, 2019 and 2018, we financed, primarily through vendor financing arrangements, the purchase of approximately $115 million and $345 million respectively, of long-lived assets consisting primarily of network equipment. At both March 31, 2019 and 2018, $1.0 billion and $1.3 billion, respectively, relating to these financing arrangements, including those entered into in prior years and liabilities assumed through acquisitions, remained outstanding. These purchases are non-cash financing activities and therefore are not reflected within Capital expenditures in our condensed consolidated statements of cash flows.