RNS Number:4185R
Verizon Communications
28 October 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: October 28, 2003
(Date of earliest event reported)
VERIZON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8606 23-2259884
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
1095 Avenue of the Americas,
New York, New York 10036
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (212) 395-2121
Not applicable
(Former name or former address, if changed since last report)
================================================================================
Item 12. Results of Operations and Financial Condition.
Attached as an exhibit hereto is a press release and financial tables dated
October 28, 2003 issued by Verizon Communications Inc. The information contained
in this report, including the exhibit attached hereto, is also intended to be
furnished under Item 9 "Regulation FD Disclosure" and shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934.
Non-GAAP Measures
Verizon's press release and financial tables include non-GAAP financial
information. The consolidated statements of income before special items
eliminate special items and non-recurring items of revenues, expenses, gains and
losses primarily as a result of their non-operational and/or non-recurring
nature. Management believes this presentation of operating performance assists
readers in better understanding our results of operations and trends from period
to period, consistent with management's evaluation of Verizon's consolidated and
segment results of operations for a variety of internal measures including
strategic business planning, capital allocation and compensation. Management
believes that the consolidated statements of income before special items provide
current and prior period results of operations on a comparable basis as well as
provide trends that are more indicative of future operating results than GAAP
results of operations, given the non-operational and/or non-recurring nature of
the special items removed for purposes of reporting results of operations before
special items. While some of these items have been periodically reported in
Verizon's consolidated results of operations, including significant severance
and impairment charges, their occurrence in future periods is dependent upon
future business and economic factors, among other evaluation criteria, and may
frequently be beyond the control of management. As a result of these factors,
management also provides this information externally, along with a complete
reconciliation to their comparable GAAP amounts so readers have access to the
detail and general nature of adjustments made to GAAP results. Complete
descriptions of the special items are provided in the schedules accompanying the
news release.
Management believes that free cash flow, net debt and Domestic Telecom cash
expense excluding pension/OPEB, additional non-GAAP financial measures, are also
useful to investors and other users of our financial information in evaluating
liquidity and operating financial performance. Free cash flow and net debt are
financial measures that are commonly used by readers of financial information in
assessing financial performance, including liquidity and the company's ability
to meet obligations with available cash flows and cash balances. Management uses
free cash flow information for allocating resources to debt repayment and for
other cash investing and financing activities. The definition of free cash
flows, cash from operating activities less capital expenditures and dividends
paid to Verizon's shareowners, is readily determinable from amounts provided in
Verizon's consolidated statements of cash flows. Domestic Telecom cash expense
excluding pension/OPEB is a non-GAAP operating performance measure used
internally to evaluate current and prior operating expense efficiency, as well
as assist management in evaluating the financial results of our largest
operating segment with and without a significant expense driver compared to
prior periods. Management believes this presentation assists readers in better
understanding our results of operations and trends from period to period,
consistent with management's evaluation of the Domestic Telecom segment's
results of operations for a variety of internal measures, including setting
current and future year operating targets.
Verizon Information Services revenues - conforming basis provides the prior year
impact of a change in accounting, described fully in the exhibit, if the
accounting change had occurred in the prior year. This presentation is useful to
investors and other users of our financial information in evaluating operating
financial performance consistent with the pro forma disclosures required in the
year of an accounting change, as required by GAAP.
It is management's intent to provide Non-GAAP financial information to enhance
understanding of Verizon's GAAP consolidated financial statements and should be
considered by the reader in addition to, but not instead of, the financial
statements prepared in accordance with GAAP.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Verizon Communications Inc.
----------------------------------------
(Registrant)
Date: October 28, 2003 /s/ David H. Benson
---------------- ----------------------------------------
David H. Benson
Senior Vice President and Controller
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
99 Press release and financial tables, dated October 28, 2003, issued by
Verizon Communications Inc.
EXHIBIT 99
NEWS RELEASE
FOR IMMEDIATE RELEASE MEDIA CONTACTS:
OCT. 28, 2003 PETER THONIS
212-395-2355
peter.thonis@verizon.com
BOB VARETTONI
212-395-7726
robert.a.varettoni@verizon.com
VERIZON COMMUNICATIONS REPORTS THIRD-QUARTER EARNINGS
HIGHLIGHTED BY STRONG CUSTOMER GROWTH, SOLID CASH FLOW
FUNDAMENTALS REMAIN STRONG AS REVENUES CONTINUE SHIFT FROM TRADITIONAL
SERVICES TO WIRELESS, LONG-DISTANCE, BROADBAND AND BUNDLED OFFERINGS
THIRD-QUARTER HIGHLIGHTS
o Verizon Wireless: 1.3 million retail net customer additions, up 12.5
percent from last year's quarter (1.4 million total net customer
additions); strong revenue growth of 18.2 percent over last year's quarter;
strong margins; total customers at 36.0 million
o Long-Distance: 1.3 million net additional long-distance lines; 15.9 million
total lines; growth of 27 percent since year-end 2002
o DSL (digital subscriber lines): 185,000 net additional lines; 2.1 million
total lines; growth of 27 percent since year-end 2002
o Diluted Earnings Per Share (EPS): 64 cents in fully diluted EPS, compared
with $1.60 per share in third quarter 2002 (last year's quarter included
net special gains)
o EPS Before Special Items (non-GAAP measure): 67 cents, compared with 77
cents in EPS before special items in third quarter 2002
o Debt Reduction: Net debt (non-GAAP, gross debt less cash and cash
equivalents) reduced by $7.1 billion since year-end 2002 to $44.7 billion
o Free Cash Flow (non-GAAP, cash from operating activities less capital
expenditures and dividends): $5.0 billion in first nine months of 2003
Note: See the schedules accompanying this news release and
www.verizon.com/investor for reconciliations to generally accepted accounting
principles (GAAP) for the non-GAAP financial measures mentioned in this
announcement.
Verizon News Release, page 2
NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced third
quarter 2003 fully diluted EPS of 64 cents, or 67 cents before one special item,
supported by strong revenues and customer additions from wireless,
long-distance, DSL and other growth initiatives.
Reported earnings were $1.8 billion in the third quarter, compared with
$4.4 billion in last year's third quarter when Verizon recorded net special
gains and tax benefits from sales of businesses.
Third quarter 2003 earnings were $1.9 billion before special items,
compared with $2.1 billion in third quarter 2002. The third quarter 2003
reflects a special item of $0.1 billion relating to pension settlements during
the quarter for employees who received lump-sum distributions under voluntary
separation plans.
FIFTH CONSECUTIVE QUARTER OF REVENUE GROWTH
Verizon posted its fifth consecutive quarter of year-over-year revenue
growth, as the company's overall revenue mix continued to shift to growth areas
such as wireless.
