EX-99 2 dex99.htm PRESS RELEASE AND FINANCIAL TABLES, DATED OCTOBER 29, 2007 Press Release and Financial tables, dated October 29, 2007

Exhibit 99

NEWS RELEASE

LOGO

 

FOR IMMEDIATE RELEASE   
October 29, 2007    Media contacts:
   Peter Thonis
  

212-395-2355

peter.thonis@verizon.com

   Bob Varettoni
   908-559-6388
   robert.a.varettoni@verizon.com

Verizon Reports Continued Success in 3Q 2007

Results Reflect Another Quarter of Strong Wireless and FiOS Customer Growth

3Q 2007 HIGHLIGHTS

Consolidated Results

 

•  

44 cents in EPS and 63 cents in adjusted EPS (non-GAAP), compared with EPS for the same quarter last year of 53 cents and 55 cents, respectively, before discontinued operations.

 

•  

$23.8 billion in revenues, up 5.8 percent; up 6.0 percent on an adjusted basis (non-GAAP).

 

•  

$4.2 billion in operating income, up 19.0 percent.

Wireless

 

•  

1.8 million net retail customer additions, 1.6 million total net customer additions after reductions in wholesale customers, 61.8 million retail (non-wholesale) customers and 63.7 million total customers.

 

•  

1.21 percent retail and 0.96 percent retail post-paid churn — industry lows.

 

•  

14.4 percent increase in total revenues — largest U.S. wireless company based on total revenues; data revenues up 63.4 percent; highest-ever service and data ARPU; 44.7 percent EBITDA margin (non-GAAP).

Wireline

 

•  

202,000 net new FiOS TV customers, 717,000 total FiOS TV customers; more than 1.5 million total video customers, including satellite TV.

 

•  

229,000 net new FiOS Internet customers, 1.3 million total FiOS Internet customers; 8.0 million total broadband connections (FiOS Internet and DSL), up 21.3 percent.

 

•  

28.6 percent increase in Verizon Business revenues from strategic services (IP and managed services); total Verizon Business adjusted revenue growth (non-GAAP) of 2.2 percent.

Verizon News Release, page 2

Note: Comparisons are year over year unless otherwise noted. Prior-period amounts have been reclassified to reflect comparable results. See the accompanying schedules and www.verizon.com/investor for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this news release. Discontinued operations include Verizon Information Services, as well as Verizon’s interests in Verizon Dominicana C. por A. and Telecomunicaciones de Puerto Rico, Inc. The dispositions of these non-strategic businesses were completed on Nov. 17, 2006; Dec. 1, 2006; and March 30, 2007, respectively.

NEW YORK — Verizon Communications Inc. (NYSE:VZ) today reported another strong quarter of financial and operational results. Verizon Wireless continued its record of industry-leading profitability, Verizon Telecom reported accelerating sales of FiOS TV, and Verizon Business increased overall sales and sales of strategic services.

Verizon reported third-quarter 2007 earnings of 44 cents in fully diluted earnings per share (EPS). This compares with third-quarter 2006 earnings of 53 cents per share before income from discontinued operations that have since been sold or divested.

On an adjusted basis (non-GAAP), third-quarter 2007 earnings were 63 cents per share. This is a 14.5 percent increase, compared with 55 cents per share in the third quarter 2006 after excluding discontinued operations.

Adjusted earnings in the third quarter 2007 reflect 19 cents per share in special items: 16 cents per share for international taxes, 2 cents per share for costs related to a previously announced spin-off of access lines and 1 cent per share in merger integration costs. Adjusted earnings in the third quarter 2006 excluded 2 cents per share in special items for pension settlement charges, and merger integration and Verizon Center relocation costs.

Successful Transformation

“Our third-quarter results show that we have hit our stride as a leading wireless, broadband and enterprise company,” said Verizon Chairman and CEO Ivan Seidenberg. “In recent years, we have transformed our business model and revenue base. Our results throughout 2007, and especially in the third quarter, show that our strategy has been successful. We expect to build on these results in the fourth quarter and beyond.”

Verizon News Release, page 3

Strong Consolidated Results

Verizon’s total operating revenues grew 5.8 percent to $23.8 billion, compared with the third quarter 2006. Operating revenues grew 6.0 percent on an adjusted basis (non-GAAP). Verizon’s total operating expenses increased 3.4 percent to $19.6 billion, compared with the third quarter 2006. Operating expenses increased 3.5 percent on an adjusted basis (non-GAAP).

On a reported basis, Verizon’s operating income grew 19.0 percent to $4.2 billion, compared with the third quarter 2006. On an adjusted basis, operating income grew 18.5 percent to $4.3 billion.

Operating income margin rose to 17.7 percent, compared with 15.7 percent in the third quarter 2006. On an adjusted basis, Verizon’s operating income margin rose to 18.1 percent, compared with 16.2 percent in the third quarter 2006.

Cash flows from continuing operations totaled $18.0 billion through the first nine months of 2007. This represents 5.0 percent growth over the same period last year.

Dividends, Repurchase Program Reflect Confidence

Reflecting confidence in Verizon’s business model and continued strong cash flows, Verizon’s Board of Directors announced during the third quarter that it had increased the company’s quarterly dividend 6.2 percent, beginning with the Nov. 1 dividend.

Verizon also repurchased nearly $800 million of its shares in the quarter, for a total of $1.7 billion in the last nine months. Verizon is increasing the 2007 target for its share repurchase program to $2.5 billion, up $500 million from the original target.

Verizon News Release, page 4

Wireless Continues to Lead Industry

Verizon Wireless extended its record of strong, industry-leading performance. It continues to be the largest domestic wireless company in total revenues, data revenues and retail customers.

In the third quarter:

 

  •  

Nearly all of the 1.8 million retail net customer additions (including acquisitions and adjustments) were post-paid customers.

 

  •  

Total customers (retail and wholesale) increased to 63.7 million. The company added 1.6 million total net customers after approximately 115,000 net reductions to the company’s wholesale base.

 

  •  

Verizon Wireless continued its industry-leading customer loyalty, with 1.21 percent retail churn. Churn among retail post-paid customers at 0.96 percent was substantially lower.

 

  •  

Revenues totaled $11.3 billion, up 14.4 percent. Service revenues were $9.7 billion, up 15.1 percent, driven by customer growth and demand for data services.

 

  •  

ARPU levels (average monthly revenue per customer) were the company’s highest ever: $52.17 retail service ARPU, up 1.9 percent year over year; $10.59 retail data ARPU, up 42.9 percent.

 

  •  

Wireless operating income margin was 27.1 percent, the company’s second highest. EBITDA margin on service revenues (non-GAAP) was 44.7 percent.

Verizon News Release, page 5

Wireline Reports Strong Growth in FiOS, Strategic Services

Verizon’s Wireline business, which includes Verizon Telecom and Verizon Business, reported continued strong growth in customers of FiOS fiber-optic services and sales of strategic services to enterprise customers.

In the third quarter:

 

  •  

Verizon added a net of 202,000 new FiOS TV customers. The company has 717,000 FiOS TV customers in total, with approximately 600,000 added within the past 12 months. Including satellite TV customers served in partnership with DIRECTV (a net of 85,000 added this quarter), Verizon has more than 1.5 million video customers.

