-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K/2hWbtacS4jUJBebne8slLtjuNYU+ij0eGhmH/LgSBJ5q/akHj80FEXykwy15zG wcrw+FsReZS1PZDJ5DNg/g== 0000950134-03-010645.txt : 20030729 0000950134-03-010645.hdr.sgml : 20030729 20030729093117 ACCESSION NUMBER: 0000950134-03-010645 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030729 ITEM INFORMATION: FILED AS OF DATE: 20030729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERIZON COMMUNICATIONS INC CENTRAL INDEX KEY: 0000732712 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 232259884 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08606 FILM NUMBER: 03807255 BUSINESS ADDRESS: STREET 1: 1095 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2123952121 MAIL ADDRESS: STREET 1: 1095 AVE OF THE AMERICAS STREET 2: 38TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: BELL ATLANTIC CORP DATE OF NAME CHANGE: 19920703 8-K 1 d07743e8vk.txt FORM 8-K ================================================================================ 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: July 29, 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 (Commission File Number) (I.R.S. Employer of incorporation) 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) 395-2121 Not applicable (Former name or former address, if changed since last report) ================================================================================ Item. 12. Disclosure of Results of Operations and Financial Condition Attached as an exhibit hereto is a press release and financial tables dated July 29, 2003 issued by Verizon Communications Inc. and included in its Investor Relations Bulletin. 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 eliminates 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 assists readers in better understanding our results of operations and trends from period to period, consistent with how management evaluates Verizon's consolidated and segment results of operations for a variety of internal measures including strategic business planning, capital allocation and compensation. Furthermore, 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. Management believes that adjusted operating income before depreciation and amortization margin, free cash flow, net debt and wireless cash expense per subscriber per month, non-GAAP financial measures, are useful in evaluating financial performance. Margins, free cash flow and net debt are also commonly used by readers of financial information in assessing performance. Cash expense per subscriber is a non-GAAP measure used internally to evaluate expense efficiency. 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: July 29, 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 July 29, 2003, issued by Verizon Communications Inc. and contained in its Investor Relations Bulletin.
EX-99 3 d07743exv99.txt PRESS RELEASE EXHIBIT 99 (VERIZON LOGO) NEWS RELEASE FOR IMMEDIATE RELEASE MEDIA CONTACTS: JULY 29, 2003 PETER THONIS 212-395-2355 peter.thonis@verizon.com BOB VARETTONI 212-395-7726 robert.a.varettoni@verizon.com VERIZON'S SECOND-QUARTER RESULTS MARKED BY SECTOR-LEADING REVENUE GROWTH AND SOLID CASH FLOW SUSTAINED GROWTH IN WIRELESS, LONG-DISTANCE, BROADBAND AND BUNDLED SERVICES COMPLEMENTS STRONG OPERATIONAL EXECUTION AND DISCIPLINED CASH MANAGEMENT SECOND-QUARTER HIGHLIGHTS o Verizon Wireless: 1.2 million net retail customer additions, up 10 percent from last year's quarter (1.3 million total net customer additions); record-low churn; strong margins; service revenue up 14.7 percent from last year's quarter; customer total at 34.6 million o Long Distance: 1.4 million net additional long-distance lines in the quarter; total long-distance lines, 14.6 million, a 36.1 percent year-over-year increase o DSL (digital subscriber lines): 1.9 million billed lines, up 101,000 since last quarter o Diluted earnings per share (EPS): 12 cents in fully diluted EPS, compared with a loss of 78 cents per share in second quarter 2002 o EPS before special items: 69 cents, compared with 77 cents in EPS before special items in second quarter 2002 o Debt Reduction: Net debt (total debt less cash and cash equivalents) reduced by $3.7 billion since year-end 2002 to $48.1 billion o Free Cash Flow (cash from operating activities less capital expenditures and dividends): $3.6 billion in first half of year GUIDANCE o Reiterated 2003 guidance, with additional net debt reduction; new Verizon Wireless guidance of net retail customer additions for 2003 of more than 4 million Note: The schedules accompanying this news release provide reconciliations to generally accepted accounting principles (GAAP) for all non-GAAP financial measures mentioned in this announcement. Verizon News Release, page 2 NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced second quarter 2003 fully diluted EPS of 12 cents, or 69 cents before special items. The results reflect growth from the net addition of 1.3 million Verizon Wireless customers and 1.4 million long-distance lines, and continued strong operational and cash-management results. Verizon's reported earnings were $0.3 billion in the quarter, compared with a reported loss of $2.1 billion in the second quarter 2002. SPECIAL ITEMS Second quarter 2003 special items totaled $1.6 billion, or 56 cents per share. The components were charges of: $0.9 billion, or 33 cents per share, as a result of Verizon's decision to sell its consolidated interest in Grupo Iusacell; $0.4 billion, or 16 cents per share, for severance, pension and other benefits, including costs associated with a July 10 labor arbitration ruling; and $0.2 billion, or 7 cents per share, related to other special items, such as the early redemption of debt. Excluding these items, Verizon's second-quarter earnings were $1.9 billion, or 69 cents per share. Verizon's second-quarter results reflect the reclassification of Iusacell to discontinued operations in the current and prior periods, as a result of the decision to sell Iusacell. As announced July 1, the results for Verizon's directory publishing unit since the beginning of the year are being reported using the amortization method of accounting. REVENUE GROWTH Verizon reported operating revenues of $16.8 billion for the quarter, a 0.5 percent increase from the second quarter 2002. However, last year's second quarter included $246 million in revenue generated by 1.27 million switched access lines that Verizon has since sold. Excluding the effect of these access line sales, revenues increased 2.0 percent in the second quarter 2003. Growth rates of both reported revenues and revenues excluding the effects of the access line sales include $101 million attributable to the change in directory accounting, since the amortization method more evenly distributes revenues and expenses for Verizon's directory unit this year compared with last year. Verizon News Release, page 3 Verizon Wireless' second-quarter consolidated