Total third-quarter reported operating revenues of $17.2 billion were
up slightly from the third quarter 2002. Last year's total included revenues
from Domestic Telecom access lines that the company has since sold. Excluding
revenues from these access lines, Verizon's third quarter 2003 revenues of $17.2
billion represented a 1 percent increase from $17.0 billion in third quarter
2002.
Also for the fifth consecutive quarter, Verizon Wireless posted
double-digit, year-over-year revenue increases. Verizon Wireless' service
revenues grew 14.9 percent, to $5.3 billion, from $4.6 billion in the third
quarter of 2002. Verizon Wireless' total revenues grew 18.2 percent in the third
quarter 2003, to $5.9 billion, from $5.0 billion in the third quarter 2002. The
additional increase in total revenue was driven by growth in equipment and other
revenues.
Third-quarter Domestic Telecom revenues were $9.9 billion -- a decline
of 4.1 percent compared with third quarter 2002 and essentially flat compared
with second quarter 2003. Revenues from long-distance increased 17.2 percent to
$1.0 billion in third quarter 2003, compared with third quarter 2002.
CUSTOMER ADDITIONS AND MARKETING SUCCESS
Verizon News Release, page 3
The overall revenue gain was supported by significant customer
additions in growth markets, as well as successful new marketing initiatives,
which also offset competitive pressures on revenues in other areas of Domestic
Telecom.
Verizon Wireless added 1.4 million net subscribers in the third
quarter, the highest quarterly increase in the company's history, bringing its
customer total to 36.0 million. Verizon Wireless sustained strong performance
across-the-board, delivering record quarterly results for net additions, average
revenue per user and profitability, as well as continued low churn levels.
In the third quarter, Verizon also added a net of 1.3 million
long-distance lines and 185,000 DSL lines. Verizon now serves 15.9 million
long-distance lines and 2.1 million DSL lines, with both totals increasing by 27
percent since year-end 2002.
In the large-business market, Verizon has entered into more than 800
Enterprise Advance contracts since late last year, signing nearly 330 contracts
in the third quarter.
For consumers, Verizon has introduced Verizon Freedom plans in 12
markets, covering more than 80 percent of consumer access lines, since the end
of January. For small businesses, the company has also rolled out Verizon
Freedom for Business plans in six markets, covering more than 60 percent of
business access lines, since May. Verizon Freedom plans help retain and win back
customers by offering local services with various combinations of long-distance,
wireless and Internet access in a discounted bundle available on one bill.
COMPETITIVE POSITION IMPROVES
Verizon CEO Ivan Seidenberg said, "Verizon continues to improve its
competitive position. In the third quarter, we again made significant progress
in gaining share in growth markets, and Verizon Wireless -- which has been our
template for success in new areas of our business -- is again proving to be the
premium company in the industry.
"The composition of our overall revenues continues to shift to newer,
non-traditional sources, fueled by high levels of customer and revenue growth in
wireless, long-distance and broadband," Seidenberg added. "At the same time, we
have maintained operating margins in traditional markets, and Verizon businesses
continue to generate excellent cash flow."
Verizon News Release, page 4
EXPENSES, DEBT AND CASH FLOW
Verizon reported total operating expenses of $13.9 billion in the third
quarter 2003. In the third quarter 2002, reported total operating expenses were
$11.1 billion and included an offset related to the company's sales of
businesses. On an adjusted basis, primarily excluding this offset, total
operating expenses increased 6.9 percent, from $12.9 billion in the third
quarter 2002 to $13.8 billion in the third quarter 2003. This increase was
primarily driven by a reduction of $422 million in pension income net of other
post-retirement benefit costs when comparing third quarter 2003 with the prior
year's quarter.
On Sept. 23, Verizon detailed additional third-quarter Domestic Telecom
expenses, including increased weather-related repair expenses and contingency
costs to maintain operational readiness during recent labor negotiations. These
costs were offset on an EPS basis by non-operational benefits from Verizon's
International and Information Services business units in the third quarter.
Net debt was reduced to $44.7 billion at the end of the third quarter
2003, from $51.8 billion at year-end 2002. Gross debt was $45.5 billion at the
end of the third quarter 2003, down $7.8 billion from $53.3 billion at year-end
2002.
Verizon's free cash flow was $5.0 billion for the first nine months of
2003, compared with $4.2 billion in the first nine months of 2002. In these same
periods, respectively, cash from operations was $16.3 billion and $16.1 billion;
cash used in investing activities was $6.9 billion and $0.9 billion; and cash
used in financing activities was $10.0 billion and $10.4 billion. Cash used in
investing activities was lower in 2002 primarily because of the receipt of
proceeds from sales of businesses and a wireless spectrum refund.
BUSINESS SEGMENT HIGHLIGHTS
DOMESTIC TELECOM
(Note: Current and prior periods exclude the effects of access lines
sold in 2002.)
o Verizon has increased its long-distance access lines by 4.2 million
since the third quarter 2002, a 35.4 percent increase.
o Approximately 44 percent of Verizon's residential customers have
purchased local services in combination with either Verizon long-
distance or Verizon DSL, or both.
Verizon News Release, page 5
o Voice-grade access line equivalents (access lines plus equivalent data
circuits) grew to 139.4 million, up 3.3 percent compared with the third
quarter 2002.
o Total revenues for high-capacity and data services were $1.8 billion in
the third quarter, down slightly from the year-earlier period.
Increased demand for high-speed services was offset by a lessened
demand for lower-speed services.
o Domestic Telecom's continued focus on expense control and operational
excellence produced several year-over-year improvements in key metrics,
including a 3.6 percent increase in repair productivity, a 42 percent
reduction in uncollectibles, and a 3.7 percent decrease in cash
expenses when excluding the impact of lower pension income net of other
post-retirement benefit costs. As previously announced, Verizon is
currently offering fourth-quarter voluntary separation programs to most
union and management employees to reduce ongoing expenses, primarily in
the Domestic Telecom segment.
o As of the end of the third quarter, approximately 74 percent of
Verizon's 56.2 million access lines qualified for DSL service -- and
the company remains on track to meet its 80 percent target by year-end.
VERIZON WIRELESS
o Verizon Wireless' retail customer base grew nearly 14 percent year over
year and represented 34.6 million of the company's 36 million total
customers at the end of the third quarter. Retail gross additions were
up 8.8 percent over the third quarter 2002, while retail net additions
were up 12.5 percent -- totaling approximately 1.3 million of the
company's 1.4 million net additions.
o Continued low churn drove record net-add performance. Retail churn, as
well as total churn for resale and wholesale, was just under 1.9
percent. In the retail post-pay segment -- which is more than 90
percent of the company's base -- churn was 1.4 percent for the third
quarter.
o Average monthly service revenue per subscriber was more than $50, up 1
percent over the prior-year quarter. Service revenue for the quarter
was $5.3 billion, up 14.9 percent.
o The company's low-cost structure continued to lead the industry, as
cash expense per subscriber decreased slightly over the prior-year
quarter and over the prior sequential quarter, a particularly
significant achievement given the record volume of new subscribers.
o Quarterly operating income margin remained strong at 18.9 percent.