 

  •  

Verizon added a net of 285,000 new broadband connections (DSL and FiOS Internet connections combined). Broadband connections totaled 8.0 million, an increase of 21.3 percent compared with the third quarter 2006. The company added a net of 229,000 FiOS Internet connections this quarter, for a total of 1.3 million.

 

  •  

ARPU in legacy Verizon wireline markets (which excludes former MCI consumer markets) increased 10.8 percent to $58.79, compared with last year’s third quarter. This increase was due to strong demand for broadband and TV services.

 

  •  

Wireline operating income margin rose to 9.4 percent, compared with 8.8 percent in last year’s third quarter.

 

  •  

Verizon Business had revenues of $5.3 billion, or growth of 2.2 percent compared with last year’s third quarter on an adjusted basis (non-GAAP). This is Verizon Business’ fourth consecutive quarter of year-over-year, pro-forma revenue growth (non-GAAP, calculated as if Verizon and MCI had merged on Jan. 1, 2005).

Verizon News Release, page 6

 

  •  

Strong sales of key strategic services — such as IP (Internet protocol), managed services, Ethernet and optical ring services — continued to drive Verizon Business’ growth. These services generated $1.4 billion in revenue, up 28.6 percent from last year’s third quarter.

Details of 3Q 2007 Adjustments

Special items reflected in this quarter’s EPS are:

 

  • 16 cents per share for tax charges that would be payable as a result of possible distributions from the company’s investment in Vodafone Omnitel N.V. Verizon estimates that its portion of these distributions may amount to as much as $2.5 billion pre-tax over the next 12 months.

 

  • 2 cents per share for costs in connection with the spin-off of access lines in Maine, New Hampshire and Vermont. These costs are non-operational and include systems-related costs to enable the spin-off to operate on a stand-alone basis.

 

  • 1 cent per share for MCI merger integration costs.

Additional 3Q Business Group Results

Wireless

 

•  

The company added 1.8 million retail customers — the most in the industry. More than 97 percent of the company’s customer base was retail.

 

•  

Verizon Wireless continued to lead the industry in cost efficiency. Cash expense per customer (non-GAAP) was $28.62, an increase of 2.8 percent over the similar period in 2006 and 3.3 percent over second quarter 2007.

 

•  

Total data revenues were up 63.4 percent over the prior year, contributing $2.0 billion or 20 percent of all service revenues in the quarter. The company had 42.0 million retail data customers in September — a 35.6 percent increase over the prior year and up 6.2 percent sequentially.

 

•  

Verizon Wireless continued to expand the size of its nationwide high-speed wireless broadband network, powered by EV-DO Revision A (Rev. A) technology, making it available in additional cities. At the end of the quarter, more than half of the company’s retail customers — 32 million — had broadband-capable devices.

 

•  

The company unveiled several best-in-class music-capable phones that will be available for the 2007 holiday season, including the Juke by Samsung, the Venus and the Voyager by LG, and the BlackBerry Pearl. Verizon Wireless offers some 25 multimedia phones — at various price points — that can download music over the air and surf the Web wirelessly at broadband speeds.

Verizon News Release, page 7

 

•  

For business customers, Verizon Wireless began offering the industry’s first USB wireless broadband modem and the smallest EV-DO Rev. A modem stick with up to 4GB of data storage capacity. The company also introduced Verizon Wireless Private Network, a secure turnkey network solution that gives greater security to enterprise customers who routinely send proprietary information using Verizon Wireless PC cards, PDAs and smartphones.

 

•  

During the quarter, Verizon Wireless customers sent or received 36.5 billion text messages and 721 million picture/video messages. Customers also completed 29.7 million music and video downloads.

Wireline

 

•  

Wireline total operating revenues were $12.7 billion, a 0.8 percent decrease on an adjusted basis (non-GAAP), compared with third quarter 2006. This includes the continuation of expected declines in former MCI operations serving mass market customers. Excluding these operations, revenues increased 0.9 percent. Wireline total operating expenses were $11.5 billion, a 1.5 percent decrease on an adjusted basis, compared with third quarter 2006.

 

•  

Data revenues across all market segments increased 13.0 percent to $4.6 billion. This is the largest increase (on a non-GAAP basis) since the MCI merger. This reflects increasing revenues from consumer broadband, such as FiOS services and Verizon High Speed Internet (DSL), as well as from wholesale data transport and sales of Verizon Business data services.

 

•  

Revenues in Verizon Telecom’s total consumer market decreased by 2.2 percent, compared with third quarter 2006. However, in legacy Verizon consumer markets year-over-year revenues grew 3.1 percent. In addition, broadband and video revenues in all consumer markets grew more than 67 percent, comparing this year’s third quarter to last year’s.

 

•  

Verizon’s broadband fiber-to-the-premises network, which delivers FiOS Internet and FiOS TV services to customers, passed 8.5 million premises by the end of the quarter. Third-quarter EPS dilution from FiOS deployment and customer-acquisition costs was 9 cents.

 

•  

FiOS Internet was available for sale to 6.5 million premises in parts of 16 states by the end of the quarter. Penetration for the service averaged 20.0 percent across all markets. FiOS TV was available for sale to 4.7 million premises by the end of the quarter. Penetration for the service averaged 15.2 percent across all markets.

 

•  

Verizon Business rolled out significant enhancements to its global networking and managed services offerings, strengthening its position as the global IP leader and network-based solutions partner for corporations and governments worldwide. Rollouts included a managed solution to upgrade networks serving retail stores, branch offices or other remote locations; a Unified Communications solution for voice-over-IP customers; Verizon Integrated Optical Service, which enables enterprises to converge multiple technologies onto a single network; and an extension of the company’s Denial of Service Defense Mitigation security offering to the Asia-Pacific region.

Verizon News Release, page 8

 

•  

Verizon Business also took steps to make it even easier to do business with the company. It enhanced service level agreements for Private IP customers, streamlined billing processes, reduced the number of billing platforms and expanded the availability of the Verizon Business Customer Center portal to customers based in the Asia-Pacific region.

 

•  

Verizon Business continued to expand and enhance its global network. It began deployment of the Internet’s next-generation IPv6 protocol; obtained connectivity to China Telecom’s Next Convergence Network; began construction under a special license of the first multi-terabit, optical submarine cable system directly linking the U.S. mainland and China; and activated additional Converged Packet Architecture switches globally.

 

•  

Multinational corporations including Arup, Cavotec MSL, Deltek, Fujitsu, NAVTEQ, OMX, Schindler Elevator Corp. and Thomson Corp., as well as major U.S. regional players such as Park Nicollet Health Services, completed agreements for a wide range of advanced communications, information technology and professional services. Organizations extending their master service agreements included the Australian Federal Government’s Department of Finance, the Belgian Federal Government Service for Information Communication Technology (ICT), Korn/Ferry International, Martinair and Tele Atlas Data Gent.