operating revenues include a double-digit, year-over-year increase for the fourth consecutive quarter. Verizon Wireless total revenues grew 14.3 percent to $5.5 billion, from $4.8 billion in the second quarter of 2002. Service revenues grew 14.7 percent, to $5.0 billion, compared with the second quarter of 2002. Domestic Telecom reported quarterly revenues for all long-distance services of $0.9 billion, a growth rate of 17.2 percent, compared with the second quarter 2002. A significant component of this total, interLATA long-distance revenue, grew at a 27 percent rate. Domestic Telecom's overall total operating revenues declined 3.4 percent compared with second quarter 2002, to $9.9 billion in the second quarter 2003. While the mix of Verizon's consolidated revenues has shifted, the company continued to maintain margins (as defined in the accompanying financial schedules) in the second quarter 2003. Margins were 41.2 percent in this year's second quarter, compared with 41.4 percent in last year's second quarter. EXPENSES AND CASH FLOW Verizon reported operating expenses of $14.1 billion in the second quarter 2003, virtually flat compared with the second quarter 2002. On a comparable basis, operating expenses increased 4.6 percent in the second quarter 2003, driven by significantly lower pension income net of other post-retirement benefit costs. The expenses for the comparable quarter of the prior year included a $374 million net expense credit associated with pensions and post-retirement benefits, compared with a $72 million net expense credit for the second quarter 2003. Verizon's free cash flow was $3.6 billion for the first six months of 2003, compared with $2.0 billion in the same period last year. Cash from operations was $11.0 billion through the first six months of 2003, compared with $10.1 billion through the first six months of 2002. SUSTAINABLE RESULTS Verizon CEO Ivan Seidenberg said, "Our second-quarter results are strong and sustainable. This is underscored by Verizon Wireless' continued industry-leading financial and operational results, and Verizon's continued strong growth in selling bundled packages of local, long-distance and broadband services. Verizon News Release, page 4 "We have demonstrated our ability to retain share in traditional markets and capture share in new markets," Seidenberg added. "We are making efficient use of our advanced network capabilities, and combining that with a focus on customer service, innovation and operational excellence. Our cash flow continues to be excellent, and we have made the necessary investments to maintain margins and to retain and capture market share in the future." 2003 GUIDANCE Seidenberg reiterated Verizon's 2003 guidance of $2.70 to $2.80 in adjusted EPS, 0 to 2 percent comparable revenue growth, and $12.5 billion to $13.5 billion in capital expenditures. Also, Verizon is now targeting a further $3 billion to $4 billion reduction in net debt -- from a range of $49 billion to $51 billion, to $46 billion to $47 billion -- based on continued strong operational performance, the use of proceeds from non-strategic asset sales and the deconsolidation of Iusacell's $0.8 billion debt. In second quarter 2003, net debt was reduced to $48.1 billion, from $51.8 billion at year-end 2002. Total debt was $48.9 billion at the end of the second quarter 2003, reduced from $53.3 billion at year-end 2002. Verizon also announced that Verizon Wireless expects a total of more than 4 million net retail customer additions in 2003. BUSINESS SEGMENT HIGHLIGHTS DOMESTIC TELECOM (Note: Current and prior periods exclude the effects of access lines sold in 2002.) The company indicated that bargaining to renew the labor contracts that expire at midnight on Aug. 2 continues. These labor contracts affect more than 78,000 Domestic Telecom employees in Northeast and mid-Atlantic states. While the range of issues in these negotiations reflects complex marketplace realities, the company is hopeful that new contracts can be negotiated by the contract deadline. In the event an agreement is not reached on time, Verizon said it has contingency plans in place to provide the necessary customer service and operational support. Regarding second quarter 2003 highlights, Domestic Telecom reported a 36.1 percent year-over-year increase in long-distance lines served. Verizon, the nation's third largest long- Verizon News Release, page 5 distance carrier for consumers, served 14.6 million long-distance lines at the end of the second quarter 2003, an increase of 1.4 million lines in the quarter. More than 58 percent of these lines are in states where Verizon has obtained long-distance authorization over the past three and a half years. During the second quarter 2003, Verizon Freedom plans were launched for consumers in Maryland, West Virginia, California, Texas and Washington, D.C. -- and similar plans for businesses were launched in Massachusetts and New York. Verizon Freedom plans, introduced last summer, continue to 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. Nearly 24 percent of Verizon consumers now subscribe to a package of Verizon services, including either local service plus enhanced calling features or local service plus broadband, long distance or wireless services. Other Domestic Telecom second-quarter highlights include: o Billed DSL service grew to a total of 1.9 million lines, up 101,000 since last quarter. Approximately 67 percent of Verizon's 56.8 million access lines are qualified to receive DSL service. As previously announced, the company expects to qualify 80 percent of its access lines by year-end through the continued deployment of DSL technology. o Voice-grade access line equivalents (access lines plus equivalent data circuits) grew to 137.6 million, up 3.6 percent compared with the second quarter 2002. o Total revenues for high-capacity and digital-data services were $1.8 billion in the second quarter, down slightly from the year-earlier period, with increased demand for high-speed services such as ATM, Frame Relay, SONET and DSL, offset by a lessened demand for low-speed services. o Building on the company's presence in two-thirds of the nation's top 100 markets, Verizon has signed approximately 500 contracts with large-business customers as part of its Enterprise Advance initiative launched in the fourth quarter 2002. Offerings include advanced data networking, such as Gigabit Ethernet and Dense Wave Division Multiplexing, which Verizon now provides on a nationwide basis since gaining all necessary long-distance approvals earlier this year. VERIZON WIRELESS In the second quarter 2003, Verizon Wireless continued its consistent, industry-leading performance, delivering strong profitability, strong ARPU (average revenue per user) and strong Verizon News Release, page 6 customer growth in the quarter. Retail gross additions were up 3.5 percent over the prior year. The total number of