Quarterly operating income increased 15.9 percent year over year to a
record $1.1 billion.
o The company launched several innovative features and network services
in the third quarter, including nationwide Get Pix picture messaging;
nationwide Push to Talk; and, in San Diego and Washington, D. C.,
Broadband Access, the first broadband wide area wireless data network
in major U.S. cities.
Verizon News Release, page 6
o Demand for these and for the company's existing data services continued
to build in the quarter. Text messaging grew to more than 400 million
text messages a month, and more than 1 billion for the quarter, and Get
It NowSM BREW-based downloadable ringtones, games and exclusive content
grew to 4 million downloads a month. In the less than three months
since its debut, picture messaging service grew to 2 million picture
messages a month in the third quarter, and the company's Push to Talk
feature has more than 100,000 subscribers to date, on price plans
starting at $60. At the end of the quarter, the company had nearly 10
million revenue-generating data subscribers. Data usage on the
company's NationalAccess 1X data network has significantly increased
over the preceding quarter. Data services now account for more than 2
percent of the company's total service revenue.
o The company continued to improve its already strong position in the
business market segment, due to the reliability and reputation of its
voice and data network, and its expanding VZOffice suite of solutions
designed to meet enhanced voice and remote connectivity needs of
business customers.
INFORMATION SERVICES
(Note: Effective Jan. 1, 2003, Verizon changed its accounting for
recognizing directory revenues and direct expenses from the publication-date
method to the amortization method. The publication-date method recognizes
revenues and expenses when directories are distributed. Under the amortization
method, which is increasingly becoming the industry standard, revenues and
expenses are recognized over the life of the directory, which is usually 12
months. This change results in a more even distribution of revenue and expenses
throughout the year, and does not impact cash flow. As required by GAAP, the
previous year's results have not been adjusted for this change.)
o Verizon Information Services (VIS) revenue for the third quarter 2003
decreased 12 percent compared with the same period in 2002, primarily
due to the change from the publication-date method to the amortization
method of accounting. Using comparable accounting, third quarter 2003
revenues declined 4.9 percent compared with the same period last year;
however, on a book-to-book basis, including print and electronic
revenue, ongoing operations were relatively flat compared with the same
period last year.
o In the third quarter, VIS reported pretax operating expense reductions
of $141 million, primarily as a result of selling directory businesses
in Europe.
o VIS' domestic Internet directory, SuperPages.com(TM), continues to
achieve strong growth as demonstrated by a 31 percent increase in
revenue and a 42 percent increase in searches over third quarter 2002.
Verizon News Release, page 7
INTERNATIONAL
o Equity in earnings of unconsolidated businesses increased to $397
million, compared with $210 million in the third quarter 2002. A large
portion of the increase was driven by additional Italian tax benefits
from a reorganization at Vodafone Omnitel, in which Verizon has an
equity investment.
o Third-quarter revenues were $446 million, compared with $538 million in
the third quarter 2002 -- primarily the result of declining foreign
exchange rates in the Dominican Republic.
o Verizon's International investments continued to experience strong
wireless growth, with total subscribers increasing by nearly 3 million
compared with third quarter 2002 to more than 32 million customers
worldwide.
A Fortune 10 company, Verizon Communications (NYSE:VZ) is one of the
world's leading providers of communications services, with approximately $67
billion in revenues and 221,000 employees. Verizon companies are the largest
providers of wireline and wireless communications in the United States, with
more than 139 million access line equivalents and 36 million Verizon Wireless
customers. Verizon is the third largest long-distance carrier for U.S.
consumers, with nearly 16 million long-distance lines. The company is also the
largest directory publisher in the world, as measured by directory titles and
circulation. Verizon's international presence includes wireline and wireless
communications operations and investments, primarily in the Americas and Europe.
For more information, visit www.verizon.com.
####
VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches and
biographies, media contacts and other information are available at Verizon's
News Center on the World Wide Web at www.verizon.com/news. To receive news
releases by e-mail, visit the News Center and register for customized automatic
delivery of Verizon news releases.
NOTE: This press release contains statements about expected future events and
financial results that are forward-looking and subject to risks and
uncertainties. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The following important factors could affect future results
and could cause those results to differ materially from those expressed in the
forward-looking statements: the duration and extent of the current economic
downturn; materially adverse changes in economic and industry conditions and
labor matters, including workforce levels and labor negotiations, and any
resulting financial and/or operational impact, in the markets served by us or by
companies in which we have substantial investments; material changes in
available technology; technology substitution; an adverse change in the ratings
afforded our debt securities by nationally accredited ratings organizations; the
final results of federal and state regulatory proceedings concerning our
provision of retail and wholesale services and judicial review of those results;
the effects of competition in our markets; our ability to satisfy regulatory
merger conditions; the ability of Verizon Wireless to continue to obtain
sufficient spectrum resources; our ability to recover insurance proceeds
relating to equipment losses and other adverse financial impacts resulting from
the terrorist attacks on Sept. 11, 2001; and changes in our accounting
assumptions that regulatory agencies, including the SEC, may require or that
result from changes in the accounting rules or their application, which could
result in an impact on earnings.