Verizon Communications Inc. (NYSE:VZ), headquartered in New York, is a leader in delivering broadband and other wireline and wireless communication innovations to mass market, business, government and wholesale customers. Verizon Wireless operates America’s most reliable wireless network, serving 63.7 million customers nationwide. Verizon’s Wireline operations include Verizon Business, which delivers innovative and seamless business solutions to customers around the world, and Verizon Telecom, which brings customers the benefits of converged communications, information and entertainment services over the nation’s most advanced fiber-optic network. A Dow 30 company, Verizon has a diverse workforce of nearly 238,000 and last year generated consolidated operating revenues of more than $88 billion. For more information, visit www.verizon.com.

####

VERIZON’S ONLINE NEWS CENTER: Verizon news releases, executive speeches and biographies, media contacts, high quality video and images, 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.

 

Verizon News Release, page 9

NOTE: This news 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: 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, including disruption of our suppliers’ provisioning of critical products and services; 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; the timing, scope and financial impacts of our deployment of fiber-to-the-premises broadband technology; the ability of Verizon Wireless to continue to obtain sufficient spectrum resources; 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; the ability to complete acquisitions and dispositions; and the extent and timing of our ability to obtain revenue enhancements and cost savings following our business combination with MCI, Inc.

Verizon Communications Inc.

Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

Unaudited

   

3 Mos. Ended

9/30/07

    

3 Mos. Ended

9/30/06

    

% Change

    

9 Mos. Ended

9/30/07

    

9 Mos. Ended

9/30/06

    

% Change

  

Operating Revenues

    $ 23,772     $ 22,459     5.8     $ 69,629     $ 65,576     6.2  

Operating Expenses

             

Cost of services and sales

      9,608       8,932     7.6       27,751       26,157     6.1  

Selling, general & administrative expense

      6,349       6,384     (0.5 )     19,012       18,610     2.2  

Depreciation and amortization expense

      3,605       3,606     *       10,711       10,880     (1.6 )
                                    

Total Operating Expenses

      19,562       18,922     3.4       57,474       55,647     3.3  

Operating Income

      4,210       3,537     19.0       12,155       9,929     22.4  

Equity in earnings of unconsolidated businesses

      147       288     (49.0 )     492       616     (20.1 )

Other income and (expense), net

      49       100     (51.0 )     124       263     (52.9 )

Interest expense

      (450 )     (572 )   (21.3 )     (1,390 )     (1,798 )   (22.7 )

Minority interest

      (1,298 )     (1,088 )   19.3       (3,720 )     (2,940 )   26.5  
                                    

Income Before Provision for Income Taxes,

Discontinued Operations, Extraordinary Item and Cumulative Effect of Accounting Change

      2,658       2,265     17.4       7,661       6,070     26.2  

Provision for income taxes

      (1,387 )     (720 )   92.6       (3,223 )     (1,980 )   62.8  
                                    

Income Before Discontinued Operations, Extraordinary Item and Cumulative Effect of Accounting Change

      1,271       1,545     (17.7 )     4,438       4,090     8.5  

Income from discontinued operations, net of tax (1)

      —         377     (100.0 )     142       1,117     (87.3 )

Extraordinary item, net of tax

      —         —       *       (131 )     —       *  

Cumulative effect of accounting change, net of tax

      —         —       *       —         (42 )   (100.0 )
                                    

Net Income

    $ 1,271     $ 1,922     (33.9 )   $ 4,449     $ 5,165     (13.9 )
                                    

Basic Earnings per Common Share (2)

             

Income before discontinued operations, extraordinary item and cumulative

             

effect of accounting change

    $ .44     $ .53     (17.0 )   $ 1.53     $ 1.41     8.5  

Income from discontinued operations, net of tax

      —         .13     (100.0 )     .05       .38     (86.8 )

Extraordinary item, net of tax

      —         —       *       (.05 )     —       *  

Cumulative effect of accounting change, net of tax

      —         —       *       —         (.01 )   (100.0 )
                                    

Net income

    $ .44     $ .66     (33.3 )   $ 1.53     $ 1.77     (13.6 )

Weighted average number of common shares (in millions)

      2,896       2,907         2,902       2,911    

Diluted Earnings per Common Share (2) (3)

             

Income before discontinued operations, extraordinary item and cumulative

             

effect of accounting change

    $ .44     $ .53     (17.0 )   $ 1.53     $ 1.40     9.3  

Income from discontinued operations, net of tax

      —         .13     (100.0 )     .05       .38     (86.8 )

Extraordinary item, net of tax

      —         —       *       (.05 )     —       *  

Cumulative effect of accounting change, net of tax

      —         —       *       —         (.01 )   (100.0 )
                                    

Net income

    $ .44     $ .66     (33.3 )   $ 1.53     $ 1.76     (13.1 )

Weighted average number of common shares-assuming dilution (in millions)

             
     2,900       2,923         2,906       2,945    

Footnotes:

 

(1) Discontinued Operations includes Verizon Information Services, as well as our interests in Verizon Dominicana, C. por A. and Telecomunicaciones de Puerto Rico, Inc. The dispositions of these non-strategic businesses were completed on November 17, 2006, December 1, 2006 and March 30, 2007, respectively. Discontinued Operations in the first quarter of 2007 includes a gain on the sale of Telecomunicaciones de Puerto Rico, Inc. of $70 million, net of tax.

 

(2) EPS totals may not add due to rounding.

 

(3) Diluted Earnings per Share includes (i) income related to share dilution (exchangeable equity interests and zero coupon convertible debt) of $4 million and $31 million for the third quarter and year-to-date 2006, respectively, and (ii) the dilutive effect of shares issuable under our stock-based compensation plans, exchangeable equity interests and zero coupon convertible debt, which represent the only potential dilution. The zero coupon debt was retired on May 15, 2006. The exchangeable equity interest was converted on August 15, 2006 by issuing 29.5 million Verizon shares.

 

* Not meaningful

Verizon Communications Inc.

Consolidated Statements of Income Before Special Items

(dollars in millions, except per share amounts)

 

Unaudited

   

3 Mos. Ended

9/30/07

    

3 Mos. Ended

9/30/06

    

% Change

    

9 Mos. Ended

9/30/07

    

9 Mos. Ended

9/30/06

    

% Change

  

Operating Revenues (1)

             

Wireline

    $ 12,674     $ 12,781     (0.8 )   $ 37,776     $ 38,009     (0.6 )

Domestic Wireless

      11,289       9,869     14.4       32,439       27,944     16.1  

Other

      (191 )     (216 )   (11.6 )     (586 )     (458 )   27.9  
                                    

Total Operating Revenues

      23,772       22,434     6.0       69,629       65,495     6.3  
                                    

Operating Expenses (1)

             

Cost of services and sales

      9,596       8,910     7.7       27,735       26,096     6.3  

Selling, general & administrative expense

      6,257       6,278     (0.3 )     18,783       17,973     4.5  

Depreciation and amortization expense

      3,605       3,606     *       10,711       10,880     (1.6 )
                                    

Total Operating Expenses

      19,458       18,794     3.5       57,229       54,949     4.1  
                                    

Operating Income

      4,314       3,640     18.5       12,400       10,546     17.6  

Operating income impact of operations sold (1)

     —         4     (100.0 )     —         12     (100.0 )