customers grew 14.2 percent, while churn levels were the lowest in the company's history. The retail customer base grew 15 percent year over year, and represented more than 96 percent of the base, or 33.4 million of the company's 34.6 million total customers, at the end of the quarter. Retail net customer additions in the quarter -- up more than 10 percent over the second quarter 2002 - -- were 1.2 million of the company's approximately 1.3 million net additions. Retail churn, as well as total churn for both retail and reseller, was 1.7 percent. The retail post-pay segment -- which is more than 90 percent of the company's base -- had a churn rate of 1.4 percent for the second quarter. Other Verizon Wireless highlights include: o Average monthly service revenue per subscriber was more than $49, up 1.2 percent over the prior-year quarter and up more than $2 over the first quarter 2003. o The company's low-cost structure continued to lead the industry, as cash expense per subscriber increased only 1.2 percent over the prior-year quarter, even with the record volume of new subscribers. The percentage of operating income before depreciation and amortization, divided by service revenues, remained strong at 38.7 percent. o Quarterly operating income before depreciation and amortization increased 14.5 percent year over year to $1.9 billion. o Virtually all of the company's national network, the most extensive in the country, is now equipped with Express Network 1XRTT service, providing higher data speeds and improved efficiency of spectrum use to accommodate growth in overall usage as well as in popular data services. The network now is poised for the company's launch of EVDO, which will enable the next generation of higher data speeds, in two cities this fall. o Demand for the company's data and text services continued to build in the quarter. Text messaging grew to more than 300 million billed text messages a month, and 1.4 billion in the first half of this year. Usage on the company's Express Network has significantly increased over the preceding quarter. And the company's Get It Now(SM) BREW-based downloadable ringtones, games and exclusive content grew to 2.5 million revenue-generating downloads a month and 170 unique applications. o The company continued to strengthen its position in the business market segment and now serves 70 percent of Fortune 100 companies and half of the Fortune 500, with nearly 25 percent of the wireless business market share. Driving this growth is the expanding suite of Wireless Office services launched earlier this year for voice tools, data access and Verizon News Release, page 7 customized solutions for the latest PDA, laptop and Blackberry devices on the company's national 1XRTT Express Network. o The company launched its easy-to-use picture messaging service for sending photos, with text and voice recordings added, to other Verizon Wireless handsets, or to any e-mail address. The service is available on the company's LG VX 6000 handset, one of the only camera phones in the market with a zoom control feature. o Leading the industry on the issue of Wireless Local Number Portability (WLNP), the company announced plans for consumer-friendly porting of phone numbers when WLNP takes effect in November. The company called on the rest of the industry to adopt its plan and the Federal Communications Commission to issue its stamp of approval. 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) revenues for the second quarter 2003 increased 12.1 percent compared with the same period last year, and operating income before depreciation and amortization for the second quarter 2003 increased 15 percent over 2002. These growth rates primarily reflect the accounting change mentioned above, as well as VIS' commitment to cost containment through process improvement and system consolidation. o VIS' electronic product, SuperPages.com(TM), continues to achieve strong domestic growth, as demonstrated by a 37 percent increase in revenue and a 25 percent increase in searches, when comparing the second quarter 2003 with the second quarter 2002. INTERNATIONAL o Second-quarter revenues were $509 million, compared with $570 million in the second quarter 2002. The revenue decline was largely the result of declining foreign exchange rates in the Dominican Republic. o Verizon continued to see strong International wireless subscriber growth, as the total number of wireless subscribers served by Verizon's International investments increased nearly 3 million compared with second quarter 2002, representing a 10.1 percent growth rate. Verizon News Release, page 8 A Fortune 10 company, Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services. Verizon companies are the largest providers of wireline and wireless communications in the United States, with 137.6 million access line equivalents and 34.6 million Verizon Wireless customers. Verizon is the third largest long-distance carrier for U.S. consumers, with 14.6 million long-distance lines, and the company is also the largest directory publisher in the world, as measured by directory titles and circulation. With approximately $67 billion in annual revenues and 221,000 employees, Verizon's global presence extends to the Americas, Europe and Asia. For more information on Verizon, 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 or labor conditions, including 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. - -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. CONSOLIDATED STATEMENTS OF INCOME - --------------------------------------------------------------------------------
(dollars in millions, except per share amounts) 3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change - ----------------------------------------- ------------ ------------ -------- ------------ ------------ -------- OPERATING REVENUES $ 16,829 $ 16,752 .5 $ 33,319 $ 33,037 .9 OPERATING EXPENSES Cost of services and sales 5,042 4,951 1.8 10,166 9,760 4.2 Selling, general & administrative expense 5,673 5,793 (2.1) 9,965 10,691 (6.8) Depreciation and amortization expense 3,384 3,322 1.9 6,751 6,608 2.2 Sales of assets, net -- -- -- -- (220) (100.0) ----------- ---------- ---------- ----------- TOTAL OPERATING EXPENSES 14,099 14,066 .2 26,882 26,839 .2 ----------- ---------- ---------- ----------- OPERATING INCOME 2,730 2,686 1.6 6,437 6,198 3.9 Income (loss) from unconsolidated businesses 227 (3,359) * 394 (4,903) * Other income and (expense), net (46) 60 * 11 105 (89.5) Interest expense (692) (769) (10.0) (1,447) (1,556) (7.0) Minority interest (380) (372) 2.2 (722) (633) 14.1 ----------- ---------- ---------- ----------- INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,839 (1,754) * 4,673 (789) * Provision for income taxes (573) (323) 77.4 (1,497) (1,282) 16.8 ----------- ---------- ---------- ----------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,266 (2,077) * 3,176 (2,071) * DISCONTINUED OPERATIONS Loss from operations of Iusacell (952) (35) * (957) (42) * Income tax benefit (provision) 24 (3) * 22 (7) * ----------- ---------- ---------- ----------- Loss on discontinued operations (928) (38) * (935) (49) * CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- -- -- 503 (496) * ----------- ---------- ---------- ----------- NET INCOME (LOSS) $ 338 $ (2,115) * $ 2,744 $ (2,616) * =========== ========== ========== =========== BASIC EARNINGS (LOSS) PER SHARE $ .12 $ (.78) * $ 1.00 $ (.96) * Weighted average number of common shares (in millions) 2,754 2,726 2,751 2,723 DILUTED EARNINGS (LOSS) PER SHARE(1) $ .12 $ (.78) * $ .99 $ (.96) * Weighted average number of common shares-assuming dilution (in millions) 2,786 2,726 2,783 2,723