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VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02 % Change 9/30/03 9/30/02 % Change
- ------------------------------- ------------ ------------ --------- ------------ ------------ ---------
OPERATING REVENUES $ 17,155 $ 17,113 .2 $ 50,474 $ 50,150 .6
OPERATING EXPENSES
Cost of services and sales 5,740 5,135 11.8 15,906 14,895 6.8
Selling, general & administrative
expense 4,932 5,204 (5.2) 14,897 15,895 (6.3)
Depreciation and amortization expense 3,419 3,287 4.0 10,170 9,895 2.8
Sales of businesses, net (141) (2,527) (94.4) (141) (2,747) (94.9)
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 13,950 11,099 25.7 40,832 37,938 7.6
OPERATING INCOME 3,205 6,014 (46.7) 9,642 12,212 (21.0)
Equity in earnings (loss) of
unconsolidated businesses 358 187 91.4 673 (1,675) *
Income (loss) from other
unconsolidated businesses 80 299 (73.2) 159 (2,742) *
Other income and (expense), net 12 5 140.0 23 110 (79.1)
Interest expense (685) (776) (11.7) (2,132) (2,332) (8.6)
Minority interest (410) (389) 5.4 (1,132) (1,022) 10.8
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES, DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 2,560 5,340 (52.1) 7,233 4,551 58.9
Provision for income taxes (769) (925) (16.9) (2,266) (2,207) 2.7
--------- --------- --------- ---------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 1,791 4,415 (59.4) 4,967 2,344 111.9
DISCONTINUED OPERATIONS
Loss from operations of Iusacell -- (8) (100.0) (957) (50) *
Income tax benefit (provision) -- (2) (100.0) 22 (9) *
--------- --------- --------- ---------
Loss on discontinued operations -- (10) (100.0) (935) (59) *
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX -- -- * 503 (496) *
--------- --------- --------- ---------
NET INCOME $ 1,791 $ 4,405 (59.3) $ 4,535 $ 1,789 153.5
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ .65 $ 1.61 (59.6) $ 1.65 $ .66 150.0
Weighted average number of common
shares (in millions) 2,759 2,732 2,753 2,726
DILUTED EARNINGS PER SHARE(1) $ .64 $ 1.60 (60.0) $ 1.63 $ .65 150.8
Weighted average number of common
shares-assuming dilution
(in millions) 2,791 2,749 2,786 2,737
FOOTNOTES:
(1) Diluted Earnings per Share include income related to share dilution
(exchangeable equity interests) of $6 million and $15 million for the third
quarter and year-to-date 2003 respectively, $3 million for the third
quarter and year-to-date 2002, and the dilutive effect of shares issuable
under our stock-based compensation plans and exchangeable equity interests,
which represent the only potential dilution.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. However, prior year
results have not been adjusted for the change in accounting, effective January
1, 2003, related to recognition of directory revenues and direct costs from the
publication date method to the amortization method.
* Not meaningful
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME BEFORE SPECIAL ITEMS
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02 % Change 9/30/03 9/30/02 % Change
--------------------------- ------------ ------------ --------- ------------ ------------ ---------
OPERATING REVENUES(1)
Domestic Telecom $ 9,851 $ 10,268 (4.1) $ 29,697 $ 30,773 (3.5)
Domestic Wireless 5,942 5,029 18.2 16,505 14,250 15.8
Information Services 1,031 1,174 (12.2) 3,101 2,913 6.5
International 446 538 (17.1) 1,472 1,670 (11.9)
Other (115) (32) * (301) (79) *
--------- --------- --------- ---------
TOTAL OPERATING REVENUES 17,155 16,977 1.0 50,474 49,527 1.9
--------- --------- --------- ---------
OPERATING EXPENSES(1)
Cost of services and sales 5,740 5,055 13.6 15,906 14,676 8.4
Selling, general & administrative
expense 4,801 4,591 4.6 13,872 13,344 4.0
Depreciation and amortization
expense 3,419 3,287 4.0 10,170 9,895 2.8
Sales of businesses, net (141) -- * (141) -- *
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 13,819 12,933 6.9 39,807 37,915 5.0
--------- --------- --------- ---------
OPERATING INCOME 3,336 4,044 (17.5) 10,667 11,612 (8.1)
Operating income impact of operations
sold(1) -- 55 (100.0) -- 382 (100.0)
Equity in earnings of unconsolidated
businesses 358 178 101.1 673 369 82.4
Income from other unconsolidated
businesses 80 17 * 159 212 (25.0)
Other income and (expense), net 12 39 (69.2) 84 166 (49.4)
Interest expense (685) (776) (11.7) (2,132) (2,332) (8.6)
Minority interest (410) (400) 2.5 (1,132) (1,069) 5.9
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND DISCONTINUED OPERATIONS 2,691 3,157 (14.8) 8,319 9,340 (10.9)
Provision for income taxes (819) (1,040) (21.3) (2,632) (3,110) (15.4)
--------- --------- --------- ---------
INCOME BEFORE DISCONTINUED OPERATIONS 1,872 2,117 (11.6) 5,687 6,230 (8.7)
DISCONTINUED OPERATIONS
Income (loss) from operations of
Iusacell -- (7) (100.0) 1 (49) (102.0)
Provision for income taxes -- (2) (100.0) (4) (9) (55.6)
--------- --------- --------- ---------
Loss on discontinued operations -- (9) (100.0) (3) (58) (94.8)
--------- --------- --------- ---------
NET INCOME BEFORE SPECIAL ITEMS $ 1,872 $ 2,108 (11.2) $ 5,684 $ 6,172 (7.9)
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ .68 $ .77 (11.7) $ 2.06 $ 2.26 (8.8)
Weighted average number of common
shares (in millions) 2,759 2,732 2,753 2,726
DILUTED ADJUSTED EARNINGS PER SHARE $ .67 $ .77 (13.0) $ 2.05 $ 2.26 (9.3)
Weighted average number of common
shares-assuming dilution
(in millions) 2,791 2,749 2,786 2,737
FOOTNOTES:
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. However, prior year
results have not been adjusted for the change in accounting, effective January
1, 2003, related to recognition of directory revenues and direct costs from the
publication date method to the amortization method.