Equity in earnings of unconsolidated businesses

      147       288     (49.0 )     492       616     (20.1 )

Other income and (expense), net

      49       100     (51.0 )     124       263     (52.9 )

Interest expense

      (450 )     (572 )   (21.3 )     (1,390 )     (1,772 )   (21.6 )

Minority interest

      (1,298 )     (1,088 )   19.3       (3,720 )     (2,940 )   26.5  
                                    

Income Before Provision for Income Taxes and Discontinued Operations

      2,762       2,372     16.4       7,906       6,725     17.6  

Provision for income taxes

      (948 )     (760 )   24.7       (2,834 )     (2,226 )   27.3  
                                    

Income Before Discontinued Operations

      1,814       1,612     12.5       5,072       4,499     12.7  

Income from discontinued operations, net of tax (2)

      —         374     (100.0 )     72       1,114     (93.5 )
                                    

Net Income Before Special Items

    $ 1,814     $ 1,986     (8.7 )   $ 5,144     $ 5,613     (8.4 )
                                    

Basic Adjusted Earnings per Common Share (3)

            

Income before discontinued operations

    $ .63     $ .55     14.5     $ 1.75     $ 1.55     12.9  

Income from discontinued operations, net of tax

      —         .13     (100.0 )     .02       .38     (94.7 )
                                    

Net income

    $ .63     $ .68     (7.4 )   $ 1.77     $ 1.93     (8.3 )

Weighted average number of common shares (in millions)

      2,896       2,907         2,902       2,911    

Diluted Adjusted Earnings per Common Share (3) (4)

             

Income before discontinued operations

    $ .63     $ .55     14.5     $ 1.75     $ 1.54     13.6  

Income from discontinued operations, net of tax

      —         .13     (100.0 )     .02       .38     (94.7 )
                                    

Net income

    $ .63     $ .68     (7.4 )   $ 1.77     $ 1.92     (7.8 )

Weighted average number of common share-assuming dilution (in millions)

      2,900       2,923         2,906       2,945    
Footnotes:             

(1)      Reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results, including the sale of selected non-strategic assets of the Wireline segment during the first quarter of 2007 as follows:

       

Revenues

    $ —       $ 25       $ —       $ 81    

Expenses

    $ —       $ 21       $ —       $ 69    

 

(2) Discontinued Operations includes Verizon Information Services, as well as our interests in Verizon Dominicana, C. por A. and Telecomunicaciones de Puerto Rico, Inc. The dispositions of these non-strategic businesses were completed on November 17, 2006, December 1, 2006 and March 30, 2007, respectively. Discontinued Operations in the first quarter of 2007 includes a gain on the sale of Telecomunicaciones de Puerto Rico, Inc. of $70 million, net of tax.

 

(3) EPS totals may not add due to rounding.

 

(4) Diluted Earnings per Share includes (i) income related to share dilution (exchangeable equity interests and zero coupon convertible debt) of $4 million and $31 million for the third quarter and year-to-date 2006, respectively, and (ii) the dilutive effect of shares issuable under our stock-based compensation plans, exchangeable equity interests and zero coupon convertible debt, which represent the only potential dilution. The zero coupon debt was retired on May 15, 2006. The exchangeable equity interest was converted on August 15, 2006 by issuing 29.5 million Verizon shares.

 

* Not meaningful

Verizon Communications Inc.

Consolidated Statements of Income - Reconciliations

 

(dollars in millions, except per share amounts)

 

    

3 Mos. Ended
9/30/07

Reported
(GAAP)

     Special and Non-Recurring Items    

3 Mos. Ended
9/30/07

Before Special
Items

  

Unaudited

      Merger
Integration Costs		    

Access Line

Spin-Off
Related Charges

     International
Taxes		    

Operating Revenues

    $ 23,772     $ —       $ —       $ —       $ 23,772  

Operating Expenses

           

Cost of services and sales

      9,608       (12 )     —         —         9,596  

Selling, general & administrative expense

      6,349       (33 )     (46 )     (13 )     6,257  

Depreciation and amortization expense

      3,605       —         —         —         3,605  
                                        

Total Operating Expenses

      19,562       (45 )     (46 )     (13 )     19,458  
                                        

Operating Income

      4,210       45       46       13       4,314  

Equity in earnings of unconsolidated businesses

      147       —         —         —         147  

Other income and (expense), net

      49       —         —         —         49  

Interest expense

      (450 )     —         —         —         (450 )

Minority interest

      (1,298 )     —         —         —         (1,298 )
                                        

Income Before Provision for Income Taxes and Discontinued Operations

      2,658       45       46       13       2,762  

Provision for income taxes

      (1,387 )     (17 )     (2 )     458       (948 )
                                        

Income Before Discontinued Operations

      1,271       28       44       471       1,814  

Income from discontinued operations, net of tax

      —         —         —         —         —    
                                        

Net Income

    $ 1,271     $ 28     $ 44     $ 471     $ 1,814  
                                        

Basic Earnings per Common Share (1)

           

Income before discontinued operations

    $ .44     $ .01     $ .02     $ .16     $ .63  

Income from discontinued operations, net of tax

      —         —         —         —         —    
                                        

Net income

    $ .44     $ .01     $ .02     $ .16     $ .63  

Diluted Earnings per Common Share (1)

          

Income before discontinued operations

    $ .44     $ .01     $ .02     $ .16     $ .63  

Income from discontinued operations, net of tax

      —         —         —         —         —    
                                        

Net income

    $ .44     $ .01     $ .02     $ .16     $ .63  

(dollars in millions, except per share amounts)

 

Unaudited

   

3 Mos. Ended
9/30/06

Reported
(GAAP)

     Special and Non-Recurring Items    

3 Mos. Ended
9/30/06

Before Special
Items

  
     Merger
Integration
Costs		     Verizon
Center
Relocation,
Net		     Severance,
Pension and
Benefit Charges		     Impact of
Operations Sold		    

Operating Revenues

    $ 22,459     $ —       $ —       $ —       $ (25 )   $ 22,434  

Operating Expenses

             

Cost of services and sales

      8,932       (6 )     —         —         (16 )     8,910  

Selling, general & administrative expense

      6,384       (19 )     (48 )     (34 )     (5 )     6,278  

Depreciation and amortization expense

      3,606       —         —         —         —         3,606  
                                                

Total Operating Expenses

      18,922       (25 )     (48 )     (34 )     (21 )     18,794  
                                                

Operating Income

      3,537       25       48       34       (4 )     3,640  

Operating income impact of operations sold

      —         —         —         —         4       4  

Equity in earnings of unconsolidated businesses

      288       —         —         —         —         288  

Other income and (expense), net

      100       —         —         —         —         100  

Interest expense

      (572 )     —         —         —         —         (572 )

Minority interest

      (1,088 )     —         —         —         —         (1,088 )
                                                

Income Before Provision for Income Taxes and Discontinued Operations

      2,265       25       48       34       —         2,372  

Provision for income taxes

      (720 )     (9 )     (17 )     (14 )     —         (760 )
                                                

Income Before Discontinued Operations

      1,545       16       31       20       —         1,612  

Income from discontinued operations, net of tax

      377       —         —         (3 )     —         374  
                                                

Net Income

    $ 1,922     $ 16     $ 31     $ 17     $ —       $ 1,986  
                                                

Basic Earnings per Common Share (1)