FOOTNOTES: (1) Diluted Earnings (Loss) per Share include income related to share dilution (exchangeable equity interests) of $4 million and $9 million for the second quarter and year-to-date 2003 respectively, and the dilutive effect of shares issuable under our stock-based compensation plans and exchangeable equity interests, which represent the only potential dilution. There is no impact of diluted securities in the second quarter and year-to-date of 2002 since a net loss from continuing operations was reported. 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. 3 Mos. 6 Mos. 6 Mos. Ended Ended Ended Ended Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change - ------------------------------------------------------ -------- -------- -------- -------- -------- -------- OPERATING REVENUES(1) Domestic Telecom $ 9,905 $ 10,254 (3.4) $ 19,846 $ 20,505 (3.2) Domestic Wireless 5,477 4,791 14.3 10,563 9,221 14.6 Information Services 1,049 936 12.1 2,070 1,739 19.0 International 509 570 (10.7) 1,026 1,132 (9.4) Other (111) (45) 146.7 (186) (47) * -------- -------- -------- -------- TOTAL OPERATING REVENUES 16,829 16,506 2.0 33,319 32,550 2.4 -------- -------- -------- -------- OPERATING EXPENSES(1) Cost of services and sales 5,042 4,873 3.5 10,166 9,621 5.7 Selling, general & administrative expense 4,779 4,427 8.0 9,071 8,753 3.6 Depreciation and amortization expense 3,384 3,322 1.9 6,751 6,608 2.2 -------- -------- -------- -------- TOTAL OPERATING EXPENSES 13,205 12,622 4.6 25,988 24,982 4.0 -------- -------- -------- -------- OPERATING INCOME 3,624 3,884 (6.7) 7,331 7,568 (3.1) Operating income impact of operations sold (1) -- 165 (100.0) -- 327 (100.0) Income from unconsolidated businesses 227 241 (5.8) 394 386 2.1 Other income and (expense), net 15 64 (76.6) 72 127 (43.3) Interest expense (692) (769) (10.0) (1,447) (1,556) (7.0) Minority interest (380) (396) (4.0) (722) (669) 7.9 -------- -------- -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES AND DISCONTINUED OPERATIONS 2,794 3,189 (12.4) 5,628 6,183 (9.0) Provision for income taxes (889) (1,056) (15.8) (1,813) (2,070) (12.4) -------- -------- -------- -------- INCOME BEFORE DISCONTINUED OPERATIONS 1,905 2,133 (10.7) 3,815 4,113 (7.2) DISCONTINUED OPERATIONS Income (loss) from operations of Iusacell 6 (35) * 1 (42) * Provision for income taxes (2) (3) (33.3) (4) (7) (42.9) -------- -------- -------- -------- Income (loss) on discontinued operations 4 (38) * (3) (49) (93.9) -------- -------- -------- -------- NET INCOME BEFORE SPECIAL ITEMS $ 1,909 $ 2,095 (8.9) $ 3,812 $ 4,064 (6.2) ======== ======== ======== ======== BASIC EARNINGS PER SHARE $ .69 $ .77 (10.4) $ 1.39 $ 1.49 (6.7) Weighted average number of common shares (in millions) 2,754 2,726 2,751 2,723 DILUTED ADJUSTED EARNINGS PER SHARE $ .69 $ .77 (10.4) $ 1.37 $ 1.49 (8.1) Weighted average number of common shares-assuming dilution (in millions) 2,786 2,726 2,783 2,723
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. 3 Mos. 6 Mos. 6 Mos. Ended Ended Ended Ended 6/30/03 6/30/02 6/30/03 6/30/02 ------- ------- ------- ------- Revenues $ -- $ 246 $ -- $ 487 Expenses $ -- $ 81 $ -- $ 160 * Not meaningful
- -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. CONSOLIDATED STATEMENTS OF INCOME - RECONCILIATIONS - --------------------------------------------------------------------------------
(dollars in millions, except per share amounts) Special and Non-Recurring Items --------------------------------------------- 3 Mos. Ended Severance, Lease 3 Mos. Ended 6/30/03 Pension and Impairment 6/30/03 Reported Iusacell Benefit and Other Before Unaudited (GAAP) Charge Charges Special Charges Special Items - -------------------------------------------------- ------------ ------------ -------------- --------------- --------------- OPERATING REVENUES $ 16,829 $ -- $ -- $ -- $ 16,829 OPERATING EXPENSES Cost of services and sales 5,042 -- -- -- 5,042 Selling, general & administrative expense 5,673 -- (697) (197) 4,779 Depreciation and amortization expense 3,384 -- -- -- 3,384 Sales of assets, net -- -- -- -- -- ------------ ------------ -------------- --------------- --------------- TOTAL OPERATING EXPENSES 14,099 -- (697) (197) 13,205 ------------ ------------ -------------- --------------- --------------- OPERATING INCOME 2,730 -- 697 197 3,624 Operating income impact of operations sold -- -- -- -- -- Income from unconsolidated businesses 227 -- -- -- 227 Other income and (expense), net (46) -- -- 61 15 Interest expense (692) -- -- -- (692) Minority interest (380) -- -- -- (380) ------------ ------------ -------------- --------------- --------------- INCOME BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,839 -- 697 258 2,794 Provision for income taxes (573) -- (262) (54) (889) ------------ ------------ -------------- --------------- --------------- INCOME BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,266 -- 435 204 1,905 DISCONTINUED OPERATIONS Loss from operations of Iusacell (952) 957 1 -- 6 Income tax benefit (provision) 24 (26) -- -- (2) ------------ ------------ -------------- --------------- --------------- Loss on discontinued operations (928) 931 1 -- 4 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- -- -- -- -- ------------ ------------ -------------- --------------- --------------- NET INCOME $ 338 $ 931 $ 436 $ 204 $ 1,909 ============ ============ ============== =============== =============== BASIC EARNINGS PER COMMON SHARE(1) $ .12 $ .34 $ .16 $ .07 $ .69 DILUTED EARNINGS PER COMMON SHARE(1) $ .12 $ .33 $ .16 $ .07 $ .69