(1) Reclassifications of prior period amounts have also been made to reflect
comparable operating results excluding significant operations sold, the
previously announced Domestic Telecom access lines, as follows:
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
9/30/03 9/30/02 9/30/03 9/30/02
------------ ------------ ------------ ------------
Revenues $ -- $ 136 $ -- $ 623
Expenses $ -- $ 81 $ -- $ 241
* Not meaningful
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VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME - RECONCILIATIONS
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
SPECIAL AND
NON-
RECURRING
ITEMS
-----------
3 Mos. Ended Severance, 3 Mos. Ended
9/30/03 Pension and 9/30/03
REPORTED Benefit BEFORE SPECIAL
Unaudited (GAAP) Changes ITEMS
---------------------------------------------- ------------ ----------- --------------
OPERATING REVENUES $ 17,155 $ -- $ 17,155
OPERATING EXPENSES
Cost of services and sales 5,740 -- 5,740
Selling, general & administrative expense 4,932 (131) 4,801
Depreciation and amortization expense 3,419 -- 3,419
Sales of businesses, net (141) -- (141)
--------- --------- ---------
TOTAL OPERATING EXPENSES 13,950 (131) 13,819
--------- --------- ---------
OPERATING INCOME 3,205 131 3,336
Equity in earnings of unconsolidated businesses 358 -- 358
Income from other unconsolidated businesses 80 -- 80
Other income and (expense), net 12 -- 12
Interest expense (685) -- (685)
Minority interest (410) -- (410)
--------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 2,560 131 2,691
Provision for income taxes (769) (50) (819)
--------- --------- ---------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,791 81 1,872
DISCONTINUED OPERATIONS
Loss from operations of Iusacell -- -- --
Income tax benefit (provision) -- -- --
--------- --------- ---------
Loss on discontinued operations -- -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- -- --
--------- --------- ---------
NET INCOME $ 1,791 $ 81 $ 1,872
========= ========= =========
BASIC EARNINGS PER COMMON SHARE(1) $ .65 $ .03 $ .68
DILUTED EARNINGS PER COMMON SHARE(1) $ .64 $ .03 $ .67
(dollars in millions, except per share amounts)
SPECIAL AND NON-RECURRING ITEMS
------------------------------------------------------------------
3 Mos. Ended Severance,
9/30/02 Sales of Impact of Investment- Pension
REPORTED Businesses, Transition Operations Related and Benefit
Unaudited (GAAP) Net Costs Sold Charges Charges
------------------------------ ------------ ------------ ---------- ---------- ----------- ------------
OPERATING REVENUES $ 17,113 $ -- $ -- $ (136) $ -- $ --
OPERATING EXPENSES
Cost of services and sales 5,135 -- (26) (54) -- --
Selling, general &
administrative expense 5,204 -- (68) (27) -- (294)
Depreciation and
amortization expense 3,287 -- -- -- -- --
Sales of businesses, net (2,527) 2,527 -- -- -- --
-------- -------- -------- -------- -------- --------
TOTAL OPERATING EXPENSES 11,099 2,527 (94) (81) -- (294)
-------- -------- -------- -------- -------- --------
OPERATING INCOME 6,014 (2,527) 94 (55) -- 294
Operating income impact of
operations sold -- -- -- 55 -- --
Equity in earnings (loss) of
unconsolidated businesses 187 -- -- -- -- --
Income (loss) from other
unconsolidated businesses 299 (383) -- -- 101 --
Other income and (expense), net 5 -- -- -- -- --
Interest expense (776) -- -- -- -- --
Minority interest (389) -- (11) -- -- --
-------- -------- -------- -------- -------- --------
INCOME BEFORE PROVISION FOR
INCOME TAXES, DISCONTINUED
OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING
CHANGE 5,340 (2,910) 83 -- 101 294
Income tax benefit (provision) (925) 1,131 (33) -- (27) (110)
-------- -------- -------- -------- -------- --------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS AND CUMULATIVE
EFFECT OF
ACCOUNTING CHANGE 4,415 (1,779) 50 -- 74 184
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (8) -- -- -- -- 1
Income tax provision (2) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Loss on discontinued operations (10) -- -- -- -- 1
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS) $ 4,405 $ (1,779) $ 50 $ -- $ 74 $ 185
======== ======== ======== ======== ======== ========
BASIC EARNINGS (LOSS) PER COMMON
SHARE(1) $ 1.61 $ (.65) $ .02 $ -- $ .03 $ .07
DILUTED EARNINGS (LOSS) PER COMMON
SHARE(1) $ 1.60 $ (.65) $ .02 $ -- $ .03 $ .07
SPECIAL AND NON-RECURRING ITEMS
------------------------------- 3 Mos. Ended
Other 9/30/02
Special Tax BEFORE SPECIAL
Unaudited Items Benefits ITEMS
------------------------------------- -------- -------- --------------
OPERATING REVENUES $ -- $ -- $ 16,977
OPERATING EXPENSES
Cost of services and sales -- -- 5,055
Selling, general &
administrative expense (224) -- 4,591
Depreciation and
amortization expense -- -- 3,287
Sales of businesses, net -- -- --
-------- -------- --------
Total Operating Expenses (224) -- 12,933
-------- -------- --------
OPERATING INCOME 224 -- 4,044
Operating income impact of
operations sold -- -- 55
Equity in earnings (loss) of
unconsolidated businesses (9) -- 178
Income (loss) from other
unconsolidated businesses -- -- 17
Other income and (expense), net 34 -- 39
Interest expense -- -- (776)
Minority interest -- -- (400)
-------- -------- --------
INCOME BEFORE PROVISION FOR
INCOME TAXES, DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 249 -- 3,157
Income tax benefit (provision) (93) (983) (1,040)
-------- -------- --------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 156 (983) 2,117
DISCONTINUED OPERATIONS
Loss from operations of Iusacell -- -- (7)
Income tax provision -- -- (2)
-------- -------- --------
Loss on discontinued operations -- -- (9)
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX -- -- --
-------- -------- --------
NET INCOME (LOSS) $ 156 $ (983) $ 2,108
======== ======== ========
BASIC EARNINGS (LOSS) PER COMMON
SHARE(1) $ .06 $ (.36) $ .77
DILUTED EARNINGS (LOSS) PER COMMON
SHARE(1) $ .06 $ (.36) $ .77
FOOTNOTE:
(1) EPS totals may not add across due to rounding.
NOTE: See www.verizon.com/investor for a reconciliation of other non-GAAP
measures included in this Quarterly Bulletin.
---------------------------------------------------------------------------------
Verizon Communications Inc.
Consolidated Statements of Income - Reconciliations
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
---------------------------------------------------------
9 Mos. Ended Lease Cumulative 9 Mos. Ended
9/30/03 Severance, Impairment and Effect 9/30/03
Reported Iusacell Pension and Other Special of Accounting Before Special
Unaudited (GAAP) Charge Benefit Changes Changes Change Items
---------------------------- ------------ --------- --------------- -------------- ------------- --------------
OPERATING REVENUES $ 50,474 $ -- $ -- $ -- $ -- $ 50,474
OPERATING EXPENSES
Cost of services and sales 15,906 -- -- -- -- 15,906
Selling, general &
administrative expense 14,897 -- (828) (197) -- 13,872
Depreciation and amortization
expense 10,170 -- -- -- -- 10,170
Sales of businesses, net (141) -- -- -- -- (141)
---------- ---------- --------------- -------------- ------------- --------------
TOTAL OPERATING EXPENSES 40,832 -- (828) (197) -- 39,807
---------- ---------- --------------- -------------- ------------- --------------
OPERATING INCOME 9,642 -- 828 197 -- 10,667
Equity in earnings of
unconsolidated businesses 673 -- -- -- -- 673
Income from other unconsolidated
businesses 159 -- -- -- -- 159
Other income and (expense), net 23 -- -- 61 -- 84
Interest expense (2,132) -- -- -- -- (2,132)
Minority interest (1,132) -- -- -- -- (1,132)
---------- ---------- --------------- -------------- ------------- --------------
INCOME BEFORE PROVISION FOR
INCOME TAXES,
DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 7,233 -- 828 258 -- 8,319
Provision for income taxes (2,266) -- (312) (54) -- (2,632)
---------- ---------- --------------- -------------- ------------- --------------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 4,967 -- 516 204 -- 5,687
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (957) 957 1 -- -- 1
Income tax benefit (provision) 22 (26) -- -- -- (4)
---------- ---------- --------------- -------------- ------------- --------------
Loss on discontinued operations (935) 931 1 -- -- (3)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX 503 -- -- -- (503) --
---------- ---------- --------------- -------------- ------------- --------------
NET INCOME (LOSS) $ 4,535 $ 931 $ 517 $ 204 $ (503) $ 5,684
========== ========== =============== ============== ============= ==============