             

Income before discontinued operations

    $ .53     $ .01     $ .01     $ .01     $ —       $ .55  

Income from discontinued operations, net of tax

      .13       —         —         —         —         .13  
                                                

Net income

    $ .66     $ .01     $ .01     $ .01     $ —       $ .68  

Diluted Earnings per Common Share (1)

            

Income before discontinued operations

    $ .53     $ .01     $ .01     $ .01     $ —       $ .55  

Income from discontinued operations, net of tax

      .13       —         —         —         —         .13  
                                                

Net income

    $ .66     $ .01     $ .01     $ .01     $ —       $ .68  

Footnote:

 

(1) EPS totals may not add 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)

 

Unaudited

          Special and Non-Recurring Items        
  

9 Mos. Ended

9/30/07

Reported
(GAAP)

     Merger
Integration
Costs		     Sale of Puerto
Rico, Net		     Loss on
CANTV		    Access Line
Spin-Off
Related
Charges		     International
Taxes		    

9 Mos. Ended

9/30/07

Before
Special Items

 

Operating Revenues

    $ 69,629     $ —       $ —       $ —      $ —       $ —       $ 69,629  

Operating Expenses

                

Cost of services and sales

      27,751       (16 )     —         —        —         —         27,735  

Selling, general & administrative expense

      19,012       (70 )     (100 )     —        (46 )     (13 )     18,783  

Depreciation and amortization expense

      10,711       —         —         —        —         —         10,711  
                                                       

Total Operating Expenses

      57,474       (86 )     (100 )     —        (46 )     (13 )     57,229  
                                                       

Operating Income

      12,155       86       100       —        46       13       12,400  

Equity in earnings of unconsolidated businesses

      492       —         —         —        —         —         492  

Other income and (expense), net

      124       —         —         —        —         —         124  

Interest expense

      (1,390 )     —         —         —        —         —         (1,390 )

Minority interest

      (3,720 )     —         —         —        —         —         (3,720 )
                                                       

Income Before Provision for Income Taxes, Discontinued Operations and Extraordinary Item

      7,661       86       100       —        46       13       7,906  

Provision for income taxes

      (3,223 )     (32 )     (35 )     —        (2 )     458       (2,834 )
                                                       

Income Before Discontinued Operations and Extraordinary Item

      4,438       54       65       —        44       471       5,072  

Income from discontinued operations, net of tax

      142       —         (70 )     —        —         —         72  

Extraordinary item, net of tax

      (131 )     —         —         131      —         —         —    
                                                       

Net Income

    $ 4,449     $ 54     $ (5 )   $ 131    $ 44     $ 471     $ 5,144  
                                                       

Basic Earnings per Common Share (1)

                

Income before discontinued operations and extraordinary item

    $ 1.53     $ .02     $ .02     $ —      $ .02     $ .16     $ 1.75  

Income from discontinued operations, net of tax

      .05       —         (.02 )     —        —         —         .02  

Extraordinary item, net of tax

      (.05 )     —         —         .05      —         —         —    
                                                       

Net income

    $ 1.53     $ .02     $ —       $ .05    $ .02     $ .16     $ 1.77  

Diluted Earnings per Common Share (1)

                

Income before discontinued operations and extraordinary item

    $ 1.53     $ .02     $ .02     $ —      $ .02     $ .16     $ 1.75  

Income from discontinued operations, net of tax

      .05       —         (.02 )     —        —         —         .02  

Extraordinary item, net of tax

      (.05 )     —         —         .05      —         —         —    
                                                       

Net income

    $ 1.53     $ .02     $ —       $ .05    $ .02     $ .16     $ 1.77  

(dollars in millions, except per share amounts)

 

          Special and Non-Recurring Items        

Unaudited

  

9 Mos. Ended
9/30/06

Reported
(GAAP)

     Extinguishment
of Debt		     Impact of
Accounting
for Share
Based
Payments		   Merger
Integration
Costs		     Verizon
Center
Relocation,
Net		     Severance,
Pension
and
Benefits
Charges		     Impact of
Operations
Sold		    

9 Mos. Ended
9/30/06

Before
Special Items

  

Operating Revenues

   $ 65,576     $ —       $ —     $ —       $ —       $ —       $ (81 )   $ 65,495  

Operating Expenses

                

Cost of services and sales

     26,157       —         —       (6 )     —         —         (55 )     26,096  

Selling, general & administrative expense

     18,610       —         —       (151 )     (138 )     (334 )     (14 )     17,973  

Depreciation and amortization expense

     10,880       —         —       —         —         —         —         10,880  
                                                             

Total Operating Expenses

     55,647       —         —       (157 )     (138 )     (334 )     (69 )     54,949  
                                                             

Operating Income

     9,929       —         —       157       138       334       (12 )     10,546  

Operating income impact of operations sold

     —         —         —       —         —         —         12       12  

Equity in earnings of unconsolidated businesses

     616       —         —       —         —         —         —         616  

Other income and (expense), net

     263       —         —       —         —         —         —         263  

Interest expense

     (1,798 )     26       —       —         —         —         —         (1,772 )

Minority interest

     (2,940 )     —         —       —         —         —         —         (2,940 )
                                                             

Income Before Provision for Income Taxes Discontinued Operations and Cumulative Effect of Accounting Change

     6,070       26       —       157       138       334       —         6,725  

Provision for income taxes

     (1,980 )     (10 )     —       (58 )     (50 )     (128 )     —         (2,226 )
                                                             

Income Before Discontinued Operations and Cumulative Effect of Accounting Change

     4,090       16       —       99       88       206       —         4,499  

Income from discontinued operations, net of tax

     1,117       —         —       —         —         (3 )     —         1,114  

Cumulative effect of accounting change, net of tax

     (42 )     —         42     —         —         —         —         —    
                                                             

Net Income

   $ 5,165     $ 16     $ 42   $ 99     $ 88     $ 203     $ —       $ 5,613  
                                                             

Basic Earnings per Common Share (1)

                

Income before discontinued operations and cumulative effect of accounting change

   $ 1.41     $ .01     $ —     $ .03     $ .03     $ .07     $ —       $ 1.55  

Income from discontinued operations, net of tax

     .38       —         —       —         —         —         —         .38  

Cumulative effect of accounting change, net of tax

     (.01 )     —         .01     —         —         —         —         —    
                                                             

Net income

   $ 1.77     $ .01     $ .01   $ .03     $ .03     $ .07     $ —       $ 1.93  

Diluted Earnings per Common Share (1)

                

Income before discontinued operations and cumulative effect of accounting change

   $ 1.40     $ .01     $ —     $ .03     $ .03     $ .07     $ —       $ 1.54  

Income from discontinued operations, net of tax

     .38       —         —       —         —         —         —         .38  

Cumulative effect of accounting change, net of tax

     (.01 )     —         .01     —         —         —         —         —    
                                                             

Net income

   $ 1.76     $ .01     $ .01   $ .03     $ .03     $ .07     $ —       $ 1.92  

Footnote:

 

(1) EPS totals may not add 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

    9/30/07     9/30/06  

Debt to debt and shareowners' equity ratio-end of period

      38.8 %     47.4 %

Book value per common share

    $ 17.19     $ 15.85  

Common shares outstanding (in millions)

     

End of period

      2,890       2,920  

Total employees (1)

      237,858       234,595  

 

Unaudited

    3 Mos. Ended
9/30/07		    3 Mos. Ended
9/30/06		    9 Mos. Ended
9/30/07		    9 Mos. Ended
9/30/06

Capital expenditures (including capitalized software)

            

Wireline

    $ 2,753    $ 2,334    $ 7,873    $ 7,344

Domestic Wireless

      1,515      1,623      4,903      4,801

Other

      9      36      16      133
                           

Total

    $ 4,277    $ 3,993    $ 12,792    $ 12,278
                           

Cash dividends declared per common share

    $ 0.430    $ 0.405    $ 1.240    $ 1.215

Footnote:

 

(1) Prior period has been reclassified to reflect comparable amounts.