(dollars in millions, except per share amounts) Special and Non-Recurring Items ----------------------------------------- 3 Mos. Ended 6/30/02 Impact of Investment - Reported Transition Operations Related Unaudited (GAAP) Costs Sold Charges - --------------------------------------------------- ------------- ----------- ----------- ------------- OPERATING REVENUES $ 16,752 $ -- $ (246) $ -- OPERATING EXPENSES Cost of services and sales 4,951 (41) (37) -- Selling, general & administrative expense 5,793 (61) (44) -- Depreciation and amortization expense 3,322 -- -- -- Sales of assets, net -- -- -- -- ------------- ----------- ----------- ------------- TOTAL OPERATING EXPENSES 14,066 (102) (81) -- ------------- ----------- ----------- ------------- OPERATING INCOME 2,686 102 (165) -- Operating income impact of operations sold -- -- 165 -- Income from unconsolidated businesses (3,359) -- -- 3,558 Other income and (expense), net 60 -- -- -- Interest expense (769) -- -- -- Minority interest (372) (10) -- -- ------------- ----------- ----------- ------------- INCOME BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1,754) 92 -- 3,558 Provision for income taxes (323) (35) -- (253) ------------- ----------- ----------- ------------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,077) 57 -- 3,305 DISCONTINUED OPERATIONS Loss from operations of Iusacell (35) -- -- -- Income tax provision (3) -- -- -- ------------- ----------- ----------- ------------- Loss on discontinued operations (38) -- -- -- CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- -- -- -- ------------- ----------- ----------- ------------- NET INCOME (LOSS) $ (2,115) $ 57 $ -- $ 3,305 ============= =========== =========== ============= BASIC EARNINGS (LOSS) PER COMMON SHARE (1) $ (.78) $ .02 $ -- $ 1.21 DILUTED EARNINGS (LOSS) PER COMMON SHARE (1) $ (.78) $ .02 $ -- $ 1.21 (dollars in millions, except per share amounts) Special and Non-Recurring Items ------------------------------------------ Severance, WorldCom 3 Mos. Ended Pension and Exposure and 6/30/02 Benefit NorthPoint Other Special Before Unaudited Charges Settlement Items Special Items - --------------------------------------------------- ------------ ----------- ------------- ------------- OPERATING REVENUES $ -- $ -- $ -- $ 16,506 OPERATING EXPENSES Cost of services and sales -- -- -- 4,873 Selling, general & administrative expense (692) (175) (394) 4,427 Depreciation and amortization expense -- -- -- 3,322 Sales of assets, net -- -- -- -- ------------ ----------- ------------- ------------- TOTAL OPERATING EXPENSES (692) (175) (394) 12,622 ------------ ----------- ------------- ------------- OPERATING INCOME 692 175 394 3,884 Operating income impact of operations sold -- -- -- 165 Income from unconsolidated businesses 42 -- -- 241 Other income and (expense), net -- -- 4 64 Interest expense -- -- -- (769) Minority interest (14) -- -- (396) ------------ ----------- ------------- ------------- INCOME BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 720 175 398 3,189 Provision for income taxes (245) (61) (139) (1,056) ------------ ----------- ------------- ------------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 475 114 259 2,133 DISCONTINUED OPERATIONS Loss from operations of Iusacell -- -- -- (35) Income tax provision -- -- -- (3) ------------ ----------- ------------- ------------- Loss on discontinued operations -- -- -- (38) CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- -- -- -- ------------ ----------- ------------- ------------- NET INCOME (LOSS) $ 475 $ 114 $ 259 $ 2,095 ============ =========== ============= ============= BASIC EARNINGS (LOSS) PER COMMON SHARE (1) $ .17 $ .04 $ .10 $ .77 DILUTED EARNINGS (LOSS) PER COMMON SHARE (1) $ .17 $ .04 $ .10 $ .77 FOOTNOTE: (1) EPS totals may not add across due to rounding.
- -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. CONSOLIDATED STATEMENTS OF INCOME - RECONCILIATIONS - --------------------------------------------------------------------------------
(dollars in millions, except per share amounts) Special and Non-Recurring Items ------------------------------------------------------------ 6 Mos. Ended Severance, Lease Cumulative 6 Mos. Ended 6/30/03 Pension and Impairment and Effect of 6/30/03 Reported Benefit Other Special Accounting Before Special Unaudited (GAAP) Iusacell Charge Charges Charges Change Items - --------------------------------------- ------------ --------------- ----------- -------------- ---------- -------------- OPERATING REVENUES $ 33,319 $ -- $ -- $ -- $ -- $ 33,319 OPERATING EXPENSES Cost of services and sales 10,166 -- -- -- -- 10,166 Selling, general & administrative expense 9,965 -- (697) (197) -- 9,071 Depreciation and amortization expense 6,751 -- -- -- -- 6,751 Sales of assets, net -- -- -- -- -- -- --------- ------- --------- --------- --------- --------- TOTAL OPERATING EXPENSES 26,882 -- (697) (197) -- 25,988 --------- ------- --------- --------- --------- --------- OPERATING INCOME 6,437 -- 697 197 -- 7,331 Operating income impact of operations sold -- -- -- -- -- -- Income from unconsolidated businesses 394 -- -- -- -- 394 Other income and (expense), net 11 -- -- 61 -- 72 Interest expense (1,447) -- -- -- -- (1,447) Minority interest (722) -- -- -- -- (722) --------- ------- --------- --------- --------- --------- INCOME BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 4,673 -- 697 258 -- 5,628 Provision for income taxes (1,497) -- (262) (54) -- (1,813) --------- ------- --------- --------- --------- --------- INCOME BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 3,176 -- 435 204 -- 3,815 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) $ 2,744 $ 931 $ 436 $ 204 $ (503) $ 3,812 ========= ======= ========= ========= ========= ========= BASIC EARNINGS PER COMMON SHARE(1) $ 1.00 $ .34 $ .16 $ .07 $ (.18) $ 1.39 DILUTED EARNINGS PER COMMON SHARE(1) $ .99 $ .33 $ .16 $ .07 $ (.18) $ 1.37
(dollars in millions, except per share amounts) Special and Non-Recurring Items --------------------------------------------------------------------------- 6 Mos. Ended 6/30/03 Sales Impact of Investment- Reported of Assets, Transition Operations Related Unaudited (GAAP) Net Costs Sold Charges - --------------------------------- ------------- ---------- ---------- ---------- ------------ OPERATING REVENUES $ 33,037 $ -- $ -- $ (487) $ -- OPERATING EXPENSES Cost of services and sales 9,760 -- (51) (88) -- Selling, general & administrative expense 10,691 -- (147) (72) (458) Depreciation and amortization expense 6,608 -- -- -- -- Sales of assets, net (220) 220 -- -- -- ---------- ---------- ---------- ---------- ---------- TOTAL OPERATING EXPENSES 26,839 220 (198) (160) (458) ---------- ---------- ---------- ---------- ---------- OPERATING INCOME 6,198 (220) 198 (327) 458 Operating income impact of operations sold -- -- -- 327 -- Income from unconsolidated businesses (4,903) -- -- -- 5,247 Other income and (expense), net 105 -- -- -- -- Interest expense (1,556) -- -- -- -- Minority interest (633) -- (22) -- -- ---------- ---------- ---------- ---------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (789) (220) 176 -- 5,705 Provision for income taxes (1,282) 104 (67) -- (374) ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,071) (116) 109 -- 5,331 DISCONTINUED OPERATIONS Loss from operations of Iusacell (42) -- -- -- -- Income tax provision (7) -- -- -- -- ---------- ---------- ---------- ---------- ---------- Loss on discontinued operations (49) -- -- -- -- CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX (496) -- -- -- -- ---------- ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ (2,616) $ (116) $ 109 $ -- $ 5,331 ========== ========== ========== ========== ========== BASIC EARNINGS (LOSS) PER COMMON SHARE(1) $ (.96) $ (.04) $ .04 $ -- $ 1.96 DILUTED EARNINGS (LOSS) PER COMMON SHARE(1) $ (.96) $ (.04) $ .04 $ -- $ 1.96 (dollars in millions, except per share amounts) Special and Non-Recurring Items ----------------------------------------------------------------------------- Severance, WorldCom Cumulative 6 Mos. Ended Pension and Exposure and Effect 6/30/02 Benefit NorthPoint Other Special of Accounting Before Unaudited Charges Settlement Items Change Special Items - ---------------------------------- ----------- ------------ ------------- ------------- ------------- OPERATING REVENUES $ -- $ -- $ -- $ -- $ 32,550 OPERATING EXPENSES Cost of services and sales -- -- -- -- 9,621 Selling, general & administrative expense (692) (175) (394) -- 8,753 Depreciation and amortization expense -- -- -- -- 6,608 Sales of assets, net -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- TOTAL OPERATING EXPENSES (692) (175) (394) -- 24,982 ---------- ---------- ---------- ---------- ---------- OPERATING INCOME 692 175 394 -- 7,568 Operating income impact of operations sold -- -- -- -- 327 Income from unconsolidated businesses 42 -- -- -- 386 Other income and (expense), net -- -- 22 -- 127 Interest expense -- -- -- -- (1,556) Minority interest (14) -- -- -- (669) ---------- ---------- ---------- ---------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 720 175 416 -- 6,183 Provision for income taxes (245) (61) (145) -- (2,070) ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 475 114 271 -- 4,113 DISCONTINUED OPERATIONS Loss from operations of Iusacell -- -- -- -- (42) Income tax provision -- -- -- -- (7) ---------- ---------- ---------- ---------- ---------- Loss on discontinued operations -- -- -- -- (49) CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- -- -- 496 -- ---------- ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ 475 $ 114 $ 271 $ 496 $ 4,064 ========== ========== ========== ========== ========== BASIC EARNINGS (LOSS) PER COMMON SHARE(1) $ .17 $ .04 $ .10 $ .18 $ 1.49 DILUTED EARNINGS (LOSS) PER COMMON SHARE(1) $ .17 $ .04 $ .10 $ .18 $ 1.49
FOOTNOTE: (1) EPS totals may not add across due to rounding. - -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. OTHER RECONCILIATIONS - --------------------------------------------------------------------------------
(dollars in millions, except per share amounts) 3 Mos. Ended 3 Mos. Ended Unaudited 6/30/03 6/30/02 - --------------------------------------------------------------------- ------------ ------------ ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION MARGIN Net income before special items $ 1,909 $ 2,095 Discontinued operations (4) 38 Plus: Income taxes 889 1,056 Minority interest 380 396 Interest expense 692 769 Other income and (expense), net (15) (64) Income from unconsolidated businesses (227) (241) Operating income impact of operations sold -- (165) ---------- ---------- Operating income before special items 3,624 3,884 Depreciation and amortization 3,384 3,322 ---------- ---------- Adjusted operating income before depreciation and amortization 7,008 7,206 Less: Net pension and OPEB credit 72 374 ---------- ---------- Adjusted operating income before depreciation and amortization excluding pension and OPEB $ 6,936 $ 6,832 Revenues before special items $ 16,829 $ 16,506 Adjusted operating income before depreciation and amortization margin 41.2% 41.4%
6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 - --------------------------------------------------------------------- ------------ ------------ FREE CASH FLOW Cash from operating activities $ 10,969 $ 10,095 Less: Capital expenditures (including network and non-network software) (5,294) (5,980) Dividends paid (2,115) (2,096) ---------- ---------- $ 3,560 $ 2,019 ========== ==========
Unaudited 6/30/03 12/31/02 - --------------------------------------------------------------------- ------------ ------------ NET DEBT Short-term debt $ 10,083 $ 9,267 Long-term debt 38,846 44,003 Less: Cash and cash equivalents (820) (1,422) ---------- ---------- $ 48,109 $ 51,848 ========== ==========
3 Mos. Ended 3 Mos. Ended Unaudited 6/30/03 6/30/02 - --------------------------------------------------------------------- ------------ ------------ WIRELESS CASH EXPENSE PER SUBSCRIBER PER MONTH Cost of services and sales $ 1,567 $ 1,328 Selling, general and administrative expense 1,973 1,771 Less: Equipment and other revenue (466) (422) ---------- ---------- Cash expense 3,074 2,677 Cumulative average subscribers (millions) 101.8 89.8 ---------- ---------- Cash expense per subscriber $ 30.19 $ 29.82 ========== ==========
Unaudited Year Ended 12/31/03 - --------------------------------------------------------------------- ---------------------------------- 2003 REVENUES 2002 Revenues - GAAP $ 67,304 Impact of access lines sold 623 ---------- $ 66,681 ========== 2003 Estimated Revenues - GAAP $ 66,681 to $ 68,014 ========== ========== Growth 0% to 2% ========== ========== 2003 DILUTED EARNINGS PER SHARE 2003 Estimated EPS - GAAP $ 2.32 to $ 2.42 Iusacell charge .33 to .33 Severance, pension and benefit charges .16 to .16 Lease impairment and other special charges .07 to .07 Cumulative effect of accounting change (.18) to (.18) ---------- ---------- 2003 Estimated EPS - Before Special Items $ 2.70 to $ 2.80 ========== ==========
FOOTNOTES: A reconciliation of net debt at year-end 2003 is not available as there is no current estimate of year-end cash and cash equivalents or components of debt. (1) EPS totals may not add due to rounding. - -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. SELECTED FINANCIAL AND OPERATING STATISTICS - --------------------------------------------------------------------------------
(dollars in millions, except per share amounts) 3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 6/30/03 6/30/02 - ------------------------------------------- ------------ ------------ ------------ ------------ Debt to debt and shareowners' equity ratio-end of period 58.8% 68.0% 58.8% 68.0% Book value per common share $ 12.42 $ 10.50 $ 12.42 $ 10.50 Cash dividends declared per common share $ .385 $ .385 $ .770 $ .770 Common shares outstanding (in millions) End of period 2,756 2,728 2,756 2,728 Capital expenditures (including capitalized network and non-network software) Domestic Telecom $ 1,733 $ 1,962 $ 3,019 $ 3,619 Domestic Wireless 989 1,269 2,096 2,088 Information Services 24 60 42 102 International 75 98 123 151 Other 7 11 14 20 --------- --------- --------- --------- Total $ 2,828 $ 3,400 $ 5,294 $ 5,980 ========= ========= ========= ========= Total employees(1) 221,139 237,140 221,139 237,140 FOOTNOTE: (1) Prior period adjusted to reflect a comparable figure.