BASIC EARNINGS PER COMMON
SHARE(1) $ 1.65 $ .34 $ .19 $ .07 $ (.18) $ 2.06
DILUTED EARNINGS PER COMMON
SHARE(1) $ 1.63 $ .33 $ .19 $ .07 $ (.18) $ 2.05
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
------------------------------------------------------------------
9 Mos.
Ended Severance,
9/30/02 Sales of Impact of Investment- Pension
REPORTED Businesses, Transition Operations Related and Benefit
Unaudited (GAAP) Net Costs Sold Charges Charges
------------------------------- --------- ---------- ---------- ---------- ----------- ------------
OPERATING REVENUES $ 50,150 $ -- $ -- $ (623) $ -- $ --
OPERATING EXPENSES
Cost of services and sales 14,895 -- (77) (142) -- --
Selling, general &
administrative expense 15,895 -- (215) (99) (458) (986)
Depreciation and amortization
expense 9,895 -- -- -- -- --
Sales of businesses, net (2,747) 2,747 -- -- -- --
-------- -------- -------- -------- -------- --------
TOTAL OPERATING EXPENSES 37,938 2,747 (292) (241) (458) (986)
-------- -------- -------- -------- -------- --------
OPERATING INCOME 12,212 (2,747) 292 (382) 458 986
Operating income impact of
operations sold -- -- -- 382 -- --
Equity in earnings (loss) of
unconsolidated businesses (1,675) -- -- -- 2,011 42
Income (loss) from other
unconsolidated businesses (2,742) (383) -- -- 3,337 --
Other income and (expense), net 110 -- -- -- -- --
Interest expense (2,332) -- -- -- -- --
Minority interest (1,022) -- (33) -- -- (14)
-------- -------- -------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 4,551 (3,130) 259 -- 5,806 1,014
Income tax benefit (provision) (2,207) 1,235 (100) -- (401) (355)
-------- -------- -------- -------- -------- --------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 2,344 (1,895) 159 -- 5,405 659
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (50) -- -- -- -- 1
Income tax provision (9) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Loss on discontinued operations (59) -- -- -- -- 1
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX (496) -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS) $ 1,789 $ (1,895) $ 159 $ -- $ 5,405 $ 660
======== ======== ======== ======== ======== ========
BASIC EARNINGS (LOSS) PER
COMMON SHARE(1) $ .66 $ (.70) $ .06 $ -- $ 1.98 $ .24
DILUTED EARNINGS (LOSS) PER
COMMON SHARE(1) $ .65 $ (.69) $ .06 $ -- $ 1.97 $ .24
Special and Non-Recurring Items
--------------------------------------------------------
9 Mos. Ended
Cumulative 9/30/02
Other Effect Before
NorthPoint Special Tax of Accounting Special
Unaudited Settlement Items Benefits Change Items
- ----------------------------------------- ---------- -------- -------- ------------- ------------
OPERATING REVENUES $ -- $ -- $ -- $ -- $ 49,527
OPERATING EXPENSES
Cost of services and sales -- -- -- -- 14,676
Selling, general &
administrative expense (175) (618) -- -- 13,344
Depreciation and amortization
expense -- -- -- -- 9,895
Sales of businesses, net -- -- -- -- --
-------- -------- -------- -------- --------
TOTAL OPERATING EXPENSES (175) (618) -- -- 37,915
-------- -------- -------- -------- --------
OPERATING INCOME 175 618 -- -- 11,612
Operating income impact of
operations sold -- -- -- -- 382
Equity in earnings (loss) of
unconsolidated businesses -- (9) -- -- 369
Income (loss) from other
unconsolidated businesses -- -- -- -- 212
Other income and (expense), net -- 56 -- -- 166
Interest expense -- -- -- -- (2,332)
Minority interest -- -- -- -- (1,069)
-------- -------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 175 665 -- -- 9,340
Income tax benefit (provision) (61) (238) (983) -- (3,110)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 114 427 (983) -- 6,230
DISCONTINUED OPERATIONS
Loss from operations of Iusacell -- -- -- -- (49)
Income tax provision -- -- -- -- (9)
-------- -------- -------- -------- --------
Loss on discontinued operations -- -- -- -- (58)
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX -- -- -- 496 --
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 114 $ 427 $ (983) $ 496 $ 6,172
======== ======== ======== ======== ========
BASIC EARNINGS (LOSS) PER
COMMON SHARE(1) $ .04 $ .16 $ (.36) $ .18 $ 2.26
DILUTED EARNINGS (LOSS) PER
COMMON SHARE(1) $ .04 $ .16 $ (.36) $ .18 $ 2.26
Footnote:
(1) EPS totals may not add across due to rounding.
Note: See www.verizon.com/investor for a reconciliation of other non-GAAP
measures included in this Quarterly Bulletin.
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
SELECTED FINANCIAL AND OPERATING STATISTICS
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
Unaudited 3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
9/30/03 9/30/02 9/30/03 9/30/02
--------------------------------------------- ------------- ------------- ------------- -------------
Debt to debt and shareowners' equity
ratio-end of period 56.4% 64.0% 56.4% 64.0%
Book value per common share $ 12.72 $ 11.64 $ 12.72 $ 11.64
Cash dividends declared per common share $ .385 $ .385 $ 1.155 $ 1.155
Common shares outstanding (in millions)
End of period 2,762 2,736 2,762 2,736
Capital expenditures
(including capitalized network and
non-network software)
Domestic Telecom $ 1,746 $ 1,715 $ 4,765 $ 5,334
Domestic Wireless 983 938 3,079 3,026
Information Services 13 33 55 135
International 99 118 222 269
Other 7 10 21 30
------------- ------------- ------------- -------------
Total $ 2,848 $ 2,814 $ 8,142 $ 8,794
============= ============= ============= =============
Total employees(1) 221,207 234,537 221,207 234,537
FOOTNOTE:
(1) Prior period adjusted to reflect a comparable figure.