Verizon Communications Inc.

Consolidated Balance Sheets

(dollars in millions)

 

Unaudited

    9/30/07     12/31/06     $ Change  

Assets

       

Current assets

       

Cash and cash equivalents

    $ 715     $ 3,219     $ (2,504 )

Short-term investments

      1,194       2,434       (1,240 )

Accounts receivable, net

      11,509       10,891       618  

Inventories

      1,786       1,514       272  

Assets held for sale

      —         2,592       (2,592 )

Prepaid expenses and other

      1,833       1,888       (55 )
                        

Total current assets

      17,037       22,538       (5,501 )
                        

Plant, property and equipment

      211,152       204,109       7,043  

Less accumulated depreciation

      126,823       121,753       5,070  
                        
     84,329       82,356       1,973  
                        

Investments in unconsolidated businesses

      5,453       4,868       585  

Wireless licenses

      50,755       50,959       (204 )

Goodwill

      5,442       5,655       (213 )

Other intangible assets, net

      5,078       5,140       (62 )

Other assets

      17,525       17,288       237  
                        

Total Assets

    $ 185,619     $ 188,804     $ (3,185 )
                        

Liabilities and Shareowners' Investment

       

Current liabilities

       

Debt maturing within one year

    $ 2,064     $ 7,715     $ (5,651 )

Accounts payable and accrued liabilities

      14,244       14,320       (76 )

Liabilities related to assets held for sale

      —         2,154       (2,154 )

Other

      7,850       8,091       (241 )
                        

Total current liabilities

      24,158       32,280       (8,122 )
                        

Long-term debt

      29,383       28,646       737  

Employee benefit obligations

      30,592       30,779       (187 )

Deferred income taxes

      14,118       16,270       (2,152 )

Other liabilities

      6,445       3,957       2,488  

Minority interest

      31,234       28,337       2,897  

Shareowners' investment

       

Common stock

      297       297       —    

Contributed capital

      40,289       40,124       165  

Reinvested earnings

      18,049       17,324       725  

Accumulated other comprehensive loss

      (6,216 )     (7,530 )     1,314  

Common stock in treasury, at cost

      (2,832 )     (1,871 )     (961 )

Deferred compensation - employee stock ownership plans and other

      102       191       (89 )
                        

Total shareowners' investment

      49,689       48,535       1,154  
                        

Total Liabilities and Shareowners' Investment

    $     185,619     $     188,804     $     (3,185 )
                        

Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)

 

Unaudited

    9 Mos. Ended
9/30/07		     9 Mos. Ended
9/30/06		     $ Change  

Cash Flows From Operating Activities

       

Net Income

    $ 4,449     $ 5,165     $ (716 )

Adjustments to reconcile net income to net cash provided by operating activities - continuing operations:

       

Depreciation and amortization expense

      10,711       10,880       (169 )

Employee retirement benefits

      1,290       1,466       (176 )

Deferred income taxes

      708       (522 )     1,230  

Provision for uncollectible accounts

      741       814       (73 )

Equity in earnings of unconsolidated businesses

      (492 )     (616 )     124  

Extraordinary item, net of tax

      131       —         131  

Cumulative effect of accounting change, net of tax

      —         42       (42 )

Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses

      (2,296 )     (1,517 )     (779 )

Other, net

      2,777       1,441       1,336  
                        

Net cash provided by operating activities - continuing operations

      18,019       17,153       866  

Net cash provided by (used in) operating activities - discontinued operations

      (570 )     1,113       (1,683 )
                        

Net cash provided by operating activities

      17,449       18,266       (817 )
                        

Cash Flows From Investing Activities

       

Capital expenditures (including capitalized software)

      (12,792 )     (12,278 )     (514 )

Acquisitions, net of cash acquired, and investments

      (697 )     1,053       (1,750 )

Net change in short-term investments

      1,267       1,506       (239 )

Other, net

      981       556       425  
                        

Net cash used in investing activities - continuing operations

      (11,241 )     (9,163 )     (2,078 )

Net cash provided by (used in) investing activities - discontinued operations

      757       (159 )     916  
                        

Net cash used in investing activities

      (10,484 )     (9,322 )     (1,162 )
                        

Cash Flows From Financing Activities

       

Proceeds from long-term borrowings

      3,402       3,958       (556 )

Repayments of long-term borrowings and capital lease obligations

      (4,994 )     (8,706 )     3,712  

Increase (decrease) in short-term obligations, excluding current maturities

      (3,438 )     1,831       (5,269 )

Dividends paid

      (3,529 )     (3,537 )     8  

Proceeds from sale of common stock

      794       115       679  

Purchase of common stock for treasury

      (1,734 )     (1,348 )     (386 )

Other, net

      30       4       26  
                        

Net cash used in financing activities - continuing operations

      (9,469 )     (7,683 )     (1,786 )

Net cash used in financing activities - discontinued operations

      —         (176 )     176  
                        

Net cash used in financing activities

      (9,469 )     (7,859 )     (1,610 )
                        

Increase (decrease) in cash and cash equivalents

      (2,504 )     1,085       (3,589 )

Cash and cash equivalents, beginning of period

      3,219       760       2,459  
                        

Cash and cash equivalents, end of period

    $ 715     $ 1,845     $  (1,130 )
                        

Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)

 

Unaudited

   

3 Mos. Ended

9/30/07

    

3 Mos. Ended

9/30/06

     % Change    

9 Mos. Ended

9/30/07

    

9 Mos. Ended

9/30/06

     % Change  

Wireline Operating Revenues

             

Verizon Telecom

             

Mass Markets

    $ 5,505     $ 5,587     (1.5 )   $ 16,551     $ 16,772     (1.3 )

Wholesale

      2,048       2,107     (2.8 )     6,076       6,272     (3.1 )

Other

      482       573     (15.9 )     1,432       1,797     (20.3 )

Verizon Business

             

Enterprise Business

      3,717       3,630     2.4       10,957       10,582     3.5  

Wholesale

      836       806     3.7       2,530       2,441     3.6  

International and Other

      789       793     (0.5 )     2,376       2,309     2.9  

Eliminations

      (703 )     (715 )   (1.7 )     (2,146 )     (2,164 )   (0.8 )
                                    

Total Operating Revenues

      12,674       12,781     (0.8 )     37,776       38,009     (0.6 )
                                    

Operating Expenses

             

Cost of services and sales

      6,347       6,266     1.3       18,759       18,491     1.4  

Selling, general & administrative expense

      2,846       3,020     (5.8 )     8,730       8,937     (2.3 )

Depreciation and amortization expense

      2,295       2,376     (3.4 )     6,833       7,164     (4.6 )
                                    

Total Operating Expenses

      11,488       11,662     (1.5 )     34,322       34,592     (0.8 )
                                    

Operating Income

    $ 1,186     $ 1,119     6.0     $ 3,454     $ 3,417     1.1  

Operating Income Margin

      9.4 %     8.8 %       9.1 %     9.0 %  

Segment Income

    $ 310     $ 390     (20.5 )   $ 1,051     $ 1,192     (11.8 )

Verizon Communications Inc.