- -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------
(dollars in millions) Unaudited 6/30/03 12/31/02 $ Change - ---------------------------------------- --------- --------- --------- ASSETS Current assets Cash and cash equivalents $ 820 $ 1,422 $ (602) Short-term investments 906 2,042 (1,136) Accounts receivable, net 10,077 12,496 (2,419) Inventories 1,245 1,497 (252) Assets of discontinued operations 986 1,305 (319) Prepaid expenses and other 4,497 3,331 1,166 --------- --------- --------- Total current assets 18,531 22,093 (3,562) --------- --------- --------- Plant, property and equipment 179,184 176,838 2,346 Less accumulated depreciation 103,413 103,080 333 --------- --------- --------- 75,771 73,758 2,013 --------- --------- --------- Investments in unconsolidated businesses 5,404 4,986 418 Intangible assets 47,026 46,339 687 Other assets 20,894 20,292 602 --------- --------- --------- TOTAL ASSETS $ 167,626 $ 167,468 $ 158 ========= ========= ========= LIABILITIES AND SHAREOWNERS' INVESTMENT Current liabilities Debt maturing within one year $ 10,083 $ 9,267 $ 816 Accounts payable and accrued liabilities 12,573 12,642 (69) Liabilities of discontinued operations 1,036 1,007 29 Other 5,640 5,013 627 --------- --------- --------- Total current liabilities 29,332 27,929 1,403 --------- --------- --------- Long-term debt 38,846 44,003 (5,157) Employee benefit obligations 15,543 15,389 154 Deferred income taxes 21,821 19,467 2,354 Other liabilities 3,804 4,007 (203) Minority interest 24,055 24,057 (2) Shareowners' investment Common stock 276 275 1 Contributed capital 25,023 24,685 338 Reinvested earnings 11,200 10,536 664 Accumulated other comprehensive loss (1,757) (2,110) 353 --------- --------- --------- 34,742 33,386 1,356 Less common stock in treasury, at cost 115 218 (103) Less deferred compensation - employee stock ownership plans and other 402 552 (150) --------- --------- --------- Total shareowners' investment 34,225 32,616 1,609 --------- --------- --------- TOTAL LIABILITIES AND SHAREOWNERS' INVESTMENT $ 167,626 $ 167,468 $ 158 ========= ========= =========
- -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
(dollars in millions) 6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 $ Change - --------------------------------------------------------------- ------------ ------------ -------- CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before discontinued operations and cumulative effect of accounting change $ 3,176 $ (2,071) $ 5,247 Adjustments to reconcile income (loss) before discontinued operations and cumulative effect of accounting change to net cash provided by operating activities: Depreciation and amortization expense 6,751 6,608 143 Sales of assets, net -- (220) 220 Employee retirement benefits 170 (726) 896 Deferred income taxes 752 784 (32) Provision for uncollectible accounts 904 1,462 (558) (Income) loss from unconsolidated businesses (394) 4,903 (5,297) Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses (134) (801) 667 Other, net (256) 156 (412) -------- -------- -------- Net cash provided by operating activities 10,969 10,095 874 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (including capitalized network and non-network software) (5,294) (5,980) 686 Acquisitions, net of cash acquired, and investments (1,033) (993) (40) Proceeds from disposition of businesses -- 770 (770) Proceeds from spectrum payment refund -- 1,479 (1,479) Net change in short-term investments 1,145 1,104 41 Other, net 98 129 (31) -------- -------- -------- Net cash used in investing activities (5,084) (3,491) (1,593) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term borrowings 2,815 5,554 (2,739) Repayments of long-term borrowings and capital lease obligations (8,573) (3,920) (4,653) Increase (decrease) in short-term obligations, excluding current maturities 1,109 (4,623) 5,732 Dividends paid (2,115) (2,096) (19) Proceeds from sale of common stock 471 424 47 Other, net (194) 66 (260) -------- -------- -------- Net cash used in financing activities (6,487) (4,595) (1,892) -------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (602) 2,009 (2,611) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,422 932 490 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 820 $ 2,941 $ (2,121) ======== ======== ========
- -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. DOMESTIC TELECOM - SELECTED FINANCIAL RESULTS - --------------------------------------------------------------------------------
(dollars in millions) 3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change - ---------------------------------------- ------------ ------------ -------- ------------ ------------ -------- OPERATING REVENUES Local services $ 4,903 $ 5,111 (4.1) $ 9,803 $10,227 (4.1) Network access services 3,229 3,347 (3.5) 6,553 6,726 (2.6) Long distance services 901 769 17.2 1,782 1,540 15.7 Other services 872 1,027 (15.1) 1,708 2,012 (15.1) ------- ------- ------- ------- TOTAL OPERATING REVENUES 9,905 10,254 (3.4) 19,846 20,505 (3.2) ------- ------- ------- ------- OPERATING EXPENSES Cost of services and sales 3,413 3,340 2.2 6,936 6,692 3.6 Selling, general & administrative expense 2,253 2,204 2.2 4,253 4,376 (2.8) Depreciation and amortization expense 2,300 2,400 (4.2) 4,631 4,771 (2.9) ------- ------- ------- ------- TOTAL OPERATING EXPENSES 7,966 7,944 .3 15,820 15,839 (.1) ------- ------- ------- ------- OPERATING INCOME $ 1,939 $ 2,310 (16.1) $ 4,026 $ 4,666 (13.7) OPERATING INCOME MARGIN 19.6% 22.5% 20.3% 22.8% OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION $ 4,239 $ 4,710 (10.0) $ 8,657 $ 9,437 (8.3) OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION MARGIN 42.8% 45.9% 43.6% 46.0% SEGMENT INCOME $ 915 $ 1,124 (18.6) $ 1,922 $ 2,281 (15.7)