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------------
(dollars in millions)
Unaudited 9/30/03 12/31/02 $ Change
------------------------------------- ------------- ------------- -------------
ASSETS
Current assets
Cash and cash equivalents $ 746 $ 1,422 $ (676)
Short-term investments 366 2,042 (1,676)
Accounts receivable, net 10,049 12,496 (2,447)
Inventories 1,280 1,497 (217)
Assets of discontinued operations -- 1,305 (1,305)
Prepaid expenses and other 4,124 3,331 793
------------- ------------- -------------
Total current assets 16,565 22,093 (5,528)
------------- ------------- -------------
Plant, property and equipment 179,721 176,838 2,883
Less accumulated depreciation 104,623 103,080 1,543
------------- ------------- -------------
75,098 73,758 1,340
------------- ------------- -------------
Investments in unconsolidated businesses 5,567 4,986 581
Wireless licenses 40,884 40,038 846
Goodwill 1,368 1,339 29
Other intangible assets, net 4,690 4,962 (272)
Other assets 20,834 20,292 542
------------- ------------- -------------
TOTAL ASSETS $ 165,006 $ 167,468 $ (2,462)
============= ============= =============
LIABILITIES AND SHAREOWNERS' INVESTMENT
Current liabilities
Debt maturing within one year $ 7,499 $ 9,267 $ (1,768)
Accounts payable and accrued liabilities 12,664 12,642 22
Liabilities of discontinued operations -- 1,007 (1,007)
Other 5,705 5,013 692
------------- ------------- -------------
Total current liabilities 25,868 27,929 (2,061)
------------- ------------- -------------
Long-term debt 37,961 44,003 (6,042)
Employee benefit obligations 15,599 15,389 210
Deferred income taxes 22,374 19,467 2,907
Other liabilities 4,100 4,007 93
Minority interest 23,968 24,057 (89)
Shareowners' investment
Common stock 277 275 2
Contributed capital 25,159 24,685 474
Reinvested earnings 11,931 10,536 1,395
Accumulated other comprehensive loss (1,801) (2,110) 309
------------- ------------- -------------
35,566 33,386 2,180
Less common stock in treasury, at cost 115 218 (103)
Less deferred compensation -
employee stock ownership plans and other 315 552 (237)
------------- ------------- -------------
Total shareowners' investment 35,136 32,616 2,520
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREOWNERS' INVESTMENT $ 165,006 $ 167,468 $ (2,462)
============= ============= =============
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------
(dollars in millions)
Unaudited 9 Mos. Ended 9 Mos. Ended
9/30/03 9/30/02 $ Change
------------------------------------------------------------- ------------ ------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Income before discontinued operations and
cumulative effect of accounting change $ 4,967 $ 2,344 $ 2,623
Adjustments to reconcile income before discontinued
operations and cumulative effect of accounting change to
net cash provided by operating activities:
Depreciation and amortization expense 10,170 9,895 275
Sales of businesses, net (141) (2,747) 2,606
Employee retirement benefits 230 (963) 1,193
Deferred income taxes 1,418 851 567
Provision for uncollectible accounts 1,292 2,188 (896)
(Income) loss from unconsolidated businesses (832) 4,417 (5,249)
Changes in current assets and liabilities, net of
effects from acquisition/disposition of businesses (406) 209 (615)
Other, net (417) (96) (321)
------------ ------------ ---------
Net cash provided by operating activities 16,281 16,098 183
------------ ------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (including capitalized network (8,142) (8,794) 652
and non-network software)
Acquisitions, net of cash acquired, and investments (1,097) (1,012) (85)
Proceeds from disposition of businesses 229 4,638 (4,409)
Proceeds from spectrum payment refund -- 1,479 (1,479)
Net change in short-term and other current investments 1,683 1,633 50
Other, net 409 1,113 (704)
------------ ------------ ---------
Net cash used in investing activities (6,918) (943) (5,975)
------------ ------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 2,831 7,471 (4,640)
Repayments of long-term borrowings and capital lease obligations (8,870) (5,867) (3,003)
Decrease in short-term obligations, excluding current maturities (1,274) (9,633) 8,359
Dividends paid (3,175) (3,147) (28)
Proceeds from sale of common stock 617 653 (36)
Other, net (168) 79 (247)
------------ ------------ ---------
Net cash used in financing activities (10,039) (10,444) 405
------------ ------------ ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (676) 4,711 (5,387)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,422 932 490
------------ ------------ ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 746 $ 5,643 $(4,897)
============ ============ =========
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED FINANCIAL RESULTS
---------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02 % Change 9/30/03 9/30/02 % Change
--------------------------------- ------------ ------------ -------- ------------ ------------ ---------
OPERATING REVENUES
Local services $ 4,826 $ 5,138 (6.1) $ 14,629 $ 15,365 (4.8)
Network access services 3,093 3,318 (6.8) 9,646 10,044 (4.0)
Long distance services 1,000 853 17.2 2,782 2,393 16.3
Other services 932 959 (2.8) 2,640 2,971 (11.1)
------------ ------------ ------------ ------------
TOTAL OPERATING REVENUES 9,851 10,268 (4.1) 29,697 30,773 (3.5)
------------ ------------ ------------ ------------
OPERATING EXPENSES
Cost of services and sales 3,879 3,499 10.9 10,815 10,191 6.1
Selling, general &
administrative expense 2,069 2,323 (10.9) 6,322 6,699 (5.6)
Depreciation and amortization
expense 2,296 2,319 (1.0) 6,927 7,090 (2.3)
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 8,244 8,141 1.3 24,064 23,980 .4
------------ ------------ ------------ ------------
OPERATING INCOME $ 1,607 $ 2,127 (24.4) $ 5,633 $ 6,793 (17.1)
OPERATING INCOME MARGIN 16.3% 20.7% 19.0% 22.1%
SEGMENT INCOME $ 703 $ 1,031 (31.8) $ 2,625 $ 3,312 (20.7)
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature. Also, see footnotes to the consolidated statements of
income before special items for additional discussion of these items.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED OPERATING STATISTICS
---------------------------------------------------------------------------------
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02 % Change 9/30/03 9/30/02 % Change
------------------------------ ------------- ------------- -------- ------------- ------------- ---------
Switched access lines in
service (000)
Residence 36,468 37,777 (3.5) 36,468 37,777 (3.5)
Business 19,214 20,144 (4.6) 19,214 20,144 (4.6)
Public 473 535 (11.6) 473 535 (11.6)
------------- ------------- ------------- -------------
Total 56,155 58,456 (3.9) 56,155 58,456 (3.9)
Special DS0 equivalents 83,233 76,419 8.9 83,233 76,419 8.9
------------- ------------- ------------- -------------
Total voice grade equivalents
(000) 139,388 134,875 3.3 139,388 134,875 3.3
------------- ------------- ------------- -------------
Resale & UNE-P lines (000) 5,378 3,891 38.2 5,378 3,891 38.2
Minutes of use from Carriers
and CLECs
(in millions) 59,165 63,767 (7.2) 180,008 194,695 (7.5)
Long distance lines (000) 15,900 11,747 35.4 15,900 11,747 35.4
High capacity and digital data
revenues
($ in millions)
Data transport $ 1,596 $ 1,644 (2.9) $ 4,914 $ 4,951 (.7)
Data solutions 179 159 12.6 478 492 (2.8)
------------- ------------- ------------- -------------
Total revenues $ 1,775 $ 1,803 (1.6) $ 5,392 $ 5,443 (.9)
------------- ------------- ------------- -------------
FOOTNOTE:
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
VERIZON WIRELESS - SELECTED FINANCIAL RESULTS
---------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02 % Change 9/30/03 9/30/02 % Change
-------------------------------------- ------------ ------------ --------- ------------ ------------ --------
REVENUES
Service revenues $ 5,299 $ 4,613 14.9 $ 14,970 $ 13,034 14.9
Equipment and other 643 416 54.6 1,535 1,216 26.2
--------- --------- --------- ---------
TOTAL REVENUES 5,942 5,029 18.2 16,505 14,250 15.8
--------- --------- --------- ---------
OPERATING EXPENSES
Cost of services and sales 1,715 1,392 23.2 4,721 3,966 19.0
Selling, general &
administrative expense 2,103 1,839 14.4 5,942 5,239 13.4
Depreciation and amortization
expense 1,000 828 20.8 2,863 2,394 19.6
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 4,818 4,059 18.7 13,526 11,599 16.6
--------- --------- --------- ---------
OPERATING INCOME $ 1,124 $ 970 15.9 $ 2,979 $ 2,651 12.4
OPERATING INCOME MARGIN 18.9% 19.3% 18.0% 18.6%
SEGMENT INCOME $ 301 $ 268 12.3 $ 776 $ 705 10.1
SELECTED OPERATING STATISTICS
Subscribers (000) 36,026 31,521 14.3 36,026 31,521 14.3
Penetration 15.4% 13.9% 15.4% 13.9%
Subscriber net adds in period(1) (000) 1,407 1,214 15.9 3,535 2,123 66.5
Total churn rate, including prepaid 1.9% 2.3% 1.9% 2.4%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature. Also see footnotes to the consolidated statements of
income before special items for additional discussion of these items.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
(1) Includes acquisition of 68,000 subscribers and 411,000 subscribers in
the first and third quarters of 2002, respectively, and 6,000
subscribers in the first quarter of 2003.