Wireline – Selected Operating Statistics

 

Unaudited

                   09/30/07    09/30/06    % Change  

Switched access lines in service (000)

                  

Residence

               25,559      28,523    (10.4 )

Business

               16,446      17,095    (3.8 )

Public

               311      355    (12.4 )
                         

Total

               42,316      45,973    (8.0 )
                         

Wholesale voice connections* (000)

               3,046      3,621    (15.9 )

Broadband connections (000)

               7,971      6,573    21.3  
              (dollars in millions)  

Unaudited

   

3 Mos. Ended

9/30/07

   

3 Mos. Ended

9/30/06

    % Change   

9 Mos. Ended

9/30/07

   

9 Mos. Ended

9/30/06

    % Change  

High capacity and digital data revenues

                  

Data transport

    $ 4,261    $ 3,814    11.7    $ 12,341    $ 11,092    11.3  

Data solutions

      365      278    31.3      961      752    27.8  
                                 

Total revenues

    $ 4,626    $ 4,092    13.0    $ 13,302    $ 11,844    12.3  
                                 

Footnote:

 

* Resale and UNE-P lines, including lines covered under commercial agreements.

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.

Intersegment transactions have not been eliminated.

Certain reclassifications have been made, where appropriate, to reflect comparable operating results.

Verizon Communications Inc.

Verizon Wireless – Selected Financial Results

(dollars in millions)

 

Unaudited

   

3 Mos. Ended

9/30/07

    

3 Mos. Ended

9/30/06

     % Change    

9 Mos. Ended

9/30/07

    

9 Mos. Ended

9/30/06

     % Change  

Revenues

             

Service revenues

    $ 9,749     $ 8,469     15.1     $ 28,142     $ 24,114     16.7  

Equipment and other

      1,540       1,400     10.0       4,297       3,830     12.2  
                                    

Total Revenues

      11,289       9,869     14.4       32,439       27,944     16.1  
                                    

Operating Expenses

             

Cost of services and sales

      3,551       2,930     21.2       9,843       8,347     17.9  

Selling, general & administrative expense

      3,385       3,132     8.1       9,956       8,837     12.7  

Depreciation and amortization expense

      1,299       1,220     6.5       3,848       3,684     4.5  
                                    

Total Operating Expenses

      8,235       7,282     13.1       23,647       20,868     13.3  
                                    

Operating Income

    $ 3,054     $ 2,587     18.1     $ 8,792     $ 7,076     24.3  

Operating Income Margin

      27.1 %     26.2 %       27.1 %     25.3 %  

Segment Income

    $ 978     $ 804     21.6     $ 2,804     $ 2,164     29.6  

 

Verizon Communications Inc.

Verizon Wireless – Selected Operating Statistics

 

             

Unaudited

                      9/30/07     9/30/06     % Change  

Total Customers (000)

            63,699       56,747     12.3  

Retail Customers (000)

            61,840       54,562     13.3  

Unaudited

   

3 Mos. Ended

9/30/07

    

3 Mos. Ended

9/30/06

     % Change    

9 Mos. Ended

9/30/07

    

9 Mos. Ended

9/30/06

    

% Change

  

Total Customer net adds in period (1) (000)

      1,645       1,912     (14.0 )     4,647       5,410     (14.1 )

Retail Customer net adds in period (2) (000)

      1,760       1,981     (11.2 )     5,028       5,526     (9.0 )

Total churn rate

      1.27 %     1.24 %       1.22 %     1.18 %  

Retail churn rate

      1.21 %     1.15 %       1.12 %     1.09 %  

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.

 

Intersegment transactions have not been eliminated.

Certain reclassifications have been made, where appropriate, to reflect comparable operating results.

 

(1) Includes acquisitions and adjustments of 7,000, - and 2,000 customers in the first, second and third quarters of 2007 and 17,000, 7,000 and - customers in the first, second and third quarters of 2006, respectively.

 

(2) Includes acquisitions and adjustments of 7,000, - and 2,000 customers in the first, second and third quarters of 2007, and 17,000, 83,000 and - customers in the first, second and third quarters of 2006, respectively. The second quarter 2006 acquisition and adjustment of 83,000 customers includes 76,000 reseller customers which were already included in the total customer base.

Verizon Communications Inc.

Consolidated EBITDA

(dollars in millions)

 

Unaudited

    3 Mos. Ended
9/30/07		     3 Mos. Ended
9/30/06		  

Verizon Consolidated EBITDA

     

Consolidated Net Income Before Special Items

    $ 1,814     $ 1,986  

Add/subtract non-operating items:

     

Discontinued Operations, net of taxes

      —         (374 )

Provision for income taxes

      948       760  

Minority Interest

      1,298       1,088  

Interest expense

      450       572  

Other income/(expense), net

      (49 )     (100 )

Equity in earnings of unconsolidated business

      (147 )     (288 )

Operating income impact of operations sold

      —         (4 )
                

Operating income

      4,314       3,640  

Add depreciation and amortization expense

      3,605       3,606  
                

Verizon EBITDA

    $ 7,919     $ 7,246  
                

Verizon total revenues

    $ 23,772     $ 22,434  
                

Verizon operating income margin

      18.1 %     16.2 %
                

Verizon EBITDA margin

      33.3 %     32.3 %
                

 

Verizon Communications Inc.

