-----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, IMJxxzUWqG/eaE6YhDwlzF0AF3nikwOpl9Na3QzKhpbEfdAmFI4cGRt08PptwVB0 vToPeZK3U2Df0a0xys+TPg== 0000950134-03-014059.txt : 20031028 0000950134-03-014059.hdr.sgml : 20031028 20031028102933 ACCESSION NUMBER: 0000950134-03-014059 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031028 ITEM INFORMATION: FILED AS OF DATE: 20031028 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: 03959848 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 d09936e8vk.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: 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.
EX-99 3 d09936exv99.txt PRESS RELEASE 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. Verizon News Release, page 3 CUSTOMER ADDITIONS AND MARKETING SUCCESS 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. - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 ========== ==========
-----END PRIVACY-ENHANCED MESSAGE-----