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. Operating income before depreciation and amortization margin is calculated by dividing operating income before depreciation and amortization by total operating revenues. Certain reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results. - -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. DOMESTIC TELECOM - SELECTED OPERATING STATISTICS - --------------------------------------------------------------------------------
(dollars in millions) 3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change - -------------------------------------- ------------ ------------ -------- ------------ ------------ -------- Switched access lines in service (000) Residence 36,885 38,065 (3.1) 36,885 38,065 (3.1) Business 19,389 20,330 (4.6) 19,389 20,330 (4.6) Public 487 557 (12.6) 487 557 (12.6) ------- ------- ------- -------- Total 56,761 58,952 (3.7) 56,761 58,952 (3.7) Special DS0 equivalents 80,855 73,840 9.5 80,855 73,840 9.5 ------- ------- ------- -------- Total voice grade equivalents (000) 137,616 132,792 3.6 137,616 132,792 3.6 ------- ------- ------- -------- Resale & UNE-P lines (000) 4,999 3,678 35.9 4,999 3,678 35.9 Minutes of use from Carriers and CLECs (in millions) 59,966 65,167 (8.0) 120,843 130,928 (7.7) Long distance lines (000) 14,606 10,735 36.1 14,606 10,735 36.1 High capacity and digital data revenues ($ in millions) Data transport $ 1,647 $ 1,656 (.5) $ 3,318 $ 3,307 .3 Data solutions 164 170 (3.5) 299 333 (10.2) ------- ------- ------- -------- Total revenues $ 1,811 $ 1,826 (.8) $ 3,617 $ 3,640 (.6) ------- ------- ------- --------
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 6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change - ------------------------------------------- ------------ ------------ -------- ------------ ------------ -------- REVENUES Service revenues $ 5,011 $ 4,369 14.7 $ 9,671 $ 8,421 14.8 Equipment and other 466 422 10.4 892 800 11.5 ------ ------ ------ ------ TOTAL REVENUES 5,477 4,791 14.3 10,563 9,221 14.6 ------ ------ ------ ------ OPERATING EXPENSES Cost of services and sales 1,567 1,328 18.0 3,006 2,574 16.8 Selling, general & administrative expense 1,973 1,771 11.4 3,839 3,400 12.9 Depreciation and amortization expense 956 785 21.8 1,863 1,566 19.0 ------ ------ ------ ------ TOTAL OPERATING EXPENSES 4,496 3,884 15.8 8,708 7,540 15.5 ------ ------ ------ ------ OPERATING INCOME $ 981 $ 907 8.2 $ 1,855 $ 1,681 10.4 OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION $ 1,937 $ 1,692 14.5 $ 3,718 $ 3,247 14.5 OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION MARGIN 38.7% 38.7% 38.4% 38.6% SEGMENT INCOME $ 257 $ 240 7.1 $ 475 $ 437 8.7 SELECTED OPERATING STATISTICS Subscribers(000) 34,619 30,307 14.2 34,619 30,307 14.2 Penetration 14.8% 13.6% 14.8% 13.6% Subscriber net adds in period(1)(000) 1,295 723 79.1 2,128 909 134.1 Total churn rate, including prepaid 1.7% 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. Operating income before depreciation and amortization margin is calculated by dividing operating income before depreciation and amortization by service revenues. Certain reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results. (1) Includes acquisitions of 68,000 subscribers in first quarter 2002 and 6,000 subscribers in first quarter 2003.
- -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. INFORMATION SERVICES - SELECTED FINANCIAL RESULTS - --------------------------------------------------------------------------------
(dollars in millions) 3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change - ---------------------------------------------- ------------ ------------ -------- ------------ ------------ -------- OPERATING REVENUES $1,049 $ 936 12.1 $2,070 $1,739 19.0 OPERATING EXPENSES Cost of services and sales 160 152 5.3 314 289 8.7 Selling, general & administrative expense 361 325 11.1 705 622 13.3 Depreciation and amortization expense 23 16 43.8 44 31 41.9 ------ ------ ------ ------ TOTAL OPERATING EXPENSES 544 493 10.3 1,063 942 12.8 ------ ------ ------ ------ OPERATING INCOME $ 505 $ 443 14.0 $1,007 $ 797 26.3 OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION $ 528 $ 459 15.0 $1,051 $ 828 26.9 OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION MARGIN 50.3% 49.0% 50.8% 47.6% SEGMENT INCOME $ 299 $ 260 15.0 $ 599 $ 473 26.6
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. Operating income before depreciation and amortization margin is calculated by dividing operating income before depreciation and amortization by operating revenues. - -------------------------------------------------------------------------------- VERIZON COMMUNICATIONS INC. INTERNATIONAL - SELECTED FINANCIAL RESULTS - --------------------------------------------------------------------------------
(dollars in millions) 3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change - ---------------------------------------------- ------------ ------------ -------- ------------ ------------ -------- OPERATING REVENUES $ 509 $ 570 (10.7) $1,026 $1,132 (9.4) OPERATING EXPENSES Cost of services and sales 140 149 (6.0) 278 299 (7.0) Selling, general & administrative expense 195 170 14.7 351 356 (1.4) Depreciation and amortization expense 85 96 (11.5) 172 191 (9.9) ------ ------ ------ ------ TOTAL OPERATING EXPENSES 420 415 1.2 801 846 (5.3) ------ ------ ------ ------ OPERATING INCOME $ 89 $ 155 (42.6) $ 225 $ 286 (21.3) OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION $ 174 $ 251 (30.7) $ 397 $ 477 (16.8) OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION MARGIN 34.2% 44.0% 38.7% 42.1% INCOME FROM UNCONSOLIDATED BUSINESSES $ 265 $ 275 (3.6) $ 481 $ 451 6.7 SEGMENT INCOME $ 314 $ 302 4.0 $ 580 $ 533 8.8
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. Operating income before depreciation and amortization margin is calculated by dividing operating income before depreciation and amortization by operating revenues. -----END PRIVACY-ENHANCED MESSAGE-----