- --------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
INFORMATION SERVICES - SELECTED FINANCIAL RESULTS
- --------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02 % Change 9/30/03 9/30/02 % Change
------------------------------- ------------ ------------ ------------ --------- ------------ ---------
OPERATING REVENUES $ 1,031 $ 1,174 (12.2) $ 3,101 $ 2,913 6.5
OPERATING EXPENSES
Cost of services and sales 181 170 6.5 495 459 7.8
Selling, general & administrative
expense 371 411 (9.7) 1,076 1,033 4.2
Depreciation and amortization expense 22 21 4.8 66 52 26.9
Sales of businesses, net (141) -- * (141) -- *
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 433 602 (28.1) 1,496 1,544 (3.1)
-------- -------- -------- --------
OPERATING INCOME $ 598 $ 572 4.5 $ 1,605 $ 1,369 17.2
OPERATING INCOME MARGIN 58.0% 48.7% 51.8% 47.0%
SEGMENT INCOME $ 360 $ 347 3.7 $ 959 $ 820 17.0
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature. Also, see footnotes to the consolidated statements of
income before special items for additional discussion of these items.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. However, prior year
results have not been adjusted for the change in accounting, effective January
1, 2003, related to recognition of directory revenues and direct costs from the
publication date method to the amortization method.
* Not meaningful
- --------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
INTERNATIONAL - SELECTED FINANCIAL RESULTS
- --------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02 % Change 9/30/03 9/30/02 % Change
----------------------------------- ------------ ------------ --------- --------- ------------ --------
OPERATING REVENUES $ 446 $ 538 (17.1) $ 1,472 $ 1,670 (11.9)
OPERATING EXPENSES
Cost of services and sales 144 124 16.1 422 423 (.2)
Selling, general & administrative
expense 222 116 91.4 573 472 21.4
Depreciation and amortization expense 80 97 (17.5) 252 288 (12.5)
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 446 337 32.3 1,247 1,183 5.4
---------- ---------- ---------- ----------
OPERATING INCOME $ -- $ 201 (100.0) $ 225 $ 487 (53.8)
OPERATING INCOME MARGIN 0.0% 37.4% 15.3% 29.2%
EQUITY IN EARNINGS OF
UNCONSOLIDATED BUSINESSES $ 397 $ 210 89.0 $ 789 $ 465 69.7
INCOME FROM OTHER
UNCONSOLIDATED BUSINESSES 80 16 * 169 212 (20.3)
SEGMENT INCOME $ 471 $ 325 44.9 $ 1,051 $ 858 22.5
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature. Also, see footnotes to the consolidated statements of
income before special items for additional discussion of these items.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
* Not meaningful
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
OTHER RECONCILIATIONS
---------------------------------------------------------------------------------
(dollars in millions)
9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02
--------------------------------------------------------------------------------- ------------ ------------
FREE CASH FLOW
Cash from operating activities $ 16,281 $ 16,098
Less: Capital expenditures (including network and non-network software) (8,142) (8,794)
Dividends paid (3,175) (3,147)
---------- ----------
Free Cash Flow $ 4,964 $ 4,157
========== ==========
9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/03 9/30/02
--------------------------------------------------------------------------------- ------------ ------------
CASH FLOW SUMMARY
Cash from operating activities $ 16,281 $ 16,098
Cash used in investing activities (6,918) (943)
Cash used in financing activities (10,039) (10,444)
---------- ----------
Increase (decrease) in cash and cash equivalents (676) 4,711
Cash and cash equivalents, beginning of period 1,422 932
---------- ----------
Cash and cash equivalents, end of period $ 746 $ 5,643
========== ==========
Unaudited 9/30/03 12/31/02
--------------------------------------------------------------------------------- ------------ ------------
NET DEBT
Short-term debt $ 7,499 $ 9,267
Long-term debt 37,961 44,003
Less: Cash and cash equivalents (746) (1,422)
---------- ----------
$ 44,714 $ 51,848
========== ==========
3 Mos. Ended 3 Mos. Ended
Unaudited 9/30/03 9/30/02
--------------------------------------------------------------------------------- ------------ ------------
DOMESTIC TELECOM CASH EXPENSE EXCLUDING PENSION/OPEB
Cost of services and sales $ 3,879 $ 3,499
Selling, general & administrative expense 2,069 2,323
Net pension/OPEB credit 118 475
---------- ----------
$ 6,066 $ 6,297
========== ==========
3 Mos. Ended 3 Mos. Ended
Unaudited 9/30/03 9/30/02
--------------------------------------------------------------------------------- ------------ ------------
VERIZON INFORMATION SERVICES REVENUES - CONFORMING BASIS
Operating revenues $ 1,031 $ 1,174
Directory accounting change -- (90)
---------- ----------
Conforming basis revenues $ 1,031 $ 1,084
========== ==========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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