Other Reconciliations-Wireless

 

 

(dollars in millions)  

Unaudited

    3 Mos. Ended
9/30/07		  

EBITDA—Verizon Wireless

   

Segment income:

   

Wireline

    $ 310  

Verizon Wireless

      978  
        

Total segments

      1,288  

Corporate and other

      526  
        

Consolidated net income

    $ 1,814  
        

Verizon Wireless EBITDA

   

Segment income

    $ 978  

Add/subtract non-operating items:

   

Provision for income taxes

      729  

Minority interest

      1,298  

Interest expense

      56  

Other income/(expense), net

      3  

Equity in earnings of unconsolidated businesses

      (10 )
        

Operating income

      3,054  

Add depreciation and amortization expense

      1,299  
        

Verizon Wireless EBITDA

    $ 4,353  
        

Verizon Wireless total revenues

    $ 11,289  
        

Verizon Wireless service revenues

    $ 9,749  
        

Verizon Wireless operating income margin

      27.1 %
        

Verizon Wireless EBITDA margin

      44.7 %
        

(dollars in millions, except Total Service ARPU and Cash Expense per Customer)

 

Unaudited

    3 Mos. Ended
9/30/07		     3 Mos. Ended
6/30/07		     3 Mos. Ended
3/31/07		     3 Mos. Ended
9/30/06		  

Domestic Wireless Cash Cost Per Customer

        

Domestic Wireless Cost of Services and Sales

    $ 3,551     $ 3,270     $ 3,022     $ 2,930  

Domestic Wireless Selling, General & Administrative Expense

      3,385       3,271       3,300       3,132  

Less Equipment and Other Revenue

      (1,540 )     (1,441 )     (1,316 )     (1,400 )
                                

Cash Expense

    $ 5,396     $ 5,100     $ 5,006     $ 4,662  

Cumulative average customer (millions)

      188.54       184.12       179.62       167.39  

Cash Expense Per Customer

    $ 28.62     $ 27.70     $ 27.87     $ 27.85  
                                

Total Service ARPU

    $ 51.70     $ 51.05     $ 50.06     $ 50.59  
                                

 

Verizon Communications Inc.

Pro Forma Combined Selected Financial Results Before Special Items

 

For the Nine Months Ended September 30, 2006

 

          (dollars in millions)
          Pro Forma

Unaudited

    Verizon (1)    Adjustments (2)     Combined

Operating Revenues

    $ 65,495    $ 227     $ 65,722

Operating Expenses

      54,949      240       55,189
                     

Operating Income

      10,546      (13 )     10,533

Income Before Provision for Income Taxes and Discontinued Operations

      6,725      (16 )     6,709

Weighted average number of common shares (in millions) - Basic

      2,911      —         2,911

Weighted average number of common shares (in millions) - Diluted

      2,945      —         2,945

 

For the Year Ended December 31, 2005

 

          (dollars in millions)
          Pro Forma

Unaudited

    Verizon (1)    Adjustments (3)    Combined

Operating Revenues

    $ 69,338    $ 16,119    $ 85,457

Operating Expenses

      57,085      15,493      72,578
                    

Operating Income

      12,253      626      12,879

Income Before Provision for Income Taxes and Discontinued Operations

      8,196      697      8,893

Weighted average number of common shares (in millions) - Basic

      2,766      163      2,929

Weighted average number of common shares (in millions) - Diluted

      2,817      163      2,980

Footnotes:

 

1. Selected financial results before special items. For a reconciliation of reported results to results before special items, see the corresponding Consolidated Statements of Income - Reconciliations for the period noted accompanying this material.

 

2. MCI, Inc. results for the period prior to the acquisition, on January 1 through January 5, 2006.

 

3. The unaudited pro forma information contains the actual combined operating results of Verizon and the former MCI, with the results prior to the acquisition date adjusted to include the pro forma impact of: the elimination of transactions between Verizon and the former MCI; the adjustment of amortization of acquired intangible assets and depreciation of fixed assets based on the purchase price allocation; the elimination of merger expenses incurred by the former MCI; the reclassification of revenues and operating expenses to reflect comparable operating results, including for the sale of selected non-strategic assets during the first quarter of 2007; the adjustment of interest expense reflecting the redemption of all of MCI’s debt and the replacement of that debt with $4 billion of new debt issued in February 2006 at Verizon's weighted average borrowing rate; and the elimination of severance expense incurred by the former MCI. Full year 2005 unaudited pro forma results include $82 million of income, which was reported as discontinued operations by the former MCI for an operation sold during the first quarter of 2005; and the conversion of MCI shares into Verizon shares issued in connection with the merger. Given that the former MCI’s 2005 reported tax provision included certain one-time items, pro forma results are presented on an income before tax basis.

Verizon Communications Inc.

Pro Forma Combined Selected Financial Results Before Special Items

For the Year Ended December 31, 2005 by Quarter and Quarter Ended March 31, 2006

 

                        

(dollars in millions)

     2005 (1)    2006

Unaudited

    1st Quarter    2nd Quarter    3rd Quarter    4th Quarter    Annual    1Q06

Operating Revenues

    $ 20,878    $ 21,271    $ 21,574    $ 21,734    $ 85,457    $ 21,429

Operating Expenses

      17,951      18,127      18,260      18,240      72,578      18,170
                                         

Operating Income

      2,927      3,144      3,314      3,494      12,879      3,259

Income Before Provision for Income Taxes and Discontinued Operations

      2,125      2,233      2,343      2,192      8,893      2,044

Weighted average number of common shares (in millions) - Basic

      2,932      2,929      2,928      2,927      2,929      2,915

Weighted average number of common shares (in millions) - Diluted

      2,984      2,981      2,980      2,979      2,980      2,963

Depreciation and Amortization Expense included in Operating Expenses

    $ 3,647    $ 3,682    $ 3,705    $ 3,761    $  14,795    $ 3,686

Income from discontinued operations

    $ 439    $ 306    $ 359    $ 348    $ 1,452    $ 392

Footnotes:

 

1. The unaudited pro forma information contains the actual combined operating results of Verizon and the former MCI, with the results prior to the acquisition date adjusted to include the pro forma impact of: the elimination of transactions between Verizon and the former MCI; the adjustment of amortization of acquired intangible assets and depreciation of fixed assets based on the purchase price allocation; the elimination of merger expenses incurred by the former MCI; the reclassification of revenues and operating expenses to reflect comparable operating results, including for the sale of selected non-strategic assets during the first quarter of 2007; the adjustment of interest expense reflecting the redemption of all of MCI’s debt and the replacement of that debt with $4 billion of new debt issued in February 2006 at Verizon's weighted average borrowing rate; and the elimination of severance expense incurred by the former MCI. Full year 2005 unaudited pro forma results include $82 million of income, which was reported as discontinued operations by the former MCI for an operation sold during the first quarter of 2005; and the conversion of MCI shares into Verizon shares issued in connection with the merger. Given that the former MCI’s 2005 reported tax provision included certain one-time items, pro forma results are presented on an income before tax basis.

Verizon Communications Inc.

Other Reconciliations-Wireline Unaudited Pro Forma Selected Financial Results

For the Three Months Ended September 30, 2005

 

          (dollars in millions)
          Pro Forma

Unaudited

    Verizon (1)    Adjustments (2)    Combined

Wireline Operating Revenues

    $ 9,445    $ 3,958    $ 13,403

Verizon Telecom Operating Revenues

      7,952      833      8,785

Verizon Business Operating Revenues

      1,946      3,404      5,350

Strategic Services Revenue (3)

      138      711      849

Wireline Data Revenue

      2,162      1,689      3,851

 

Footnotes:

 

1) Selected financial results before special items. For a reconciliation of reported results to results before special items, see the corresponding Consolidated Statements of Income - Reconciliations for the period noted accompanying this material.

 

2) The unaudited Proforma information contains the actual combined operating results of Verizon and the former MCI, for the period prior to the acquisition.

 

3) Private IP, IP VPN, Security, Managed Network Data, Hosting, Ethernet and Ring Services; excludes Dial-up.